Fiscal Year 2021/2022 Budget Narrative

Sewer Utility Fund

he 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 2002‐337, 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 wastewater utility from mile marker 91 to 106 and southern portions of C‐905 in North Key Largo. It provides service to approximately 10,500 improved parcels and 10,095 accounts are billed monthly, and 15,240 EDUs billed. 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 FY21‐22 projected revenues and other sources of the District are as follows:

FY 2021-22 Budget % of Total FY 2020-21 Budget % of Total
Wastewater Service Revenue $7,800,000 42.45% $7,651,033 41.14%
Non Ad Valorem Assessments 3,540,865 19.27% 3,800,924 20.44%
Grant Revenue – Stewardship 3,406,300 18.54% 2,325,385 12.50%
Monroe County ILA 2,125,000 11.57% 2,125,000 11.43%
Islamorada ILA Revenue 1,365,302 7.43% 1,230,000 6.61%
SDC Prepayments 100,000 0.54% 255,000 1.37%
Interest Income 36,000 0.20% 75,000  0.40%
Operating Cash Commitment to Reserves 0.00% 940,000 5.05%
Planned Use of Repair & Replacement Reserves 0.00% 764,000 4.11%
Use of/(Addition to) Reserves (470,444) 0.00% (568,998) -3.06%
$18,373,467 100% $18,832,827 100%

Where the Money Comes From

Wastewater Service Revenue ($7,800,000)

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.

Non Ad Valorem Assessments ($3,540,865)

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. 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.

Monroe County ILA ($2,125,000)

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 FY15/16 the District exchanged $1,250,000 of Stewardship funding in return for annual payments from the County of funds that have an unrestricted use.

Stan Mayfield funding exchange $ 17,000,000
Stewardship Bill Funding Exchange 1,250,000
Payments received from Monroe County (9,375,000)
Balance due Monroe County $8,875,000
Expected Mayfield $17M & Stewardship
2022 2,125,000
2023 2,125,000
2024 2,125,000
2025 2,125,000
2026 125,000
2027 125,000
2028 125,000
$8,875,000

Islamorada Wastewater Service & Insurance Surcharge Revenue ($1,365,302)

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.

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.

System Development Charge Advance Payoff Revenue ($100,000)

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.

Interest Income ($36,000)

The District is projected to earn interest income in FY21/22 from its interest bearing accounts.

Expenditure Overview

The total projected appropriations of this budget are $18,373,467.The following chart shows a summary of the budgeted appropriations by category:

FY 2021-22 Budget % of Total FY 2020-21 Budget % of Total
Personnel Services $2,914,376 15.86% $2,771,178 14.90%
Operating Expenses 4,515,212 24.57% 4,188,575 22.52%
Capital Outlay 4,400,193 23.95% 4,071,684 21.89%
Transfers 2,260,000 12.30% 2,128,522 11.45%
Debt Service 4,283,686 23.31% 5,437,385 29.24%
$18,373,467 100% $18,597,344 100%

Where the Money Goes

Personnel Services ($2,914,376)

Personnel Services includes all salaries and benefits (including workers compensation insurance) for District employees. This represents a $143,198 increase from the FY20/21 budgeted amount.

Department FY21-22 FTE FY21-22 Budget FY20-21 FTE FY20-21 Budget
Commissioners NA $56,449 NA $53,710
Administrative 6 609,518 8 707,838
Plant 6.5 519,795 6 508,465
Field 13 1,176,340 12 998,166
Maintenance 6 552,274 6 502,999
Total 31.5 $2,914,376 32 $2,771,178

Operating Expenses ($4,515,212)

Operating expenditures increased by $326,637.FY21/22 will be the twelfth year of full operations.

Capital Outlay ($4,400,193)

The FY21/22 budget includes appropriations for capital outlay.The following chart provides the details on the specific capital outlay items requested.

Capital Outlay Items

Administrative
IT Equipment 34,000
Parking Lot/Sidewalk Rehabilitation 18,000
52,000
Plant
Buildings 7,500
IT Equipment 47,360
54,860
Field
Vehicles (3) 96,648
Equipment (vac pump rebuilds & spares) 30,000
IT Equipment 20,885
147,533
Maintenance
Vehicles (1) 26,000
Capital Outlay Items (continued)
Capital Improvements (includes Engineering Design & CEI)
Preliminary Design and Budgeting 25,000
Solar 284,575
Lift Station at Key Largo Trailer Park 257,000
Vac Trailer/VPS piping modifications 480,000
Tank Coatings (3 SBR, 1 EQ, 1 Digester, 1 Headworks) 679,300
Effluent Filtration Upgrade 900,400
Reclaimed Water Fill Station 114,025
Combined Record Drawing Project 35,000
Spare Injection Well Pump and new VFD 18,000
Vac System Monitoring 230,000
Spare VFD 8,500
Sewage Pump Replacement and Piping Modifications 700,000
Effluent Injection Pump Rebuild 73,000
Service Connection Construction Revisions 315000
4,119,800
Total Capital Outlay $4,400,193

These projects, while budgeted, are still subject to board approval

Debt Service ($4,283,686)

The FY21/22 budget includes appropriations for debt service on the District’s two State Revolving Fund (SRF) loans.The SRF loans are paid semi‐annually.This includes appropriations of $1,265,310 for extra debt payments.

Debt Obligation Loan Balance @ 9/30/21 Required Annual Debt Service Loan Balance @ 9/30/21 without extra
payments
SRF Loan 46401P $1 1,199,268 $1,558,961 $9 ,922,146
SRF Loan 464010 1,435,902 1,459,415
Total 12,635,171 3,018,376 9,922,146

Transfers ($2,260,000)

The FY21/22 budget includes transfers to the District’s following reserve accounts: repair and replacement, self‐insurance and insurance deductible.$1,200,000 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. The District is also going to reserve $1,060,000 for insurance deductibles and for self‐insurance.FY21/22 is the fourth year a contribution will be made to the self insurance & insurance deductible fund.At the end of FY21/22, the District expects to have $7,625,450 in funding designated for repairs and replacements, $2,360,000 for insurance deductibles and self‐insurance.

Budgeted Transfer to R&R fund $1,200,000
$0.35 of Islamorada Flow Charge (100,055)
Total Required Transfer to R&R fund (100,055)
Amount in EXCESS of minimum requirement $1,099,945

Excess reserve funding is required to meet the actual reserve and replacement funding necessary based on the engineering estimates.These reserve categories are important due to the District’s unique island location.The District’s goal is to maintain twelve months of operating expenses in unassigned cash as a reserve balance.

Unassigned Cash Balance as of Sept 30, 2020 $13,928,771
Budgeted Revenues FY20‐21 $18,597,344
Budgeted Expenditures & Reserve Transfers FY20‐21 (18,028,346)
Budgeted Revenues in excess of Expenditures & Reserve Transfers FY20‐21 568,998
Expected Unassigned Cash Balance as of Sept 30, 2021 14,497,769
Budgeted Revenues & Planned Use of Reserves FY21‐22 $18,373,467
Budgeted Expenditures & Reserve Transfers FY21‐22 (18,373,467)
Budgeted Revenues in excess of Expenditures & Reserve Transfers FY21‐22 0
Expected Unassigned Cash Balance as of Sept 30, 2022 $14,497,769