Review of 2019 hearing on November 14 Annual Operating 2018 Budget - - PowerPoint PPT Presentation

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Review of 2019 Annual Operating Budget and Capital Improvement Plan

OCTOBER 19, 2018

• Setting the date for the public

hearing on November 14

• 2018 Budget Amendment
• 2019 Annual Budget Adoption

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BUDGET FOUNDATION

CFU 2018- 2027 Strategic Plan

Adopted March 14, 2018

CFU Mission & Vision

Mission: To provide our customers with innovative, high-quality utility services that bring the best value to the community.

Vision: Cedar Falls Utilities strives to achieve a standard

• f excellence as an industry

leader and a trusted provider of utility services to its customers and community.

CFU Core Values

Customer Focus Ethical & Responsible Behavior Innovation Employee Teamwork and Personal Growth

Three Pillars

• f Success

Customer Satisfaction Fiscal Responsibility Employee Enthusiasm

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2017 Customer Survey

OFFICE STAFF SATISFACTION FIELD STAFF SATISFACTION

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EMPLOYEE SURVEY – 2017 RESULTS

• In 2016, the 5 point scale was changed as compared to 2015
• Agree was changed to Strongly Agree = 5
• Disagree was changed to Strongly Disagree = 1

4.61 4.69 4.33 4.48 4.32 4.48

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

JOB CFU

Overall Satisfaction

2015 2016 2017

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RESIDENTIAL REPORT CARD

CFU Residential Report Card

For the period June 2017 - May 2018 Average Bill (per year) City Franchise Population Electric Gas Water Cable TV Internet Total

Cedar Falls Utilities

Electric Gas

41,390 $1,017.29 $518.38 $245.28 $960.00 $486.00

$3,226.95

CFU Ranking of 21

na na

1st 1st 4th 1st 1st 1st

Larger than Cedar Falls Ames

na 0%

66,191 $1,140.25 $715.51 $291.48 $1,126.80 $839.88 $4,113.91

Davenport

0% 0%

102,612 $1,073.00 $561.23 $294.12 $1,114.68 $839.88 $3,882.91

Des Moines

5% 5%

215,472 $1,127.96 $616.44 $285.96 $1,120.32 $839.88 $3,990.56

Cedar Rapids

3% 3%

131,127 $1,676.55 $578.06 $493.08 $1,119.36 $839.88 $4,706.94

Council Bluffs

2% 2%

62,524 $1,095.74 $689.64 $308.16 $1,019.88 $923.88 $4,037.29

Dubuque

5% 5%

58,531 $1,709.11 $709.92 $269.64 $1,091.16 $839.88 $4,619.71

Iowa City

1% 1%

74,398 $1,083.73 $566.84 $290.40 $1,074.12 $839.88 $3,854.97

Sioux City

5% 5%

82,872 $1,064.53 $616.44 $345.84 $1,187.40 $540.00 $3,754.21

Waterloo

3% 3%

67,934 $1,044.26 $604.70 $184.91 $1,121.40 $839.88 $3,795.15

West Des Moines

5% 5%

64,560 $1,127.96 $616.44 $320.04 $1,120.32 $839.88 $4,024.64

Smaller than Cedar Falls Fort Dodge

0% 0%

24,441 $1,073.00 $561.23 $273.00 $1,115.04 $839.88 $3,862.15

Indianola

5% 3%

15,785 $1,271.00 $604.70 $355.44 $1,120.32 $839.88 $4,191.34

Keokuk

0% 0%

10,431 $1,627.72 $750.13 $286.32 $1,120.08 $839.88 $4,624.13

Marshalltown

0% 0%

27,328 $1,627.72 $715.51 $228.00 $1,126.80 $839.88 $4,537.91

Mason City

0% 0%

27,430 $1,627.72 $715.51 $502.32 $1,130.64 $839.88 $4,816.07

Muscatine

na 1%

23,914 $1,124.42 $722.66 $241.68 $1,043.88 $791.88 $3,924.52

Newton

0% 0%

15,034 $1,627.72 $676.12 $268.08 $1,126.80 $839.88 $4,538.60

Ottumwa

0% 0%

24,487 $1,627.72 $561.23 $424.20 $1,122.12 $839.88 $4,575.15

Pella

na 0%

10,255 $1,139.12 $715.51 $422.16 $1,126.80 $839.88 $4,243.47

Waverly

na 0%

10,093 $1,404.14 $587.09 $438.00 $1,001.40 $599.40 $4,030.03

Average of Peer Communities

$1,314.67 $644.24 $326.14 $1,106.47 $814.66 $4,206.18

Typical annual savings for a household with electric, natural gas, water, cable TV and internet service = $979.23 (Compared with Average of Peer Communities)

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RESIDENTIAL COMMUNITY SAVINGS

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Overall 2019 Budget Review

Operating Budget Capital Improvement Plan

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2018 STATE BUDGET AMENDMENT

• Expenditures reforecast higher due to addition of the 2010B debt redemption and slightly

higher operating expenses

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2019 STATE BUDGET CERTIFICATION

• Operating expenditures = expenses less depreciation, interest expense & pension/post

employment expenses

Electric Gas Water Comm Total

Beginning Fund Balance

$35,655,389 $12,323,486 $4,359,721 $5,335,649 $57,674,245 Revenues & Other Financing Sources Debt Issuance Costs $0 $0 $0 $0 $0 Use of Money & Property 432,214 84,000 22,000 11,000 549,214 Operating Revenues 54,169,640 11,200,033 4,648,459 21,564,554 91,582,686 Miscellaneous Revenues 1,273,667 13,584 192,000 47,712 1,526,963 Total Revenues & Financing Sources $55,875,521 $11,297,617 $4,862,459 $21,623,266 $93,658,863 Expenditures & Transfers Out Operating Expenditures $44,068,627 $10,053,336 $3,390,953 $14,985,162 $72,498,078 Capital Outlays 8,448,710 1,712,370 2,429,730 4,858,190 17,449,000 Interest Payments 849,375 849,375 Principal Payments 2,490,000 2,490,000 Accrual Adjustments 19,875 19,875 Total Expenditures & Transfers Out $55,876,587 $11,765,706 $5,820,683 $19,843,352 $93,306,328

Excess of Revenues & Other Sources ($1,066) ($468,089) ($958,224) $1,779,914 $352,535

Ending Fund Balance

$35,654,323 $11,855,397 $3,401,497 $7,115,563 $58,026,780

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2019 TOTAL OPERATING REVENUES & EXPENSES

• Combined Revenues: $91.5 million
• Combined Expenses: $85.7 million

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2019 CAPITAL IMPROVEMENT PLAN BUDGET

• Combined 2019 CIP is $17,449,000

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MAJOR OPERATING EXPENSES

Percent of Total Expenses 2018 Published 2018 Reforecast 2019 Budget Commodities 48.4% 49.2% 47.6% Compensation & Related Costs 22.3% 21.1% 22.5% Depreciation 14.8% 14.2% 15.3% Materials, Supplies, Services 7.8% 8.8% 8.7% PILOT 3.9% 3.9% 3.7% Interest on Debt 1.3% 1.5% 0.7% Insurance 0.9% 0.8% 1.0% Property Taxes 0.6% 0.5% 0.5%

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COMMODITY EXPENSES

• Purchases for Resale is for MISO power purchases to serve load
• Coal Usage includes the fuel as used by the Western Units and Streeter Station

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ENERGY INCENTIVES BUDGET

• Does not include Low Income Energy Assistance Program (LIEAP), which has a 2019

budget of $86,740

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COMPENSATION BUDGET – PERFORMANCE MERIT

• Non-Union: New Pay for Performance and Wage Schedule approved in 2017

Recommendation for Non-Union Wage Schedule:

• Adjust Wage Schedule Structure by 2.3%
• Midpoint of all ranges is adjusted up by 2.3%
• Recommendation of Consultant in order to not fall behind market
• Merit increases of 3% on average
• Average pay increases are expected to rise 2.8% for middle performers

(3% median) and rise 4% for high performers (according to World @ Work)

• Placeholder of 3% in budget will cover all of the above
• December Board meeting: Resolution to specifically approve final

recommendation

• Union: Last year of multi-year contract is 2019-2020
• 3% pay increase effective 07/06/2019
• Fall of 2019 – Union recertification election

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COMPENSATION BUDGET – TOTAL PAYROLL AND BENEFITS

• Benefits are the costs of providing medical, dental, life, 457 match, IPERS & FICA contributions
• Capital Labor is the cost of building new infrastructure using internal staff
• O&M Labor is the cost of operations, maintenance, administrative, & general services by internal

staff

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BUDGETED STAFFING

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AVERAGE CUSTOMER COUNTS

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PAYMENT IN LIEU OF TAXES (PILOT)

• Current budgeted PILOT payments
• Accrual basis, Cash payments occur in the following year

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GENERAL PLANT CAPITAL IMPROVEMENT PLAN

• Called out items are owned by Electric, Gas, & Water in some combination or only owned

by the Electric Utility and rented to other utilities through operating expenses.

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Electric Utility 2019 Budget Review

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ELECTRIC UTILITY – REVENUES & EXPENSES

• Net Operating Income = Operating Revenues less Operating Expenses

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ELECTRIC UTILITY - COMMODITIES

• Costs of fuel used in generation and purchased power from MISO
• Used in calculations for Net Energy Cost Adjustment and Western Unit Revenue Sharing

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ELECTRIC UTILITY – CAPITAL IMPROVEMENT PLAN

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ELECTRIC UTILITY – SOME DETAILED CIP

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ELECTRIC UTILITY – KEY RATIOS

• No new debt is planned.
• Paying off 2010A and 2010B Electric Revenue Bonds 12-1-18 using cash reserves

Measures

Goal

2018 Published 2018 Reforecast 2019 Budgeted 2020 Projected

Debt Service Coverage-All Debt 1.75+ 2.37 2.62 3.49 3.45 Debt Service Coverage-Revenue Debt 1.75+ 2.37 2.62 3.49 3.45 Cash as a % of Operating Expenses (without Depreciation, PILOT, & NPL/OPEB exp) 50%+ 61.58% 71.18% 64.77% 58.35% Net Operating Income as a % of Revenue (NOI) 6%+ 2.34% 6.91% 4.26% 4.65% Net Income as a % of Revenue 6%+ 3.94% 8.21% 6.39% 6.05% Cash Surplus (Deficit) after Legal & Board Recommended Reserves Zero $7,367,259 $11,094,554 $9,508,893 $7,441,732

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ELECTRIC UTILITY – DEBT

DESCRIPTION Net Interest Cost Call Date Maturity Date Issue Amounts Redemptions To Date 12-1-18 Debt Payment O/S DEBT 12-31-18

Remaining Interest Rates

Electric Revenue Capital Loan Notes, Series 2010A 4.103% 12/1/2018 12/1/2030 $ 10,000,000 $ 2,905,000 $ 7,095,000 $ - Electric Revenue Refunding Capital Loan Notes, Series 2010B 3.306% 12/1/2018 12/1/2023 6,870,000 2,205,000 4,665,000 $ - Electric Revenue Refunding Capital Loan Notes, Series 2015 2.455% 12/1/2023 12/1/2026 26,395,000 4,390,000 2,370,000 $ 19,635,000 2.50%-5.00% Total Revenue Bonds $ 43,265,000 $ 9,500,000 $ 14,130,000 $ 19,635,000

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ELECTRIC UTILITY – BOARD DESIGNATIONS

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ELECTRIC UTILITY – CASH RESERVES

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ELECTRIC UTILITY – G&T ACQUISITION FUND – CFU CAPACITY SOURCES

2018/19 Capacity Sources

Unit Capacity (ZRCs) Year Fuel Ownership

Streeter #6 18.7 1963 Natural Gas / Coal CFU 100% Owner GT #1 18.6 1968 Natural Gas / Oil CFU 100% Owner GT#2 21.4 1970 Natural Gas / Oil CFU 100% Owner Streeter #7 37.1 1973 Natural Gas / Coal CFU 100% Owner WS #3 20.8 1978 Coal CFU 3.1% Owner Neal #4 15.8 1979 Coal CFU 2.5% Owner UNI 7.3 1984 Coal / Oil Contract WS #4 16.7 2007 Coal CFU 2.14% Owner Solar_1 1.0 2014 Solar Contract

Total 157.4

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G&T FUND – PROJECTED LOAD REQUIREMENT VS CAPACITY

Estimated Load Requirements MISO Capacity Auction Sale MISO Capacity Auction Sale ZRC Contract Sale Estimated CFU Capacity MISO Capacity Auction Sale MISO Capacity Auction Sale ZRC Contract Sale Estimated CFU Capacity if Streeter 7 lost 60 70 80 90 100 110 120 130 140 150 160 MW Planning Year Estimated Load Requirements Estimated CFU Capacity Estimated CFU Capacity if Streeter 7 lost

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G&T FUND – FUTURE GENERATION NEED AND COST

• Most recent generation investments
• Walter Scott #4
• Cost

$27.1 million

• Bonded $26.8 million (99%)
• Gas Turbine #2
• Cost

$5.1 million

• Bonded $4.7 million (92%)

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G&T FUND – CAPACITY DEFICIT

• Based on recent growth and current

generation – excess until 2063

• Cannot count on this, so evaluate with loss
• f generation

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G&T FUND – CAPACITY DEFICIT

2 4 6 8 10 12 14 16 18 MW Planning Year

Capacity Deficit without Streeter 7

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G&T FUND – COST OF CAPACITY

• Annual MISO Auction
• Annual Bilateral Contract Purchase
• New Construction – Gas Turbine

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G&T FUND - GENERATION PURCHASE CAPABILITY

$25 Fund Balance $75 Capital Cost of Physical Capacity Needed $77 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90

MILLIONS

• Assumes No Streeter 7
• Capital Cost of New Generation

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G&T FUND – HOW MUCH SOLAR WOULD OUR BALANCE BUY

• Estimated Solar Capital Cost of $2,288,000 / MW
• 2020

2.3 MW would need 12 acres

• 2025

8.4 MW would need 42 acres

• 2030

14.8 MW would need 74 acres

• Would meet capacity requirements without Streeter #7 through 2044

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Communications Utility 2019 Budget Review

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COMMUNICATIONS UTILITY – REVENUES & EXPENSES

• Net Operating Income = Operating Revenues less Operating Expenses

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COMMUNICATIONS UTILITY – KEY RATIOS

• Plan to payoff the Inter-Company loan from the Gas Utility in 2018
• Communications will be debt free!

Measures

Goal

2018 Published 2018 Reforecast 2019 Budgeted 2020 Projected

Debt Service Coverage-All Debt 1.75+ 0.00 0.00 0.00 0.00 Debt Service Coverage-Revenue Debt 1.75+ 0.00 0.00 0.00 0.00 Cash as a % of Operating Expenses (Net of Depreciation, PILOT, & Net Pension) 50%+ 36.08% 35.09% 45.86% 59.86% Net Operating Income as a % of Revenue (NOI) 6%+ 12.70% 12.43% 13.39% 13.99% Net Income as a % of Revenue 6%+ 13.07% 12.41% 13.77% 14.37% Cash Surplus (Deficit) after Legal & Board Recommended Reserves Zero ($472,111) ($1,863,623) $31,299 $2,817,870

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COMMUNICATIONS UTILITY - DEBT

DESCRIPTION Net Interest Cost Call Date Maturity Date Issue Amounts Redemptions To Date 12-1-18 Debt Payment O/S DEBT 12-31-18

Remaining Interest Rates

Communications Utility Revenue Capital Loan Notes, Series 2009 3.913% 12/1/2017 12/1/2024 $ 2,195,000 $ 2,195,000 $ - 4.00%-4.30% Communications Utility Revenue Capital Loan Notes, Series 2010 2.518% 12/1/2016 12/1/2020 13,130,000 13,130,000

• 3.00%

Total Revenue Bonds $ 15,325,000 $ 15,325,000 $ - $ - City General Obligation Capital Loan Notes, Series 2009B 3.217% 12/1/2017 12/1/2024 2,320,000 2,320,000

• 2.70%-3.80%

Note Payable to Gas Utility 2012 NA 12/1/2017 3,000,000 3,000,000

• 2.00%

Note Payable to Gas Utility 2017 NA 12/1/2018 4,000,000 - 4,000,000 - 2.00% Total Notes Payable $ 9,320,000 $ 5,320,000 $ 4,000,000 $ - Total Debt Outstanding $ 24,645,000 $ 20,645,000 $ 4,000,000 $ -

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COMMUNICATIONS UTILITY – BOARD DESIGNATIONS

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COMMUNICATIONS UTILITY – CASH RESERVES

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Gas Utility 2019 Budget Review

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GAS UTILITY – REVENUES & EXPENSES

• Net Operating Income = Operating Revenues less Operating Expenses

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GAS UTILITY - COMMODITIES

• Gas costs are made up of fixed price deals, monthly index-based gas, CPEP

projects #1-3 and daily index-based gas for the projected incremental supply

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GAS UTILITY - COMMODITIES

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GAS UTILITY – CAPITAL IMPROVEMENT PLAN

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GAS UTILITY – KEY RATIOS

• With high cash balances, the NOI% is being kept low to draw down cash reserves

to the Legal & Board reserve levels

Measures

Goal

2018 Published 2018 Reforecast 2019 Budgeted 2020 Projected

Debt Service Coverage-All Debt 1.75+ 0.00 0.00 0.00 0.00 Debt Service Coverage-Revenue Debt 1.75+ 0.00 0.00 0.00 0.00 Cash as a % of Operating Expenses (without Depreciation, PILOT, & NPL/OPEB exp) 50%+ 83.06% 79.23% 79.20% 72.09% Net Operating Income as a % of Revenue (NOI) 6%+ 2.69% 3.72% 2.17% 1.53% Net Income as a % of Revenue 6%+ 3.74% 5.28% 3.13% 2.29% Cash Surplus (Deficit) after Legal & Board Recommended Reserves Zero $5,909,466 $5,501,580 $4,569,789 $4,134,650

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GAS UTILITY – BOARD DESIGNATIONS

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GAS UTILITY CAPITAL REPLACEMENT FUND

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GAS UTILITY – CASH RESERVES

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Water Utility 2019 Budget Review

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WATER UTILITY – REVENUES & EXPENSES

• Net Operating Income = Operating Revenues less Operating Expenses

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WATER UTILITY – CAPITAL IMPROVEMENT PLAN

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WATER UTILITY – KEY RATIOS

• Construction projects keep cash reserves low

Measures

Goal

2018 Published 2018 Reforecast 2019 Budgeted 2020 Projected

Debt Service Coverage-All Debt 1.75+ 0.00 0.00 0.00 0.00 Debt Service Coverage-Revenue Debt 1.75+ 0.00 0.00 0.00 0.00 Cash as a % of Operating Expenses (Net of Depreciation, PILOT, & Net Pension) 50%+ 101.26% 126.36% 96.31% 87.87% Net Operating Income as a % of Revenue (NOI) 6%+ 12.98% 11.42% 8.59% 9.21% Net Income as a % of Revenue 6%+ 20.70% 19.51% 13.74% 13.84% Cash Surplus (Deficit) after Legal & Board Recommended Reserves Zero $364,949 $1,233,844 $663,225 $479,579

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WATER UTILITY – BOARD DESIGNATIONS

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WATER UTILITY – CASH RESERVES

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Board of Trustees:

Recommending Approval of the resolutions to Set the Date of the Public Hearing for the 2019 Proposed Rate Changes and the 2019 Budget