FROM: Robert Thompson, General Manager
Originator: Wally Ritchie, Director of Finance
SUBJECT:
title
BUDGET INCREASE FOR FISCAL YEAR 2024-25
end
GENERAL MANAGER'S RECOMMENDATION
recommendation
RECOMMENDATION: Recommend to the Board of Directors to:
Approve a budget increase of $20,000,000 for FY 2024-25, for a total budget as follows:
|
|
FY 2024-25 |
|
Net Operating |
$232,674,493 |
|
Self-Insurance - Worker’s Comp. |
$1,124,029 |
|
Self-Insurance - Property & Gen. Liability |
$4,402,500 |
|
Net Capital Improvement Program |
$243,075,113 |
|
Debt/COP Service |
$61,027,421 |
|
Intra-District Joint Equity Purchase/Sale (1) |
$3,500,000 |
|
Total |
$545,803,556 |
(1) Cash to/from Revenue Area 14 (RA14) in exchange for capital assets to/from Consolidated Revenue Area 15 (RA15)
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BACKGROUND
In June 2024, the Board of Directors approved the Operating, Capital, Debt Service, and Self-Insurance Budgets for FY 2024-25 and FY 2025-26. Subsequently, the Board of Directors approved a land purchase in September 2024, and a construction claim settlement in December 2024. These actions are capital expenditures and were not included in the original budget. Staff did not request a budget increase at the time of approval of these expenses believing there was sufficient budget capacity. In the final months of the fiscal year, pre-planned and budgeted capital expenses were fully realized, driving the need to request a FY 2024-25 budget increase. However, cashflow remains unaffected due to receiving higher than budgeted revenues, which offset this budget increase.
RELEVANT STANDARDS
• Ensure the public’s money is wisely spent
• Produce appropriate financial reporting - Ops & CIP budgets every two years, with annual update
PROBLEM
The budget authority for FY2024-25 is not adequate to cover the actual expenses for the fiscal year. The budget authority was not increased concurrently with the Board approval of the property purchase or construction claim settlement after budget adoption. Planned operating and capital expenses closely matched budgeted levels for the entire fiscal year, with capital spending picking up in the second half of the year.
PROPOSED SOLUTION
Approve the proposed budget increase for FY 2024-25.
TIMING CONCERNS
The budget increase needs to be approved prior to finalizing the audit for FY 2024-25.
RAMIFICATIONS OF NOT TAKING ACTION
OC San will not have a budget approved at sufficient levels to accommodate the expenses incurred in FY 2024-25.
PRIOR COMMITTEE/BOARD ACTIONS
December 2024 - OHL USA, Inc. v. Orange County Sanitation District
September 2024 - Orange County Sanitation District, a public entity v. Bayside Village Marina, LLC
June 2024 - Approved the proposed Operating, Capital, Debt Service, and Self-Insurance Budgets for FY 2024-25 and FY 2025-26 as follows:
|
|
FY 2024-25 |
FY 2025-26 |
|
Net Operating |
$232,674,493 |
$239,114,716 |
|
Self-Insurance - Worker’s Comp. |
1,124,029 |
1,182,835 |
|
Self-Insurance - Property & Gen. Liability |
4,402,500 |
4,767,000 |
|
Net Capital Improvement Program |
223,075,113 |
279,436,128 |
|
Debt/COP Service |
61,027,421 |
60,431,104 |
|
Intra-District Joint Equity Purchase/Sale (1) |
3,500,000 |
3,500,000 |
|
Total |
$525,803,556 |
$588,431,783 |
(1) Cash to/from Revenue Area 14 (RA14) in exchange for capital assets to/from Consolidated Revenue Area 15 (RA15)
ADDITIONAL INFORMATION
The table below shows the approved budget and estimated actuals for FY 2024-25, in millions.
|
|
Approved Budget |
Estimated Actuals |
Variance |
Performance Percentage |
|
Capital |
|
|
|
|
|
Budget Approved |
$223 |
$222 |
$(1) |
100% |
|
Land Purchase |
- |
$17 |
$17 |
- |
|
Settlement |
- |
$7 |
$7 |
- |
|
Operating |
$233 |
$229 |
$(4) |
98% |
|
Debt Service |
$61 |
$60 |
$(1) |
98% |
|
Other |
$8 |
$8 |
$(-) |
100% |
|
Total |
$525 |
$543 |
$18 |
|
The addition of the two subsequent events totaling $24 million was partially offset by reduction in planned expenditures, resulting in OC San expenditures exceeding the budget by $18 million. However, staff are currently working on finalizing the accounting for FY 2024-25, therefore this request is to increase the prior approved budget by $20 million.
Cashflow remains unaffected by the budget increase due to receiving higher than budgeted revenues for FY 2024-25, which offset the request to increase the expenditure budget, detailed in the table below (in millions).
|
|
Adopted Budget |
Estimated Actuals |
Variance |
|
Revenues |
$531 |
$555 |
$24 |
|
Expenditures |
525 |
543 |
18 |
|
Net Revenues |
$6 |
$12 |
$6 |
CEQA
N/A
FINANCIAL CONSIDERATIONS
N/A
ATTACHMENT
The following attachment(s) may be viewed on-line at the OC San website (www.ocsan.gov) with the complete agenda package:
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