City Council

EXHIBIT "A" FY23 Budget Workshop June 14, 2022 Presented by: Michael Rodgers, CPA Director of Finance 1 Funds To Be Discussed • Water and Sewer Fund • Drainage Fund 2 2 1  Water and Sewer Fund Year-End Forecast for FY22 FY22 FY22 Adopted Year-End Budget Estimate Revenue $ 10,460,630 $ 10,312,712 Expenditures (10,614,980) (10,415,010) Incr/(Decr) to Reserve $ (154,350) $ (102,298) 3 3 Forecast for FY22 • Revenue is expected to increase nine percent over FY 2021 but still fall short of budget by $147,000 • Expenditures may end the year $200,000 under budget due to savings related to the water and sewer master plan 4 4 2  Water and Sewer Fund FY23 Statement of Fund Balance Projected Unrestricted Balance, Sept 30, 2022 $ 6,055,233 57.0% Increases/(Decreases) to Fund Balance: FY23 Revenue 12,160,390 FY23 Expenses (12,770,490) Net Increase/(Decrease) to Fund Balance (610,100) Projected Restricted Balance, Sept 30, 2023 $ 5,445,133 42.6% The City has adopted a fund balance policy with the goal of achieving and maintaining fund balance equal to 30% of budgeted expenditures plus the annual debt service for any fund-supported borrowing from external creditors for the fiscal year. At no time, shall fund balance fall below 25% of budgeted expenditures. 5 5 Status of Water and Sewer Fund Reserves $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2016 2017 2018 2019 2020 2021 2022 2023 Unrestricted Reserve Balance Minimum Reserve Requirement 6 6 3  Budget to Budget Comparison Revenue by Category Water and Sewer Fund FY22 FY22 FY23 Increase / Revenue Category Budget Estimate Budget (Decrease) Water Revenue $ 6,014,130 $ 5,739,009 $ 5,930,250 $ (83,880) Sewer Revenue 3,829,650 3,782,831 5,255,500 1,425,850 Fees and Other Revenue 489,690 658,550 560,900 71,210 Miscellaneous 127,160 132,322 130,610 3,450 Transfers 0 0 283,130 283,130 Total Revenue $10,460,630 $10,312,712 $12,160,390 $ 1,699,760 7 7 FY23 Water and Sewer Fund Revenue • Water revenue increases by three percent which is comparable to the four-year average growth rate • Sewer revenue increases by $1.4 million due to increases in base and volumetric rates • Transfers reflects personnel cost allocations and the use of ARPA funds 8 8 4  Water and Sewer Fund Revenue from FY16 to FY23 FY Water Sewer Other $14,000,000 2016 $4,030,216 $2,468,700 $ 420,284 $12,000,000 2017 4,557,170 2,827,928 567,997 $10,000,000 2018 4,907,703 3,087,121 697,601 $8,000,000 2019 4,725,361 3,155,709 750,217 $6,000,000 2020 5,244,147 3,289,304 558,943 $4,000,000 2021 5,293,154 3,546,462 578,160 $2,000,000 2022Projected 5,739,009 3,782,831 790,872 2023Budget 5,930,250 5,255,500 974,640 Water Sewer Other 9 9 FY23 Water and Sewer Fund Expenses by Category Expense Category Amount Personnel, 15% Personnel $ 1,949,880 Transfers, 33% Supplies 149,700 Maintenance 234,050 Services 802,480 Debt, 15% Debt 1,954,450 Water Purchases 2,358,600 Water Purchases, 19% Sewage Treatment 878,520 Personnel Supplies Maintenance Other Expenses 50,000 Services Debt Water Purchases Capital Outlay 214,000 Sewage Treatment Other Expenses Capital Outlay Transfers 4,178,810 Transfers Total Expenses $12,770,490 10 10 5  Budget to Budget Comparison Expenses by Category Water/Sewer Fund FY22 FY22 FY23 Increase / Expense Category Budget Estimate Budget (Decrease) Personnel $ 2,089,620 $ 2,021,761 $ 1,949,880 $ (139,740) Supplies 123,070 133,688 149,700 26,630 Maintenance 182,350 250,050 234,050 51,700 Services 1,019,210 685,770 802,480 (216,730) Debt 1,536,880 1,620,809 1,954,450 417,570 Water Purchases 1,500,700 1,511,514 2,358,600 857,900 Sewage Treatment 829,340 807,500 878,520 49,180 Other Expenses 90,000 10,000 50,000 (40,000) Capital Outlay 404,000 367,000 214,000 (190,000) Transfers 2,839,810 3,006,918 4,178,810 1,339,000 Totals $10,614,980 $10,415,010 $12,770,490 $ 2,155,510 11 11 Water & Sewer Fund Significant Changes • Personnel costs reflect changes to the method of allocating payroll costs • Consulting expenses fall by $256,000 after completion of the rate study and a cost reduction to the utility master plan update • City debt service payments increase by $417,000 after the issuance of Certificates of Obligation in 2022 for the elevated storage tank and 6th Ave waterline 12 12 6  Water & Sewer Fund Significant Changes • Water costs rise by $857,000 due to increasing operating costs and BCWCID-issued debt for water distribution, water treatment capacity and backup power generation • Capital outlay includes $200,000 for water tap materials and $14,000 for wash bay doors 13 13 Water & Sewer Fund Significant Changes • Transfers for capital projects total $2,550,000 in FY23 to cash fund several projects, including $1,500,000 TBWWTP expansion (bond offset) $ 600,000 Continental lift station offload $ 450,000 W Avenue A sewer replacement • Other transfers include $ 599,950 Personnel cost allocation $ 618,050 Franchise fees and fleet allocation $ 135,710 Capital equipment replacement $ 275,100 Water meter replacement 14 14 7  Outstanding City Debt for FY 2023 Outstanding Bond Issuance Description Amount Certificates of Obligation, Series 2008 $ 58,950 Certificates of Obligation, Series 2015 $ 5,635,000 Certificates of Obligation, Series 2016 $ 8,215,000 G.O. Refunding Bonds, Series 2017 $ 435,000 Certificates of Obligation, Series 2022 $ 6,070,000 Revenue-Supported Debt Outstanding $ 20,413,950 15 15 Annual Debt Service Payments on Revenue-Supported Debt $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Interest Principal 16 16 8  Drainage Fund 17 17 Drainage Fund Year-End Forecast for FY22 FY22 Year-End Budget Estimate Revenue $ 580,400 $ 557,112 Expenditures (573,180) (532,278) Incr/(Decr) to Reserve $ 7,220 $ 24,834 18 18 9  Forecast for FY22 • Revenue grows by five percent over FY 2021 but ends FY 2022 $23,380 under budget • Expenses are under budget due to savings in personnel and maintenance 19 19 Drainage Fund FY23 Statement of Fund Balance Projected Spendable Balance, Sept 30, 2022 $ 342,071 Increases/(Decreases) to Fund Balance: FY23 Revenue 582,100 FY23 Expenditures (582,100) Net Increase/(Decrease) to Fund Balance - Spendable Fund Balance, Sept 30, 2023 $ 342,071 20 20 10  Budget to Budget Comparison Revenue by Category Drainage Fund FY22 FY22 FY23 Increase / Revenue Category Budget Estimate Budget (Decrease) Storm Drainage Fees $580,000 $556,620 $579,000 $ (1,000) Interest Income 400 492 600 200 Transfers 0 0 2,500 2,500 Total Revenue $580,400 $557,112 $582,100 $ 1,700 21 21 FY23 Drainage Fund Revenue • No change to the City’s drainage fee is proposed for FY23 • Storm drainage fee revenue increases by four percent over the year-end estimate for FY22 • Interest income grows as yields are expected to increase 22 22 11  Drainage Fund Revenue from FY16 to FY23 FY Drainage Fees $600,000 2016 $377,990 $500,000 2017 389,230 $400,000 2018 452,742 $300,000 2019 492,639 $200,000 2020 517,462 $100,000 2021 531,251 $0 2022Projected 556,620 2023Budget 579,000 Drainage Fees 23 23 Budget to Budget Comparison Expenses by Category Drainage Fund FY22 FY22 FY23 Increase / Expense Category Budget Estimate Budget (Decrease) Personnel $ 268,990 $251,515 $ 198,610 $ (70,380) Supplies 15,630 16,940 17,120 1,490 Maintenance 46,260 30,760 54,360 8,100 Services 30,090 21,185 37,510 7,420 Debt 25,030 25,030 25,130 100 Capital Outlay 8,000 7,668 0 (8,000) Transfers 179,180 179,180 249,370 70,190 Totals $ 573,180 $532,278 $ 582,100 $ 8,920 24 24 12  Significant Changes • Personnel costs and transfers reflect changes to the method of allocating payroll costs • Flood warning expenses include the replacement of the Roy Reynolds/IH-14 Service Road device with a radar sensor • Capital outlay decreases after the purchase of a zero-turn mower in FY 2022 25 25 Annual Debt Service Payments on Revenue-Supported Debt $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 2023 2024 2025 2026 2027 2028 Interest Principal 26 26 13  In Summary • Water & Sewer Fund revenue grows to cover increasing costs for water distribution, water treatment, and backup power generation; additional debt service for the elevated storage tank; and cash-funding for capital projects • $2,550,000 will be transferred into capital project funds for upcoming projects • No rate increases are planned for drainage 27 27 Questions/Comments? 28 28 14  6/15/2022 EXHIBIT "B" WATER AND SEWER RATE STRUCTURE 2023 - 2027 CITY COUNCIL FOLLOW-UP JUNE 14, 2022 1 RATE STUDY FOLLOW-UP • NELISA HEDDIN, PROPRIETOR OF NELISA HEDDIN CONSULTING, LLC, PRESENTED HER STUDY AND RECOMMENDATIONS TO CITY COUNCIL ON MAY 24, 2022 • BASED UPON FEEDBACK, NELISA HAS ADJUSTED THE STUDY ASSUMPTIONS TO INCLUDE • COMMERCIAL CONSUMPTION WAS INCREASED BY 1,500,000 GALLONS PER MONTH BEGINNING IN 2024 DUE TO EXPANSION OF THE BELL COUNTY JAIL • MULTIFAMILY CONSUMPTION WAS INCREASED BY 600,000 GALLONS PER MONTH IN 2024 AND RAISED AGAIN BY 600,000 GALLONS PER MONTH IN 2026 FOR TWO APARTMENT COMPLEXES • CONSUMPTION FOR NEW SCHOOLS WERE ADDED IN 2024 AND 2026 • ON MAY 26, 2022, BELL COUNTY WCID INFORMED THE CITY THAT IT PLANNED TO ISSUE APPROXIMATELY $12M IN DEBT FOR BACKUP POWER AT THE WATER PLANT. BELTON’S SHARE OF THE PROJECT IS $1.5M PLUS INTEREST. DEBT SERVICE PAYMENTS OF $120,000 PER YEAR HAVE BEEN ADDED TO THE STUDY BEGINNING IN 2023 2 1  6/15/2022 WATER AND WASTEWATER REVENUE REQUIREMENTS • UTILITY RATES MUST COLLECT SUFFICIENT REVENUE TO COVER OPERATING EXPENSES, CAPITAL IMPROVEMENTS, DEBT SERVICE, AND INFLATION OVER THE NEXT FIVE YEARS • SEVERAL MAJOR PROJECTS WILL OCCUR DURING THE PERIOD THAT WILL ELEVATE EXPENSES SIGNIFICANTLY (WATER) BELTON TRANSMISSION SYSTEM UPGRADE PROJECT UPSIZES THE 14” WATERLINE TO 24” AND INSTALLS TWO 9.5 MGD PUMPS FOR $6.7M, INCREASING ANNUAL EXPENSES BY $450,000 (WATER) BELTON WATER TREATMENT CAPACITY WILL INCREASE TO 4 MGD WITH A 30-YEAR BOND ISSUE BY BCWCID FOR $22M, INCREASING ANNUAL EXPENSES BY $1,000,000 (WATER) BACKUP POWER AT THE WATER TREATMENT PLANT, A $12.4M BCWCID PROJECT, WILL INCREASE CITY OF BELTON ANNUAL EXPENSES BY $120,000 TO PAY ITS SHARE OF DEBT SERVICE (WASTEWATER) BIDDING IN 2023, EXPANSION OF THE TEMPLE-BELTON WWTP WILL REQUIRE A CITY DEBT ISSUANCE OF APPROXIMATELY $9.0M IN 2023, INCREASING ANNUAL EXPENSES BY $660,000 3 REVENUE REQUIREMENTS WATER UTILITY 2023 2024 2025 2026 2027 Water Utility $5,503,234 $6,471,056 $7,080,236 $8,161,670 $8,706,589 Increase due to three Increase due to debt BCWCID water projects; service on $3.9M cash-funded City capital bond issuance by the projects; and additional City and cash-funded staff capital projects 4 2  6/15/2022 REVENUE REQUIREMENTS WASTEWATER UTILITY 2023 2024 2025 2026 2027 Wastewater Utility $5,960,688 $5,580,872 $6,219,099 $5,937,060 $6,913,264 2023 is elevated Decline due Increase due to Increase due to due to debt to fewer cash-funded cash-funded service on $9M cash-funded capital projects capital projects bond issuance by projects City and cash- compared funded capital to 2023 projects per CIP 5 RATE STRUCTURE OPTIONS TO CONSIDER • WATER BASE RATES • OPTION 1) BASE FEES BY METER SIZE AS RECOMMENDED BY THE CONSULTANT • OPTION 2) BASE FEES BY METER SIZE WITH SAME RATE FOR 5/8” AND 3/4” • OPTION 3) BASE FEES, ALL SAME CHARGE • WATER VOLUMETRIC RATES • OPTION 1) SEPARATE DOMESTIC AND SPRINKLER CUSTOMER CLASSES AS RECOMMENDED • OPTION 2) SINGLE CUSTOMER CLASS 6 3  6/15/2022 OPTION 1) WATER BASE FEES BY METER SIZE Count Size Current 2023 2024 2025 2026 2027 7732 5/8” $ 17.00 $ 20.32 $ 22.54 $ 23.36 $ 24.92 $ 24.92 1 3/4” 17.00 25.61 28.62 29.70 31.89 31.89 563 1” 17.00 36.19 40.80 42.39 45.83 45.83 122 1.5” 17.00 62.65 71.24 74.10 80.69 80.69 276 2” 17.00 94.40 107.77 112.16 122.53 122.53 48 3” 17.00 179.07 205.17 213.65 234.08 234.08 13 4” 17.00 274.33 314.75 327.83 359.58 359.58 8 6” 17.00 538.92 619.14 644.98 708.18 708.18 3 8” 17.00 856.43 984.41 1,025.57 1,126.50 1,126.50 0 10” 17.00 1,226.86 1,410.55 1,469.59 1,614.55 1,614.55 0 12” 17.00 3,502.35 4,028.30 4,197.13 4,612.54 4,612.54 7 OPTION 2) WATER BASE FEES BY METER SIZE WITH 5/8” AND 3/4” CHARGED SAME RATE Count Size Current 2023 2024 2025 2026 2027 5/8 or 7733 $ 17.00 $ 20.32 $ 22.54 $ 23.36 $ 24.92 $ 24.92 3/4” 563 1” 17.00 36.19 40.80 42.39 45.83 45.83 122 1.5” 17.00 62.65 71.24 74.10 80.69 80.69 276 2” 17.00 94.40 107.77 112.16 122.53 122.53 48 3” 17.00 179.07 205.17 213.65 234.08 234.08 13 4” 17.00 274.33 314.75 327.83 359.58 359.58 8 6” 17.00 538.92 619.14 644.98 708.18 708.18 3 8” 17.00 856.43 984.41 1,025.57 1,126.50 1,126.50 0 10” 17.00 1,226.86 1,410.55 1,469.59 1,614.55 1,614.55 0 12” 17.00 3,502.35 4,028.30 4,197.13 4,612.54 4,612.54 8 4  6/15/2022 OPTION 3) WATER BASE FEES, ALL SAME CHARGE Count Size Current 2023 2024 2025 2026 2027 8766 All Sizes $ 17.00 $ 22.14 $ 24.52 $ 25.32 $ 26.97 $ 26.97 9 OPTION 1) WATER VOLUMETRIC RATE, DOMESTIC AND SPRINKLER CUSTOMER CLASSES Count Class Current 2023 2024 2025 2026 2027 8044 Domestic $ 3.70 $ 3.70 $ 3.90 $ 4.10 $ 4.38 $ 4.64 722 Sprinkler 3.70 4.75 5.38 5.71 6.43 6.67 • SPRINKLER METERS WOULD HAVE NO MONTHLY BASE CHARGE BEGINNING IN FY 2023 • VOLUMETRIC RATES APPLY FOR EACH 1,000 GALLONS CONSUMED • OF THE 722 SPRINKLER CUSTOMERS, 525 ARE RESIDENTIAL AND 197 ARE COMMERCIAL/MULTI-FAMILY • A CUSTOMER USING 10,000 GALLONS THROUGH A 5/8” SPRINKLER METER WOULD PAY $47.50 IN FY 2023 COMPARED TO $49.92 USING THE DOMESTIC RATE PLUS BASE CHARGE METHODOLOGY AS IN PRIOR YEARS 10 5  6/15/2022 OPTION 2) WATER VOLUMETRIC RATE, SINGLE CUSTOMER CLASS Count Class Current 2023 2024 2025 2026 2027 8766 All Classes $ 3.70 $ 3.87 $ 4.13 $ 4.35 $ 4.69 $ 4.93 11 EFFECT ON A CUSTOMER WHO USES 5,000 GALLONS THROUGH A DOMESTIC 5/8” METER OPTIONS 1 & 2 OPTION 3 BASE RATES BY METER SIZE AND SINGLE BASE RATE AND SINGLE TWO CUSTOMER CLASSES VOLUMETRIC RATE Amount Amount Base charge, incl 2,000 gallons $20.32 Base charge, incl 2,000 gallons $22.14 Volumetric charge (3x$3.70) 11.10 Volumetric charge (3x$3.87) 11.61 Total billed for water in FY 2023 31.42 Total billed for water in FY 2023 33.75 Total billed for water in FY 2022 28.10 Total billed for water in FY 2022 28.10 Change from FY 2022 $3.32 Change from FY 2022 $5.65 12 6  6/15/2022 RECOMMENDED WASTEWATER RATES Current 2023 2024 2025 2026 2027 Base Fee $ 14.00 $ 16.25 $ 18.51 $ 18.51 $ 18.51 $ 18.51 Volumetric Rate 5.00 7.50 8.50 8.50 8.50 8.85 13 TOTAL WATER AND WASTEWATER BILL FOR A CUSTOMER WHO USES 5,000 GALLONS THROUGH A 5/8” DOMESTIC METER FY 2022 FY 2023 Amount Amount Water base charge $17.00 Water base charge* $20.32 Water volumetric charge 11.10 Water volumetric charge* 11.10 Wastewater base charge 14.00 Wastewater base charge 16.25 Wastewater volumetric charge 15.00 Wastewater volumetric charge 22.50 Total billed in FY 2022 $57.10 Total billed in FY 2023* $70.17 *Bill would be $72.50 if single-rate options are selected 14 7  6/15/2022 CITY COMPARISION City Water Sewer Total Bill Killeen $23.68 $26.86 $50.54 Temple 21.85 33.25 55.10 Harker Heights 28.74 27.03 55.77 Copperas Cove 40.00 44.25 88.25 Denison (pop 25,118) 39.75 35.56 75.31 Watauga (pop 24,629) 38.87 41.69 80.56 Corsicana (pop 23,989) 32.60 34.80 67.40 Belton FY 2022 28.10 29.00 57.10 Belton FY 2023 31.42 38.75 70.17 15 RECOMMENDATIONS • OUR CONSULTANT, NELISA HEDDIN, RECOMMENDS ENDORSING • BASE WATER RATES BY METER SIZE • VOLUMETRIC RATES WITH TWO CUSTOMER CLASSES: DOMESTIC AND SPRINKLER • WASTEWATER BASE AND VOLUMETRIC RATES AS CALCULATED • HOW CUSTOMERS ARE CHARGED IS A POLICY DECISION OF CITY COUNCIL • CITY COUNCIL WILL ANNUALLY ADOPT UTILITY RATES WITH THE FEE SCHEDULE 16 8