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FY 2023 Proposed Budget Water and Wastewater Commission July 20, 2022 Joseph Gonzales, Financial Services Assistant Director Agenda  Proposed FY 2023 O&M Budget Overview  Capital Improvement Plan  Affordability 2 Budget Considerations  Increase operational and infrastructure resiliency • AW priority since 2019  Maintain financial strength and stability • Financial condition significantly improved since drought of record from 2011 – 2015 • Stable bond ratings since 2016  Maintain rate affordability • 4.8% Retail reduction in FY 2018 • No rate increase for 5 years (FY 2019 – FY 2023) 3 Proposed FY 2023 Budget Highlights  Resiliency Efforts • $13.6 million in O&M • $441.3 million in the 5-Year CIP (FY23-FY27)  FTEs • 47 total new FTEs proposed in FY 2023 • Support enterprise resiliency, enhance customer satisfaction and operational optimization  Continued debt management strategies • $47.0 million debt defeasance proposed in FY 2023 • Potential debt refunding opportunity in FY 2023 • Texas Water Development Board Loans anticipated closing in FY 2023 4 Proposed FY 2023 Budget Overview Sources of Funds $306.3 $315.6 $280.7 $264.9 Department Service Revenue: FY 2022 Amended: $583.4 million FY 2023 Proposed: $608.7 million $350 $300 $250 $200 $150 $100 $50 $0 5 Water Services Wastewater Services Miscellaneous Revenue $9.7 $9.7 $2.5 $2.7 Reclaimed Water Services FY22 Amended FY 23 Proposed Proposed FY 2023 Budget Overview Uses of Funds Department Expenditures: FY 2022 Amended: $656.2 million FY 2023 Proposed: $683.8 million $300 $250 $200 $150 $100 $50 $0 6 $274.2 $252.6 $220.8 $214.2 $161.6 $175.4 $21.2 $20.0 Program Requirements Other Requirements Debt Service Transfers FY 2022 Amended FY 2023 Proposed Program and Other Requirements Changes Description Contractuals and Commodities 47 New FTEs Employee Wages and Benefits Operational Optimization Fleet Fuel and Maintenance Enterprise Resiliency Utility Billing System Support Bad Debt Expense Total Program and Other Requirements Changes FY2023 Significant Changes (In millions) $6.8 $5.0 $4.8 $2.5 $1.3 $1.0 ($0.5) ($0.6) $20.3 7 Austin Water FY 2023 Proposed New FTEs Initiative Proposed FTEs Operational Optimization Customer Satisfaction Enterprise Resiliency Reducing contracted services Employee Leadership and Development My ATX Water Infrastructure Strategy and Performance Facility Improvements Water Forward Affordability Expedited Development Review Total 9 8 6 5 5 4 3 2 1 1 3 47 8 Budget Challenges  Supply Chain Challenges/Inflation • 17 contract price adjustments totaling $3.1M  Inter-department Transfers • Increasing faster than rate of inflation • Ongoing efforts to reduce certain allocation factors  Growing Capital Plan • Several large strategic projects on the horizon • Construction costs continue to rise  Revenue Impact of Drought Conditions 9 CAPITAL IMPROVEMENT PLAN Proposed FY 2023 Budget Overview Capital Improvement Spending Plan $1.37 Billion 5-year Capital Spending Plan $ in millions 5-Year Plan FY 2023-2027 2023 2024 2025 2026 2027 Total Water Wastewater Reclaimed Combined $ $ 99.9 121.0 16.0 236.9 $ $ 125.9 124.0 13.5 263.4 $ $ 87.8 178.6 13.1 279.5 $ $ 81.7 224.3 4.1 310.1 $ $ 71.0 205.3 1.2 277.5 $ 466.3 853.2 48.0 1,367.5 $ 11 CIP Plan Funding Overview $1,600 Millions $944M $978M $1,098M FY20-24 Plan FY21-25 Plan FY22-26 Plan FY23-27 Proposed $1,371M (+25%) Renewal $521 $465 $45 $50 $290 System Extension & Enhancement System Extension Request & Mobility Relocation Strategic Growth, Enhancement & Priority Improvements $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 12 Strategic Projects 13 Other Priorities Projects 14 AFFORDABILITY Debt Management Efforts Total Debt Service Requirements Comparison FY2018 to Current - Budget Basis $45.9 $48.7 $43.8 $31.7 $69.6 $72.9 $66.9 $66.4 $71.8 $53.5 Total Debt Service Savings $607M * 2017-18 Actual 2018-19 Actual 2019-20 Actual 2020-21 Actual 2021-22 Estimate 2022-23 Forecast 2023-24 Forecast 2024-25 Forecast 2025-26 Forecast 2026-27 Forecast Current Debt Service Requirements 2016 Debt Service Requirements * Graph illustrates 4 years of actual, current year estimate, and 5 year forecast savings. Total savings includes FY2016 and FY 2017 which is not shown on this graph. FY 2023-2027 forecasted savings are subject to change. Fiscal Year Debt Svc Reduction $280 $240 $200 $160 $120 $80 $40 $0 ) s n o i l l i m n i ( e c i v r e S t b e D 16 Debt Management Efforts TWDB Debt Service Loan Savings Loan Amount PV Savings $13.3 $8.0 $36.8 $71.1 $197.7 Million in Loan Closings To-Date $34.0 Million in Present Value Savings To-Date $4.5 $45.2 $2.0 $20.4 $5.8 $21.2 $.3 $3.0 2019 Fiscal Year 2017 2018 2020 2021 2022 s r a l l o D f o s n o i l l i M $90 $80 $70 $60 $50 $40 $30 $20 $10 $ 17 Proposed FY 2023 Budget Overview Average Residential Customer Proposed Bill Impacts Water Service2 Wastewater Service Total Revenue Current 2022 Rates $ $ 40.31 40.48 80.79 Proposed 2023 Rates $ $ 40.31 40.48 80.79 $ Variance % Variance $ - - $ - 0.0% 0.0% 0.0% Notes: 1. Bills based on 5,800 gallons of water and 4,000 gallons of wastewater discharge 2. Water bills include the Water Reserve Fund Surcharge 3. Water and Wastewater bills include the Community Benefit Charge Fund Surcharge 18 Proposed FY 2023 Budget Overview Customer Assistance Program Overview • Over 14,000 Residential CAP participants • Over 18,000 Multifamily CAP participants • Waived residential monthly water and wastewater fixed fees • Discounted residential volumetric water and wastewater rates • Multifamily CAP monthly credit $17 ($11 Water and $6 Wastewater) 2021 Average Monthly Residential Bill Comparison: Non-CAP vs. CAP Non-CAP CAP $ Discount % Discount Water $ 40.31 $ 17.58 $ 22.73 Wastewater 40.48 22.01 18.47 Combined $ 80.79 $ 39.59 $ 41.20 56.4% 45.6% 51.0% Note: Bills based on 5,800 Gals water and 4,000 Gals. wastewater 19 Proposed FY 2023 Budget Overview Affordability Benchmark Average Annual Bill % of Median Household Income Actual FY 2021: 1.25% Projected FY 2022: 1.21% AW Goal: 1.5% or less 20 1.75% 1.25% 1.00% 1.50% 1.44% 1.47% 1.36% 1.29% 1.28% 1.25% 1.21% 1.19% 1.21% 1.18% 1.19% 1.16% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Baseline % of MHI Proposed FY 2023 Budget Fund Summary Estimated Proposed Amended 2022 $ 2022 $ Proposed Budget complies with all Council approved financial policies. (In Millions) Beginning Balance Revenue Transfers In Available Funds Operating Requirements Debt Service Transfers Out Total Requirements Excess (Deficiency) Ending Balance FTEs Debt Service Coverage % Cash Financing of CIP Days Cash 224.3 583.3 74.9 $658.2 273.8 161.6 220.7 656.1 2.1 226.4 1,314 1.81 36.3% 296 $ 213.7 596.1 75.7 $671.8 275.9 157.9 220.6 654.4 17.4 231.1 1,314 1.91 2023 231.1 608.7 64.6 $673.3 294.1 175.4 214.2 683.7 (10.4) 220.7 1,361 1.76 32.6% 37.8% 264 $ $ 294 $ $ $ $ 21 QUESTIONS 22