NACWA Member Update (MU06-12)

Action Please By:
June 16, 2006

Each year the Association’s budget development process includes a careful review of revenues and expenses, as well as an assessment of dues levels to ensure our ability to deliver essential services to our members is not only maintained, but consistently improved. In September 2005 this process was expanded when NACWA’s Board of Directors directed the National Office staff, as part of the development of the FY 2007 preliminary budget, to include projections for expenses and revenues covering a five year period. As directed, the FY 2007 budget and future projections were to include an analysis of the resources necessary to implement key activities and priorities identified through the Association’s business planning and strategic planning processes.

The implementation of this process resulted in the development of seven different options, offering a diverse range of approaches. The FY 2007 General Fund and Targeted Action Fund (TAF) budgets ultimately adopted by the Board on April 30 are hybrids which acknowledge the significant challenge presented by aligning NACWA’s financial resources with its human resources to implement the Association’s Strategic Plan.

This Member Update presents a FY 2007 General Fund Budget which, through an across-the-board 7% dues increase, allows for continued progress in achieving the key goals of NACWA’s Strategic Plan – and a FY 2007 Targeted Action Fund Budget which fully supports engagement in both ongoing and evolving issues.

Attached to the Member Update you will find an analysis of the impact of a 7% dues increase to each membership category and level (Attachment A); the adopted preliminary FY 2007 General Fund Budget (Attachment B); and, the adopted preliminary FY 2007 TAF Budget (Attachment C). Also included is an analysis of continuing TAF projects for FY 2007 (Attachment D), and an overview and status report of all TAF projects currently underway (Attachment E).

Consistent with NACWA’s budget cycle, we are distributing the attached preliminary budgets to NACWA’s membership for review and comment. All comments received will be carefully considered and final budgets will be adopted by the Board in July. The Association is pleased to provide the Association’s membership with this report addressing both fiscal and organizational initiatives for the 2007 fiscal year (October 1, 2006 – September 30, 2007). As always, our primary focus is on advocacy on behalf of our members interests. We look forward to sharing additional information on our advocacy work, and associated achievements, in the upcoming Year in Review.

Board Strives to Ensure Quality Service, Meet Challenges, in FY 2007 Budget
Overall, the Association’s FY 2007 General Fund Budget will ensure that NACWA can both maintain and enhance its aggressive agenda in the legislative, regulatory and legal arenas – making certain that issues of critical importance to our members receive the attention they deserve in Washington. In finalizing the preliminary budgets for FY 2007 the Board worked hard to accommodate their commitment to move forward with implementation of NACWA’s Strategic Plan; the need to respond to increasing demands upon staff resources; the challenge presented by rising costs; and, the desire to keep member dues increases to an absolute minimum.

Many scenarios were explored – and the FY 2007 budgets that were ultimately adopted respond effectively to the preceding identified challenges and provide for the following strategic initiatives:

• Sustained support NACWA’s Targeted Action Fund;
• NACWA engagement in new regulatory and legislative initiatives and enhanced enforcement activities (including but not limited to Blending/SSOs/CSOs, emerging pollutants, cross-cutting issues);
• Protection of member agency interests through a robust and active legal program;
• Enhanced strategic communication and public affairs capabilities;
• Strategic, advocacy-focused involvement in security and emergency preparedness issues;
• A strengthened Strategic Alliance between NACWA, WEF, and WERF to ensure a coordinated response and a common voice on key issues;
• Addressing a diverse array of utility management issues under a common, collaborative framework and positioning NACWA, WEF, and WERF as leaders in public utility management;
• Support for member agency interests by providing for the rehabilitation and replacement of aging infrastructure through an aggressive program to establish sustainable clean water funding;
• The growth and evolution of CleanWater Central as the data source for the water sector;
• Continued NACWA visibility among and outreach to national, state and regional organizations;
• Growth in NACWA’s membership and increased marketing of Association products and programs;
• Recruitment and retention of necessary staff with appropriate levels of expertise and technical ability; and,
• Strong succession planning for NACWA’s future.

To fund this effort, the FY 2007 budgets include the following key elements:

• A 7% increase in all dues categories (see Attachment A);
• NACWA’s Targeted Action Fund funded at $530,000; and,
• Deferred funding of General Fund Reserves and Building Improvement Reserves.

NACWA Staff Viewed as Critical Asset
NACWA has been able to meet its goals without substantial dues increases in the recent past; however, this is becoming increasingly difficult as our expenses increase yearly with inflation. While most of our expense line items increase from 3 % to 5% annually, others including Insurance, Real Estate & Property Taxes and Computer/Software & Equipment Maintenance have more significant increases. Our two biggest line items, Salaries and Payroll Taxes & Benefits, increase about 5% to 10%, respectively, each year. This line item, which is currently equal to almost 60% of our general fund budget, provides for the predominant asset critical to achieving the Association’s goals – our employees. The proposed moderate increase in member dues will serve to fund these increasing costs. Five-year projections for the General Fund currently anticipate similar single-digit increases in each of the next four years.

Targeted Action Fund Remains Strong & Vital
NACWA’s Targeted Action Fund continues to prove its value. Now, well into its second decade, the “stand alone” TAF strengthens the Association’s capability to achieve its short and long-term objectives. The TAF has provided dedicated funds to gather and analyze data, initiate litigation, and secure the services of consultants having expertise beyond that which the National Office can offer. These funds enable NACWA to pursue a wide range of Committee-identified projects that are of critical importance in achieving our strategic goals and objectives. The Board believes that the FY 2007 allocation of $530,000 in member dues to the Association’s TAF provides an amount sufficient to both sustain and enhance the important work accomplished by the Association through this fund. Five- year projections for the TAF currently anticipate increases of $30,000/year in TAF funding for each of the next four years.

NACWA’s Building Equity – An Unrealized Asset
As noted, the desire to keep member dues increases to an absolute minimum was paramount among the Board’s priorities as they considered the FY 2007 budgets. Through their discussion, the equity in the building that the Association owns and utilizes as its national office was identified as an unrealized asset. Unlike equity in a personal residence, the growing equity in NACWA’s National Office building cannot be returned to its members. It can, however, provide significant financial benefit to the Association’s member agencies through refinancing. The potential for refinancing the building as a means to fund Association reserves and potentially limit member dues increases was discussed in detail. NACWA’s staff was directed to explore this option with the Association’s financial institution and report back to the Board at their July meeting. NACWA staff plans to provide a full report regarding this option to the Board of Directors in July.

In Summary . . .
As the Association moves forward in its fourth decade of advocacy and service, initiatives throughout the year will support the objective of maintaining NACWA’s strategic position as the driving force in national clean water policy. We plan to continue to focus our efforts largely on the legislative, regulatory and legal arenas. Through leadership and member support, we will also continue to commit time and resources to address the challenging management issues faced by our membership.

This past year we have accomplished many things. Playing the most instrumental role in these accomplishments were NACWA’s leadership and members, whose firm decisions and substantial participation lent unquestioned credibility to the Association’s positions and led to increased attention to its policy goals. Many thanks for your continuing participation and support.

Member Comment Invited on FY 2007 Budgets
The Board of Directors encourages all members to review the FY 2007 Preliminary Budgets for both the General Fund and the Targeted Action Fund. Please direct any comments you may have to Chris Westhoff, NACWA’s Treasurer and Chair of the Association’s Budget & Audit Committee (213/978-8158 or via e-mail at cwestho@atty.lacity.org) or NACWA’s Executive Director Ken Kirk (202/833-4653 or via e-mail at kkirk@nacwa.org). NACWA’s Board of Directors will meet in Seattle, Washington on July 19, 2006, and will adopt final FY 2007 budgets at that time. Please provide your comments and recommendations prior to Friday, June 16, 2006.

ATTACHMENTS:

• Attachment A - Analysis of Dues Increase to Member Dues (PDF)
• Attachment B - Preliminary FY 2007 General Fund Budget (PDF)
• Attachment C - Preliminary FY 2007 Targeted Action Fund Budget (PDF)
• Attachment D - Targeted Action Fund FY 2007 Continuing Project Analysis (PDF)
• Attachment E - Targeted Action Fund (TAF) Project Overview & Status Report (PDF)