Two key factors affecting the “mid-cycle update” for the 2014 budget for the El Dorado Irrigation District are increased hookup fee collections and lower expenses as 2013 comes to a close. EID operates on a calendar-year budget, and budgets two years at a time.
Hookup fees, called Facility Capital Charges, for 2013 are $1 million higher than budgeted, according to Finance Director Mark Price, who also said Monday that projected year-end expenditures are expected to be $575,000 less than the adopted budget.
The two factors include savings of $358,000 in 2014 over the revised 2013 projected cost for Public Employees Retirement System payments by the district. Those payments were lowered after the employees agreed to pay the full amount of their portions of PERS, which the state’s pension reform law requires by 2018. EID employees agreed to fully implement the reform act’s provision this year rather than stretching it out over the next four years.
Total employee benefits are projected to be $11.019 million by Dec. 31 and $11.004 million in the revised 2014 budget. The savings on PERS helped offset increases to FICA and employer PERS assessments, Price reported. FICA is the Federal Insurance Compensation Act that funds Social Security and Medicare through payroll taxes.
The district’s revenue for 2013 was revised slightly upward to $75.787 million. The 2014 revenue budget was revised downward from $79 million to $76.333 million. Revised 2013 operating expenses were down almost $600,00 from budget but will be up about $1 million in the revised 2014 budget.
The debt services ratio in 2013 is projected to be 2.00 and 1.56 in 2014. The minimum required by bond holders is 1.25.
The budget outlook plus putting off to 2015 a new bond issue is leading EID staff to recommend dialing back the 2014 rate increase from 11 percent to 5 percent. The bond sales — $40 million to $60 million — will cover big-ticket long-term projects like the $18 million to raise Forebay Dam 10 feet and meet dam safety requirements, and $4.3 million to replace the Sly Park Intertie. The intertie is 3.4 miles of 20-inch waterline between Reservoir A and Reservoir 1 water treatment facilities. The steel-coated pipe was installed as part of a hurried drought relief project in 1977-78 and is now corroded.
Price is projecting FCC revenue to be $3 million each year from 2014 through 2018, which he called a conservative forecast.
Price also did alternative budgets based on no rate increase in 2014 and a 3 percent rate increase in 2014. Both of those scenarios would reduce cash available to pay for capital improvement projects from $8.7 million in 2014 to $3.9 million and $5.63 million, respectively. To maintain that “pay-go” level at $8 million-$11 million would require 5 percent raises in each of the following years, but 15 percent and 12 percent, respectively in 2017.
Price’s budget projections call for 5 percent raises, though increased FCC collections could mean a rate hike less than 5 percent. Abercrombie reminded the board that failure to raise rates by small amounts in the past forced the district to do double-digit rate increases when new home construction came to a halt in 2007-2008.
“One thing …. we’re missing: What if we trimmed 3-5 percent?” asked Director Alan Day. “Would we have had to have these rate increases?”
“Right now we’re keeping it close to 2013 and are spending $2 million less than 2008,” said General Manager Jim Abercrombie. “I’m getting pretty good pushback from most of my staff on (further cutbacks).”
Price added that the average fleet is 10 years old with 100,000-150,000 miles.
“What the board doesn’t see is (the higher budget). We’ve taken some of these reductions in before presenting it to the board,” Abercrombie said.
Director George Osborne asked,”Is there a number for ‘pay-go’ projects and put the extras into paying off the debt. It is has a tremendous effect, especially on our bond rating.”
Abercrombie said $10 million to $12 million cash to do annual projects is “the number I look for.”
Osborne asked about dedicating anything above that to prepayment of the debt.
“FCC revenue is an annual decision — to pay-go, reserve or bond,” Price said.
The revised 2014 budget was approved 4-1, with Day voting no.
Right after that the board unanimously approved putting $3 million into escrow to pay part of the 2004 bond coming due March 1, 2014. On that date the district will kick in an additional $2.25 million. That will leave a balance of $35.182 million on the 2004 bond, according to Price.
Another unanimous monetary action by the board was to approve a “headwaters benefit agreement” with the Sacramento Municipal Utility District that will bring in $30,000 in revenue to EID, with an annual inflation adjustment. The theory in this agreement that took 10 years to negotiate is that SMUD gains from EID releasing water into the South Fork of the American River that SMUD makes use of in its White Rock Powerhouse. PG&E also benefits at its Chili Bar Powerhouse, but that was waived as part of the sales agreement for Project 184.
The $30,000 figure was reached after an analysis of 12 years of hydro flows in Project 184, said EID engineer Jake Eymann.
One additional new revenue source is $24,000 annually for a cell tower on El Dorado Hills Water Treatment Plant, approved unanimously.