HomeMy WebLinkAboutAgenda Packet City Council - 06/14/2011 (W)CITY OF ORPUS
Texas HRISTI
FY 2011-2012
Proposed Budget
Enterprise Funds Presentation
June 14, 2011
C
Enterprise Funds are used for operations that
are financed and operated in a manner similar
to private business enterprises with the costs
of providing goods or services being financed
or recovered primarily through user charges.
2City of Corpus Christi
ENTERPRISE FUNDS
3
Customer Growth Rates
2001 2011 Total %
Change
Annual Avg %
Change
Water 77,965 88,503 11.9%1.19%
Wastewater 74,755 88,174 15.2%1.52%
Gas 55,185 55,474 0.52%0.05%
City of Corpus Christi
Summary of Fund Balances
Fund
Projected
Fund
Balance @
8/1/2011
Budget
Revenues
Budget
Expenditures
Projected
Fund
Balance @
7/31/2012
Projected
Additions to
Capital
Reserve
7/31/2012
Water $16,365,295 $116,297,207 $109,107,112 $19,499,690 $4,055,700
Choke Canyon $24,875,250 $114,364 $1,750,163 $23,239,451
Gas $9,331,529 $40,165,694 $42,407,762 $3,679,833 $3,409,628
Wastewater $22,453,853 $58,497,257 $52,895,995 $24,274,841 $3,780,274
Storm Water $6,736,344 $23,886,465 $23,091,521 $3,967,745 $3,563,543
Total $79,762,271 $238,960,987 $229,252,553 $74,661,560 $14,809,145
4City of Corpus Christi
Summary of Working Capital
Fund Current Assets
@ 7/31/2010
Current
Liabilities@
7/31/2010
Reservations of
Fund Balance@
7/31/2010
Net Working
Capital @
7/31/2010
Water $17,837,588 $3,574,186 $5,392,278 $8,871,124
Choke Canyon 26,513,132 0 26,513,132 0
Gas 10,496,015 1,595,059 547,197 8,353,759
Wastewater 30,990,635 1,813,023 914,165 28,263,447
Storm Water 12,879,321 394,737 257,769 12,226,815
Total $98,716,691 $7,377,005 $33,624,541 $57,715,145
5City of Corpus Christi
Current assets are equal to cash, investments, receivables, and inventories.
Current liabilities are equal to accounts payable, accrued expenses, deposits, and other liabilities due
within one year
•The proposed 5.6% water rate increase is the
result of applying capital reserves to offset
operating expenditures in the Water fund in Fiscal
Year 2012.
•The short and long term impact of this application
of capital reserves requires Council consideration.
•This use of capital reserves precedes finalization
of a policy governing the use of capital reserves as
proposed to be considered during review of the
Fiscal Year 2012 Capital Improvement Plan.
5aCity of Corpus Christi
Utility Rate Increases
Average Residential
7City of Corpus Christi
Water 5.56%
Wastewater 1.30%
Gas 0%
8City of Corpus Christi
Components of Water Rate Increase
for Residential Customer
Amount
Increase
5.56%
increase
Diversion ($ .06)(.18%)
Treatment $ .34 1.02%
Network $ .16 .47%
Distribution $.48 1.47%
Storm Water ($.61)(1.88%)
Impact on Block Rates due to
Consumption
$ 1 .34 4.15%
Raw Water $ .17 .51%
Total Monthly Increase $1.82 5.56%
9City of Corpus Christi
Components of Wastewater Rate
Increase for Residential Customer
Amount
Increase
1.30%
Increase
Consumption change ($2.12)(5.00%)
O & M increase $0.85 2.00%
Debt Service increase $1.82 4 .30%
Total Monthly Increase $0.55 1.30%
Sample Utility Bill
Water –Inside City Limits Current Proposed Increase
Residential
•7,000 gallons/month
$32.72 $34.54 $1.82
Commercial
•50,000 gallons/month
$268.00 $287.00 $19.00
Wastewater –Inside City Limits
Residential
•6,000 gallons/month
$42.77 $43.32 $0.55
Commercial
•50,000 gallons/month
$195.80 $198.63 $2.83
Gas –Inside City Limits
Residential
•2 MCF (Cost of Service only)
$26.81 $26.81 $0
10City of Corpus Christi
11
Programmatic Utility Debt Service by Year
(Revenue Bond and Refunding Debt Only)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Est 2012
Prop.
WATER WASTEWATER STORM WATER GAS
Note: Storm Water was included with Water in years prior to FY 2009. The increases are driven
primarily by G.O. Bond street work utility support and utility-specific capital projects. The above
slide shows each utility program debt independently by year. The following slide shows the debt
in a “stacked bar” chart to illustrate the overall debt service by year.
City of Corpus Christi
12
Total Utility Debt Service
(Revenue Bond and Refunding Debt Only)
4%
14%
45%
-1%
15%
14%
18%
4%
5%
7%
2%
8%
-10%
0%
10%
20%
30%
40%
50%
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Est
2012
Prop.
WATER WASTEWATER STORM WATER GAS Rev Debt % Change
Note: The above graph reflects the increase in utility debt service requirements since 2000. The amount of total revenue debt service
has more than tripled since FY 2000 and reflects an average annual compound growth rate of about 11% -thus requiring a doubling of
debt service dollars roughly every 6-7 years. The percentage rate of growth appears to have fewer fluctuations since 2008 due in part
to increased scrutiny on the sustainability of debt service along with the switch to 30 year vs. 20 year revenue bonds. The following slide
breaks out the average annual growth rates of the above graph by program.
City of Corpus Christi
13
Programmatic Average Annual Utility Debt
Service
(Revenue Bond and Refunding Debt Only)
Program Debt Service Available
Since
Average Annual
Compound Growth
Rate (Rounded)
Water FY 2000 10%
Wastewater FY 2000 7%
Storm Water FY 2009 14%
Gas FY 2006 44%
Overall 11%
City of Corpus Christi
Gas
Budget Budget
11 12
Purchased Gas $23,279,476 $24,724,363
Residential $ 9,061,091 $ 9,116,572
Commercial $ 4,515,348 $ 4,533,863
Other $ 1,781,273 $ 1,790,896
Total $38,637,188 $40,165,694
62%
23%
11%
4%
Purchased Gas
Residential
Commercial
Other
City of Corpus Christi 14
•Average natural gas price expected to remain
stable in FY 12
•No rate increase necessary
15
Gas Consumption
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Est
2012
Proj
MCF
City of Corpus Christi
Gas
Budget Budget
11 12
Personnel $ 6,116,527 $ 6,298,995
Operating $ 3,249,258 $ 3,506,981
Natural Gas $22,658,325 $24,336,684
Debt $ 769,152 $ 866,314
Capital $ 734,363 $ 560,664
Total $33,527,625 $35,569,638
•Decrease of 2 FTE’s: (1) Safety Coordinator in Gas Office; and (1) Management Assistant due to
payroll re-organization.
•In order to provide safe natural gas in this year’s budget, the Gas Department will implement a
Distribution Integrity Management Plan (DIMP) to improve the gas infrastructure.
•The reliability will be improved by the merging of the Corpus Christi gas system with the
Calallen/Annaville gas system. This will provide additional redundancy.
•The promotion of gas use will be addressed in two ways: 1) Through the conversion/new construction
rebates, including the revised Builder’s Incentive Program; 2) Through a new division entitled
“Compressed Natural Gas” (CNG).
•Equipment replacement includes: 1 dump truck; 1 truck w/extended cab; 1 winch truck; 1 backhoe;
and 1 crew truck.
FTE’s
FY11 FY12
137 135
City of Corpus Christi 16
Storm Water
Budget Budget
11 12
Personnel $ 3,687,879 $ 3,818,752
Operating $ 5,118,495 $ 5,062,663
Debt $10,216,135 $10,268,273
Capital $ 1,060,702 $ 949,328
Total $20,083,211 $20,099,016
•Revenues continue to be a transfer from Water Fund
•0.58% decrease in Operating Budget
•No change in staffing level
•$52,000 increase in Debt Service ($780,000 absorbed by Debt Service Fund Balance)
•$100,000 new charge for storm water manhole adjustments (which had previously been a CIP
expense)
•Accepted 16 RIF employees from Solid Waste & Golf at salaries above what was budgeted, resulting in
increased salaries and wages
•Reduced Reserve Appropriation from $200,000 to $100,000
•$1.2 M in outsourced contracts which supplement operations
•Equipment replacement includes: 2 Vacuum Trucks; 1 Dump Truck; and 1 Pick-up Truck
FTE’s
FY11 FY12
87 87
City of Corpus Christi 17
Water
Budget Budget
11 12
Raw Water Sales $21,826,394 $21,568,884
ICL Sales $60,142,015 $59,440,459
OCL Sales $17,317,813 $18,566,816
Raw Water Contr.$ 9,592,860 $ 9,774,284
Other $ 4,903,499 $ 6,946,764
Total $113,782,581 $116,297,207
19%
51%
16%
8%6%Raw Water Sales
ICL Sales
OCL Sales
Raw Water Contr
Other
City of Corpus Christi 18
•5.56% average residential rate increase included in revenue projections
•Majority of the treated water rate increase is due to a decrease in the three-year average of Sales Volume
•Raw Water Cost Adjustment increase is due to true-up caused by under collection of $688,000 in 2010
19
Gallons of Water Consumed (1,000 gallons)
Raw and Treated
28,000,000
30,000,000
32,000,000
34,000,000
36,000,000
38,000,000
40,000,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Est
2012
ProjFiscal Year
City of Corpus Christi
Water
Budget Budget
11 12
Personnel $ 9,665,539 $ 9,691,333
Operating $21,693,107 $20,042,266
Debt $34,980,390 $34,904,848
Capital $ 2,325,507 $ 2,565,150
Total $68,664,543 $67,203,597
•6 FTE’s decreased: (2) Safety Coordinators from Water Utility Support Group; (1) Water Resource
Planner from Water Supply Development; (2) Management Assistants due to payroll re-organization
and (1) Support Services Assistant from Water Utility Support Services Group.
•Reduced operating expenses by $1.6 million by deferring planned life-cycle replacement/Integration of
Supervisory Control and Data Acquisition (SCADA) hardware at O.N.Stevens Water Treatment Plant
and the Pumps Stations and by deferring security improvements at the same locations. We will
continue to pursue the funding for security improvements via Homeland Security Grants.
•Funding is included for improvements: $100,000 –electrical and drainage improvements at Sunrise
Beach facility; $150,000 –development and management of projects related to Nueces River;
$255,000 –recycling of water and security improvements at O.N.Stevens Water Treatment Plant;
$150,000 –new HVAC system for the Water Utility Laboratory building; and $25,000 –telemetry
upgrade at Choke Canyon Dam.
•Equipment replacement includes: 1 valve truck; and 1 crane truck.
FTE’s
FY11 FY12
167 161
City of Corpus Christi 20
Wastewater
Budget Budget
11 12
Commercial $16,468,495 $16,910,797
Residential $37,289,648 $39,616,679
Other $ 1,617,208 $ 1,992,781
Total $55,375,351 $58,520,257
29%
68%
3%
Commercial
Residential
Other
City of Corpus Christi 21
•1.3% rate increase included in revenue projections. This equates to increased revenue of $2.3M from residential customers and $0.4M from commercial customers.
•The rate increase will support continued capital improvement investment for Wastewater projects.
•Residential rates are computed using a 3 month winter average.
Wastewater
Budget Budget
11 12
Personnel $ 7,741,594 $ 7,870,161
Operating $18,150,672 $20,785,975
Debt $16,476,035 $16,637,577
Capital $ 1,498,331 $ 615,076
Total $43,866,632 $45,908,789
•1 FTE increase: 1 Management Assistant added from the Water Fund due to payroll re-organization.
•Construction has begun for a new facility to replace the existing Broadway Wastewater Treatment Plant
which was constructed in 1936. The new plant is scheduled for completion in January 2013 at a cost
of $50.5 M.
•More stringent permit parameters for the Oso Water Reclamation Plant will require ammonia limits of
4.0 mg/l as mandated by the TCEQ and EPA. Resolution of this requirement will involve expenditures
of approximately $5 M over the next 30 months for break point chlorination but long term resolution
may require up to $50 M plus increases to the operating chemical budget for unfunded mandate
requirements.
•Application to the TCEQ for resolution of overflows through the State of Texas Sanitary Sewer Overflow
initiative (SSO-1) has been developed and submitted for approval. For FY 12 Budget, the department
has added an addition $2 M for contracting line cleaning.
FTE’s
FY11 FY12
167 168
City of Corpus Christi 22
Summary of Fund Balances
Fund
Projected Fund
Balance @
8/1/2011
Budget
Revenues
Budget
Expenditures
Projected Fund
Balance @
7/31/2012
Airport $4,446,836 $7,234,242 $6,733,549 $4,947,529
Golf Center ($1,015,779)$250,958 $135,244 ($900,065)
Marina $37,102 $1,787,197 $1,638,705 $185,594
Total $3,468,159 $9,272,397 $8,507,498 $4,233,058
23City of Corpus Christi
Airport Fund Major Revenues
Budget Budget
11 12
Landing Fes $ 674,400 $ 663,816
Space Rental $1,038,000 $1,066,200
Auto Rental $1,248,000 $1,260,000
Parking Lot $1,853,210 $1,770,733
TSA Charges $ 595,520 $ 613,494
Security Service $ 303,900 $ 308,460
Other $1,360,828 $1,551,539
Total $7,073,858 $7,234,242
City of Corpus Christi
10%
2%
20%
28%
10%
5%
25%
Landing Fees
Space Rental
Auto Rental
Parking Lot
TSA Charges
Security Services
Other
24
•Airline landing fee and space rental revenue reflect contractual increase of 1.5%
•Auto rental reflects annual contractual adjustment on Minimum Amount Guaranteed (MAG)
•Parking Lot revenue adjusted for slight decrease in enplanements at Airport
•TSA Charges reflect Council approved lease amendment to include janitorial services for Transportation Security Administration offices in Terminal
•Other Revenue includes modest increase in terminal rent for tenants
Airport
Budget Budget
11 12
Personnel $3,809,828 $3,641,540
Operating $1,546,766 $1,603,570
Debt $ 89,541 $ 201,108
Capital $ 55,000 $ 0
Transfers $ 386,748 $ 300,812
Total $5,887,883 $5,747,030
•Review of operations and job assignments resulted in the elimination of five (5) vacant positions
•Airport Maintenance & Airfield personnel are now centralized in a new Airfield & Maintenance
building resulting in operating efficiencies
•Lease of airport property for a new 46,552 sq. ft. building for Fed-Ex Ground Distribution near
completion and expected to begin generating lease payment revenue early in FY11-2012
•A Request for Proposal (RFP) for a Management Services Agreement for parking lot operations and for a
Fixed Base Operator (FBO) –Lease & Development Agreement on the West FBO will be solicited, and
followed by a recommendation made to Council in an effort to reduce expenditures and enhance revenues
•Construction of a Quick Turn Around Facility to consolidate make-ready and light maintenance for rental car
operations is expected in FY11-2012. The facility will be owned & operated by the Airport , producing several
revenue opportunities including fuel sales.
FTE’s
FY11 FY12
97.2 92.2
City of Corpus Christi 25
Golf Center
Budget Budget
11 12
Personnel $ 913,850 $ 0
Operating $ 642,739 $123,186
Debt $ 11,007 $ 322
Capital $ 140,000 $ 0
Transfers $ 301,680 $ 0
Total $2,009,276 $123,508
FTE’s
FY11 FY12
29.5 0
City of Corpus Christi 26
•Fiscal Year 2012 will be the first full year both
courses will be operated by a private company
Marina Major Revenues
Budget Budget
11 12
Bayfront Revenues $ 220,500 $ 310,250
Slip Rentals $1,159,500 $1,314,000
Other $ 287,523 $ 162,947
Total $1,667,523 $1,787,197
City of Corpus Christi
17%
74%
9%
Bayfront
Revenue
Slip Rentals
Other
27
•Slip Rentals continue to increase due to an
aggressive marketing effort.
Marina
Budget Budget
11 12
Personnel $ 588,735 $ 600,734
Operating $ 350,989 $ 384,032
Debt $ 371,049 $ 330,131
Transfers $ 80,628 $ 53,124
Total $1,391,401 $1,368,021
FTE’s
FY11 FY12
15 15
City of Corpus Christi 28
•Establish Marina Market Days to be held the first
Saturday of each month
•Continue to maintain current level of services
Fiscal Year 2011-12 Proposed Budget
•The remaining schedule is as follows:
•June 21 –Debt Service/Special Revenue/ Internal
Service
•June 28 –Public Hearing
•July 12 –First Reading of Adoption Ordinance
•July 19 –Second Reading of Adoption Ordinance
•To be determined –Receipt of Certified Tax Roll
•To be determined –Adoption of Tax Rate
29City of Corpus Christi
QUESTIONS?
30City of Corpus Christi
Defining the Path Ahead
1
ISSUE
Pursuant to Section 29 of Article II of the City’s Charter:
(a) The city council shall appoint a city auditor. The
city auditor may be removed only by a majority of the
city council.
(b) The city auditor shall report to the city council and
have such duties, responsibilities, and staff as
determined by ordinance, including the responsibility
to conduct, or cause to be conducted, financial,
performance, investigative, and other audits following
government auditing standards as promulgated by the
Comptroller General of the United States.
2
TIMELINE TO DATE
1/25/11 Council discussed City Auditor appointment
process
4/12/11 Council discussed job descriptions
5/6/11 –5/18/11 RFP open
5/10/11 –5/24/11 City Auditor, Associate Auditor and
Senior Accountant positions posted
6/14/11 Administration Committee recommended that
City Council review two options:
1. Hiring full-time staff
2. Contracting the service
3
DESIRED OUTCOMES
Obtain Council direction regarding:
1. Contracting or hiring full-time staff for internal
auditor services
2. Process to define the relationship between the
internal auditor, city council and executive staff.
3. Initial projects for the internal auditor consideration
4
ESTABLISH DIRECTION
REGARDING CONTRACTING OR
HIRING FULL-TIME STAFF
5
OPTION 1
HIRE FULL-TIME STAFF
Applications received:
City Auditor –15 received; 5 met minimum
qualifications
Assoc. Auditor –27 received; 2 met minimum
qualifications
Sr. Accountant –23 received; 12 met minimum
qualifications
6
OPTION 2
CONTRACTING INTERNAL AUDIT
SERVICES
All contracts exceeding $50,000 must be approved by
City Council
7
OPTION 2 (cont.)
REQUEST FOR PROPOSALS
HR and Purchasing developed an RFP; three-year contract
(length of contract may be adjusted)
RFP was disseminated as follows:
Issued directly to 17 providers, of which the following 5
are local:
Collier, Johnson & Woods, PC
Ernest R. Garza & Co., PC
Gowland, Stealy, Morales & Co., PLLC
Kirk, Monroe & Klastermann, LLP
Lovvorn & Kieschnick, LLP
City did not receive proposals from local providers
8
OPTION 2 (cont.)
PROPOSALS RECEIVED
4 proposals were received from the following:
Grant Thornton, L.L.P., Houston
McConnell, Jones, Lanier & Murphy, L.L.P.,
Houston
Smith, Patterson & Johnson, P.L.L.P., Austin
(deemed non-responsive as required total pricing
not provided by proposer)
Weaver & Tidwell, L.L.P., San Antonio
9
OPTION 2 (cont.)
SUMMARY EVALUATION MATRIX
Evaluation Criteria
Maximum
Score
WEAVER & TIDWELL, L.L.P.
San Antonio, TX
GRANT THORNTON, L.L.P.
Houston, TX
McCONNELL, JONES, LANIER &
MURPHY, L.L.P
Houston, TX
Technical Solution 15%9.0%10.2%15.0%
Proposer's Profile & Qual.30%20.7%21.6%27.6%
Pricing 50%50.0%34.3%17.1%
Exceptions 5%5.0%1.0%5.0%
Total Score 100%84.7%67.1%64.7%
Total Three-Year Award Amount $417,150.00 $404,856.00 $879,620.23
Projected Number of Audits over
Three-Year Contract 18 12 13
Average Number of Audits per Yr.6 4 4
Average Annual Cost $139,050 $134,952 $293,206.74
Average Projected Cost Per Audit $23,175.00 $33,738.00 $67,663.09
Note: Pricing scores are based on the Average Projected Cost Per Audit 10
INTERNAL AUDITOR COUNCIL &
EXECUTIVE STAFF WORKING
RELATIONSHIP
11
Working Relationship
Many government entities define working relationships that ensure the productivity and achievement of outcomes produced by an Internal Auditor:
Institute of Internal Auditors
“The internal audit activity plan of engagements must be based on a documented risk assessment, undertaken at least annually. The input of senior management and the board must be considered in this process.”
The chief audit executive must report periodically to senior management and the board on the internal audit activity’s purpose, authority responsibility, and performance relative to its plan. Reporting must also include significant risk exposures and control issues, including fraud risks, governance issues and other matters needed or requested by senior management and the board. ”
12
Working Relationship
City of Austin, Texas
“The City Auditor is responsible for selection of an audit area
and may consider requests from council and the city
manager in selecting an audit area.”
City of Dallas, Texas
“In addition, the Mayor, City Council Members, or the City
Manager may request specific audits.”
Shohomish County, Washington
“The executive may recommend to the county council that
the internal auditor perform special audits. Special audits
shall be requested by the executive in writing and identify
the anticipated objectives of the audit. ”
13
Working Relationship
It is recommended that staff begin preparation of an
ordinance to be considered by the City Council that
develops the policies, procedures and protocols that
govern the working relationship between the City
Council, Internal Auditor and the City Manager. The
ordinance would be brought for Council’s
consideration before August 1, 2011.
14
IDENTIFY SUGGESTED PROJECTS
FOR INTERNAL AUDITOR
15
SUGGESTED PROJECTS
1.Review City’s delinquency and collection policy in the
following areas:
a. Utility Services
b. Municipal Court
c. Development Services
2. Evaluate current procurement policies/procedures to
avoid risk of abuse or illegality
3. Review inventory controls utilized by City departments to
ensure system integrity and safeguarding of City assets
16
COUNCIL DIRECTION REQUESTED
1. Contracting or hiring full-time staff for internal
auditor services
2. Process to define the relationship between the
internal auditor, city council and executive staff.
3. Initial projects for the internal auditor consideration
17
QUESTIONS
18