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FY2015 4th Quarter Operating Financial Reports
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Submitted to the Board for review and informational purposes are the financial reports for the quarter ended June 30, 2015. The reports provide a year to date comparison between the approved FY15 budget and actual expenditures through June 30, 2015. The reports also include revenue and expenditures to June 30, 2015.
Fund 21 General Operating Fund
Revenues:
Year-end revenues are $9.5 million above the actuals for the same period in FY14. This revenue increase includes increased revenue from water sales of $5.2 million, San Juan Chama Strategy Implementation $1.4 million, and Sewer revenue $2.9 million. For FY15 an accounting change was made on the method of how revenue is recognized on the financials. The booked revenues are now posted on an accrual basis versus cash. The change was made primarily due to the fact that the Authority is on an accrual basis of accounting which keeps expenditure and revenue being recognized the same and also allows the Authority to capture a full 12 months of a rate increase. This change was made by the Authority’s External Auditors and verified by the Authority’s Internal Auditor. The FY15 rate revenues are higher than FY14 revenues for the same time period based on the base rate increase approved by the Board for FY15. In addition, there was a 1.2% decrease in water usage for the 4th quarter of FY15 as compared to FY14 which resulted in 1.2% or 366 million gallon decrease in consumption as compared to the same 12-month period of FY14. Rate revenue was $5.5 million less than budgeted based on actual consumption levels.
Miscellaneous Revenues budget projection increased in FY15 from FY14 levels by $4 million which is attributable to the pending sale of Water Authority property in FY15. FY15 Miscellaneous Revenues are $2.7 million less than what was projected in the FY15 budget. This is due to the delay in the pending sale of Water Authority property during this time period. The sale is still pending and is anticipated to sell in FY16. Revenues from this sale was not projected in FY16 budgeted revenues and upon completion of the sale will increase revenues above the level projected. Miscellaneous Revenues are up by $481,000 through the year end as compared to the same period of FY14. Projected approved budget revenues amounts were derived with the expectation of very limited growth in the service area for the next several years coupled with a GCPD level of 135.
Expenditures:
Third quarter total expenditures are $3.9 million above the actuals for the same period in FY14. This increase is mainly due to the increase in interfund transfers of $3.9 million offset by savings in the operating divisions. This is an increase in the amount transferred to CIP as compared to the same period in FY14. The increase in Legal/Risk cost is due to the transfer of appropriations for Risk and Tort costs that were appropriated in General Government in FY14. In addition, due to the refinancing completed in September and April, there is a $4 million savings in debt service payments from appropriated levels. Moreover, there were operational efficiencies and savings which accounted for an additional $2.47 million in savings. Total expenditures at June 30, 2015, are $6.47 million under the approved budgeted amounts and offset the $5.5 million rate revenue shortfall. No CIP funding was deferred in FY15.
Working capital or fund balance plus rate reserve is projected to be (2,031,825), compared to a beginning balance in 2014 of ($10.6) million. The fund balance trend has reversed as planned and will eventually meet the target of 1/12 of operating expenditures. There will be further adjustments made to the working capital balance through the audit of the FY15 CAFR. Working capital has been understated by approximately $13 million by the amortization expense for water rights. The expenditure of these water rights should not have been booked and this was validated by both the Authority’s Internal and External Auditors. There will be an additional liability booked on the CAFR in FY15 to record the Authority’s PERA liability. This amount is estimated to be $11 million.
FISCAL IMPACT:
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, debt service payments, reserves, and debt service coverage must be met. Consumption levels will continue to be monitored to ensure proper revenue levels are achieved.
The Water Authority will continue to control operating expenditures to offset any reductions in Revenue. The reduction in debt service payments for FY15 of $4 million has offset revenue reductions, as well as $2.47 million savings from operating expenditures. The $4 million in the Rate Reserve will was not needed.
The Water Authority went to the Bond Market in the spring of 2015. Three bond issues were evaluated to be refinanced with a Net Present Value (NPV) savings of an estimated $11.5 million. Also, the Water Authority borrowed for the next two-year CIP cycle, odor control at Central and Yucca, as well as CIP projects that were deferred in FY14 and FY15. The Authority’s Debt Coverage increased from the FY14 level of 1.34x to 2.03x in FY15. Days Cash on hand has improved from approximately 35 days in FY14 to 70 days in FY15.