HWU 2016-2017 Budget – Executive Summary
The Operating Budget includes estimated revenues of $ 18,629,010, which shows no increase from last year in spite of our previously approved 5.85% rate increase effective 1 July 2016. This is a conservative approach, based on recent trends in industrial use and uncertainty associated with our revenue stream.
This budget does not anticipate any additional borrowing for major projects. Capital projects in this budget will be paid from remaining funds available from the last tranche of borrowing, and from cash generated from operations. Our conservative budgeting and forecasting over the last several years has served us well, and our cash position is good, considering all we’ve done over the period since 2010.
Operating expenses are budgeted at $ 18,038,112, a 5.28 % increase when compared to last year. The increase is largely due to higher projected costs for salaries, benefits, pension contributions, and power.
- Salaries and wages are based upon the 105 full-time budgeted positions identified below. With Commissioners, temporary/seasonal employees and interns, our total budgeted complement is 124.
- FICA and Medicare are determined by salaries and overtime charged at the applicable statutory rates.
- Life Insurance, Employee Assistance Program, and Cancer Insurance expenses are based on the number of eligible employees and rates supplied by the City.
- Medical Benefits expense is based on the number of eligible employees and the rate per employee supplied by the City.
- Workers Compensation charges are based upon 2015 – 2016 charges to date.
- Unemployment Insurance expense is based on 2017 projected rates from the City.
- Retirement Expense is based upon the required contributions of 18.68 % of gross wages for non-hazardous duty employees. Last year the required contribution was 17.06 %.
- Contractual Services is largely made up of four components:
- Wastewater sludge trucking and disposal
- Miscellaneous Consulting Services, when not charged to a specific project
- Mowing and grounds maintenance covering all HWU facilities and properties
- Laboratory Services, which includes field sampling, testing, laboratory analysis services, and annual calibration of lab equipment to maintain state certification.
Changes in some items compared to last year’s budget:
Fuel: We have significantly lowered our planned expenditures in light of the continued trend of lower gasoline prices. While we can’t predict that costs for regular gas will remain low, our use has been significantly under budget the last three years.
Repairs to Vehicles, Equipment and Structures: These numbers tend to bounce around from year to year, since expenditures depend on what breaks, when. We’ve lowered Equipment Repairs and Vehicle Maintenance given our recent experience, and increased Structure Repairs, based on trend to date in the current fiscal year. Doing more preventive maintenance in-house has lowered our Vehicle and Equipment repair costs, over the last two years. The rise in Tools and Small Equipment reflects some items being moved from Equipment Repairs to a more correct designation.
Utilities-Electric: This category is seeing a whopping 24% increase, year over year. This includes adjusting up based on two months experience with increased bills from the North WWTP and the new UV disinfection system. Two months is not a lot of data to base an estimate on, so we have tried to err on the conservative side. Another significant portion of the increase is due to a projected 34% increase in costs at the South Plants.
Last year’s personnel budget (after amendment during the year) contained 100 full-time classified employees, the General Manager, the Director of Engineering (unfilled), 5 Water & Sewer Commissioners and 14 seasonal employees, for a total of 121 budgeted positions.
In the new budget, we will be at 105 full-time employee equivalents, including some unfilled positions as detailed below.
We are continuing the Seasonal “Treatment/Engineering Intern” positions, since we’ve had very good experience with the young people hired into these positions.
In Field Operations, we’ve had a problem keeping our crews at their full complement, partly due to paid time off (sick, vacation and personal). To address this, we added an additional USW II position in 2015, and we wish to add a position for an additional Utility System Worker I in this budget. Currently, one USW I is tied up in “shop” duties (receiving, shipping, inventory, delivery of parts in the field). We’re adding a position for a Receiving/Inventory Clerk through reclassification, and will then be able to utilize that Utility System Worker position in the field. In future years, we may add an additional USW III, to flesh out another crew or provide a full crew of “floaters”.
Also in this budget, we are adding two Utility System Worker I “ghost” positions. This will function similar to what we’ve done in the past with these positions in other classifications. Our problem of late has been that, when a USW II or III position has opened due to retirement or promotion, we have not always had an incumbent employee in a lower classification that is prepared for the higher position. We prefer to hire from within, since our work in the field does require a high degree of training and we benefit from employee familiarity with our systems. With these two additional USW I’s, we will be able to hire entry level employees and train them to fill the higher positions. As they are ready and able, we would test in-house and promote from the ranks.
We have historically had two Utility System Superintendent positions in Field Operations, one responsible for “Maintenance” and the other for “Construction”. Construction included two partial crews, Maintenance included all the other field personnel working out of the SOC. As part of our reorganization strategy, we added an Assistant Superintendent position, which has been filled, and are not going to fill the Superintendent position held by Joe Bentley when he retires at the end of July (we will drop that position in next year’s budget). As part of this switch, we also relocated the pump station Maintenance staff under Kevin Roberts in the Plant Operations division. Now all plant and pump station maintenance forces will report to one person.
The single Superintendent and the Assistant Superintendent in Field Operations now share and subdivide duties within the department as they see fit. This will allow better coordination, more flexibility, and will serve as a form of succession planning.
Consequently, you will note a lot of movement on the Schedule of Budgeted Positions under SOC: Support 04-864, where our “Construction” crews have been moved to the SOC: Distribution-Collection-Maintenance category, 04-862. This accounts for this internal transfer from a bookkeeping standpoint. That division between Construction and Maintenance was formerly how we accounted for Capital construction vs. regular operations. Now, work orders in Cityworks will be used to make this distinction, and all our crews will be able to work interchangeably on Capital projects or day-to-day field work, as need dictates.
There are 14 total classified positions listed in the Water Treatment Operator I and II classifications; however there will never be more than 10 of those positions permanently filled. Four Water Treatment Plant Operator I positions exist, allowing us to hire and train new operators due to turnover or vacancy; but these positions are only filled when new, untrained operators are hired, and as they gain certification and experience, they will test up into the higher classification, not expanding our total working complement of 10 water operators.
There are also a total of 15 positions at Wastewater Treatment Operator I and II, but no more than 9 of these positions will be filled at any time. As wastewater operators test and promote, we will likely reduce the number of positions in the lower classification in future budgets. We made that change in 2015, to replicate the procedure on the Water side. We are dropping one WWTO I position in this budget; that position had been assigned to the sludge operation, and we’re moving those duties to a new Maintenance Tech, for no net gain in positions.
Also, a total of 11 classified positions are listed as Maintenance Technician I, II and Senior; no more than 9 of these positions will be filled at any time during the budget cycle. Adding additional positions allowed us to establish a method of promotion and betterment for these employees as they achieve certification or licensure in their field. We made this change in 2014. We have added the sludge processing/maintenance position into this mix, and have eliminated that position in this budget. There was an outside vendor who had operated the drying beds for us on a contract basis for a number of years, but that gentleman passed away late last year and his family business is now closed, so we have added a total of two full-time Maintenance Tech I positions to assist with that operation and other maintenance around the North WWTP.
All of these “ghost” slots taken together overstate our actual full-time complement by fourteen positions, so that the grand total of 105 full-time positions overall will never actually exceed 91 actual employees (excluding our Commissioners), and not including seasonal and intern positions.
We are adding a position for an additional Water Quality Specialist, to provide additional support in the water and wastewater laboratory operations. As regulations get tighter and more intensive, we need more out of that department, particularly as it relates to increased distribution monitoring, treatment optimization in the plants and source water monitoring (at both water plants).
Finally, in the new fiscal year the next Chief Financial Officer will be a full-time, contractual employee in a non-Civil Service position, as we and the City have begun doing with department head and above positions. This will give us three such positions (GM, Director of Engineering and CFO).
Our Capital Budget for this year includes a total of $ 3,424,400 in capital projects, vehicle replacements and new equipment. We have not included detailed descriptions of the items listed as they seem to be self-explanatory; details available on request. This is down from $ 8.4 million last year, reflecting the completion of the large, bond-financed projects in the Long-Term Control Plan.
A small number of projects that were budgeted in the 2015-2016 fiscal year are being carried over into next year’s budget as incomplete.
Completion of the North Wastewater Plant (Headworks) project in the third quarter of CY 2016 is the last piece necessary to complete our Long Term Control Plan (LTCP) as amended, as required under a Consent Judgment with the Commonwealth of Kentucky. As we complete that long process, we look forward to termination of that judgment in the immediate future.
Our focus has shifted to Water System projects, including renovations at the North Water Plant, and planning for expansion/renovation at the South Water Plant. We have completed the first of a series of projects to renovate our nine water storage tanks with the Frontier Tank project. The Vine Street Tank is now under contract, and the College Tank will follow.
Also included in our plan is ongoing replacement of vehicles and upgrades to equipment, which we have not specified here, but will detail as the year progresses.
Based upon the limited funds available, our capital spending on new items in the 2016-2017 FY is restricted to $ 2,500,000. We have included only one specific project under this category, the previously approved Vine Street Tank painting and rehab. Choosing to identify capital projects as we go through the year has worked well for us the last two years, where each project is brought to our Board in an Action Report, giving us the opportunity to review and discuss each project in depth. This allows us maximum flexibility to meet critical needs as the year passes, and increases Board oversight.
You have received a copy of our updated Strategic Plan under separate cover, which outlines our plans in the short and long terms for capital construction. This plan was first produced in 2014, and we’ll continue to revise this blueprint yearly at about this time, to better tailor our budgeted capital expenditures to the needs identified in the plan, and to provide justification for our capital spending priorities.
A Final Note:
We want to thank our Administrative Staff for their diligence and hard work on this document. It represents a combined effort of many people. This group has an ongoing commitment to providing safe, clean, dependable, and reasonably priced water services, from intake to outfall.