May Water News: Budget Process

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Below from the desk of Marlene King, SFID Director, Div. 3

SFID April 16, 2020 Board Meeting 

The five hour Zoom Board meeting primarily was the Board’s first look at the proposed FY’21 budget.  Fellow Solana Beach Director Petree shared his piercing analysis and questions to staff about expenses and whether expenses would exceed income.  I commented that reviewing non-personnel operating expenses, with the exception of a decrease of less than 1000th of one percent decrease in Administrative expenses, expense category after expense category showed increases from current FY-20 budget.  More importantly, the current FY’20 budget January mid-year review projected expenses vs. income would require a 700% increase in funds needing to be transferred out of Rate Stabilization reserves to balance FY’20 budget.  And even more importantly, this 700% increase in reserve transfer was projected before the extraordinary April rainfall, which book ended nearly five months – November 2019 through April 2020 – of customers essentially turning off their outdoor irrigation save for a two week period in February, significantly decreasing revenues.  I commented that when we close out FY’20, we will look back fondly on this 700% increase projection of reserve fund transfer because total potable water sales will easily be 9% or more under FY’20’s projection.  A rainfall year with the very high numbers we are experiencing would normally have resulted in the District transferring funds INTO the Rate Stabilization Fund, not OUT of the Rate Stabilization Fund.

The Board directed staff to re-evaluate their proposed FY’21 budget and reduce expenses.  The May 21, 2020 Board meeting will review staff’s expense cuts. 

Div. 1 Open Board Position Appointment 

The May meeting will review applications of people who wish to be appointed to fill the remaining months on Dir. Dunford’s term, which expires November 2020.  Dir. Dunford’s division covers the western portion of the Covenant not represented by me, and the eastern edge of Solana Beach. 

Friday, May 8th, close of business, is the deadline for submitting a letter to G.M. Al Lau regarding appointment to Div. 1 position.  Click here for additional information on the Board appointment process.

Budget Lessons Learned

What does this comparison of FY’20 projected income vs. expense and the Board directing staff to cut proposed FY’21 expenses teach us?  When a budget is being developed, one can not accurately predict or account for the following: (1) the weather – both expected rainfall and expected high temperatures; (2) actual customer demand, especially with the State Water Resources Control Board on the verge of releasing customer water usage targets;  (3) how much local (rainfall) water SFID will yield from Lake Hodges, as the California Division of Dam Safety required the lowering of permitted water in Lake Hodges, which is why just weeks ago Hodges released 2850 Acre Feet of water, which is the amount of water SFID would hope to yield in a good year; (4) Cost of Service Studies which tell customers that the District needs to increase rates to increase reserve funding for infrastructure spend are not particularly accurate; and, (5) Cost of Service Studies based on staff’s projected expense requirements can easily over-estimate income for all the above noted reasons, resulting in reserve funding continuing to decline.  Budgets are unsustainable when based on the large property owners continuing to pour potable water on their landscapes while adding a fifth tier to send a “price signal” to those same customers to decrease water usage.

As your Div. 3 representative, my primary focus when voting on a budget is whether I believe there is a reasonable expectation that income will cover expenses and whether the District is building up reserves, not depleting reserves.  I was the sole vote against approving the FY’20 budget. 

Residential gallons per capita per day

February 2020 clocked in with 252.5 r-gpcd; March 2020 was 177.8 r-gpcd, demonstrating the nearly two weeks of warm weather in February caused customers to turn on their outdoor irrigation.