SFPUC
FY 2023-24 1st Quarter Budget Report
Laura Busch
Acting Deputy CFO
December 12, 2023
2 • Positive operating results projected for Wastewater, Power, CleanPowerSF and a shortfall for Water.
• Water and Wastewater: revenues are projected to be below budget.
The budget was adopted assuming the drought surcharge would remain. It was removed May of 2023. Additionally, the wholesale water volumes are lower than expected.
• Power: revenues are projected to exceed the budget due to higher wholesale sales and generation. Large savings are also projected for power purchases due to higher generation, avoiding additional power purchases in the first quarter. Projections include the 100-day planned shutdown of Mountain Tunnel.
• CleanPowerSF: revenues are projected to exceed budget due to increased sales and customer enrollment, partially offset by higher than expected power purchase.
• Year-end financial results projected to meet or exceed policy targets FY 2023-24 Q1 Report Summary
3 • Net operating result: ($14.6M)
• Total sources down ($26.5M), and $11.9M in cost savings Sources
• ($20.3M) or -5.9% retail revenues
• ($5.0M) or -1.6% wholesale revenues
• ($1.2M) or -2.3% non-operating revenues
Uses
• $0.7M or -0.6% salaries and benefits
• $5.9M or -100% general reserve planned to go unspent
• $5.2M or -1.57% debt service (savings from 2023CD refunding bonds)
FY 2023-24 Water Budgetary Variances
4 • Net operating result: $6.9M
• Total sources down ($22.7M), and $29.6M in cost savings Sources
• ($26.1M) or -6.3% sewer service charges
• $3.3M or 37.6% non-operating revenues
Uses
• ($0.6M) or 0.6% debt service
• $2.4M or -2.7% salaries and benefits
• $27.8M or -100% general reserve planned to go unspent FY 2023-24 Wastewater Budgetary
Variances
5 • Net operating result: $38.7M
• Total sources up $12.4M and $26.2M in cost savings
Sources
• ($0.5M) or -0.3% retail sales
• ($0.9M) or -3.7% gas & steam sales
• $11.4M or 36.1% wholesale sales
• $2.4M or 43.9% non-operating revenues
Uses
• $26.1M or -16.1% power and gas & steam costs
• $0.1M or -0.2% salaries and benefits
FY 2023-24 Power Budgetary
Variances
6 • Net operating result: $52.9M
• Total sources up $29.8M and $23.1M in cost savings
Sources
• $28.6M or 7.8% power sales
• $1.2M or 200% interest income
Uses
• ($10.1M) or 3.1% purchase of power
• $0.5M or -5.8% salaries and benefits
• $32.7M or -100% general reserve planned to go unspent FY 2023-24 CleanPowerSF Budgetary
Variances
7 Key Financial Ratios
Fund Balance Reserve
Water Waste
Water
Hetchy Clean
Power
SF
• 25%-68% of Annual
Operating Uses
53.9% 67.4% 69.0% 38.4%*
Debt Service Coverage
Reserve
• Indenture Basis ≥ 1.35x 1.5 3.4 56.1
• Current Basis ≥ 1.10x 1.1 2.1 18.3
* CleanPowerSF’s SFPUC's Fund Balance Reserve Policy requires this to be at least 50% within three years of policy adoption (by June 30, 2025). 8 OUR MISSION: To provide our customers with high-quality, efficient and reliable water, power and sewer services in a manner that values environmental and community interests and sustains the resources entrusted to our care.
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
T 415.554.3155
F 415.554.3161
TTY 415.554.3488
Date: December 12, 2023
To: Commissioner Tim Paulson, President
Commissioner Anthony Rivera, Vice President
Commissioner Newsha K. Ajami
Commissioner Sophie Maxwell
Commissioner Kate H. Stacy
Through: Dennis J. Herrera, General Manager
From: Nancy L. Hom, Chief Financial Officer and Assistant General Manager, Business Services
Subject: SFPUC FY 2023-24 First Quarter Budgetary Report through September 2023
The FY 2023-24 first quarter budgetary reports are attached for the three Enterprises and CleanPowerSF, with high-level changes to revenues and expenses summarized in the following table:
Beginning
Available
Fund
Balance
Fund
Balance
Budgeted
to be
(Used)
FY 2023-24 Operations
Projected
Year End
Available
Fund
Balance
Projected
Sources
Projected
Uses
(excluding
Capital)
Net
Operating
Results
Surplus /
(Shortfall)
Mid-year
Adjustments
to Fund
Balance
Water 211.4 - (26.5) 11.9 (14.6) - 196.8
Wastewater 155.7 - (22.7) 29.6 6.9 - 162.5
Power 179.3 (35.4) 12.4 26.2 38.7 - 182.5
CleanPowerSF 90.1 - 29.8 23.1 52.9 - 143.0
Summary:
• Positive year end operating results projected for Wastewater, Power, CleanPowerSF and a negative year end result for Water. • Water: Retail revenues are projected to be below budget. The FY 2023-24 budget was adopted assuming the 5% drought
surcharge would still be in effect, but it was removed in May of 2023. The surcharge accounted for approximately $14.1 million in revenue. Additionally, wholesale volumes are lower than what was assumed in the budget, resulting in a shortfall. The reduction in revenues is partially offset by lower labor costs due to vacant positions and savings from debt refunding.
• Wastewater: Similar to Water, revenues are projected to be below budget. The FY 2023-24 budget was adopted assuming the 5% drought surcharge would be in effect. The surcharge accounted for approximately $18.8 million. Additionally, multiple stormwater- only parcels currently have no existing service agreements and remain uncollected. This is offset by higher than expected interest rates, lower labor costs due to vacant positions, and savings from general reserve.
• Power: Wholesale revenues are projected to exceed the budget due to higher sales from resource adequacy combined with higher generation. In addition, large savings are projected for power purchases due to higher generation in 2023, avoiding additional power purchases in the first quarter. Projections include the 100-day planned shutdown of Mountain Tunnel.
• CleanPowerSF: Revenues are projected to exceed budget due to increased sales, customer enrollment, and savings from general reserve. This is partially offset by increases to power purchases due to renewable energy and resource adequacy costs.
• All enterprises are projected to meet financial policy minimums and coverage ratios at fiscal yearend.
If you have questions, please contact me at [email protected].
cc:
Ronald P. Flynn, Deputy GM, SFPUC
Barbara Hale, AGM, Power Enterprise, SFPUC
Joel Prather, Acting AGM, Wastewater Enterprise, SFPUC
Steve Ritchie, AGM, Water Enterprise, SFPUC
Stephen Robinson, AGM, Infrastructure, SFPUC
Wendy Macy, Chief People Officer, SFPUC
Masood Ordikhani, AGM, External Affairs, SFPUC
Laura Busch, Acting Deputy Chief Financial Officer, SFPUC Anna Duning, Budget Director, Mayor’s Office
Ben Rosenfield, Controller
Attachments:
Appendix A Water Enterprise
Appendix B Wastewater Enterprise
Appendix C Hetch Hetchy Water & Power, including the Power Enterprise
Appendix D CleanPowerSF
FY 2022-23
Actuals Original Budget
Revised
Budget
(includes
carryforwards)
Projection
(current year
spending)
Variance
(Projection vs
Revised Budget)
Sources
Retail Water Sales 310.3 346.7 347.1 326.8 (20.3) A Wholesale Water Sales 253.5 318.2 318.2 313.2 (5.0) B Interest Income 6.8 1.1 1.1 3.5 2.4 C Rental Income 13.7 13.6 13.6 13.6 (0.0) Miscellaneous Income 26.8 17.0 17.0 13.4 (3.6) D Departmental Transfer Adjustment - (46.3) (46.3) (46.3) - Federal Bond Interest Subsidy 21.3 20.8 20.8 20.8 - Appropriated/Budgeted Use of Fund Balance - - 79.5 79.5 - Total Sources 632.3 671.2 751.0 724.6 (26.5) Operating Uses
Personnel 105.7 114.9 114.9 114.2 0.7 E Non-Personnel Services 20.9 21.2 35.0 35.0 - Materials and Supplies 20.4 19.1 23.1 23.1 - Equipment 3.2 2.6 8.1 8.1 - Overhead (SFPUC Bureaus) 55.1 66.1 77.2 77.2 - Services of Other Departments 25.6 27.6 29.5 29.5 - Debt Service 306.6 333.7 333.7 328.4 5.2 F General Reserve 5.9 5.9 - 5.9 G Total Operating Uses 537.4 591.2 627.3 615.5 11.9 Net Operating Results 94.9 109.1 (14.6) Other Impacts to Operating Budget FY 2022-23
Actuals
Current Year
Transfers from
Operating
Total
Available
Funds
Projection
(current & future
years spending)
Project
Closeouts
Capital Projects 57.8 45.6 191.2 191.2 - Facilities Maintenance/Programmatic 31.7 34.4 77.8 77.8 - Total Adjustments to Operating Fund Balance $ 89.4 $ 79.9 $ 269.0 $ 269.0 $ - Available Fund Balance as of Fiscal Year-End $ 211.4 $ 196.8 Available Fund Balance, % of Operating Uses (H) 25-68% 80.5% 53.9% Debt Service Coverage (Year-End Budgetary Basis)
Indenture Basis (includes Available Fund Balance) (I) ≥ 1.35 1.53 1.79 1.54 Current Basis (J) ≥ 1.10 1.22 1.16 1.11 FY 2023-24
Appendix A
WATER ENTERPRISE OPERATING FUNDS
FY 2023-24 1st Quarter - Budgetary Basis, Funds 25940, 25950, 25960, 25990 ,26570,26600 & 26603 ($ Millions)
Appendix A
WATER ENTERPRISE OPERATING FUNDS
FY 2023-24 1st Quarter - Budgetary Basis, Funds 25940, 25950, 25960, 25990 ,26570,26600 & 26603 ($ Millions)
Revenue Variances
I. Calculated as ratio between (a) Total Sources plus Beginning Available Fund Balance plus Capacity Charges, less Operating Uses less Facilities Maintenance/Programmatic, excluding all revenues and expenses related to the 525 Golden Gate COPs, and (b) Debt Service. The Indenture requires this ratio to be a minimum of 1.25 times, and SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of 1.35 times.
J. Calculated as ratio between (a) Total Sources plus any appropriated fund balance, plus Capacity Charges, less Operating Uses less Facilities Maintenance/Programmatic, excluding all revenues and expenses related to the 525 Golden Gate COPs, and (b) Debt Service. SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of
1.10 times.
A. The FY 2023-24 budget was adopted assuming the 5% drought surcharge would remain in effect. The surcharge accounted for approximately $14.1 million in revenues. Q1 retail sales projections are 54.0 MGD, a 2.7% decrease from budgeted volumes of 55.2 MGD.
B. The FY 2023-24 wholesale budget was adopted assuming higher volumetric rate of $5.30. The adopted rate was subsequently set at $5.21, or 1.7% lower. This was driven by higher water sale projections due to the end of drought restrictions. Q1 pr
ojected wholesale sales are 122.1 MGD compared to budgeted assumption of 121.9 MGD.
Expenditure Variances
H. Calculated as Ending Available Fund Balance (including additions to General Reserve) as a percent of Operating Uses plus Facilities Maintenance/Programmatic Uses. SFPUC's Fund Balance Reserve Policy requires this to be within a range of 25-68%.
E. Savings due to vacant positions.
C. Interest rate of 1.5% is higher compared to budget of 0.5%.
D. Miscellaneous income lower than budget due to lower than budgeted collection of water service installation charges.
F. Debt Service variance due to the issuance of 2023CD refunding bonds.
Other Notes
G. $5.9M in general reserve due to higher sources than uses.
FY 2022-23
Actuals
Original
Budget
Revised
Budget
(includes
carryforwards)
Projection
(current year
spending)
Variance
(Projection vs
Revised Budget)
Sources
Sewer Service Charges 360.8 415.4 415.8 389.7 (26.1) A Interest Income 7.6 1.7 1.7 5.0 3.3 B Miscellaneous Income 7.9 3.8 3.8 3.8 0.0 Federal Bond Interest Subsidy 3.5 3.4 3.4 3.4 - Appropriated/Budgeted Use of Fund Balance - 26.4 26.4 - Total Sources 379.8 424.2 451.0 428.3 (22.7) Operating Uses
Personnel 76.1 87.6 87.6 85.2 2.4 C Non-Personnel Services 25.5 28.0 33.3 33.3 - Materials and Supplies 14.1 13.2 14.4 14.4 - Equipment 1.4 2.0 7.7 7.7 - Overhead (SFPUC Bureaus) 32.9 39.0 45.8 45.8 - Services of Other Departments 38.4 38.8 41.0 41.0 - Debt Service 98.6 98.0 98.0 98.6 (0.6) D General Reserve 27.8 27.8 - 27.8 E Total Operating Uses 287.1 334.5 355.6 326.0 29.6 Net Operating Results 92.7 102.2 $ 6.9 Other Impacts to Operating Budget FY 2022-23
Actuals
Current
Year
Transfers
from
Operating
Total
Available
Funds
Projection
(current & future
years spending)
Project
Closeouts
Capital Projects 71.6 81.3 263.2 263.2 - Facilities Maintenance/Programmatic 7.2 8.4 13.6 13.6 - Total Adjustments to Operating Fund Balance $ 78.8 $ 89.7 $ 276.8 $ 276.8 $ - Available Fund Balance as of Fiscal Year-End $ 155.7 $ 162.5 Available Fund Balance, % of Operating Uses (F) 25-68% 79.6% 67.4% Debt Service Coverage (Year-End Budgetary Basis)
Indenture Basis (includes Available Fund Balance) (G) ≥ 1.35 3.09 3.65 3.43 Current Basis (H) ≥ 1.10 2.01 2.04 2.07 Appendix B
WASTEWATER ENTERPRISE OPERATING FUNDS
FY 2023-24 1st Quarter - Budgetary Basis, Funds 20160, 20170 & 20550 ($ Millions)
FY 2023-24
Appendix B
WASTEWATER ENTERPRISE OPERATING FUNDS
FY 2023-24 1st Quarter - Budgetary Basis, Funds 20160, 20170 & 20550 ($ Millions)
Revenue Variances
Expenditure Variances
Other Notes
A. The FY 2023-24 budget was adopted assuming the 5% drought surcharge would remain in effect. The surcharge accounted for approximately $18.8 million in revenues. Q1 volume projections are 44.1 MGD, a decrease from budgeted volumes of 44.2 MGD.
H. Calculated as ratio between (a) Total Sources plus any appropriated fund balance plus Capacity Charges, less Operating Uses less Facilities Maintenance/Programmatic (excluding all revenues and expenses related to the 525 Golden Gate COPs), and (b) Debt Service. SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of 1.10 times.
E. $27.8M in general reserve due to higher sources than uses.
B. Interest rate of 1.5% is higher compared to budget of 0.5%.
C. Salary savings reflect vacant positions.
D. Debt service variance mainly due the issuance of the 2023C refunding of 2018C, offset partially by refunding savings from the issuance of the 2023B refunding bonds.
F. Calculated as Ending Available Fund Balance (including additions to General Reserve) as a percent of Operating Uses plus Facilities Maintenance/Programmatic Uses. SFPUC's Fund Balance Reserve Policy requires this to be within a range of 25-68%.
G. Calculated as ratio between (a) Total Sources plus Beginning Available Fund Balance plus Capacity Charges, less Operating Uses less Facilities Maintenance/Programmatic (excluding all revenues and expenses related to the 525 Golden Gate COPs), and (b) Debt Service. The Indenture requires this ratio to be a minimum of 1.25 times, and SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of 1.35 times.
FY 2022-23
Actuals
Original
Budget
Revised
Budget
(includes
carryforwards)
Projection
(current year
spending)
Variance
(Projection vs
Revised
Budget)
Sources
Electric Sales - Retail 159.6 169.1 175.8 175.2 (0.5) A Electric Sales - Wholesale 48.8 31.7 31.7 43.2 11.4 B Water Sales - Transfer from Water Department 49.6 46.3 46.3 46.3 - Natural Gas & Steam - City Work Orders 24.6 24.7 24.7 23.8 (0.9) C Interest Income 5.6 1.1 1.1 3.3 2.2 D Federal Interest Subsidy - Power Bonds 0.2 0.4 0.4 0.4 - Miscellaneous Income 4.8 4.0 4.0 4.2 0.2 E Appropriated/Budgeted Use of Fund Balance 40.5 35.4 82.2 82.2 - Total Sources 333.7 312.7 366.1 378.5 12.4 Operating Uses
Personnel 50.6 54.5 54.5 54.3 0.1 F Non-Personnel Services 36.1 43.8 71.4 71.4 - Power Purchases, Transmission Distribution & Related Charges 77.9 127.0 137.1 111.9 25.2 G Natural Gas & Steam 24.6 24.7 24.7 23.8 0.9 H Materials and Supplies 3.8 3.5 3.8 3.8 - Equipment 1.2 2.6 8.5 8.5 - Overhead (SFPUC Bureaus) 21.2 25.0 29.0 29.0 - Services of Other Departments 8.8 8.6 9.1 9.1 - Debt Service 3.5 3.8 3.8 3.8 - General Reserve - - - - - Total Operating Uses 227.8 293.4 341.9 315.6 26.2 Net Operating Results 105.9 62.9 38.7 Other Impacts to Operating Budget FY 2022-23
Actuals
Current Year
Transfers
from
Operating
Total
Available
Funds
Projection
(current & future
years spending)
Project
Closeouts
Facilities Maintenance/Programmatic 15.2 14.3 19.2 19.2 - Capital projects 13.5 5.0 76.0 76.0 - Total Adjustments to Operating Fund Balance 28.7 19.3 95.2 95.2 - Available Fund Balance as of Fiscal Year-End 179.3 182.5 Available Fund Balance, % of Operating Uses (I) 25-68% 74.9% 69.0% Debt Service Coverage… Year-End Budgetary Basis
Indenture Basis (includes Available Fund Balance) (J) ≥ 1.35 56.46 59.39 56.12 Current Basis (K) ≥ 1.10 18.97 3.34 18.27 Appendix C
HETCH HETCHY WATER & POWER OPERATING FUNDS
FY 2023-24 1st Quarter - Budgetary Basis - 24970, 24980, 24990 ($ Millions)
FY 2023-24
Revenue Variances
Expenditure Variances
Other Notes
D. Pooled funds year-to-date interest rate higher than assumed for budget.
A. Retail sales are slightly below budget.
G. Savings are mainly due to a favorable 2023 water year, avoiding additional power purchases in the first quarter.
B. Wholesale sales are higher than budget mainly due to higher attribute and resource adequacy sales, and slighlty higher sales to the power market due to higher generation.
C. Gas and steam sales slightly below budget due to lower usage.
F. Salary savings due to vacant positions.
K. Calculated as ratio between (a) Total Sources plus any appropriated fund balance, plus Capacity Charges, less Operating Uses less Facilities Maintenance/Programmatic, (excluding all revenues and expenses related to the 525 Golden Gate COPs, Natural Gas and Steam and Treasure Island), and (b) Debt Service. SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of
1.10 times.
J. Calculated as ratio between (a) Total Sources plus Beginning Available Fund Balance, less Operating Uses, less Facilities Maintenance/Programmatic (excluding all revenues and expenses related to the 525 Golden Gate COPs, Natural Gas and Steam and Treasure Island), and (b) Debt Service. The Indenture requires this ratio to be a minimum of 1.25 times, and SFPUC's Debt Service Coverage Policy requires this ratio to be a minimum of 1.35 times.
I. Calculated as Ending Available Fund Balance (including additions to General Reserve) as a percent of Operating Uses plus Facilities Maintenance/Programmatic Uses. SFPUC's Fund Balance Reserve Policy requires this to be within a range of 25-68%.
H. Gas and steam sales slightly below budget due to lower usage.
E. Miscellaneous income projected to exceed budget primarily due to settlements and DAS admin fees.
FY 2022-23
Actuals
Original
Budget
Revised
Budget
(includes
carryforwards)
Projection
(current year
spending)
Variance
(Projection vs Revised
Budget)
Operating Sources
Electric Sales - Green Product 299.7 338.4 338.4 352.7 14.3 Electric Sales - SuperGreen Product 25.6 28.9 28.9 31.8 2.8 Wholesale Sales 3.6 1.6 1.6 13.1 11.5 Subtotal - Electric Revenues 329.0 368.9 368.9 397.5 28.6 A Interest Income 1.7 0.6 0.6 1.8 1.2 B Miscellaneous Income 0.0 - - - - Appropriated/Budgeted Use of Fund Balance 16.8 - 26.4 26.4 - Total Sources 347.4 369.6 396.0 425.8 29.8 Operating Uses
Personnel 5.0 8.1 8.1 7.6 0.5 C Overhead 5.1 6.1 6.7 6.7 - Non Personnel Services 10.7 12.0 13.4 13.4 - Materials & Supplies 0.0 0.2 0.2 0.2 - Power Purchases, Transmission Distribution & Related Charges 264.3 305.3 323.6 333.7 (10.1) D Services of Other Departments 3.5 4.2 4.6 4.6 - Debt Service - - - - - General Reserve - 32.7 32.7 - 32.7 E Total Operating Uses 288.7 368.6 389.4 366.3 23.1 Net Operating Results 58.7 59.5 52.9 Other Impacts to Operating Budget FY 2022-23
Actuals
Current Year
Transfers
from
Operating
Total
Available
Funds
Projection
(current & future
years spending)
Project
Closeouts
Programmatic 0.8 0.2 5.8 5.8 - Capital Projects 1.5 0.8 5.3 5.3 - Total Adjustments to Operating Fund Balance 2.3 0.9 11.1 11.1 - Available Fund Balance as of Fiscal Year-End 90.1 143.0 F Available Fund Balance, % of Operating Uses (G) % 31.1% 38.4% Revenue Variances
Expenditure Variances
Other Notes
G. Calculated as Ending Available Fund Balance as a percent of Operating Uses plus Facilities Maintenance/Programmatic Uses. Per SFPUC's Fund Balance Reserve Policy adopted in April 2022, CleanPowerSF is required to build its fund balance reserve to at least 50% within three fiscal years (June 30, 2025) of Fiscal Year Ending 2022.
D. Power Purchases variance driven by increasing renewable and resource adequacy market costs.
Appendix D
CleanPowerSF
FY 2023-24 1st Quarter - Budgetary Basis - 24750, 24761, 24762, 24765 & 24870 ($ Millions)
FY 2023-24
A. Revenues higher than budget due to 8% load growth from customer enrollments, higher SuperGreen load, and wholesale revenues.
B. Interest rate is higher than assumed for budget.
C. Salary savings due to vacant positions.
F. Available fund balance at fiscal year end is calculated within this report by taking beginning fund balance, less any fund balance budgeted to be used as a source, and adding the projected variances as well as project closeouts. As the CleanPowerSF Trust Fund is a continuing fund, amounts budgeted therein will automatically roll forward to the following year and will not be closed out to fund balance. As such, v
ariances related to revenues, purchase of power, and general reserves will not close out to fund balance at the end of the year without manual intervention. However as those funds are not considered restricted and CleanPowerSF may choose to close them out to fund balance, we are presenting them here as part of fund balance.
E. General Reserve was intentionally budgeted and planned to go unspent to build reserves.