t
FY14 4th Quarter Operating Financial Reports
b
Submitted to the Board for review and informational purposes are the financial reports for the quarter ended June 30, 2014. These reports provide a year to date comparison between the approved FY/13 budget and actual expenditures through June 30, 2014.
Fund 21 General Operating Fund
Revenues:
Fourth quarter revenues are about $1.8 million above the same period in FY/13, which includes the release of $2 million from the rate reserve fund. This revenue increase includes decreased revenue from water sales of $0.2 million, San Juan Chama Strategy implementation $0.6 million, other miscellaneous revenues of approx. $2.5 million, and an increase in Sewer revenue of $3.2 million. The FY/14 revenues are slightly up from the FY/13 revenues for the same time period primarily due to the release of $2 million from the rate reserve fund but revenues are less than projected budget amounts due to decreased water usage as a result of a 9% reduction in consumption as compared to the same 12 month period of FY/13. The fourth quarter alone saw a 6% reduction in consumption as compared to the same period a year before. The reduction is offset by the 5% Rate Revenue increase implemented at July 1, 2013. Factors affecting the reduction are increased precipitation in the months of July and September and the 4th quarter as compared to the same period of FY/13 and normal precipitation for that same period. In addition, the increase in rates that went into effect on July 1, the increase in the discount for the low use customers, along with the 200% water use block level in the rate structure has had an impact on customer's usage patterns. Approved budget revenues amounts were derived with the expectation of very limited growth in the service area for the next several years coupled with continued reductions in consumption due to the very effective conservation efforts of the Water Authority.
Expenditures:
Fourth quarter total expenditures are $1.6 million above the same period in FY/13. Total net expenditures per the year end financials are $3.4 million less after adjustments to liabilities and backing out the GASB 45 adjustment for Other Post-Employment Benefits. This increase is mainly in the Interfund Transfers $6 million and General Government $4.7 million. The increase in the General Government is due to the large Risk Insurance Premiums the Water Authority paid as it transferred its Risk Program away from the City of Albuquerque. These two increases were offset by decreases in other operating categories. In FY/14, in conjunction with the move to a new ERP system, the Water Authority added a General Government division to the chart of accounts structure to move Water Authority-wide appropriations out of individual departments. This division is comprised of the following departments, appropriations for Utilities, Electricity, and Natural Gas. Additional appropriations for Workers Compensation, Tort and Risk, Franchise Fees, Water Conservation Fees, Admin Fees to the City of Albuquerque, and Interfund Transfers. These appropriations had, in previous years been tracked in individual departments or divisions. At this time due to the revenue shortfall, the Water Authority will continue postponing the transfer from Operating to CIP. This has generated savings of approximately $8 million for FY/14.
Working capital or fund balance is projected to be ($9.3 million), compared to a beginning balance in 2014 of ($14.9) million which includes the life insurance liability that was booked in FY13 per GASB 45. The fund balance trend has reversed as planned and will eventually meet the target of 1/12. Not shown in the 4th quarter report but important to note is that the ending cash balance at the end of FY/13 was approximately $5 million and has increased to approximately $21 million in FY/14. Also, important to note the Water Authority plans to borrow money at the end of FY/15 to supplement the 2 year CIP plan and to replenish the $8 million CIP transfer that was postponed in FY/14.
FISCAL IMPACT:
Due to the reduction in revenue, the transfer to CIP in the amount of $8 million has been postponed. It is clear that reduced consumption has caused revenues to decline. $2 million of the rate reserve fund was used in FY/14 to offset rate decreases. Also, it is projected that the Water Authority's debt service coverage will be at 1.33x for FY/14. This along with the increase in the Water Authority's cash position led all 3 rating agencies to confirm the Water Authority's current bond ratings.
The reduction in consumption is a positive result for conservation goals, however, the costs of maintaining the utility are primarily fixed in nature and the revenue requirements for operating, and debt service payments, reserves, and debt service coverage are not variable. Due to this an adjustment to the fixed charges was approved for FY/15 to continue upgrading infrastructure as planned. A rate consultant is currently evaluating this situation and will meet with staff, the public and the CAC to make further recommendations for FY/16. The FY/16 rates will also include 5% Rate Revenue increase that has already been approved by the Board.
PERFORMANCE INDICATORS:
Included in the 4th Quarter Financial Report is performance indicators. These indicators provide a snapshot of how the utility performing in key operational areas. The categories established are meant to be intuitive to our stakeholders and do not represent a specific goal or division. The report identifies the fiscal year-to-date performance compared to the established target. A status of each indicator is provided by meeting target, work in progress, or target not met. For FY14, 17 of the 22 targets were met, 4 were close in meeting the target and work continues to improve performance, and 1 target was not met.