KLWTD 2016-2017 Budget

Fiscal Year 2017 budget approved by board on September 6, 2016.

Sewer Utility Fund

The Key Largo Wastewater Treatment District (“District”) was formed as an autonomous independent Special District and political body formed in 2002 by the Legislature of the State of Florida by House Bill 471, enacted as Chapter 2002-37, Laws of Florida, for the purpose of carrying out the planning, acquisition, development, operation, and management of a wastewater management system within the District’s boundaries in Key Largo, Monroe County, Florida.

The District operates and maintains a sewer utility from mile marker 91 to 106 and on the southern portions of C-905 in North Key Largo and provides services to approximately 9,427 sewer accounts, representing 14,253 EDUs. Operating as an enterprise fund, customer charges and assessments pay for the cost of operations and maintenance, debt service, and administrative costs.

Fund Overview

The District is structured on the basis of one individual enterprise fund. An enterprise fund is established by a government to account for activities similar to private business operations. The intent is that user charges make up for the costs of providing goods or services to the public. Enterprise funds use the accrual basis of accounting. Under this method of accounting revenues are recorded when earned and expenses are recorded when the liability is incurred, regardless of when the cash is received or paid. Also, all assets and liabilities associated with the entity are included on the balance sheet. Generally, accepted accounting principles applicable to enterprise funds are similar to those applicable in the private sector

Budget Development

The annual budget is considered one of the most important documents adopted by the District’s Board of Commissioners each year. The budget reflects the District’s financial policies for the upcoming year by allocating the sources of funds for District services, and projecting expenditures for those services.

The District is focused on improvements that will continue to supply high quality service to our customers. Staff will continue to focus on the collection and disposal of wastewater in the most effective and efficient methods available. External funding sources, including grants, will continue to be aggressively sought.

Revenue Overview

The FY16-17 projected revenues and other sources of the District are as follows:

FY 2016-17 Budget % of Total FY 2015-16 Budget % of Total
Wastewater Service Revenue 8,550,000 53.45% 8,550,000 44.40%
Non Ad Valorem Assessments 4,010,190 25.07% 4,082,244 21.20%
Cash on Hand 1,574,288 9.84% 3,275,601 17.01%
Monroe County ILA 1,000,000 6.25% 1,000,000 5.19%
Islamorada ILA Revenue 642,207 4.01% 877,110 4.56%
SDC Prepayments 168,000 1.05% 175,000 0.91%
Interest Income 30,000 0.19% 17,500 0.09%
Islamorada ILA – Allocation of Capital Projects 21,146 0.13% 777,548 4.04%
DEP Grant Income (1)(2) 0.00% 0.00%
ACOE Grant Income 0.00% 500,000 2.60%
$15,995,831 100% $19,255,003 100%

(1) The District needs $17,485,422 to complete the unfunded capital projects noted under Grant Income.
(2) For comparative purposes the FY16 budgeted DEP grant income of $11,917,861 was removed.

Where the Money Comes From

Wastewater Service Revenue ($8,550,000)

Consisting of 53.13% of the District’s revenues, charges for wastewater services represent the largest source of budgeted revenues for the District. This revenue is derived by providing sewer collection and treatment services to the public. Users are charged for this service on their monthly water bill from the Florida Keys Aqueduct Authority (“FKAA”). Customers are charged a base service charge and a usage charge, which is based on their monthly water consumption. There are currently 14,253 EDUs being billed which equates to the following breakdown of base charge vs. flow charge revenues.

Annual Revenue from Base Charges 5,746,810
Annual Revenue from Flow Charges 2,803,190
Total $8,550,000

Currently, a portion of the wastewater service revenue is utilized to pay a share of the annual debt service of the District. This equates to approximately $99.35 per EDU per year.

Required Annual Debt Service 5,594,248
Less: Assessment Revenue 4,010,189
Less: Early Payoff System Development Charges 168,000
Annual Debt Service Covered by Rates $1,416,059

Non Ad valorem Assessments ($4,010,189)

Non-ad valorem assessments revenue is the annual assessments of system development charges to customers for providing the sewer infrastructure. Initially, assessments were levied in phases and customers were given the option to prepay the assessment in full, or to have the assessment spread over 20 years as a non-ad valorem assessment on their tax bill from Monroe County. This revenue stream is the annual amount the District receives from the Monroe County Tax Collector’s Office. The assessment charge is calculated on the number of equivalent dwelling units (“EDU”) for the serviced parcel. An EDU represents the equivalent to a single family unit and is based on 167 gallons per day of potable water usage.

System Development Charge Advance Payoff Revenue ($175,000)

Customers have the option to pay off their system development charge at any time. Although substantially all of the serviced parcels have been assessed, customers may choose to either pay down or pay off their assessment in advance.

Grant Income ($0)

Due to the uncertainty of the political environment staff finds it prudent not to budget any grant revenues for FY17. However, funding is needed to complete the following unfunded capital projects.

Unfunded Capital Projects
Reclaimed Water Project 9,100,000
Vacuum Pit Monitoring System 6,900,000
Fully Enclosed Headworks 500,000
Upgrade Grit Removal System 450,000
Disinfection Chamber Enclosure 364,441
SBR & Post EQ: 4 (3ft) Concrete Walkways 95,543
Monorail Plant 75,438

Monroe County ILA ($1,000,000)

During FY14/15, the District successfully negotiated an interlocal agreement with Monroe County to exchange the $17,000,000 of Stan Mayfield funding that the State allocated to the District in FY13/14, in return for annual payments from the County of funds that have an unrestricted use.

Stan Mayfield funding exchange 17,000,000
FY16 payment from Monroe County (1,000,000)
Stewardship Bill funding exchange 1,500,000
Balance due from Monroe County $17,500,000

System Development Charge Advance Payoff Revenue ($168,000)

Customers have the option to pay off their system development charge at any time. Although substantially all of the serviced parcels have been assessed, customers may choose to either pay down or pay off their assessment in advance. This figure includes the anticipation of $60,000 in rebates due to the Commercial Low Flow Program.

Interest Income ($30,000)

The District is projected to earn $30,000 in interest earnings in FY16/17 from its interest bearing accounts. This 71% increase is the result of banking changes the District completed during fiscal year 2016.

Cash on Hand ($1,574,288)

The District projects that $1,574,288 of cash reserves are needed to balance the FY16/17 budget. The FY16/17 budget includes appropriates of $2,212,410 for non-required advanced debt service principal payments. Below is a graph of the District’s cash and cash equivalents on hand at September 30th of each year.

Cash on Hand

Islamorada Revenues

Islamorada Wastewater Service Revenue ($571,457)

The District and Islamorada, Village of Islands (“Village”) have an interlocal agreement for the use of 32% of the District’s plant capacity. The Village is charged a base rate of $4.65 per 1,000 gallon of influent, not including any rate surcharges, at the District’s advanced wastewater treatment plant. That rate is calculated at $4.30 for treatment cost and $0.35 for repair and replacement funding. The District began receiving flows from the Village on June 16, 2014.

Islamorada Insurance Surcharge Revenue ($70,750)

The interlocal agreement with the Village requires them to pay 32% of the insurance expense for the advanced treatment plant. The District invoices the Village annually for this surcharge.

Islamorada Portion of Capital Projects ($21,146)

As the District continues to make required changes to the plant to accommodate for the increased flows from the Village, a portion of the capital cost associated with these changes are paid by the Village according to the interlocal agreement. For FY16/17, Islamorada’s share of the plant capital outlay projects that are being budgeted are completion of the blower upgrade project and the completion of the chemical feed system upgrade.

Construction Budgted Project Expenditures Village
Engineering and Other Soft Costs 76,887 5,434
Chemical Feed Systems Upgrade 10,000 3,200
Upgrade Blowers 39,100 12,512
Chlorine Contact Basin Covers 48,750
New Service Connections 165,000
Retention Area Project 242,260
Process Water System Upgrade/Replacement 140,000
Headworks Bypass Piping & Coating Rehab 177,092
899,089 21,146

Note: These projects, while budgeted, are still subject to board approval.

Expenditure Overview

The total projected appropriations of this budget are $16,269,982. The following chart shows a summary of the budgeted appropriations by category:

FY2016-17 Budget % of Total FY2015-16 Budget % of Total
Personnel Services 2,900,887 18.14% 2,822,595 14.66%
Operating Expenses 3,610,685 22.57% 3,697,019 19.20%
Capital Outlay(1) 1,187,089 7.42% 3,021,141 15.69%
Transfers 490,513 3.07% 820,000 4.26%
Debt Service 7,806,657 48.80% 8,894,248 46.19%
$15,995,831 100% $19,255,003 100%

(1) For comparative purposes the FY16 unfunded projects of $11,917,861 was removed from capital outlay.

Where the Money Goes

Personnel Services ($2,900,887)

Personnel Services includes all salaries and benefits for District employees. This represents an $78,293 increase from the FY15/16 budgeted amount.

Department FY16-17 FTE FY16-17 Budget FY15-16 FTE FY15-16 Budget
Commissioners NA 83,055 NA 82,237
Administrative 15 1,178,727 14.3 1,108,514
Plant 7 377,015 6.8 453,412
Field 14 928,351 14.8 1,019,459
Maintenance 5 333,739 0
Construction 0 2.1 158,972
Total 41 $2,900,887 38 $2,822,594

Operating Expenses ($3,610,688)

Operating expenditures increased by $82,639 or approximately 2%. FY16/17 will be the seventh year of full operations affording staff with more accurate historical operating data, which was used to project their future needs.

Capital Outlay ($1,187,089)

The FY16/17 budget includes $1,187,089 for capital outlay. The following chart provides details on specific capital outlay items requested by staff.

Capital Outlay Items FY16-17
Computer Equipment 8,000
Security Equipment 65,000
Vehicle(1) 26,000
Security Equipment 75,000
Vehicle(3) 66,000
Vehicle(2) 48,000
Unfunded Active
Engineering and Other Soft Costs 76,887
Chemical Feed Systems Upgrade 10,000
Upgrade Blowers 39,100
Chlorine Contact Basin Covers 48,750
New Service Connections 165,000
Retention Area Project 242,260
Process Water System Upgrade/Replacement Project 140,000
Headworks Bypass Piping & Coating Rehab 177,092
Reclaimed Water Project 9,100,000
Vacuum Pit Monitoring System 6,900,000
Grit Removal System Upgrade 450,000
Fully Enclosed Headworks 500,000
Monorail Plant 74,438
Disinfection Chamber Enclosure 364,441
SBR & Post EQ: 4(3ft) concrete walkways 95,543
17,485,422 899,089
Total Capital Outlay $1,187,089

Note: These projects, while budgeted, are still subject to board approval.

Debt Service ($7,806,657)

The FY16/17 budget includes $7,806,657 for debt service on the District’s four State Revolving Fund (SRF) loans, and the two BB&T Revenue Bonds. The SRF loans are paid semi-annually and the BB&T bonds repayments are made quarterly. This amount includes an extra $2,212,410 of debt service principal payments. That will be used to pay off two of the District’s State Revolving Fund loans in full.

Debt Obligation Loan Balance @ 9/30/16 Required Annual Debt Service Additional Debt Service Payment Loan Balance @ 9/30/17
SRF Loan 46401P 17,114,490 1,558,961 15,991,517
SRF Loan 464010 11,144,161 2,118,581 9,300,497
SRF Loan 464020 512,188 58,380 466,631
SRF Loan 464030 1,843,129 146,098 1,745,779
BB&T 2013 8,281,515 856,049 7,642,635
BB&T 2014 8,282,772 856,179 7,643,794
Total 47,178,255 5,594,247 2,212,410 40,578,443

Transfers ($490,513)

The FY16/17 budget includes transfers to the District’s following reserve accounts: repair and replacement and insurance deductible. $470,513 is projected to be transferred to the reserve for future repairs and replacements. The ILA with the Village also requires that $0.35 of the $4.65 flow charge be set aside for future repairs and replacements. At the end of FY16/17, the District expects to have $3,509,535 in funding designated for repairs and replacements.

Budgeted Transfer to R&R fund 470,513
5% of Gross Operating Revenues (427,50)
$0.35 of Islamorada Flow Charge (43,013)
Total Required Transfer to R&R fund (470,513)
Amount in EXCESS of minimum requirement $-

The District is projecting to reserve $20,000 for insurance deductibles. This reserve category is important due to the District’s unique island location. The District’s goal is to maintain twelve months of operating expenses in undesignated cash as a reserve balance.

Beginning Unassigned Fund Balance as of Sept. 30, 2015 10,595,667
Projected Revenues FY15-16 16,401,094
Projected Expenditures & Reserve Transfers FY15-16 (18,813,628)
Projected Revenues in excess of Expenditures & Reserve Transfers FY15-16 (2,412,534)
Expected Unassigned Fund Balance as of Sept 30, 2016 8,183,133
Budgeted Revenues FY16-17 14,421,543
Budgeted Expenditures & Reserve Transfers FY16-17 (15,995,831)
Budgeted Revenues in excess of Expenditures & Reserve Transfers FY16-17 (1,574,288)
Expected Unassigned Fund Balance as of Sept 30, 2017 6,608,845
12 month operating reserve balance would be 6,511,572
Amount in EXCESS of operating reserve 97,273

Debt Reduction & Wastewater Revenue Sufficiency

The FY16/17 budget includes appropriations to make an advanced debt principal reduction payment of $2,212,410, and paying off two of the four State Revolving Funds (SRF) in full. By paying off these two loans early the District will reduce it’s annual debt service requirement by $204,478 to save approximately $359,624 in interest expense, and will shorten the debt payment terms by 9 years. Below are two graphs that depict the current debt service versus assessment and County ILA income, and the revised debt service versus assessment and County ILA income after the two SRF loans are paid in full. Included FY16/17 budget is funding for a wastewater revenue sufficiency analysis, otherwise known as a rate study. The last rate study was completed during 2012, and since that time, the District successfully negotiated interlocal agreements with Islamorada and with Monroe County. The District is optimistic that the interlocal agreements will allow for advanced debt reduction that in turn would allow for a rate reduction to District customers.

Current Position - Debt Service vs. Assessment Revenue
Future Position - Debt Service vs. Assessment Revenue KLWTD FY17 Oranizational Chart and Staffing Plan