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W A T E R E N E R G Y E I I 61& RIVERSIDE PUBLIC UTILITIES PUBLIC UTILITIES Board Memorandum BOARD OF PUBLIC UTILITIES DATE: MARCH 14, 2016 ITEM NO: 10 File ID — 16 -0755 — Discussion SUBJECT: RIVERSIDE PUBLIC UTILITIES PROPOSED BUDGET FOR FISCAL YEARS 2016/17 AND 2017/18 ISSUE: The item for Board of Public Utilities consideration is to recommend approval of the City of Riverside Public Utilities Department (RPU) proposed budget for Fiscal Years (FY) 2016/17 and 2017/18 to the City Council. RECOMMENDATIONS That the Board of Public Utilities recommend that City Council: 1. Approve the Electric Funds (including Public Benefits Fund) proposed FY 2016/17 budget totaling $375.6 million in revenues, $385.9 million in operating expenditures and $34.9 million in capital improvements and proposed FY 2017/18 budget totaling $380.4 million in revenues, $389.3 million in operating expenditures and $38.8 million in capital improvements; 2. Authorize the use of the Restricted Electric Fund Regulatory Requirement Reserve for capital projects in the amount of $12.3 million; 3. Authorize the use of the Designated Electric Fund Capital Repair /Replacement Reserve for facility projects and technology in the amount of $2.1 million; 4. Approve the Water Funds (including Water Conservation Fund) proposed FY 2016/17 budget totaling $64.4 million in revenues, $64.3 million in operating expenditures and $26.5 million in capital improvements and proposed FY 2017/18 budget totaling $68.5 million in revenues, $66.8 million in operating expenditures and $16 million in capital improvements; 5. Authorize the use of the Designated Recycled Water Reserve for the recycled water project in the amount of $9.8 million; 6. Authorize the use of the Designated Property Reserve for Water Utility capital projects in the amount of $21 million; and 7. Authorize the use of the Designated Water Fund Capital Repair /Replacement Reserve for equipment in the amount of $1.5 million. BACKGROUND: Historically, the City of Riverside has adopted an annual budget. On December 8, 2015, City Council approved the implementation of a two -year budget process commencing with FY 2016/17. The rationale for transitioning to a two -year budget is that sound financial management includes multi -year financial planning. In addition, a two -year budget process will be more efficient and will allow time in the second year for long -term planning and focus on performance measurement and reporting. RPU is currently developing a 10 -year pro -forma (financial plan), which will incorporate the two -year proposed budget. There will be a mid -cycle review of year -end financials at the conclusion of the first year. Page 82