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Financial Impact of Drought. March 5, 2008. Updated 3/17/08. Drought Impacts Current Year Budget Future Years’ Budget Rate Adjustments. Budget Review. Consumption. Budget Review. 160. 150. 140. 130. Average. 120. 2008. 110. MGD. 100. 90. 80. July. May. April. June. March. - PowerPoint PPT Presentation
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Financial Impactof Drought
March 5, 2008
Updated 3/17/08
Drought Impacts
• Current Year Budget• Future Years’ Budget• Rate Adjustments
Budget Review
Consumption
Budget Review
Average
2008
MGD
80
90
100
110
120
130
140
150
160
July
Augus
t
Septe
mbe
r
Octobe
r
Novem
ber
Decem
ber
Janu
ary
Febru
ary
Mar
chApr
ilM
ayJu
ne
Water Revenues
Budget Review
Percentage of Total Annual Revenue
Average
2008
(In thousands)
Cumulative
2,565 285Expected Loss of $(7,500)
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
13.00%
14.00%
July Aug Sept Oct Nov Dec Jan Feb March April May June
2,850
1,753 (158) (3,237) (755) (1,001) (1,101)
4,603 4,445 1,208 453 (548) (1,649)
Wastewater Revenues
Budget Review
Percentage of Total Annual Revenue
Average
2008
(In thousands)
Cumulative
6.00%
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%
9.50%
10.00%
10.50%
11.00%
July Aug Sept Oct Nov Dec Jan Feb March April May June
824 797 (2,761) 700 (578) (850) Expected Loss $(4,300)
3,850 4,647 1,886 2,586 2,008 1,158
2,386 640
3,026
Water Rates
* Sewer - $3.22
Budget Review
Tiers 2008
* Commercial - $1.73
$1.89
$1.33
$2.18
$4.31> 22
12 - 22
0 - 11
Tap & Capacity
Budget Review
$ (7.1) M $ 20.3 M $ 27.4 M
ShortfallActualBudget
FY 2008 Projected
Budget Review
$ 252.4 M $ 254.8 MTotal Expenditures
28.9 M 28.9 MPay Go Contribution
129.0 M 129.7 MDebt Service
94.5 M 96.2 MOperating
$ 226.5 M $ 244.8 M Revenues
ActualBudget
$ (15.9) M $ ---
10 M 10 M Fund Balance
Total Revenues $ 236.5 M $ 254.8 M
Decrease to Fund Balance
Rate Issues
• FY 08 Bond Covenants• Mandatory Restrictions
– 1 or 2 watering seasons
• Long Term Consumption Habits• Effect Of Housing Starts
Budget Review
Bond Covenants
Budget Review
Test 1 (greater than 1 times debt service, can use fund balance)
0.94 $(13 M) 1.03
35.4% 40 .3%35% Fund Balance ActualBudget
Test 2 (greater than 1 times debt service)
0.97 $(6 M) 1.06
Projected 09 Water RevenuesPercentage of Total Annual Revenue
Full Year Shortfall of $18 Million
Average
2009
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
July Aug Sept Oct Nov Dec Jan Feb March April May June
Budget Review
Projected 09 Wastewater Revenues
Budget Review
Full Year Shortfall of $12 Million
Average
2009
Percentage of Total Annual Revenue
6.00%
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%
9.50%
10.00%
July Aug Sept Oct Nov Dec Jan Feb March April May June
Adjustments
• Revenue Requirement – 23%• Delay Capital• Operating Savings• Reduce Pay Go
Budget Review
Rate Increase
• Model Increase FY2009 - 6.05%• Drought Impact – 9.87%• Implement May 1, 2008
Budget Review
Why Additional Rates?
• Fixed vs. Variable Expenses• Operations Impacts• Rates Driven by Capital
Budget Review
Fixed vs. Variable
Budget Review
$ 255 Million Total Budget
Debt Service$159M
CustomerService $6M
Water Plants $13M
Sewer Plants$31M
Variable$4.9M
1% Reduction in Usage =$1.9M Reduction in Revenue
Fixed$8.1M
1% Reduction =$49K
City$14M
Overhead$22M
Dept. Admin$8M
Plants$44M
Lines$24M
Employees by Division
Budget Review
Field Operations
Plants
Customer Service
Laboratory
Engineering
Other
25%
4%5%
14%
15%
37%
Employees Per Thousand Accounts
Budget Review
2.08
2.02
1.881.91
1.83
1.77
1.60
1.65
1.70
1.75
1.80
1.85
1.90
1.95
2.00
2.05
2.10
2.15
2002 2003 2004 2005 2006 2007
Cost of Enforcement to Date
• Total Cost - $358 k
• Out of Pocket - $156 k• Fines - $237 k
• Employees Involved - 126
Budget Review
McDowell Creek WWTP
McAlpine Lift Station
Budget Review
Capital SpendingCompleted Projects
• McDowell Plant Expansion • Southwest Water Main Phase 1 • McAlpine Lift Station
Projects Under Way• WW Treatment Plant Expansion• Briar Creek Phase 1• Southwest Water Main 2 &3
Five Year CIP Projects• Long Creek WWTP• Northeast Water Main• Annexation
Sugar Creek WWTP
Irwin Creek WWTP
$ 76 M$ 40 M$ 32 M
$ 132 M$ 51 M$ 26 M
$ 197 M$ 117 M$ 90 M
Short Term Pain - Long Term Gain
Reduced Consumption = Reduced Water Capital
• Reduction in Size• Delay Projects• Extends Life of Current Interbasin Transfers• Extends Life of Current Federal Energy
Regulatory Commission Authorization
Budget Review
Work & Asset Management
• Reduce Capital• Repair vs. Replace• Life Cycle Cost• Risk Assessment• Pilot - $9M Reduction
Budget Review
Tier Adjustment
Budget Review
Current
0-11 $1.33
12-22 $2.18
+22 $4.31
5-8 $1.59
9-16 $2.61
+16 $5.16
Projected
0-4 $1.38
Impact
Budget Review
$13.1912 ccf
$6.368 ccf
$2.764 ccf
Monthly IncreaseUsage
* 1 ccf = 748 gallons
Conservation Impact
Budget Review
$72.2412 ccf
$46.368 ccf
$35.466 ccf
ProjectedUsage
15 ccf
10 ccf
8 ccf
Usage
* 1 ccf = 748 gallons
$75.25
$49.10
$40.00
Current
Other Rate Adjustments
Budget Review
Irrigation
Commercial
Sewer Cap
Begins Tier 1
$4.95 per ccf
18 ccf
Existing
Begins Tier 3
* $5.80 per ccf
24 ccf
Proposed
* Water rate - $1.94 per ccfSewer rate - $3.86 per ccf
Model
Budget Review
20132012201120102009
42%42%42%41%43%
40%42%43%40%41%
40%40%42%41%41%ProjectedFund Balance
1.30 1.20 1.23 1.15 1.18 1.33 1.24 1.26
1.16
1.16
Coverage
1.38 1.27 1.32 1.19 1.22 ProjectedDebt Service
$48 M $25 M $29 M $17 M $16 M $57 M $34 M $29 M $17 M $16 M
$60 M $39 M $42 M $21 M $24 M ProjectedPay Go
6.83%6.62%6.58%7.39%17.84%
6.42%7.56%7.52%9.97%15.92%
Alternative
Recommendation
6.50%6.50%6.50%6.74%6.05%ProjectedRates
Alternative
Recommendation
Alternative
Recommendation
Alternative
Recommendation
NC & SC Survey Summary of Combined Water and Sanitary Sewer
(10 CCF Usage) 2008 Rates
Budget Review
$59.30$53.45 $57.16 $58.09 $62.37
$75.78$78.86 $79.83 $79.94 $80.93 $81.26 $82.48 $83.75 $85.45
$91.69 $91.73
$106.84
$125.75
$49.10
$0
$20
$40
$60
$80
$100
$120
$140
Charlo
tte
Union C
ountyRal
eigh
Win
ston-S
alem M
onroe
Hicko
ry
Chapel
Hill Car
y
Rock H
ill
Ashev
ille
Durham
Linco
ln C
ounty
Concord
Green
sboro
Gasto
nia
Kannap
olis
Charle
ston
Moore
svill
e
Budget Review
National Survey Summary of Combined Water and Sanitary Sewer
(10 CCF Usage) 2008 Rates
$49.10$59.3
048.7556.50 59.26 60.97 61.21 63.60
75.68 75.93 80.41 85.66
128.63
148.11
$0
$20
$40
$60
$80
$100
$120
$140
$160
India
napolis
Charlo
tte
Orlando, F
L
Phoenix
Fort W
orth
Philadel
phia
Mobile
, AL
Austin
Richm
ond, VA
Louisvi
lle
Cinci
nnati
Seattl
e
Atlanta
Budget Review
Survey of Drought Stricken Jurisdictions Summary of Combined Water and Sanitary Sewer
(10 CCF Usage) 2008 Rates
$44.17$49.10
$57.16 $58.09 $59.88 $63.55$74.12 $75.95 $79.83 $79.94
$85.45 $89.32
$125.36
$148.11
$0
$20
$40
$60
$80
$100
$120
$140
$160
Colum
bus, G
A
Charlo
tte
Ralei
gh
Win
ston S
alem
Cobb County
, GA
Augusta,
GA
Mar
ietta
, GA
Gwinnet
t, GA
Cary
Rock H
ill
Green
sboro
Chap
el H
ill
Birmin
gham, A
L
Atlanta
$59.30
Budget Review
Next Steps
• Stakeholder Information - March 6th
• Council Agenda - March 24th
• Customer Information - April• New Rate - May 1st
Budget Review
Conclusion
The Value of Water Is Changing• Water is not an unlimited, cheap commodity that can be
wasted.• It is rather a valuable, limited resource that sustains life
and provides for a growing economy.• The demand for clean drinking water & a clean,
sustainable environment goes on – even during a drought.