Preliminary Approval for the 2022 Budget at the Merced Irrigation District Board of Directors Meeting – February 16, 2021
By Joel Hastings
The Board of Directors meeting for the Merced Irrigation District was called to order on WebEx on video and by phone at 10 a.m. on Tuesday, February 16. The roll call showed all directors in attendance. After the pledge of allegiance, there was no public comment, and the consent calendar items were approved unanimously under the gavel of President Jeff Marchini. Included here were minutes from the January 12 meeting and the December financial reports which showed receipts of $17,907,606.17 and cash disbursements of $10,166,692.19 among other details. Also approved was the annual NERC / WECC Electric System Reliability Regulatory Compliance Report.
Action Items
The first action item for the Board was the approval of a $300,000 deposit in the MID retirement account, representing the amount needed for 2021 to cover employee retirement benefits. The background had been presented at the January meeting but approval for the expenditure was needed. It was explained that in future years this amount would be included in the annual budget. Approval was unanimous.
Also approved was the third amendment for a lease agreement for office space owned by MID but not needed. The lease is to the Judicial Council at a rate of $1.25 / sqft for 2021 and $1.50 for the next two years. This will result in income of $6396.25 for year one and $7675.50 in the two out years. There was discussion about the possibility of a longer lease but apparently that is not desired by the Council. Approval was unanimous.
A third action item was the staff recommendation to apply for grant funding from San Joaquin Valley Air Pollution Control District in order to purchase two electric all-terrain vehicles for up to $20,000 per vehicle. The purpose of the grant is to reduce air pollution. One new vehicle will be assigned to the Parks Department for use in the Bagby Recreation Area. Staff was already seeking bids for this one. The other would be assigned to Water Maintenance Dept. to Franklin Yard for use in transporting materials, supplies and garbage. Specs for the vehicles were included in the Board materials and they looked pretty appealing. The cost to MID would be $5000 but no new infrastructure would be needed. Routine maintenance would be MID responsibility as for any vehicle. Approval was unanimous.
2022 Budget Presentation
The most important item of business taking an appropriate amount of time was consideration of 2022 budget for the fiscal year from April 1, 2021 to March 30, 2022. The plan calls for overall revenue of $118 million and expenses $92 million. With some grant revenue, a margin of $29 million would result. The plan is contained in a 482-page document that can be found at the MID website www.mercedid.org.
General Manager John Sweigard and Chief Financial Officer Donald Knapp presented summary slides for the various business units, highlighting key items and answering questions from the Directors. Overall, not many changes are anticipated for electric division or water resource division, the two major functions of the District. For water, the budget assumptions are for 248,000 AF at $150 per AF, the same as last year. The current MOU with the workers’ union expires on Mar 31. The cost of employee health insurance is going up six percent and the District will contribute $2000 to individual employees for health insurance and $6000 to employees with family coverage.
On the energy side, the cash reserve ending this year is estimated to be $53 million and the projected ending balance for next year’s budget is $37 million. Sales of 518,000 megawatts are projected, the same as this year, with overall revenue at $69.3 million and operating expense of $57.6 million. The amount of debt service will be about the same and a number of capital projects are underway carrying over from this year with an additional million dollars of expenditure in the new budget.
The discussion continued after a brief interruption for a webinar technical issue with the statement that the biggest increase in expenditure is the cost of power at $6 million. Wages and benefits are higher, and the department will be fully staffed. A new 4×4 truck will be purchased for $90,000 and a half-ton pickup will be replaced… it’s nine-years old with 145,000 miles. A mobile generator will be purchased, too. Also, natural gas costs are going up, but hedging in place with reserves to help mitigate the price.
A Director asked, “Do we give customers a reason for price increases?” The response was that explanations have been given in the past, often with sample power bills with line items used as examples. The statement was made that MID rates remain “ultra-competitive” compared with PG&E.
The hydroelectric, parks and water divisions together will show a $50 million ending balance for the current year and a drawdown of $14 million is anticipated with reserves ending at $36 million for the new fiscal year. There are large expenditures for capital improvements of the infrastructure which are ongoing, with several projects previously approved.
Hydro revenue is using 222,000 megawatt hours as the projection, down just 2,000 MWH from this year, which results in $14 million in revenue. Operating expenses are projected at $7.8 million for a net positive contribution of $5.3 million. On the capital side, there is an increase $100,000 for current projects underway for generator maintenance and rewindings, building improvements and spillways. The McSwain project spillway with a total estimated cost of $700,000 will be $150,000 in the 2022 budget for planning and approvals.
The Parks Department is anticipating a return to regular events and cabin rentals after a big reduction for COVID-19 this year. There were benefits this year, though, with more traffic for park entries. The overall budget is projected at $2 million in revenue and $4.1 million in expense, including adding back costs of promotion.
The capital expenses for Parks is at $225,000 for projects approved, with $145,000 already spent. Also included is a new pickup truck since a new park ranger is on staff. Also planned are upgrades to 50 amp electrical service at all campsites, along with dock modernization at the South ramp, the Barrett Cove swim area and the building of a 4.1 mile multi-use trail for a total budget amount of $660,000.
On the irrigation water side projections are for of 248,000 AF at $50/AF, 40,000 AF of secondary water at $300/AF. That’s revenue of $33.3 million and operating expense of $19.2 million with a $3.2 million carryover after capital expenditures.
On the fleet side, there will be a $100,000 spent for a new sweeper a dump truck, a mobile generator for $35,000, a 100hp utility tractor to eliminate a rental and a utility trailer.
Bryan Kelly, Deputy General Manager, Water Resources, spoke at length and in detail about infrastructure improvements – adding remote capabilities for gate controls, well analysis across the district, work on the main canal, pipelines and ongoing replacements for a total investment of $23 million in capital expenditures.
It was noted that on debt service “we are in great shape” and the current year-end balance at $50 million will draw down to the targeted $36 million. The District has let its line of credit expire. It’s not needed and the cost of keeping it open is as much as $150,000 per year. The Directors were told Wells Fargo Bank continues to be very happy to work with the District and the credit can be reinstated if needed. At this time, though, cash projections look solid.
In the Administrative Department, operations costs are estimated at $7.4 million with capital expenditures planned at $220,000 replacing servers, hosts, software, video equipment for security, wiring and lighting for conversion to LED lights.
It was announced that management will meet with the Operations Committee (MIDOC) for a final review and will come back to the Board at the March meeting for adoption.
There was some discussion at this point about recharge, SGMA and the possibility of
additional water allocations. It was stated that “we put 120,000 to 140,000 AF in the ground every year already.” We believe it was General Manager Sweigard who continued saying there is snowpack and there will be runoff and storage so there will be an irrigation season. He continued, “I think what’s presented here is a good budget and we’ll be in good shape with water supply.” A decision needs to be made by April 1 about any additional allocations, he said.
Report Items
The regular report from Energy Resources and Hydroelectric was presented by Juan Sandoval, Deputy General Manager, Energy Resources. He reported in some detail noting that in December 2020 there were 407,411 kilowatt hours sold for an average price of $40.06 compared to the budgeted $38, so energy revenue was in excess of $2 million. There was no discussion from the Board.
Hicham Etal, Deputy General Manager, Water Rights / Supply, spoke of the recent storms that put snow in the watershed and said he would have a more complete forecast next month with the possibility of additional moisture this season.
The agenda items for the upcoming closed session were announced as posted which included labor negotiations with the IBEW local unit 1245, real property negotiations and one matter of existing litigation in Merced County Superior Court.
With that, the Board moved into closed session at 11:55 p.m.
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Merced Irrigation District – 744 W 20th St, Merced, CA 95340 209/722-5761 website www.mercedid.org
Staff: General Manager – John Sweigard; Deputy GM, Water Rights / Supply – Hicham Eltal; Deputy GM, Water Resources – Bryan Kelly; Deputy GM, Energy Resources – Juan Sandoval
Board: Jeff Marchini – President, Robert Weimer – Vice-President, Mario Bandoni, Suzy Hultgen and Dave Long
PROFILE: The District was organized in 1919 in eastern Merced County encompassing approximately 164,000 acres. The District owns, operates and maintain three hydroelectric facilities with three lakes as the primary water storage facilities on the Merced River. The District’s water system diverts surface water from the Merced River at two locations, conjunctively managed together with groundwater supplies from approximately 220 wells. These water supplies are conveyed through approximately 800 miles of conveyance facilities consisting of canals, pipelines, pump stations, creeks and drains. The District generated electricity beginning in 1927 and began providing retail electric service in 1996, serving approximately 10,000 customers. This District owns and maintains five recreation areas adjacent to Lakes McClure and McSwain.
