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CITY OF MORGAN HILL
FY 15-16
OPERATING AND CIP BUDGET
CITY OF MORGAN HILL
FY 15-16
OPERATING AND CIP BUDGET
CITY OF MORGAN HILL
FY 15-16
OPERATING AND CIP BUDGET
CITY OF MORGAN HILL
FY15-16
OPERATING AND CIP BUDGET
CITY OF MORGAN HILL
FY 15-16
OPERATING AND CIP BUDGET
CITY OF MORGAN HILL
FY 15-16
OPERATING AND CIP BUDGET
CITY OF MORGAN HILL
FY 15-16
OPERATING AND CIP
Wastewater Operations
(continued)
FINANCIAL COMMENTS
The FY 15-16 budget for Wastewater Operations reflects the final year of the five-year rate adjustment period recom-
mended in the July 2011 Sewer Rate Study Update and approved by the City Council in October 2011. Effective January
1, 2016 ratepayers will see the last rate increase of 3.5 percent. A new rate study is planned for completion in FY 15-16,
one-year ahead of schedule. The wastewater enterprise rate study is conducted in conjunction with the water enter-
prise rate study. The water enterprise rate study is beginning a year earlier than planned due to the financial impact
the drought is exerting on water revenues.
FY 15-16 Wastewater Operations recommended budget incorporates a 30 percent reduction in water consumption
from the 2013 base year level. This reduction level is projected to have a nominal effect on sewer service fees revenue.
With the final rate increase of 3.5 percent in January 2016 and an assumed growth rate of 2 percent, the FY 15-16 rec-
ommended revenue for sewer service fees is $9.7 million, an increase of $0.3 million from FY 14-16 Adopted Budget.
The Wastewater Operations Fund remains in compliance with the required fund balance level that meets both the
financial security of the fund, and also fulfills the requirements under the debt service covenants.
In June 2015, the City anticipates issuing a Sewer Revenue Bonds Series 2015 to provide funds to finance the acquisi-
tion and construction of public capital improvements for the Wastewater Enterprise and prepay the City's outstanding
obligations under the 2002 Installment Purchase Agreement in connection with the outstanding 2002 SCRWA Bonds.
The amount of issuance is anticipated to be $21 million, with $8 million in new bond proceeds. These proceeds will be
used to fund capital projects that include the sewer main upgrades, new sewer mains, lift station improvements,
sewer trunk replacement, and SCRWA plant improvements projects.
The line item for the South County Regional Wastewater Authority (SCRWA) budget is consistent with previous fore-
cast assumptions and is estimated at $3.9 million in FY 15-16. SCRWA adopted policies that increased the amount that
the City contributes to the reserve fund by approximately 25 percent for FY 15-16 from FY 14-15. It is expected that re-
serve fund contributions will continue to increase over the next 15 years in order for the plant to maintain adequate
operations and major maintenance reserves funds.