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Message from the GM: From Strength to Strength
Financial Responsibility is a part of EID's Culture
It is a pleasure to write these words after having been on a medical leave of absence from EID. Facing medical challenges can focus the mind and provide a new vantage point for addressing immediate and future challenges. So it is not only a pleasure to return to the important challenges facing an organization of EID’s scope and complexity, it’s also a distinct pleasure to resume working with the men and women who make the district run smoothly and efficiently. These men and women ensure that when line breaks happen in the cold hours of the night, repairs are made, logistical challenges are met, and the business of water, wastewater treatment, hydroelectric generation, and recreation services continue for our ratepayers and the wider community.
For this column, I’d like to focus on an important measurement of EID’s continuing commitment to financial responsibility by reviewing our track record in managing both operating costs and personnel expenses. The following numbers show in no uncertain terms that EID has held a firm line, not only in what it takes to staff a highly complex professional organization, but also in managing firmly the operating costs that continue to rise year after year.
In 2010, EID's total operating expenses, net of depreciation, were $40.453 million.Of that total, $26.141 million (65 percent) was personnel expenses. The projected total operating expenses for 2016 are $44.769 million, an increase of 10.7 percent over that six-year period. However, the total personnel expenses are $26.894 million, a six-year increase of only 2.9 percent.
In 2010, personnel expenses represented 64.6 percent of total operating expenses; in 2016, that share has been reduced to 60 percent. The average operating expense increase of 1.8 percent per year during this period exceeds the district’s performance target of limiting operating expenses to 2 percent per year increases.
It is important to note that this has been achieved despite substantially higher increases in the district’s energy costs, as well as the increased costs of ever-stricter regulatory requirements for our services.
EID's track record on personnel expenses shows a similarly conservative and sustainable trend. The average personnel expense increase of 0.5 percent per year since 2010 is extraordinary, particularly since it has been achieved in the face of sharp, ongoing increases in employee pension and medical insurance rates.
The powerfully important factor that led to this remarkable performance has been the willingness of EID employees to bear a greater share of the rising pension and insurance costs. These collaborative changes helped set the district on a more sustainable footing. For instance, in 2010, EID employees agreed to unpaid furloughs, a major reform of the vesting schedule for retiree medical benefits, and a second, lower level of pension benefits for new employees. In 2012, the employees agreed to cost-sharing for dependent medical coverage. And in 2013, the employees agreed to additional medical cost-sharing, a third, lower level of pension benefits for new employees, and increased employee payments toward pension benefit costs.
These last two concessions enabled EID to fully implement the 2013 Public Employees’ Pension Reform Act (PEPRA) more than four years earlier than PEPRA required.
Like the management of the district’s debt-which at almost $344 million (projected to end of December 2016) is nearly $50 million less than the outstanding debt held in 2009-the controlled growth of EID’s operating expenses and near-stand still of its personnel expenses demonstrate its ongoing success in meeting EID’s guiding principle of fiscal responsibility. Financial responsibility and conservative fiscal stewardship is part of EID's culture and I look forward to continuing along this path, from strength to increasing strength, into 2017.
This article was featured in the January / February 2017 issue of The Waterfront.
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