Finance & Insurance Committee Item 8 February 12, 2018 F&I - PowerPoint PPT Presentation

Finance & Insurance Committee Item 8 February 12, 2018 F&I Committee Item 6-c, page 1 January 11, 2016

Overview Proposed Biennial Budget Operating Budget Ten-Year Financial Forecast Next Steps Finance & Insurance Committee Item 8 Slide 2 February 12, 2018

Finance & Insurance Committee Item 8 Slide 3 February 12, 2018

Support General Manager’s Strategic Priorities Adopt a two-year budget, covering fiscal years 2018/19 and 2019/20 Adopt rates and charges for calendar years 2019 and 2020 Update ten-year forecast (Ten-Year Financial Forecast), including the biennial period Finance & Insurance Committee Item 8 Slide 4 February 12, 2018

Maintain AAA/AA+/Aa1 ratings Achieve/Maintain coverage ratios • Debt service coverage = 2.0 • Fixed charge coverage = 1.2 PAYGO funding • 60 percent per year • Integral to maintaining coverage targets • Provides financial flexibility Finance & Insurance Committee Item 8 Slide 5 February 12, 2018

20% Average Rate Increase 15% 10% 3.0% 3.0% 5% 7.5% 7.5% 1.5% 1.5% 5.0% 5.0% 4.0% 4.0% 0% Calendar Year Finance & Insurance Committee Item 8 Slide 6 February 12, 2018

Fiscal Year Ending 2019 2020 Overall increase January 2019 & 2020 3.0% 3.0% Water Transactions* 1.65 MAF 1.75 MAF State Water Project Allocation 50% 50% Colorado River Aqueduct Diversions 0.84 MAF 0.92 MAF CIP Expenditures $200 M $200 M PAYGO $120 M $120 M * Includes water sales, exchanges and wheeling. Finance & Insurance Committee Item 8 Slide 7 February 12, 2018

Finance & Insurance Committee Item 8 Slide 8 February 12, 2018

Unrestricted Reserve* Target Reserve Minimum Reserve 700 Million Dollars 600 500 400 300 200 100 0 2017 2018 2019 2020 Fiscal Year Ending Overall Rate Inc. 4.0% 4.0% 3.0% 3.0% Water Transactions 1.54 1.55 1.65 1.75 (MAF)** Rev. Bond Cvg 1.6 1.5 1.6 1.9 Fixed Chg Cvg 1.4 1.4 1.5 1.7 PAYGO, $M 132 108 120 120 * Revenue Remainder and Water Rate Stabilization Fund ** Includes water sales, exchanges and wheeling. Finance & Insurance Committee Item 8 Slide 9 February 12, 2018

2018 2019 % Increase 2020 % Increase Rate Type Approved Proposed (Decrease) Proposed (Decrease) Full Service Untreated Volumetric Cost ($/AF) Tier 1 $695 $731 5.2% $755 3.3% Tier 2 $781 $817 4.6% $842 3.1% Full Service Treated Volumetric Cost ($/AF) Tier 1 $1,015 $1,050 3.4% $1,078 2.7% Tier 2 $1,101 $1,136 3.2% $1,165 2.6% RTS Charge ($M) $140 $133 (5.0%) $136 2.3% Capacity Charge ($M) $37 $31 (15.7%) $32 2.3% Rates and Charges Effective January 1 st Full Service Cost means the Full Service Rate, consisting of the following rate components: the applicable Supply Rate, the System Access Rate, the System Power Rate, the Water Stewardship Rate, and if applicable the Treatment Surcharge for treated water service. Finance & Insurance Committee Item 8 Slide 10 February 12, 2018

$2.0 $1.8 Other $1.6 Billion Dollars $1.4 CC $1.2 $1.0 RTS $0.8 Taxes $0.6 $0.4 Water Revenues* $0.2 $0.0 2017/18 2018/19 2019/20 Budget Budget Budget * Includes water sales, exchanges and wheeling Finance & Insurance Committee Item 8 Slide 11 February 12, 2018

Actual Water Transactions* Long Term Average Projection 2.5 Million Acre-Feet 2.0 1.5 2.35 2.26 2.16 2.11 2.06 1.91 1.86 1.77 1.70 1.0 1.63 1.60 1.54 0.5 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Fiscal Year Ending * Includes water sales, exchanges and wheeling Finance & Insurance Committee Item 8 Slide 12 February 12, 2018

Demand Management Supply Programs Colorado River Power O&M State Water Contract Capital Financing $2.0 $1.8 Billion Dollars $1.6 $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 2017/18 2018/19 2019/20 Budget Proposed Proposed Finance & Insurance Committee Item 8 Slide 13 February 12, 2018

$700 CA WaterFix $600 $500 Million Dollars Power $400 Minimum $300 OMP&R $200 Capital $100 Charges $0 2017/18 2018/19 2019/20 Budget Proposed Proposed Finance & Insurance Committee Item 8 Slide 14 February 12, 2018

Tax collected to fund SWC costs Tax collected for GO and Burns Porter bonds $140 $120 Million Dollars $100 $80 89 93 62 $60 $40 $20 39 27 25 $0 2017/18 2018/19 2019/20 Budget Proposed Proposed Finance & Insurance Committee Item 8 Slide 15 February 12, 2018

$60 $50 Million Dollars $40 $30 54 53 46 $20 $10 $0 2017/18 2018/19 2019/20 Budget Proposed Proposed Finance & Insurance Committee Item 8 Slide 16 February 12, 2018

$100 $90 Future Supply 2 2 Actions $80 2 $70 Million Dollars 44 41 $60 Local 42 $50 Resources $40 Program $30 Conservation 43 43 $20 32 Credits $10 Program $0 2017/18 2018/19 2019/20 Budget Proposed Proposed Finance & Insurance Committee Item 8 Slide 17 February 12, 2018

$90 $80 $70 Million Dollars $60 $50 82 $40 61 $30 54 $20 $10 $0 2017/18 2018/19 2019/20 Budget Proposed Proposed Finance & Insurance Committee Item 8 Slide 18 February 12, 2018

$250 $200 Million Dollars Bonds 80 80 80 $150 PAYGO $100 120 120 120 $50 $0 2017/18 2018/19 2019/20 Budget Proposed Proposed Finance & Insurance Committee Item 8 Slide 19 February 12, 2018

$400 $350 Million Dollars $300 Revenue Bond $250 $200 MWD GO 330 323 322 Bond $150 $100 $50 19 14 14 $0 2017/18 2018/19 2019/20 Budget Proposed Proposed Finance & Insurance Committee Item 8 Slide 20 February 12, 2018

Finance & Insurance Committee Item 8 Slide 21 February 12, 2018

1. Enhance Infrastructure Safety, Security and Resiliency 2. Prepare for More Extreme Hydrology 3. Ensure Imported Supply Reliability 4. Maximize Local Resources 5. Promote Environmental Stewardship and Sustainability 6. Foster Leadership and Strengthen Workforce Capabilities 7. Maintain Sound Business Practices and Fiscal Integrity Finance & Insurance Committee Item 8 Slide 22 February 12, 2018

FY 2017/18 - $1.695 B FY 2018/19 - $1.692 B $61 M $89 M $82 M $76 M $46 M $54 M $452 M $464 M 27% 27% $478 M $420 M 28% 25% $567 M $599 M 34% 35% Capital Financing State Water Contract O&M Colorado River Power Supply Programs Demand Management Finance & Insurance Committee Item 8 Slide 23 February 12, 2018

FY 2018/19 - $1.692 B FY 2019/20 - $1.743 B $54 M $86 M $89 M $61 M $53 M $46 M $451 M $452 M 26% $496 M 27% $478 M 29% 28% $603 M $567 M 35% 34% Capital Financing State Water Contract O&M Colorado River Power Supply Programs Demand Management Finance & Insurance Committee Item 8 Slide 24 February 12, 2018

Finance & Insurance Committee Item 8 Slide 25 February 12, 2018

Operating Equipment Other O&M Outside Services Treatment (Chemicals, Solids, Power) Materials & Supplies Benefits Salaries $600 Million Dollars $496 M $478 M $500 $420 M $400 $53 M $51 M $39 M $300 $139 M $128 M $112 M $200 $100 $323 M $304 M $273 M $0 2017/18 2018/19 2019/20 Budget Proposed Proposed Finance & Insurance Committee Item 8 Slide 26 February 12, 2018

% of total increase of $58 M $2 M 4% $9 M 15% $31 M $12 M 53% 21% $4 M 6% $1 M 1% Salaries & Benefits Materials & Supplies Treatment (Chemicals, Solids, Power) Outside Services Other O&M Operating Equipment Finance & Insurance Committee Item 8 Slide 27 February 12, 2018

2018/19 2019/20 Proposed Proposed vs vs 2017/18 2018/19 2019/20 2017/18 % 2018/19 % Millions of Dollars Budget Proposed Proposed Budget change Proposed change Salaries & Benefits 273.1 303.7 322.6 30.6 11.2% 18.9 6.2% Chemicals, Solids and Power 26.3 27.1 27.7 0.8 3.0% 0.6 2.3% Professional Services 17.0 23.2 23.1 6.2 36.8% (0.1) (0.3%) Non Professional Services 22.0 27.7 29.9 5.7 25.7% 2.2 7.9% /Security & R&M Materials & Supplies 23.7 27.4 27.3 3.7 15.5% (0.1) (0.5%) Insurance/Premiums 12.8 12.8 12.8 (0.0) (0.2%) 0.0 0.1% Utilities 7.5 8.3 8.4 0.8 11.3% 0.1 0.7% Memberships & Subscriptions 7.3 8.0 8.2 0.7 9.6% 0.1 1.6% Taxes & Permits 6.5 9.4 7.7 2.9 45.4% (1.7) (18.5%) Travel & Training 5.1 5.8 5.7 0.7 13.5% (0.1) (1.1%) 3.5 4.1 4.1 0.6 15.8% 0.0 0.0% Communications Other 8.5 11.5 11.9 2.9 34.4% 0.5 4.2% Operating equipment 6.4 8.5 7.0 2.1 32.6% (1.6) (18.4%) Total O&M $419.8 $477.5 $496.4 $57.7 13.8% $18.9 3.9% Finance & Insurance Committee Item 8 Slide 28 February 12, 2018

% of total increase of $30.6 M from FY 2017/18 $0.3 M 1% $4.3 M 14% $7.3 M $18.7 M 24% 61% COLA related salary & benefits Benefits cost increase New & refunded positions Other Finance & Insurance Committee Item 8 Slide 29 February 12, 2018

% of total increase of $18.9 M from FY 2018/19 -$0.6 M $1.1 M -3% 6% $5.9 M $12.5 M 31% 66% COLA related salary & benefits Benefits cost increase New & refunded positions Other Finance & Insurance Committee Item 8 Slide 30 February 12, 2018