Title
Department of Public Utilities FY2019 & FY2020 Budget Presentation
Recommended Action
None - discussion item only. Budget will be presented in March for approval.
Staff Recommendation
None - discussion item only. Budget will be presented in March for approval.
Body
Attached is the proposed budget for FY2019 and the projected budget for FY2020. The FY19 expenditure budget overall as presented is a reduction of 10% from the fiscal year 2018 budget, attributable primarily to low cost of power in the electric fund, low cost of gas in the gas fund, and completion or delay of certain projects that are not being re-budgeted. FY2020’s projected expenditure budget overall represents a 4% increase over 2018, and a 15% increase over the proposed FY19 budget, due primarily to planned construction of the White Rock Wastewater Treatment Facility in that year.
Changes in each Utility sub fund are discussed below.
Note: this is a preliminary draft, some inputs are still being finalized and some numbers are likely to change between now and final presentation to the Board for approval in March. All changes will be noted when the Board considers the final budget for adoption in March.
Staffing changes
There are no staffing changes proposed in this budget. We continue to have one limited term FTE on the admin roster, funded by the County ERP project to partially backfill staff resources that will be dedicated to the project. That position is expected to expire when the ERP project is finished. The Electric Production budget continues to fund double fill of a Hydro Plant Maintenance Technician in anticipation of retirement of one of the existing staff in 2018. This double fill is utilizing an existing vacancy so does not result in an increased FTE count. There are no realignments contemplated nor are there any Union agreements scheduled for renewal.
Budget Highlights
Per County Budget Office guidance, salaries were budgeted “flat” except for the increments included in the existing Union agreements. The ten-year capital plan is included in the agenda packet, as well as more detailed descriptions of the projects planned for FY19 and FY20.
Interdepartmental charges from the County (IDCs) are essentially flat in both years presented compared to FY18. Department admin costs decreased by $352k, or 7% in FY19 and remain essentially at that level in FY20. The planned reconfiguration of the Customer Care Center, budgeted at $250k in FY18, has not been re-budgeted, as funds will be available for carryover should the project not be completed in FY18. The remainder of the decrease is the result of several studies and initiatives that were budgeted in FY18 that will be completed in FY18 or will be carried over, so have not been re-budgeted in FY19 or FY20. Allocation of Admin costs are included in each utility’s O&M, so will not be discussed separately below.
Electric Distribution
No rate increases are projected in FY19 for electric distribution. The ten-year O&M budget forecast includes essentially inflationary increases of 1.5% per year after FY19. The Los Alamos Sub Station (LASS) project is scheduled for completion in FY18, so no additional funding is included in this budget for that project. Projects in Electric Distribution consist of routine overhead and underground replacements as needed.
Electric Production
The O&M budget for Electric Production is $1.5M lower than FY18, due primarily to continuing low purchased power costs. There is $250k included each year for LAC’s share of the COLA preparation for the Carbon Free Power Project, to establish budget authority should the County decide to continue participation in this phase of the project.
Gas
The NMMEAA deal guarantees a $0.274 discount, which is included in the budget for FY2018. Natural gas market prices remain low, and gas purchases are budgeted at $3.05/MMBTU in FY19, and $3.60/MMBTU in FY20 (before the NMMEAA discount). There are no major O&M or projects initiatives scheduled for this budget period.
Water Production and Distribution
The capital plan for Water Production, like last year, includes non-potable projects that are funded through a partial grant/loan from the Water Trust Board (WTB). These projects will only occur if the WTB funding is realized. The capital plan also includes the LA Reservoir Road Stabilization project, funded primarily with FEMA funds. The County portion of the project, amounting to $407,500, is being funded jointly by the DPU and the General County.
The O&M and capital budget for water production and distribution has been revised extensively to reflect the proposed 20-year plan presented to the Board at the November 2017 BPU meeting. Water sales appear to have stabilized more in line with the revised sales projections we adopted in last year’s budget cycle. In accordance with the long-range plan, a 6.25% increase in retail potable rates is budgeted in FY18. As shown in the ten-year plan, additional modest rate increases are projected through 2022, then essentially inflationary increases thereafter. While in previous drafts of the long-range plan additional increases in the wholesale water rate were projected, the current revision shows adequate cash flow with no additional wholesale rate increases, and previously scheduled increases have been deleted from the 10-year projection.
Wastewater Division
Several initiatives have been implemented to alleviate the financial challenges in the wastewater division associated with the need to construct a replacement treatment facility in White Rock. Through joint Board/Council action, an ordinance was adopted in FY18 allowing for the transfer of excess funds from the Gas fund to the Wastewater fund. A transfer of $2.5M was used in February to pay down the existing balance of the debt on the LA Plant. In addition, the remaining balance can be refinanced at a lower rate, and potentially the term extended, further reducing debt service requirements in the fund. Staff is evaluating options and will make a final refunding recommendation within the next month or two, but for this budget refinancing for the current loan term of 20 years on the LA Plant debt, and financing of the new plant for 30 years is assumed. All other projects in both the treatment plants and the collection system have been postponed allowing staff and funding to be concentrated on a successful White Rock plant project. Other projects are scheduled to resume in the out years on the 10-year plan.
The financial position of the wastewater fund and several long-term scenarios were discussed with the Board in previous meetings, With the financing initiatives described and the judicious postponement of other large capital projects, the rate trajectory presented in the alternative selected by the Board for implementation appears adequate. As shown on the 10-year plan, this includes an 8% increase in FY19, 6.25% in FY20, and ratcheting downward to essentially inflationary increases by 2024.
Alternatives
N/A
Fiscal and Staff Impact
See above
Attachments
A - FY 2019-20 Budget Briefing Package
B - Engineering Budget presentation JA
C - Electric Production Budget presentation SC
D - Electric Distribution Budget presentation RDLT
E - Water Production Budget presentation JR
F - Water Distribution Budget presentation JR
G - Gas Budget presentation JR
H - Wastewater Treatment Budget presentation JR
I - Wastewater Collection Budget presentation JR