PUBLIC UTILITIES ADVISORY BOARD AGENDA ITEM
ACTION REQUESTED:
title
Receive the 2025 Year-End Budget Report
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DEPARTMENT: Water Utilities
SUBMITTED BY: Darrell Blenniss, Director Water Utilities
BOARD/COMMISSION REVIEW:
N/A
BACKGROUND:
The Water Utilities Fund operated with a total revenue budget of $123.2 million and a total expense budget of $138.9 million for the 2025 fiscal year. Preliminary year-end actuals indicate total revenue of $108.1 million (87.7% of budget) and total expenses of $104.0 million (74.9% of budget).
The fund concluded the fiscal year with a significant positive variance in its net position relative to the adopted budget. While the fund was budgeted to operate at a planned deficit of approximately $15.7 million (attributed largely to capital improvement schedules), actual performance resulted in a surplus of approximately $4.1 million.
This deviation is primarily structural rather than operational; substantial deferrals in Capital Outlay significantly reduced expenditures, offsetting lower-than-anticipated revenue from bond proceeds.
Please note that the Finance Department is currently in the process of applying final accruals and conducting a reconciliation to close the Water Utility Funds. These standard year-end closing activities, which occur prior to the formal audit review, are anticipated to alter the preliminary results presented in this report.
DISCUSSION:
Fund Structure Update:
During the 2025 fiscal year, the Finance Department initiated the closing of the Water Capital Fund. As reflected in the 2026 Approved Budget, this fund is formally retired as of December 31, 2025. Moving forward, all capital improvement projects (CIP) and associated debt service will be accounted for directly within the Water & Wastewater Utility Fund. This consolidation eliminates the need for interfund transfers for capital projects and streamlines financial reporting.
Revenue Analysis
Total Revenue for the year was $108.1 million against a budget of $123.2 million, resulting in a variance of ($15.1 million) or 87.7% of budget. The revenue variance is largely linked to financing activities rather than core utility collections.
1. Bond Sale Proceeds: The primary driver for the revenue variance was a reduction in bond issuance.
o Budget: $31.4 million
o Actual: $20.1 million (64.0%)
o Analysis: Borrowing was likely scaled back or deferred to align with the revised timeline of capital projects.
2. Utility Charges: Core operational revenues demonstrated high stability and predictability.
o Water Charges: $56.1 million actual vs. $56.8 million budget (98.7%).
o Wastewater Charges: $29.6 million actual vs. $30.6 million budget (96.8%).
3. Other Revenues:
o Interfund Transfers: Transfers into the fund lagged, totaling $1.8 million against a budget of $2.9 million (63.3%).
§ Phosphorus Funds comprised a smaller portion of actual spending for applicable projects.
o Unrealized Revenue: Both Grants ($450k budget) and Interest Income ($385k budget) recorded zero actuals in the preliminary report.
§ Grant funds are anticipated to be applied in 2026 not 2025.
Expense Analysis
Total Expenses were $104.0 million against a budget of $138.9 million, resulting in a variance of $34.9 million or 74.9% of budget. Expenditures were significantly under budget overall, principally due to timing differences in capital projects. However, specific operational categories exceeded appropriations.
1. Capital Outlay (Major Variance):
o Budget: $70.8 million
o Actual: $35.7 million
o Performance: 50.5%
o Analysis: Approximately 50% of the capital budget remained unspent, suggesting major Capital Improvement Projects (CIP) were deferred to the subsequent fiscal year.
2. Operational Efficiencies:
o Purchased Water: Costs were managed effectively at $30.9 million (98.6% of budget).
o Purchased Services: Expenses were well below budget at $8.6 million (78.8% of budget).
3. Budget Overages:
o Personnel: Salaries & Wages ended at 105.1% of budget ($11.1 million), and Benefits ended at 104.5%.
o Debt Service: Debt service obligations exceeded the budget by roughly $500,000, ending at 110.8%.
§ 2026 bond issue was not included in the budget, and due to its timing, it had an interest payment due on 12/1.
o Interfund Transfers (Out): Transfers out of the fund were significantly higher than anticipated, totaling $4.5 million against a budget of $1.9 million (231.8%). The entirety of the overage is the result of work performed by the Electric Utiilty on behalf of Water Utilities at the Springbrook Water Reclamation Center.
Year-Over-Year Comparison
Total revenue increased by 39.1% ($77.7 million in FY24 to $108.1 million in FY25), largely driven by the inclusion of $20.1 million in bond proceeds. Total expenses increased by 30.8% ($79.6 million in FY24 to $104.0 million in FY25).
Key Variances Summary
|
Line Item |
Budget |
Actual |
% of Budget |
Status |
|
Water Charges |
$56,821,921 |
$56,058,960 |
98.7% |
On Target |
|
Purchased Water |
$31,331,000 |
$30,895,432 |
98.6% |
On Target |
|
Bond Proceeds |
$31,400,000 |
$20,101,895 |
64.0% |
Variance (Timing) |
|
Capital Outlay |
$70,802,088 |
$35,726,175 |
50.5% |
Variance (Timing) |
|
Interfund TF (Exp) |
$1,941,245 |
$4,500,352 |
231.8% |
Over Budget |
|
Debt Service |
$4,749,300 |
$5,263,908 |
110.8% |
Over Budget |
Phosphorus Fund Performance
The Phosphorus Fund continues to function as a critical strategic reserve for the Water Enterprise, specifically designed to fund regulatory compliance improvements at the Springbrook Water Reclamation Center. The fund ended 2025 with a strong cash position of approximately $22.3 million.
In alignment with the 2026 budget strategy, this fund is positioned to support significant upcoming capital outlays. For Fiscal Year 2026, a transfer of $6.54 million is budgeted from the Phosphorus Fund to the Water Utility Fund to subsidize specific capital improvements, reducing the immediate pressure on user rates and debt issuance.
Cash Position Summary
|
Cash Balance (02/02/2026) |
|
Water Utility Fund |
$29,522,637 |
|
2026 Adopted Annual Operating Budget |
$72,414,275 |
|
Monthly Operating Budget |
$6,034,522 |
|
Daily Operating Budget |
$198,395 |
|
Operating Reserve (Days) Target |
30 |
|
Operating Reserve (Days) Actual |
148 |
2026 Fiscal Outlook
The 2026 Approved Budget addresses the deferred capital needs and continued operational costs through adjusted user rates. To support a planned $95.01 million in capital investments and maintain debt service coverage, the 2026 budget includes rate adjustments of roughly 12% for water and 10% for wastewater services. The Enterprise enters 2026 with a healthy combined cash position of $40.2 million, ensuring sufficient liquidity to manage these scheduled projects.