Title
Presentation of the DPU FY2027 Budget
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Attached are the proposed FY2027 budget and the projected FY2028 budget. This is a two-year budget cycle, with a proposed budget for the first year and a projection for the second. Two years are presented to assist in analysis of trends and spending. Next year, the projected FY2028 budget will be updated and presented for approval.
The proposed FY2027 expenditure budget is $100,071,991, representing an 8% decrease compared to the FY2026 adopted budget approved by the Board in March 2025 and by Council during the April budget hearings.
Budget revisions and carryovers have been incorporated into the projected FY2026 budget. This adjustment ensures that projected ending cash balances for FY2027 are calculated more conservatively. Excluding these expenses could result in overstating cash balances and underestimating the revenue increases needed.
The specifics for each Utility sub-fund are discussed below. Note: This is a preliminary draft. Some inputs are still being finalized, and certain figures may change before the final presentation to the Board in March. All updates will be clearly noted when the Board reviews the final budget for adoption.
Staffing Changes
DPU has 102 regular-term FTEs and 3.65 FTEs for casual, student, and temporary roles. The overall FTE count remains unchanged from FY2026 to FY2027. Last year’s administrative budget included three overfill positions, and one of those was reallocated to Electric Distribution for the ED Superintendent-a change presented to the Board on September 17, 2025.
Per County Budget Office guidance, FY2027 salaries are estimated to increase 4% (1% grade adjustments, 3% performance). FY2028 salary and benefit costs are projected to rise 3%. These salary adjustments apply to employees outside DPU’s collective bargaining agreements.
Union Agreements
• IBEW: 2% increase included for FY2027; no increase for FY2028 (agreement expires Sept. 30, 2027).
• Plumbers & Pipefitters: No increases reflected for FY2027 or FY2028 (agreement expires June 30, 2026). After renewed contract is negotiated then a budget revision to cover any cost increases will be presented to BPU and Council at that time.
Budget Highlights
The ten-year capital plan and detailed project descriptions are included in the agenda packet. The project plan shown by utility is included so will not be discussed further, except to address its financial impact on the budget and any proposed or planned financing for these projects.
The following bullets highlight key points related to the current budget proposal:
All Divisions (reflects net change from FY2026 adopted budget)
• The proposed FY2027 budget increases $856,750 (11%) in direct labor costs. This reflects planned salary adjustments, longevity and stability pay, retention pay in accordance with union agreements, and additional funds in the administration budget for two overfill positions included in the FY2027 FTE count.
• The proposed FY2027 budget increases $305,355 (9%) in benefits.
• The proposed FY2027 budget reflects an overall increase of less than 1% in interdepartmental charges (IDCs).
Debt Coverage Ratio
Objective 2.3 from the FY2027 Strategic Focus Areas, Goals & Objectives sets a goal to meet financial reserve targets within our 10- year financial policy, with a debt coverage ratio of 1.3 or greater every fiscal year. The projected debt coverage ratio for FY2027 and FY2028 is 1.15 and 0.85, respectively. The main cause is that actual revenues in FY2026 are projected to be lower than the adopted budget. Gas therm sales in FY2026 are projected to be 19% lower due to warm winter weather conditions. Water Distribution sales are projected to be 5% lower due to consumer use. Potable water sales that include LANL are projected to be 9% lower. Non-potable water sales are projected to be 29% lower. Going forward this year's budget is using 5-year historical averages for projected commodity use. Annual debt service payments of $1.2 million for the White Rock Wastewater Treatment Plant and the Bayo Lift Station Elimination Pipeline projects commence in FY2027. The capital improvement project budget anticipates increased debt service to fund new projects over 10 years through a combination of bonds, low-interest loans, and grants. The Board packet includes a second option for Electric Distribution which assumes a $4 million grant for the EA-4 project in FY2028 and delays $4.5 million in bonding to FY2029. The projected debt coverage ratio for FY2027 and FY2028 is 1.15 and 1.34 respectively.
Administration
The department’s administrative budget (which includes Engineering, Public Relations, Finance and Administration, Billing, and Customer Care) will decrease by $221,963 (3%) in FY2027 compared to FY2026. The Finance and Administration Division allocates $35,000 for the annual audit, a slight increase from FY2026 costs. Labor costs account for three vacant positions: one in Finance and Administration, one in Customer Care, and one for the Deputy Utility Manager - Engineering following a retirement for FY2026.
Electric Distribution
Capital Plan:
• The proposed FY2027 capital budget allocates $1,500,000 for the White Rock URD Replacement (Aragon, Ridgecrest, Garver, and Catherine)
• $450,000 for Overhead Systems Replacement
• $35,0 00 for the DP Road Staging Area
• $500,000 for East Gate Substation Design
We plan to seek a bond for CIP expenditures in FY2028. The total projected cost for FY2027 projects is $2,485,000.
O&M Costs:
Increase of $667,535 (8%), excluding In Lieu taxes, includes $183,750 in contractual services for oil disposal and tree trimming services, $103,319 for Overhead maintenance to cover overhead switches, $242,275 in underground maintenance for switch replacement and addition 3-phase or single-phase transformer costs.
Labor and benefits cost include three vacant positions: Deputy Utilities Manager - Electric Distribution, a journeyman lineman, and an Engineering Project Manager (shared with Electric Production at a 60/40 split).
Rates:
The FY2027 budget incorporates an approved 8% rate increase, while FY2028 revenues reflect an anticipated 9% rate increase. This anticipated rate increase is needed to strengthen cash balances and even with these anticipated increases through FY2036 the cash balance for Electric Distribution does not allow fund reserves by FY2036 per Board-adopted financial guidelines (August 17, 2016).
Debt service:
Aligns with the FY2027 and FY2028 current amortization schedule.
Electric Production
Capital Plan:
The proposed budget allocates $200,000 for the Abiquiu Wicket Gate Hydraulic Servo Motor Replacement.
O&M Costs:
The O&M budget for Electric Production is about $4million (7%) lower higher than FY2026, due primarily to decreases increases in purchased power costs, and costs associated with the landfill photovoltaic array, and the administrative allocation. LANL system upgrades. The O&M budget for Abiquiu Generation includes $2.2 million for the vent shaft repair project which has been delayed from FY2026. The purchased power costs in FY2027 include anticipated power purchases for SNL/KAFB of $6.3 million due to delays in the Foxtail Flats project. SNL/KAFB may not be able to procure a PPA timely. A budget revision to reduce costs will be taken to BPU and Council in the event a PPA is procured. LANL’s load forecast is lower by 44,769 MWh in FY2027 this year as compared to FY2026 last year. Labor and benefits cost include an Engineering Project Manager (shared with Electric Distribution at a 60/40 split).
Gas
The NMMEAA agreement provides a guaranteed discount of $0.586 per MMBTU, which is reflected in the FY2027 budget. Natural gas market prices remain uncertain, and purchases for FY2027 are budgeted at $4.1690 per MMBTU, based on the five-year average of the San Juan Index.
Capital Plan:
The proposed FY2027 budget allocates $100,000 for Pipeline Repair & Replacement/Equipment and $35,000 for the DP Road Staging Area
O&M Costs:
Excluding cost of gas, the O&M budget increased $184,244 (5%). Contractual services of $133,777 for uniforms, concrete and asphalt, SCADA services, $20,000 for pipe to soil cathodic monitoring and utility locating equipment, and remaining costs for Pathway to Zero Natural Gas study. The maintenance and Repair budget of $58,195 includes on-call assistance with line maintenance, cathodic protection, PRV maintenance, and a line locate contractor. Gas funds IDCs include $45,000 or 10% of $450,000 Vactor (Vacuum Excavator) cost.
Sales and Rates:
Sales for gas have decreased from projected 800,000 therms to 760,000 therms in FY2026, therefore decreasing sales revenues.
The FY2027 and FY2028 budgets propose a 9% increase to fixed gas and service charges. Current rates are $0.34 per therm and $14.25 for the monthly service charge. Proposed rates are $0.37 per therm and $15.53 per month in FY2027, and $0.40 per therm and $16.93 per month in FY2028. Variable rate is budgeted at $0.42 per therm. This anticipated rate increase is also needed to strengthen cash balances and fund reserves by FY2036.
Water Production and Distribution
Capital Plan Water Production:
• $2,640,000 in grants and low-interest loans from the Water Trust Board for repainting Pajarito Tank 4A and Phase I of the Pajarito Road Transmission Line Replacement.
• $995,000 in CIP funds:
o $320,000 - Repainting Pajarito Tank 4A
o $340,000 - Phase I of Pajarito Road Transmission Line Replacement
o $300,000 - Pajarito Well No. 3 Replacement Wall Design
o $35,000 - DP Staging Area
Non-potable projects funded through Water Trust Board grants/loans will proceed only if funding is secured.
O&M Costs:
Increase of $420,437 (7%) from FY2026 to FY2027, the increase includes $49,000 for treatment, which includes disinfection unit upgrades and disinfection tablets. For storage tanks, $300,000 is budgeted for tank inspection and cleaning services, which is a new cost in FY2027. IDCs increased $106,070 (24%) in FY2027 from FY2026. Water Distribution funds IDCs include $45,000 or 10% of $450,000 Vactor cost.
Rates:
Proposed 8% rate increases are proposed for both potable and non-potable water rates. Additional increases are included in the 10-year forecast to meet reserve targets by FY2036.
Debt Service: Aligns with the FY2027 and FY2028 current amortization schedule.
Capital Plan for Water Distribution:
• $1.2 million in projects funded with low-interest Drinking Water State Revolving Fund grant/loan for Denver Steel Phase III (with Public Works).
• $35,000 in CIP funds for DP Staging Area
O&M Costs:
Excluding cost of water, O&M costs increased $217,764. The water distribution budget includes $106,887 for PRV replacements, $100,000 for water line repair kits and couplings, and $358,955 for contractual services. Water Distribution funds IDCs include $135,000 or 30% of $450,000 Vactor cost.
Sales & Rates:
Water sales have declined over the past five years, with projections decreasing from 800,000 Kgal to approximately 760,000 Kgal over the next decade. To strengthen cash balances and meet reserve funding requirements by FY2036 in accordance with Board-adopted financial guidelines, proposed rate increases of 8% are planned for FY2027 and FY2028. Additional rate adjustments are included in the 10-year forecast.
Debt Service: Aligns with the FY2027 and FY2028 current amortization schedule.
The capital budget for water production and distribution continues to leverage low-interest financing.
Wastewater Division
Capital Plan:
Sewer Collection
• $150,000 - Denver Steels Phase II (Public Works road project)
• $1,700,000 - Sewer Line Replacement (RIP Loan)
o $800,000 - Fairway St
o $600,0000 - Sycamore St
o $300,000 - North Community/Western Area sewer mains and services
Capital expenditure decreased $510,000 (19%).
O&M:
Increased by $448,590 (6%) due to additional operations staffing for collections and treatment. This increase is primarily driven by several departmental promotions tied to certification. Wastewater funds IDC’s also include $250,000 or 50% of $450,000 Vactor cost.
Rates:
FY2027 currently has a 7% increase, and we are anticipating an 8% increase for FY2028. Additional increases are included in the 10-year forecast to meet reserve targets by FY2036.
Profit Transfer/ Budget Options
The budget presented in the Financial Statement Fund Flow excludes projects proposed for funding through Profit Transfer funds. A five-year schedule of projected project recommendations is provided in the 10-Year CIP and Budget Option Plans. For FY2027, one project is proposed to coordinate utility infrastructure replacements with planned road construction on Fairway. Profit Transfer funding from sales for FY2027 totals $1,203,059, with $900,000 in projects proposed. The recommended motion for budget approval, when presented, will include a clause for approval of use of profit transfer funds of spending authority for this project as “budget options.”
Fiscal and Staff Impact
Explained in "Body" section.
Attachments
A - FY2027-2028 Proposed Budget Packet