Biennial Budget for Fiscal Years 2017-18 and 2018-19 Charles Turner May 17, 2017

Agenda Follow-Up Items from Prior Budget Workshops Proposed Budget Summary Primary Drivers in Budgeted Expenditures Budget and Rate Setting is Centered Around the District’s Strategic Plan: With a clearly defined mission and vision, as well as guiding principles that define how we interact with customers and employees, EMWD is driven by standards to provide safe, reliable, economical and environmentally friendly services: Highly reliable water, recycled water and wastewater service Protection of public and environmental health Superior customer and community service Sound planning and appropriate investment Efficiency and fiscal responsibility Exemplary employer Effective communication and accountability

Follow-Up Items from Prior Budget Workshops

Late Fees Until 2015, customers were charged a “Disconnect” Fee of $70 upon notice of possible termination for delinquent payments In 2015, the District modernized that practice to charge a late fee (after a grace period) for customers to encourage more timely bill payment As hoped, fewer customers are now delinquent, and the fee assessments continue to trend downward The Proposed Biennial Budget includes late fee revenue in the “Other Income/Grants” category consistent with the continued downward trend.

Recycled Water Rate Comparison

Proposed Budget Summary

Proposed Consolidated Budget (in Millions) Overall Net Operating margin to fund Capital Commitments projected to be $53 million and $57 million in FY18 and FY19. Total budgeted Capital Commitments in FY18 and FY19 of $123 million and $115 million Funded through both Rates (through Net Operating Margin) and Debt/Reserves Operating Revenue includes proposed rate Adjustments subject to Board Approval in November. FY 2017-18 Budget FY 2018-19 Budget Operating Revenue $227,796,800 $240,201,800 Non-Operating Revenue 100,609,000 107,269,600 Contributions from Debt/Reserves 69,392,200 57,529,400 Total Sources of Funds $397,798,000 $405,000,800 Operating Expenses $181,201,500 $191,787,100 Non-Operating Expenses 81,768,200 85,303,500 OPEB Obligations 12,295,200 13,524,700 Capital: Operating Fixed Assets Capital Improvement Plan 35,271,900 87,261,200 28,012,100 86,373,400 Total Uses of Funds

Proposed Budget: Sources

Proposed Budget: Uses

Primary Budget Drivers Primary drivers to budget expenditure increase: Higher demand for water will lead to $6 million in additional purchased water cost CalPERS change to lower its assumed rate of return will increase operating costs by $2.5 million in FY 2019 Wastewater treatment cost to increase due to change in disinfectant from chlorine to sodium hypochlorite Increased investment in operating fixed assets (OFA).

Budget Schedule for FY 2017-18 and FY 2018-19 Dates Proposed Actions March 15, 2017 Workshop: Review Key Budget Assumptions April 5, 2017 Workshop: Review Operating and Capital Biennial Budget May 17, 2017 Review Board Follow-Up Requests; Consider Adoption of Biennial Budget June 21, 2017 If not adopted previously, last Board meeting date to adopt FY 2017-18 and FY 2018-19 Biennial Budget before new fiscal year September 6, 2017 Approve Prop 218 Notice and Review Proposed Rates based on New Cost of Service Methodology September 30, 2017 Last Day to Mail Proposition 218 Notices November 15, 2017 Public Hearing to Consider Adoption of Proposed Rates January 1, 2018 If approved, rates become effective for bills mailed after this date

Contact Information Charles Turner Director of Finance (951) 928-3777 Ext. 4363 turnerc@emwd.org