FINAL Long Range Financial Plan Update 2021 Honolulu Board of Water Supply February 2021 This page intentionally left blank. Table of Contents Table of Contents .................................................................................................................. i Table of Figures .................................................................................................................... ii Table of Tables .................................................................................................................... iii Abbreviations and Acronyms ............................................................................................... iv Section 1 Impetus for Update ............................................................................................ 1-1 Section 2 Review Current Status vs Long Range Financial Plan .......................................... 2-1 2.1 Comparison of Actuals vs Plan ............................................................................................................................ 2-1 2.2 Revised Baseline ....................................................................................................................................................... 2-4 2.2.1 Operations & Maintenance ..................................................................................................................... 2-4 2.2.2 Capital Improvement 6-Year Plan ....................................................................................................... 2-5 2.2.3 Revised Baseline Cashflow Forecast ................................................................................................... 2-6 Section 3 Trends and Sensitivity Analysis Update .............................................................. 3-1 3.1 Update of Scenarios based on Revised Baseline .......................................................................................... 3-1 3.1.1 Aggressive Conservation ......................................................................................................................... 3-2 3.1.2 Aggressive Growth ..................................................................................................................................... 3-4 3.1.3 Climate Change............................................................................................................................................. 3-7 3.2 Pandemic Scenario ................................................................................................................................................... 3-9 3.2.1 Water Demands and Sales ....................................................................................................................... 3-9 3.2.2 Delinquencies ............................................................................................................................................ 3-15 3.2.3 Uncollectable Revenue ........................................................................................................................... 3-19 3.2.4 Expense Impacts ....................................................................................................................................... 3-23 3.3 Concurrent Pandemic and Hurricane Scenario ........................................................................................ 3-23 Section 4 Conclusions ........................................................................................................ 4-1 i Table of Contents Figures Figure 2-1. Annual Operations and Maintenance Expense Comparison, near-term ................................. 2-2 Figure 2-2. Annual Operations and Maintenance Expense Comparison, Coincident Years ................... 2-6 Figure 2-3. Capital Encumbered Projection Comparison, Coincident Years ................................................ 2-7 Figure 2-4. Capital Encumbered and Sources of Funding ..................................................................................... 2-8 Figure 2-5. Revised Baseline Operating Fund Balance .......................................................................................... 2-9 Figure 3-1. Long-Term Revenue and Revenue Requirements Trends Under Approved Rates ............ 3-1 Figure 3-2. Additional Revenue Needs Trend as a Percent of Existing Rate Based Revenue ................ 3-2 Figure 3-3. Revenue Impact due to Aggressive Conservation ............................................................................ 3-3 Figure 3-4. Additional Revenue Needs Trend as a Percent of Existing Rate-Based Revenue, Aggressive Conservation .................................................................................................................... 3-4 Figure 3-5. Revenue Impact due to Water Master Plan High Range Demand Growth ............................. 3-5 Figure 3-6. Revenue Impact due to Water Master Plan High Demand and Aggressive Growth .......... 3-5 Figure 3-7. Additional Revenue Needs Trend as a Percent of Existing Rate-Based Revenue, Water Master Plan High Demand Case ...................................................................................................... 3-6 Figure 3-8. Additional Revenue Needs Trend as a Percent of Existing Rate-Based Revenue, Aggressive Growth ................................................................................................................................ 3-7 Figure 3-9. Revenue Requirements Impact due to Climate Change and Aggressive Conservation .... 3-8 Figure 3-10. Additional Revenue Needs Trend as a Percent of Existing Rate-Based Revenue, Climate Change + Aggressive Conservation................................................................................................ 3-9 Figure 3-11. Total Island Potable Water Production since March 1, 2020 ................................................ 3-10 Figure 3-12. Rainfall Index for the Honolulu Watershed Area ........................................................................ 3-11 Figure 3-13. Single-Family Residential Monthly Demand ................................................................................. 3-12 Figure 3-14. Single-Family Residential Monthly Demand vs 5-Year Average .......................................... 3-13 Figure 3-15. Multi-Unit Residential Monthly Demand vs 5-year Average .................................................. 3-13 Figure 3-16. Non-Residential Monthly Demand vs 5-Year Average .............................................................. 3-14 Figure 3-17. Water Sales by Customer Class since January 2016 .................................................................. 3-15 Figure 3-18. Percentage of Water Accounts 30 days Past Due, 2017 to Present ..................................... 3-16 Figure 3-19. Monthly Residential Water Customer Delinquency, 2017 to 2020, Accounts ................ 3-17 Figure 3-20. Monthly Residential Water Customer Delinquency, 2017 to 2020, $ ................................ 3-17 Figure 3-21. Monthly Commercial Water Customer Delinquency, 2017 to 2020, Accounts .............. 3-18 Figure 3-22. Monthly Commercial Water Customer Delinquency, 2017 to 2020, $ .............................. 3-19 Figure 3-23. Residential Delinquency Scenarios ................................................................................................... 3-20 Figure 3-24. Commercial Delinquency Scenarios ................................................................................................. 3-21 Figure 3-25. Revenue Requirements Impact due to Pandemic ....................................................................... 3-22 Figure 3-26. Additional Revenue Needs Trend as a Percent of Existing Rate-Based Revenue, Pandemic ............................................................................................................................................... 3-23 ii Table of Contents Tables Table 1-1. Scenarios .............................................................................................................................................................. 1-1 Table 2-1. Operations and Maintenance Comparison ............................................................................................ 2-1 Table 2-2. Capital Improvement Comparison - Historical and Budget Year ................................................ 2-2 Table 2-3. Capital Improvement Comparison - 6-Year Forecast (10/1/2020) ........................................... 2-3 Table 2-4. Capital Improvement Historical Cash Comparison ........................................................................... 2-3 Table 2-5. Comparison of Forecast and Actual Billed Water, mg ...................................................................... 2-4 Table 2-6. Comparison of Forecast and Actual Rate-Based Revenue, $M ..................................................... 2-4 Table 2-7. Operations and Maintenance Forecast through FY 2027, $M ............................................. 2-5 Table 2-8. Revised 6-Year Capital Budget, 11/25/2020 ....................................................................................... 2-5 Table 2-9. Historical Encumbrances .............................................................................................................................. 2-5 Table 2-10. Projected Capital to be Funded, FY 2021 - FY 2031, $M ............................................................... 2-7 Table 2-11. Projected Capital Sources and Uses of Funds, $M ..........................................................................