HWU 2017-2018 Budget – Executive Summary
|To:||Water and Sewer Commissioners|
|From:||Tom Williams, P.E., General Manager / Todd Bowley, Chief Financial Officer|
|Re:||2017-2018 Proposed Budgets – Henderson Water Utility|
|Date:||5 May 2017|
Presented here are the Henderson Water Utility 2017-2018 Operating and Capital Budgets. We will discuss this in appropriate detail and seek your approval at the 15 May 2017 Board Meeting.
The Operating Budget includes estimated revenues of $ 19,252,610, which shows an increase of approximately 3.3% from last year based on our previously approved 5.85% rate increase and on the imposition of a fixed charge for storm water, both effective July 1, 2017. Revenues were budgeted projecting static usage from our major contractual customers and factoring the continuing trend of usage decrease from non-contract customers (projected 3% decline in residential and 1% decline in industrial/commercial customers).
This budget does not anticipate any additional borrowing for major projects. Capital projects in this budget will be paid from cash generated from operations and existing reserves. Our conservative budgeting and forecasting over the last several years has served us well, and our cash position is adequate, considering all we’ve done since 2010. However, review and forecasting has shown that the additional revenue anticipated from the series of 5.85% increases has not materialized, due to declines in usage across multiple customer bases, and some future adjustment to rates and rate structure will be necessary to provide the cash needed for capital replacement projects.
Operating expenses are budgeted at $ 18,687,147, a 3.60 % increase when compared to last year. The increase is largely due to higher projected costs for benefits, pension contributions, chemicals, maintenance costs and power.
- Salaries and wages are based upon the 106 full-time budgeted positions identified below. With Commissioners, temporary/seasonal employees and interns, our total budgeted complement is 124.
- Overtime has increased based on current trends, and is mostly related to turnover in operating positions.
- 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, currently $16,000 per employee which has remained unchanged from the prior fiscal year.
- Workers Compensation charges are based upon 2016 – 2017 charges to date.
- Unemployment Insurance expense is based on 2018 projected rates from the City.
- Retirement Expense is based upon the required contributions of 19.18 % of gross wages for non-hazardous duty employees. Last year the required contribution was 18.68 %.
- Contractual Services is largely made up of two components:
- Miscellaneous Consulting Services, when not charged to a specific project.
- Mowing and grounds maintenance covering all HWU facilities and properties.
Note, we are breaking Wastewater Sludge trucking and disposal and Laboratory Services out into separate accounts, so these can be better monitored.
Changes in some items compared to last year’s budget:
Fuel: We have reduced our planned expenditures in light of recent trends of 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. These items are being broken out into subcategories this year, in order to provide better tracking.
Utilities-Electric: This category saw a whopping 24% increase last year, year over year. This included adjusting up based on minimal experience with increased bills from the North WWTP and the new UV disinfection system. The increase this year is a more moderate 7%.
Last year’s personnel budget (after amendment during the year) contained 104 full-time classified employees, the General Manager, the Director of Engineering (unfilled), 5 Water & Sewer Commissioners and 14 seasonal employees, for a total of 124 budgeted positions. We modified that total early in the Fiscal Year when we added an additional maintenance technician position, but did not increase our total headcount.
In the new budget, we will hold our complement of employees steady at 106 full-time equivalents, including some unfilled positions as detailed below.
Interns and Seasonal: We are continuing the Seasonal “Treatment/Engineering Intern” positions, since we’ve had pleasant experience with the young people hired into these positions. We’ve reduced the number of seasonal employees slightly.
Superintendents: 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 in the 2016-17 Budget we added an Assistant Superintendent position and planned to drop the second Superintendent position. After reviewing how we have reassigned job duties during this transition, we feel that we underestimated the workload required, and will be reverting to the old setup, dropping the Assistant Superintendent position and retaining another Superintendent position, to better reflect the workload and responsibilities associated with these functions.
Extra Positions to Allow Promotions: Over the last few years, we’ve added several slots that allow us to test and promote from within, calling these “ghost” positions. They are summarized in this table:
|Position||Number Available||Not-To-Exceed (Filled)|
|Water Treatment Operator I||4||10|
|Water Treatment Operator II||10|
|Wastewater Treatment Operator I||6||9|
|Wastewater Treatment Operator II||8|
|Maintenance Tech I||4||10|
|Maintenance Tech II||8|
|Maintenance Tech Sr.||1|
|Utility System Worker I||9||12|
|Utility System Worker II||6|
As an example, 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, never expanding our total working complement of 10 water operators.
All of these “ghost” slots taken together overstate our actual full-time complement by fifteen positions, so that the grand total of 106 full-time positions overall will never actually exceed 91 actual employees (excluding our Commissioners), and not including seasonal employees and interns.
Maintenance: In the 2016-17 Budget, we have two Maintenance Team Leader positions, one in Plant Maintenance, and one in Pump Station Maintenance. The Plant Maintenance Team Leader retired in January, and since that time, the duties of both positions have been performed by the Pump Station Team Leader. In the coming budget year, we are going to consolidate the two Team Leader positions into a Maintenance Supervisor position, to be filled with this incumbent employee as a reclassification. This will be at a Grade 24, as opposed to the Grade 20 Team Leader, and the two existing Team Leader positions will be eliminated. We will also add an additional Maintenance Technician I or II to cover the workload from losing one person in this switch to one supervisor. Our total number of employees in this area will not change.
Camera Truck: With expanded duties in the positions for our Camera Truck operation, we are adding a new Utility System Specialist position to assist the current operator, and upgrading the incumbent to a new position of “Utility System Specialist – Camera Truck Lead”, at a Grade 18. This considers new duties that include extensive computer-related work, and gives us a path for succession planning in this vital area of preventive and predictive maintenance.
Directors of Field Operations and Engineering: We have had three, full-time, contractual employees in non-Civil Service positions, (the GM, the Director of Engineering, and our CFO). We have added a new Director of Field Operations to this list of contract employees, as Rodney Michael’s replacement. In this budget, we have reassigned duties and roles within the Engineering branch, eliminating the Director of Engineering position. We’ll use the savings from this to fund the next item.
Distribution System Operator: A new position will be a “Distribution System Operator” who will oversee the operation of the water distribution system, including our flushing program, water quality and metering at point of sale, tank inspections, testing for disinfection byproducts, and other regulatory issues like the Lead & Copper Rule, cross connection and backflow prevention. This Operator will be the Water-side complement to the Pretreatment Coordinator in the Wastewater system. The new Distribution System Operator will be at a Grade 18, equal to our Treatment Plant Operator II positions. At the same time, we will upgrade the Pretreatment position to this same grade 18, putting all the positions who are in “responsible charge” of plant, collection and distribution issues at an equal level.
Plant Operations Administrative Assistant: Finally, to assist with new reporting requirements, the Administrative Assistant position at the SOC will be assigned to work under Plant Operations. Many of the duties for reporting under the Consent Decree and the LTCP will soon be included in the monthly reports submitted by Plant Operations, and the Administrative Assistant will also take some of the paperwork duties off the Director and Chief Operators, freeing them for more productive work in their areas of expertise.
Salaries in General: This budget includes upgrades for several positions that have resulted from the City’s salary survey of all grades and classifications. We’ve managed to address these changes without a significant increase in the overall budget by carefully examining the number of positions, and by holding the line on hiring new employees in areas where we can make good arguments for needing more.
Our Capital Budget for this year includes a total of $ 2,901,300 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 $ 3.4 million last year.
A small number of projects that were budgeted in the 2016-2017 fiscal year are being carried over into next year’s budget as incomplete.
Completion of the North Wastewater Plant (Headworks) project in the last quarter of CY 2016 was 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 two of a series of projects to renovate our nine water storage tanks with the Frontier and Vine Street Tank projects.
Based upon the limited funds available, our capital spending in the 2017-2018 FY is restricted to $ 2,500,000. We have included only one specific project under this category, the previously approved College 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. The recently approved South Wastewater Treatment Plant Basin Renovation project may use a significant amount of our available funds this fiscal year, depending on the timing of construction.
It is doubtful that we will replace any vehicles or purchase any equipment, as the year progresses, since funding is so tight.
You have received a copy of our updated Strategic Plan separately, 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:
At bottom, this is an austere budget.
We want to thank our Administrative Staff for their diligence in working 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.