September 24, 2020
NID Directors have approved the District’s 2021 budget, featuring actions to reduce expenses and stabilize reserves. The Board took action during its Sept. 23 meeting.
The overall calendar year budget includes a $40.3 million operating Water Division budget along with a capital project budget of $6 million, a $24.1 million Hydroelectric Division budget and a $2.8 million Recreation Division budget.
Excluding capital projects and transfer outs, the 2021 budget reduces operating expenses by $5.1 million from the 2020 budget. In addition, capital projects are being reduced by $5.2 million. The reduction of operating and capital budgets results in a reserve increase of $3.1 million. The use of property taxes to service debt is not an increase in reserves because less capital project spending occurs.
Each District Division and Department is working to achieve cost reductions. For example, the Engineering Department will reduce expenditures by 42.6 percent next year through a variety of measures, ranging from a delay of purchases and a reduction in consulting services.
The Water Operations Division proposes a 13.2 percent reduction from the 2020 adopted budget, including a year delay in the repair and replacement of equipment and achieving savings in consultant fees with the completion of the Agricultural Water Management Plan and the Urban Water Management Plan.
The Maintenance Department proposes a 13 percent reduction from the 202 adopted budget through several measures including a one-year deferral in repair, replacement and/or maintenance of specific water system infrastructure, as well as a year deferral in the purchase of replacement heavy equipment and vehicles.
Please refer to the 2021 Operating & Non-Operating Budget “Division and Department Budgets” for specifics. Click here.
NID Finance Manager Marvin Davis notes that continual reductions in fiscal budgets of this magnitude are not sustainable. However, he reiterated the District is in good financial shape as it continues to keep its attention on efficient practices and cost-savings measures.
Structurally, the District is moving $7.5 million in property tax revenues into the Water Operating Fund to assist with debt service. The decision was made to use property taxes rather than continue to use Hydroelectric reserves at an unsustainable level. This budget estimates Hydroelectric revenues at 95 percent of expected receipts as opposed to 85 percent, a significant deviation from prior budgets. Davis said this approach provides a more realistic estimate of reserves.
For 2021 NID’s unrestricted available balance is approximately $60.2 million. Debt service coverage is projected at a healthy 4.63, which is 3.38 times greater than the 1.25 covenant requirement.
Davis also pointed out that Standard & Poor’s, the agency used by the District to grade its most recent 2020A refunding bonds, assigned an AA+ with a stable outlook to the debt.
The 2021 NID budget identifies the following priorities and issues:
- Continue the executive search for the General Manager replacement
- Initiate good faith negotiations with labor unions under current Memorandums of Understanding (MOUs)
- Complete 2021 Water Cost of Service (COS) study aligning rates with study
- Continue building reserves for the bonding of the Federal Energy Regulatory Commission (FERC) permanent license
- Develop long-range planning documents for another 100 years
- Continue migration of Enterprise Resource Planning (ERP) software and Computerized Maintenance Management System (CMMS) Financial Systems
- Develop Information Technology to ensure continuity of operations
- Observe safety guidelines by Center for Disease Control and Public Health Officials
- Continue efficient and effective operations and maintenance of NID systems
- Celebrate 100 years of NID existence.