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UH,[Water and Wastewater Commission on May 22, 2023. ]
YEAH.CAN YOU PUT, YEAH, SHOULD BE GOOD.
HELLO? UM, IT IS, UH, 3 0 8 AND I WOULD LIKE TO OFFICIALLY CALL THIS MEETING TO ORDER.
UM, ALL OF THE BUDGET COMMITTEE MEMBERS ARE PRESENT.
DO WE HAVE ANY PUBLIC COMMUNICATION? UH, NOBODY HAS SIGNED UP FOR PUBLIC COMMUNICATION.
LET'S MOVE ON TO THE NEXT ITEM ON THE AGENDA, WHICH IS VOTING ITEMS FOR THE COMMITTEE.
UM, ITEM NUMBER ONE IS ELECTION OF VICE CHAIR AND CONFIRMATION OF CHAIR FOR THE BUDGET COMMITTEE COMMISSIONERS.
I AM, HAVE LED THE BUDGET COMMITTEE FOR THE LAST COUPLE YEARS, UH, AS CHAIR.
I CAN KEEP DOING IT IF YOU'D LIKE, OR I'M HAPPY TO LET SOMEBODY ELSE CHAIR IT.
I AM NOT SUPER, UM,
BUT, UH, I DO BELIEVE THAT WE SHOULD HAVE A VICE CHAIR OUT OF ONE OF THE THREE OF YOU SO THAT YOU CAN STILL MEET.
CUZ IF YOU DON'T HAVE A VICE CHAIR, IF THE CHAIR CAN'T MEET YOU CAN'T MEET.
UM, SO I PROBABLY SHOULD HAVE PUT THIS ON Y'ALL BEFOREHAND, BUT IS ANYBODY INTERESTED IN NOMINATING THEMSELVES FOR VICE CHAIR
ANY, ANY DISCUSSION? SECOND? SECOND.
I SECOND THE NOMINATION OF SUSAN FOR CHAIR AND SAM FOR VICE CHAIR.
UM, I GUESS DO I ASK IS, IS THERE ANY DISCUSSION ON THAT OR ANY OTHER COMMENTS? NO.
UM, ALL THOSE IN FAVOR, SHALL I? RAISE OF HANDS? IT'S UNANIMOUS.
UH, WE WERE KIND OF TALKING ABOUT THIS A LITTLE BIT EARLIER.
REVIEW OF FUTURE COMMITTEE MEETING SCHEDULE.
UH, WE HAVE AVAILABILITY, UM, JUNE 14TH, THE 26TH, THE 27TH, AND THE 30TH.
THE WAY THAT THE CALENDAR GOES FOR THE BUDGET IS IT'S PRESENTED TO COUNSEL PHYSICALLY ON THE 15TH.
LIKE HERE'S EVERYBODY'S DEPARTMENT'S BUDGET, AND THEN IT'S PRESENTED TO COUNSEL BY JOSEPH ON SUPPOSEDLY THE 19TH OF JULY.
UM, SO, UH, THE, THE, THE PROCESS IS GONNA WORK.
UH, JOSEPH GONZALEZ, AUSTIN WATER ASSISTANT DIRECTOR OVER FINANCIAL SERVICES.
UM, THIS YEAR'S GONNA WORK A LITTLE BIT DIFFERENTLY IN TERMS OF, OF THE BUDGET PRESENTATION TO COUNCIL.
UM, THE CITY MANAGER HAS, UM, PREPARED, PREPARED AND PRESENTED THE PROPOSED BUDGET TO COUNCIL, UM, LIKE MIDDLE OF JUNE.
AND, UH, THIS YEAR IT'S GONNA GONNA HAPPEN IN TWO PARTS.
THE, UM, THE CITY MANAGER'S PROPOSED BUDGET WILL BE PUBLISHED ON JULY 14TH, SO MADE AVAILABLE TO THE PUBLIC.
UH, BUT, BUT THEN, UM, THE PRESENTATION TO COUNCIL, UH, BY CITY MANAGER.
AND, UM, THE BUDGET OFFICE WILL BE JULY 19TH.
SO THAT WILL BE, UM, WHEN THE PUBLIC PRESENTATION OCCURS.
AND THEN IT'S ULTIMATELY ADOPTED IN AUGUST.
IN AUGUST, AUGUST 16TH THROUGH 18TH ARE THE SCHEDULED DATES FOR BUDGET READINGS AND ADOPTION.
AND, AND SO JUST SO THE COMMISSION UNDERSTANDS, OUR GOAL IS TO REVIEW THE BUDGET, MAKE SURE WE UNDERSTAND IT, AND THEN WE DRAFT RECOMMENDATIONS TO THE WATER AND WASTE WATER COMMISSION FOR THEM TO REVIEW AND APPROVE.
UH, AND ONCE THAT GOES THROUGH THAT PROCESS, IT GOES UP TO COUNCIL AS OUR RECOMMENDATION AS THE WATER WASTE WATER COMMISSION ON WHAT WE THINK OF THE BUDGET FOR THE YEAR.
SO, UM, AS FAR AS FUTURE MEETING DATES, UM, I KNOW I, I'M, I THINK I'M AVAILABLE ALL OF THESE DATES, SO I DON'T KNOW IF, JUST STARTING WITH THE 14TH, WHAT KIND OF FLEXIBILITY OR AVAILABILITY WE HAVE.
I'LL BE OUT OF TOWN ON THE 14TH.
HOW ABOUT THE 26TH OUT OF TOWN AS WELL? ANYBODY OUTSIDE OF TOWN? I'LL BE OUT OF TOWN ON THE 26TH.
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GONNA BE A HARD JOB TOO.I'M, I'M LIKE TRAVELING SO I COULDN'T EVEN CALL IN, BUT ON THE 27TH I COULD CALL IN AND I JUST CAN'T, SO YOU COULD DO THE 27TH VIRTUALLY UHHUH
AND HOW ABOUT THE 30TH? I'M FINE ON THE 30TH.
IS EVERYBODY FINE ON THE 27TH AND THE 30TH? OKAY.
SO WE CAN DO EITHER OF THOSE DAYS.
UM, BUT I WOULD LIKE TO CONFIRM SOONER THAN LATER AND GET AN INVITED ON BRI'S CALENDAR, CUZ THAT'S HOW I SAID YEAH, I'M AVAILABLE AT FOUR CAUSE I DIDN'T ON MY CALENDAR.
WE'LL, WE'LL CONFIRM THAT WITH SPACE.
AND THOSE WOULD BOTH BE AFTERNOON MEETINGS PROBABLY, IF THAT'S OKAY.
I'LL HAVE TO CONFIRM THE EXACT TIME SOMETIME IN THE AFTERNOON.
AND DO WE NEED TO VOTE FOR THAT OR, UM, SURE.
ALL THOSE IN FAVOR? IT'S UNANIMOUS.
ALL RIGHT, NOW WE CAN GET ONTO WHAT WE'RE HERE FOR,
UH, MOVING ON TO THE NEXT ITEM ON, UH, THE AGENDA.
ITEM THREE, AUSTIN WATER FINANCIAL FORECAST PHYSICAL YEAR 24, 28.
UH, COULD YOU BRING UP THE PRESENTATION PLEASE? ALL RIGHT.
AGAIN, MY NAME IS JOSEPH GONZALEZ, ASSISTANT DIRECTOR OF FINANCIAL SERVICES WITH AUSTIN WATER.
AND, UH, TODAY I'LL BE PROVIDING, UM, AN AN OVERVIEW OF AUSTIN WATER'S, UH, FIVE YEAR FORECAST.
THE FIVE YEAR FORECAST IS, IS TYPICALLY THE START OF OUR BUDGET PROCESS.
IT'S A, IT'S A, UM, FIVE YEAR LOOK AT, YOU KNOW, OUR, OUR, OUR REVENUES AND EXPENDITURES AND, AND IT'S, UM, YOU KNOW, KIND OF THE FOUNDATION OF, OF OUR, OUR BUDGET PROCESS.
UH, NOW THIS YEAR HAS, UH, WORKED A LITTLE BIT DIFFERENTLY IN TERMS OF, OF OUR FIVE YEAR FORECAST.
UH, GENERALLY, HISTORICALLY, WE'VE, UH, WE'VE SUBMITTED A, A, A SINGLE FIVE YEAR FORECAST.
UH, WE WERE ASKED TO, TO PREPARE THREE DIFFERENT FORECAST SCENARIOS.
UM, SO ONE SCENARIO IS KIND OF A, UH, YOU KNOW, NO RATE INCREASE, UH, BASE COST SCENARIO WITH, WITH, UH, NO SIGNIFICANT ENHANCEMENTS OR, OR, OR, OR NEW COST ADDED INTO OUR, OUR BUDGET.
UM, SECOND SCENARIO IS, IS THAT SAME BASE COST SCENARIO, UH, BUT WHAT RATE INCREASES WOULD LOOK LIKE, UM, TO, UH, TO, TO FUND, YOU KNOW, THOSE INCREASING COST DRIVERS.
AND, AND, AND FOR US, OUR, OUR PRIMARY COST DRIVER O OVER THE FIVE YEAR FORECAST PERIOD IS, IS GONNA BE OUR CAPITAL SPENDING PA PLAN.
AND WE'LL GET INTO THAT, UH, IN A LITTLE BIT MORE DETAIL.
UM, AND THEN FINALLY, THE, THE THIRD SCENARIO, WHICH, WHICH, UH, I WOULD SAY IS KIND OF AKIN TO, YOU KNOW, OUR, OUR, OUR NORMAL SUBMISSION.
IT TAKES A LOOK AT ALL OF OUR COST DRIVERS, ANY ENHANCEMENTS, UM, AND THEN THE REVENUE'S REQUIRED TO, TO FUND THOSE COSTS.
SO FROM, FROM A FORECAST PERSPECTIVE, THAT WAS, YOU KNOW, WHAT WE'RE, WHAT WE'VE BEEN CALLING OUR, OUR SERVICE ENHANCEMENT SCENARIO.
BUT IT'S, IT'S BASICALLY OUR, OUR, OUR TYPICAL FORECAST.
IT'S WHAT WE WOULD NORMALLY PREPARE, UM, AND, AND WHAT WE'VE HISTORICALLY PREPARED FOR, FOR OUR FORECAST SUBMISSION.
UM, YOU KNOW, WHEN WE, WHEN WE START THE BUDGET PROCESS AND WHEN WE START OUR FORECAST PROCESS, UH, THERE, THERE'S CERTAINLY SEVERAL CONSIDERATIONS.
OVER THE LAST FEW YEARS, WE'VE BEEN FOCUSED HEAVILY ON, YOU KNOW, INCREASING OPERATIONAL AND, AND INFRASTRUCTURE RESILIENCY.
UH, PARTICULARLY CONSIDERING, YOU KNOW, SOME OF THE CHALLENGES THAT WE'VE HAD O OVER THE LAST FEW YEARS.
AND, AND SO AS WE, YOU KNOW, WORK TO DEVELOP THIS FORECAST, WE LOOK TO, UM, YOU KNOW, INVEST IN, IN STAFF RETENTION, PARTICULARLY IN AREAS THAT WERE HIGHLIGHTED BY THE, UH, AUSTIN WATER EXTERNAL REVIEW THAT WAS RELEASED EARLIER THIS YEAR.
UH, YOU KNOW, WE LOOK TO ADD POSITIONS, UH, NOT ONLY TO SUPPORT OPERATIONS AND SECURITY, UM, BUT CUSTOMER ENGAGEMENT, WATER FORWARD, UM, AND, YOU KNOW, AND MIT ATX WATER TO SUPPORT THE, THE TRANSITION TO THE ADVANCED METER INFRASTRUCTURE, UM, SYSTEM THAT'S BEING IMPLEMENTED.
NOW, AS WE LOOK TO, UM, TO OUR FINANCIAL FORECAST, UH, YOU
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KNOW, WE, WE LOOK TO INVEST IN, IN THE UTILITY, UM, IN A, IN, AGAIN, IN BOTH, YOU KNOW, OPERATIONS AND INFRASTRUCTURE, BUT DO IT IN A WAY, UH, THAT, THAT MAINTAINS OUR FINANCIAL STABILITY AND OUR FINANCIAL STRENGTH.UM, YOU KNOW, I'LL, I'LL, UH, AS, AS WE LOOK BACK, YOU KNOW, TO OUR PREVIOUS DROUGHT OF RECORD, UM, YOU KNOW, OUR SYSTEMS PLANNING FOLKS, UH, YOU KNOW, WHEN, WHEN THEY TALK ABOUT THE DROUGHT, THEY, THEY, THEY TALK ABOUT IT BEING FROM 2008 TO TO 2015.
UM, THERE WERE A COUPLE OF, OF, OF WETTER YEARS IN IN THAT PERIOD.
I THINK FROM, FROM A FINANCE PERSPECTIVE, THE, THE, THE IMPACT OF THE DROUGHT REALLY HIT US FROM 2011 TO 2015.
AND, AND DURING THAT TIME, WE SAW, UH, DECREASING REVENUES AS, AS CUSTOMER DEMAND DECLINED.
UM, THAT ULTIMATELY LED TO, UM, TWO OF THE THREE RATING AGENCIES, UH, PUTTING US ON, ON NEGATIVE WATCH FOR OUR, OUR CREDIT RATING.
UM, BUT SINCE THEN, AND, YOU KNOW, REALLY BEGINNING IN 2015 AS, AS THE DROUGHT WAS ENDING, UH, YOU KNOW, OUR, OUR REVENUES STABILIZED, OUR, OUR LEVEL OF CONSUMPTION STABILIZED AND, AND WE, UH, WE'VE BEEN WORKING STEADILY SINCE THEN TO, TO IMPROVE OUR FINANCIAL CONDITION.
UM, AND PART OF THAT HAS BEEN, UH, YOU KNOW, THROUGH DEBT MANAGEMENT STRATEGIES, AND I'LL TALK A LITTLE BIT MORE ABOUT THAT, UH, HERE IN A LITTLE BIT.
BUT, UH, WE'VE BEEN HEAVILY FOCUSED ON, ON REDUCING OUR OVERALL DEBT SERVICE COSTS AND, AND, AND MAINTAINING STABLE DEBT SERVICE COSTS.
UH, UM, IT'S ONE OF THE BIGGEST COST DRIVERS FOR US.
UM, AND, AND YOU KNOW, AS I MENTIONED, YOU KNOW, AS WE LOOK TO, TO OUR FORECAST AND, AND, YOU KNOW, THE RIGHT SETTING PROCESS, UH, YOU KNOW, WE'VE BEEN FOCUSED HEAVILY ON AFFORDABILITY AND, AND FOR THE FIVE YEAR FORECAST PERIOD, WE LOOK TO CONTINUE TO BALANCE AFFORDABILITY WITH, WITH, IN INCREASING COST DRIVERS.
UM, SO JUST TAKING, YOU KNOW, AGAIN, A STEP BACK, YOU KNOW, HISTORICALLY, UH, OUR, OUR LAST RATE ACTION WAS ACTUALLY A 4.8% RATE REDUCTION IN FISCAL YEAR 2018.
UM, YOU KNOW, AND, AND WE'VE GOT A CHART WHERE I'LL, I'LL TALK A LITTLE BIT MORE ABOUT THIS, BUT YOU KNOW, AS, AS WE WENT THROUGH THE DROUGHT, UH, WE SAW OUR, UM, AVERAGE CUSTOMER DEMAND ON, ON THE RESIDENTIAL SIDE DROP FROM ABOUT, UH, 8,800 GALLONS A MONTH, UM, ON AVERAGE DOWN TO ABOUT 5,800 GALLONS A MONTH.
AND, AND, UH, SO, SO DURING THAT TIME, FROM 2011 TO 2015, AS WE HAD RATE INCREASES, YOU KNOW, THOSE RATE INCREASES WERE REALLY FOCUSED ON BALANCING, UM, YOU KNOW, OUR, OUR LEVEL OF RATES WITH OUR, OUR LEVEL OF DEMAND.
AND WE WERE, YOU KNOW, THROUGHOUT THE DROUGHT, WE WERE KIND OF TRYING TO CHASE THAT, THAT RIGHT BALANCE.
UH, BUT AS THINGS, YOU KNOW, UH, AS WE GOT TO 2014, UH, WE HAD NEGATIVE CASH IN OUR WATER FUND.
SO WE HAD, UH, THE, THE REVENUE SHORTFALLS THAT WE EXPERIENCED DURING THAT TIMEFRAME LED TO, UM, US GOING NEGATIVE FOR THE WATER FUND CASH.
UM, ALSO OUR, OUR DEBT SERVICE COVERAGE.
UM, AND, AND DEBT SERVICE COVERAGE IS, IS A MULTIPLIER OF, YOU KNOW, THE AMOUNT OF REVENUES THAT ARE LEFT OVER AFTER YOU PAY YOUR OPERATING COSTS AS A MULTIPLE OF, OF DEBT SERVICE.
SO OUR, OUR FINANCIAL POLICY TARGET FOR DEBT SERVICE COVERAGE IS CURRENTLY 1.75 TIMES COVERAGE.
UH, SO MEANING, YOU KNOW, WHEN YOU TAKE REVENUES, YOU SUBTRACT OUT YOUR OPERATING COSTS, YOU SHOULD HAVE AT LEAST 1.75 TIMES, YOU KNOW, YOUR ANNUAL DEBT SERVICE REQUIREMENTS.
AND, AND IN 2015, YOU KNOW, AS, UM, BEFORE WE STARTED REBOUND, WE ACTUALLY GOT DOWN TO 1.25 TIMES DEBT SERVICE COVERAGE, WHICH IS, UM, OUR, OUR BOND COVENANT LEVEL.
IT'S, IT'S THE, THE LEVEL, UM, THAT WE STIPULATE IN, IN OUR BOND ISSUANCES THAT WOULD TRIGGER, YOU KNOW, GOING TO COUNCIL TO, TO SEEK A RATE INCREASE TO PROVIDE ADEQUATE LEVELS OF COVERAGE.
SO IF WE HAD GONE BELOW THAT 1.25, WE WOULD'VE HAD TO GO, UH, TO COUNCIL TO, TO SEEK A RATE INCREASE TO, TO REMEDY, UH, YOU KNOW, THAT SHORTFALL IN TERMS OF DEBT SERVICE COVERAGE.
UM, BUT, BUT SINCE 20, YOU KNOW, REALLY SINCE 2016, WE'VE STARTED, YOU KNOW, WE, WE'VE, UH, IMPROVED OUR FINANCIAL CONDITION.
WE HAVEN'T HAD A RATE INCREASE SINCE THAT LAST RATE ACTION.
WELL, WE HAVEN'T HAD A RATE INCREASE SINCE 2017.
UM, SO, SO NO RATE INCREASES FOR THE LAST FIVE YEARS.
UH, BUT AS WE LOOK FORWARD, UH, OVER THE FORECAST PERIOD, UM, YOU KNOW, WITH THAT, THAT MIDDLE SCENARIO, THE, THE BASE COST SCENARIO THAT DOES ANTICIPATE RATE INCREASES, WE'D ANTICIPATE, YOU KNOW, ABOUT FOUR AND A HALF PERCENT AVERAGE ANNUAL RATE INCREASES OVER THE FIVE YEAR FORECAST PERIOD, UH, REALLY OVER A PERIOD OF THREE TO FOUR YEARS, DEPENDING
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ON HOW, YOU KNOW, HOW WE STRUCTURE IT, UH, YOU KNOW, FOR A TOTAL OF ABOUT 20, UH, 22% RATE INCREASES OVER THE, OVER THE FORECAST PERIOD.UM, IN TERMS OF THE ENHANCED SCENARIO, UH, WE'D EXPECT TO, TO BE A LITTLE BIT HIGHER THAN THAT, ABOUT 25%, UH, RATE INCREASES OVER THE FIVE YEAR PERIOD.
SO YOU CAN SEE THAT, YOU KNOW, O AND M REALLY ISN'T OUR, OUR BIGGEST COST DRIVER IN TERMS OF, OF THE FORECAST PERIOD.
IT'S, IT'S GONNA BE OUR CAPITAL SPENDING PLAN AND THE ASSOCIATED DEBT SERVICE.
AND WE'LL GO INTO A LITTLE BIT MORE DETAIL ON THAT HERE.
SO THIS, THIS IS OUR BASELINE FORECAST.
UM, THIS IS THE FORECAST AGAIN, THAT ASSUMES, YOU KNOW, UH, A LITTLE OVER FOUR POINT, UH, 2%, UH, AVERAGE ANNUAL RATE INCREASES.
AND, AND YOU CAN SEE HERE, UM, THAT, UH, YOU KNOW, THIS LEVEL OF FORECAST MAINTAINS, YOU KNOW, STRONG FINANCIAL METRICS, UH, OUR DEBT SERVICE COVERAGE, I TALKED ABOUT DEBT SERVICE COVERAGE, UM, YOU KNOW, STAYS, YOU KNOW, IN, IN THE ONE NINE TO, TO TWO TIMES COVERAGE RANGE.
UM, AND, AND YOU DON'T SEE THAT ON, ON, ON THE CHART, BUT IT'S, UH, MAINTAINS BASICALLY EXISTING LEVELS OF DEBT SERVICE COVERAGE, UH, THROUGH THROUGHOUT THE FORECAST PERIOD.
AND, UM, ALSO MAINTAINS, YOU KNOW, A LEVEL OF CASH, UH, THAT'S CONSISTENT WITH OUR, OUR, OUR CURRENT LEVELS OF, OF CASH ON HAND.
UH, WE, WHEN WE LOOK AT CASH ON HAND, WE LOOK AT DAYS CASH ON HAND, THE, THE NUMBER OF DAYS OF OPERATING EXPENDITURES THAT, UH, WE CAN FUND WITH THE EXISTING LEVEL OF, OF, OF DAYS CASH.
AND WE'RE ROUGHLY IN, IN, YOU KNOW, 295 TO, TO 305, 310 DAYS CASH OVER, OVER THE LAST, YOU KNOW, COUPLE OF YEARS.
AND, AND, AND THIS LEVEL OF FORECAST MAINTAINS, YOU KNOW, UH, LEVELS OF, YOU KNOW, DAYS CASH BETWEEN 290 AND AND 300 DAYS.
SO CONSISTENT WITH, WITH CURRENT LEVELS.
UM, NOW THIS, THIS FORECAST, UH, YOU KNOW, DOES, DOES, YOU KNOW, PROVIDE, YOU KNOW, RATE INCREASES THAT, YOU KNOW, STARTS WITH, UM, A MORE MODEST RATE INCREASE, UM, YOU KNOW, AROUND THREE AND A HALF PERCENT.
UM, AND THEN ALLOWS US TO, UM, TO GO THROUGH A COST OF SERVICE STUDY, WHICH IS CURRENTLY UNDERWAY, AND, AND LOOK AT, UM, YOU KNOW, THE CUSTOMER IMPACTS OF, YOU KNOW, UM, HOW COSTS SHOULD BE ALLOCATED.
THE LAST COST OF SERVICE STUDY THAT WE HAD WAS IN 2017, AND WE TYPICALLY DO, UH, YOU KNOW, COST OF SERVICE STUDY EVERY, EVERY FIVE TO SEVEN YEARS.
SO, SO IT'S TIME FOR A NEW COST OF SERVICE STUDY.
AND, AND SO WHEN WE LOOK AT THESE RATE INCREASES, UH, I, I WOULD CALL FY 24 MORE OF A, AN INFLATIONARY, YOU KNOW, RATE ADJUSTMENT, YOU KNOW, IN RESPONSE TO, UH, CERTAINLY THE, THE SUPPLY CHAIN CHALLENGES THAT WE'VE EXPERIENCED OVER THE LAST COUPLE OF YEARS, AND THE INFLATIONARY ADJUSTMENTS THAT, THAT WE'VE SEEN IN TERMS OF OUR OPERATING COST O OVER THE LAST COUPLE OF YEARS.
UM, AND THEN THE, THE, THE NEXT THREE RATE INCREASES THAT YOU SEE, THE, THE 8.2%, 7% AND, AND 3.3%, UH, OVER 25 TO 27, UH, ARE, ARE REALLY ABOUT, YOU KNOW, BETTER ALIGNING, UH, OUR, OUR RATE STRUCTURE WITH AN INCREASED LEVEL OF, OF CAPITAL SPENDING AND INCREASED LEVEL OF INVESTMENT IN OUR INFRASTRUCTURE AS WE'VE GOT SOME SIGNIFICANT, UM, GENERATIONAL PROJECTS ON, ON THE HORIZON.
AND WE'LL TALK A LITTLE BIT MORE ABOUT THOSE SHORTLY AS WELL.
SO, AGAIN, THIS IS A BASELINE FORECAST, SO YOU CAN SEE THAT, UH, THE FTES ARE, YOU KNOW, ASSUMED TO BE LEVELED.
YOU HAD, UH, 1,361, UM, EMPLOYEES, UM, FULL-TIME EQUIVALENCE, WHAT FTE STANDS FOR, UH, OVER, OVER THE FORECAST PERIOD.
SO, UM, NEXT I'LL SH I'LL TALK A A LITTLE BIT OF OUR, ABOUT OUR CAPITAL SPENDING PLAN.
UM, THE PROPOSED CAPITAL SPENDING PLAN IS, UH, ALMOST 1.9 BILLION.
THAT'S, UH, ABOUT A 527 MILLION INCREASE, UM, OVER THE, THE, THE CURRENT FISCAL YEAR 23 THROUGH 27, UH, FIVE YEAR SPENDING PLAN.
UM, NOW MOST OF THAT ADJUSTMENT IS REALLY DRIVEN BY, BY, BY TWO FACTORS.
IT'S DRIVEN BY CHANGES IN, UM, YOU KNOW, THE, THE COST OF OUR CAPITAL PROJECTS, YOU KNOW, THE, UH, INFLATIONARY MARKET AND, AND, UM, AVAILABLE, UM, YOU KNOW,
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UH, COSTS FROM A AVAILABLE CONTRACTORS, BUT IT'S ALSO THE ACCELERATION OF PROJECTS THAT ARE ALREADY IN OUR FIVE YEAR FORECAST.SO, UH, IF YOU LOOK AT JUST THE, THE TOP FOUR, UM, THE TOP FOUR PROJECTS, THOSE TOP FOUR PROJECTS ACCOUNT FOR ABOUT 440 MILLION OF THAT 527 MILLION INCREASE.
SO ABOUT 80% OF THE CHANGE IS JUST INCREASED COST FOR THOSE FIVE YEAR, YOU KNOW, IN, IN THE FIVE YEAR PLAN FOR THOSE PROJECTS, BOTH ACCELERATING, YOU KNOW, COMING FULLY INTO THE FIVE YEAR SPENDING PLAN AND, AND JUST INCREASED COST ESTIMATES BASED ON THE, THE CURRENT CONSTRUCTION MARKET.
YOU KNOW, IN TERMS OF, OF THE BIGGEST PROJECTS, THE, UH, THE, THE BIGGEST HORIZON PROJECT IS OUR WALNUT CREEK, UH, WASTEWATER TREATMENT PLANT EXPANSION FROM 75 MILLION GALLONS PER DAY TO, UH, A HUNDRED MILLION GALLONS PER DAY.
UM, BUT, BUT THAT PROJECT REALLY IS ABOUT MORE THAN JUST, UH, YOU KNOW, UH, WASTEWATER TREATMENT, PLANT EXPANSION, IT'S, UH, UPGRADING, YOU KNOW, PROCESSES AND, AND FACILITIES.
AND, UM, WHEN, WHEN ALL IS SAID AND DONE, WE, WE THINK THAT PROJECT'S GONNA BE OVER A 700 MILLION PROJECT.
SO, SO 574 MILLION OF IT IS, IS IN THE FIVE YEAR PERIOD, BUT IT'LL EXPEND EXTEND, UH, INTO 29 AND POSSIBLY INTO FISCAL YEAR 30.
UH, THE NEXT BIGGEST PROJECT IS ALSO ON THE WASTEWATER SIDE, OUR, OUR SOUTH AUSTIN REGIONAL WASTEWATER TREATMENT PLANT, A AND B IMPROVEMENTS, UH, WITHIN THE FIVE YEAR FORECAST PERIOD.
THAT'S, UH, YOU KNOW, ANOTHER A HUNDRED MILLION.
UM, AND THEN ANOTHER GENERATIONAL PROJECT, UH, YOU KNOW, OUR AQUIFER STORAGE AND RECOVERY PROJECT, UM, WITH, WITHIN THE FIVE YEAR PERIOD FOR BOTH THE, THE, THE PILOT, WHICH WE'RE, UH, YOU KNOW, CURRENTLY IN, IN, IN THE EARLY STAGES OF, UM, AT ALMOST 22 MILLION.
AND, AND THEN FULL SCALE PROJECT, WHICH WILL START TO PROGRAM INTO THE FIVE YEAR FORECAST PERIOD.
UM, YOU KNOW, IN, IN 29 AND 30, I MEAN, I'M SORRY, 27, 28.
UM, BUT THIS PROJECT IS ABOUT TAKING TRADED WATER AND, AND, AND STORING IT IN AN UNDERGROUND AQUIFER, UH, SO THAT WE CAN EXTEND OUR WATER SUPPLY, UM, IN A WAY THAT PROTECTS IT FROM, UH, EVAPORATION.
YOU KNOW, UH, YOU KNOW, WE'RE A SURFACE WATER, UM, TREATMENT UTILITY.
AND, UM, YOU KNOW, BY, BY STORING, UH, TREATED WATER IN, IN AN AQUIFER, WE'RE ABLE TO PROTECT IT FROM, FROM THE HEAT AND EVAPORATION AND, AND BE ABLE TO SUPPLEMENT OUR, OUR WATER SUPPLY.
SO THIS IS A LONG TERM, UH, WATER SUPPLY STRATEGY THAT'S HIGHLIGHTED IN OUR, OUR 2018 WATER FORWARD PLAN.
UM, AND THEN I WON'T, I WON'T GO THROUGH EVERY PROJECT, BUT, UH, YOU KNOW, YOU CAN SEE THAT IN TERMS OF THE BREAKDOWN OF THE PROJECTS, UH, 1.3 BILLION OF, OF, UH, THE PROPOSED PLAN IS ON THE WASTEWATER SIDE.
AGAIN, THAT'S, UM, YOU KNOW, LARGELY BECAUSE OF THE TWO BIG PROJECTS, WALNUT CREEK AND, AND SOUTH AUSTIN REGIONAL WASTEWATER IMPROVEMENTS.
UM, AND THEN 555 MILLION ON THE WATER SIDE.
AND THAT'S REALLY KIND OF A TYPICAL SPEND, UH, FOR, FOR US WITHIN A FIVE YEAR PERIOD IS, IS, YOU KNOW, FIVE, 500 MILLION, 600 MILLION IS TYPICAL SPEND FOR BOTH WATER AND WASTEWATER.
WE, AGAIN, WE JUST HAVE, YOU KNOW, A COUPLE OF GENERATIONAL PROJECTS THAT ARE COMING INTO OUR, OUR FIVE YEAR SPENDING PLAN.
NOW, THOSE PROJECTS TRANSLATE INTO TO DEBT SERVICE FOR US.
YOU KNOW, WE TYPICALLY, WE TRY AND FUND, UH, BETWEEN 35 AND AND 50%, UH, OVER THE LAST, UH, FEW YEARS.
WE'VE, WE'VE BEEN MORE IN THE 40% RANGE, BUT WE TRY AND FUND, UH, AGAIN, AROUND 35, 50% OF OUR CAPITAL PROJECT WITH, WITH CASH FU CAPITAL PROJECTS, WITH CASH FUNDING, AND, UM, UM, THE REMAINDER WE FUND WITH DEBT SERVICE.
AND SO THIS CHART SHOWS, UM, SHOWS A COUPLE THINGS, UM, AND I'LL WALK THROUGH IT, BUT THE BLUE BARS REPRESENT OUR ACTUAL HISTORICAL AND ACTUAL SCHEDULED DEBT SERVICE.
UM, YOU KNOW, BOTH LOOKING BACK TO 20 16, 20 17 WHEN WE, UH, REALLY STARTED OUR, OUR DEBT MANAGEMENT EFFORTS, UM, AND THE, THE, THE, THE GREEN PART OF THE BAR IS ABOVE SHOW THE SAVINGS THAT WE'VE EITHER, UM, YOU KNOW, ACTUALLY ACHIEVED, UM, OVER THE, OVER THE FORECAST PERIOD, UM, I'M SORRY, SINCE 2016 AND, AND SHOWS FUTURE SAVINGS, UM, UM, GOING, GOING
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FORWARD.UM, AND I'LL SAY THAT, UM, THERE'S, THERE'S REALLY BEEN KIND OF THREE KEY COMPONENTS TO, TO OUR DEBT MANAGEMENT EFFORTS.
UH, FIRST AND FOREMOST, WE, WE'VE KIND OF BEEN, UH, DEFUSING DEBT, UM, WHICH IS AKIN TO, TO JUST SENDING IN EXTRA DEBT PAYMENTS, RIGHT? LIKE YOU MIGHT ON A CAR, CAR LOAN OR, OR YOUR HOME MORTGAGE.
UH, THE DIFFERENCE BEING THAT WE CAN TARGET, YOU KNOW, SPECIFIC YEARS OF DEBT.
UM, AND YOU CAN SEE THAT IN THIS CHART.
YOU CAN SEE, UM, YOU KNOW, WHERE, UH, FOR EXAMPLE, IN, IN 2019 AND IN 2024, UH, WHERE WE'VE, UH, WE'VE EITHER ALREADY SAVED, YOU KNOW, OVER 60 MILLION IN 2019, UM, IN, IN 2024, WE EXPECT TO SAVE ABOUT 91 MILLION, UH, WITH ABOUT 60 MILLION OF THAT ALREADY, UM, ALREADY TAKEN PLACE IN TERMS OF EXISTING TRANSACTIONS.
UM, SO WE, WE'VE USED CAPITAL RECOVERY FEES, UM, WHICH ARE, YOU KNOW, FEES TO CONNECT TO OUR SYSTEM, UM, TO, TO FUND THE FEES TRANSACTIONS, ALTHOUGH WE, WE HAVEN'T SUPPLEMENTED SOME WITH OPERATING FUNDS.
UH, THE MAJORITY OF THIS 497, UH, MILLION SAVINGS, UH, YOU KNOW, ALMOST 400 MILLION OF THAT HAS COME FROM FEES, ITS TRANSACTIONS.
AND THEN, SO WE'VE, WE'RE ABLE TO TARGET SPECIFIC YEARS.
UM, AND, AND AS YOU CAN SEE, WE'VE ALREADY BEEN TARGETING THESE OUT YEARS WHERE WE EXPECT TO SEE BIG INCREASES IN TERMS OF OUR, OUR DEBT SERVICE COSTS.
OUR, OUR DEBT SERVICE COSTS WILL PEAK IN FISCAL YEAR 2028, WHICH IS WHY, UH, WE'VE ALREADY STARTED TARGETING THEM, AND WE'LL CONTINUE TO TARGET THEM, UH, THROUGH THROUGHOUT THE FOUR FORECAST PERIOD WITH ADDITIONAL, UH, FEES, TRANSACTIONS TO, TO BASICALLY FREE UP DEBT CAPACITY TO FUND THIS GROWING CAPITAL SPENDING PLANT.
NOW, UM, CONTROLLING OUR DEBT SERVICE COSTS HAS BEEN REALLY BIG FOR US.
I TALKED ABOUT, UH, OUR DEBT SERVICE COVERAGE.
SO FOR, AGAIN, FOR EVERY DOLLAR OF DEBT SERVICE WE HAVE, WE NEED AT LEAST A DOLLAR 75 OF REVENUE TO, TO BE COMPLIANT WITH OUR FINANCIAL POLICIES, BUT ALSO, UM, REALLY JUST TO HAVE THE FUNDING TO, TO, UH, TO SUPPORT OUR OPERATION, TO SUPPORT, UH, YOU KNOW, AN EFFECTIVE LEVEL OF CASH FINANCING.
UM, SO, SO MAINTAINING, YOU KNOW, DEBT SERVICE COVERAGE, UH, IN THAT RANGE IS, IS, IS KEY IN TERMS OF OUR FINANCIAL PERFORMANCE AND OUR FINANCIAL STRENGTH AND STABILITY.
BUT TO THE EXTENT THAT WE'VE BEEN ABLE TO REDUCE DEBT SERVICE COSTS, UM, YOU KNOW, THAT'S ALLOWED US TO REALLY FOCUS ON AFFORDABILITY.
IT'S PART OF WHY WE WERE ABLE TO HAVE THE 4.8% RATE REDUCTION IN 2018, AND IT'S PART OF WHY WE'VE BEEN ABLE TO MAINTAIN, UM, NO RATE INCREASES DURING THAT PERIOD, DESPITE ADDING, YOU KNOW, SIGNIFICANT INVESTMENTS IN STAFF.
UH, YOU KNOW, IN, IN 20, UM, IN 2017, OUR, UH, OUR CAPITAL SPENDING PLAN WAS ABOUT 800, 900 MILLION.
UH, WE'VE GROWN IT TO THE, THE ONE IN THE CURRENT YEAR, UH, IS ABOUT 1.3 MILLION.
AND, AND SO WITH OUR CAPITAL SPENDING PLAN GROWING OVER TIME, WE'VE STILL BEEN ABLE TO MAINTAIN DEBT SERVICE COVERAGE, UM, OR MAINTAIN LEVEL DEBT SERVICE REQUIREMENTS IN A WAY THAT'S REALLY IMPACTED AFFORDABILITY.
AND YOU CAN SEE IT WITH THE GREEN LINE THAT, THAT ON, ON THE CHART, THE GREEN LINE SHOWS, UM, THE PERCENTAGE OF OUR ANNUAL BUDGET THAT'S MADE UP OF, OF DEBT SERVICE COVERAGE.
AND, AND IF WE HAD GONE BACK ONE YEAR FURTHER, WE WERE ACTUALLY, UH, ABOUT 42% IN 2016.
SO, SO DEBT SERVICE COSTS MADE UP 42% OF OUR BUDGET IN 2016.
AND, AND OVER THE LAST SEVEN YEARS, WE'VE BEEN ABLE TO BRING THAT DOWN INTO THE MID 20% RANGE, UH, AGAIN, BOTH FROM, YOU KNOW, FROM D FEASANCE TRANSACTIONS, FROM RE REFUNDING EXISTING DEBT, WHICH, UH, IS SIMILAR TO REFINANCING YOUR HOME MORTGAGE WHEN, WHEN RATES WERE AT ROCK BOTTOM.
AND, UH, YOU KNOW, OVER, OVER THAT TIME, WE WERE ABLE TO REFINANCE SOME OF OUR EXISTING DEBT AT LOWER INTEREST RATES.
UH, SO THAT'S CONTRIBUTED TO THE 497 MILLION IN, IN SAVINGS.
AND, UM, AND THEN THE, THE THIRD REALLY KEY PIECE OF OUR, UM, DEBT MANAGEMENT STRATEGIES HAS BEEN, UH, USE OF, OF LOW INTEREST LOANS TO, TO FUND ELIGIBLE PROJECTS.
SO TEXAS WATER DEVELOPMENT BOARD LOANS.
UM, FOR EXAMPLE, OUR, OUR, UH, ADVANCED METER INFRASTRUCTURE PROJECT IS FUNDED THROUGH TEXAS WATER DEVELOPMENT BOARDS WITH
[00:30:01]
LOANS.UM, SEVERAL OF OUR, OUR, UH, BIG, UH, YOU KNOW, THE PROJECTS ON OTHER PROJECTS ARE FUNDED THROUGH EITHER, UM, YOU KNOW, THE, THE CLEAN WATER, UH, STATE REVOLVING FUND OR THE DRINKING WATER STATE REVOLVING FUND.
AND, AND FOR, FOR PROJECTS THAT ARE FUNDED THROUGH, UH, THE, THE STATE REVOLVING FUND, UM, YOU KNOW, WE'VE, WE'VE SEEN SOME OF THOSE BOND ISSUANCE COME IN AT, YOU KNOW, 0% INTEREST.
SOME OF 'EM COME IN AT, YOU KNOW, MAYBE A QUARTER PERCENT INTEREST OVER, OVER THE LIFE OF, OF THE BOND ISSUANCE.
SO, SO THAT'S BEEN KEY, ALTHOUGH, YOU KNOW THAT THAT'S A COMPETITIVE PROCESS.
WE, WE, UH, TRY AND GET, UM, LOW INTEREST WATER DEVELOPMENT LOANS WHEN, WHEN, WHEN WE CAN, AND THAT'S BEEN, AGAIN, A BIG PIECE OF OUR DEBT MANAGEMENT EFFORTS OVER TIME.
NOW, THESE THREE CHARTS WILL SHOW, UH, A A LITTLE BIT MORE OF THE DETAILS FOR, FOR EACH OF THE, THE FORECAST SCENARIOS.
UM, AGAIN, THIS IS THE, THE BASE, UH, EXPENDITURE SCENARIO, UM, THAT, THAT DOES ASSUME THE, THE RATE INCREASE.
AND, UM, SO, UM, YOU KNOW, THESE WILL TIE TO, TO THAT FIRST CHART YOU SAW.
UM, I WILL POINT OUT THAT IN, IN FISCAL YEAR 24, YOU SEE A, UM, A BUDGET DEFICIT.
AND, AND THAT'S REALLY MORE OF A PLANNED BUDGET DEFICIT, UH, TO, TO SPIN DOWN, UH, A LITTLE BIT OF A FUND BALANCE THAT WE ACCUMULATED LAST YEAR.
LAST YEAR WE HAD ABOUT 25 MILLION OF, OF, UM, EXCESS FUND BALANCE, THAT, THAT WAS UNPLANNED, AS YOU KNOW, WITH THE FIRST YEAR OF, OF THE DROUGHT, UM, YOU KNOW, WE SAW INCREASED DEMAND FOR, FOR WATER, AND, AND AS A RESULT WE HAD UNANTICIPATED REVENUES.
AND, AND SO WE TRY AND MAINTAIN, YOU KNOW, REASONABLE LEVELS OF, OF, OF CASH AND, UM, AND, AND, AND, YOU KNOW, ALL OF OUR FINANCIAL, UM, METRICS.
BUT, UM, YOU KNOW, THIS IS REALLY JUST AN OPPORTUNITY TO SPIN DOWN A LITTLE BIT OF THAT FUND BALANCE AND, UH, USE IT IN A WAY THAT THAT HELPS SUPPORT, YOU KNOW, OUR, OUR, OUR BUDGET RATHER THAN JUST ACCUMULATING AND, AND SITTING ON CASH O OVER TIME.
UH, SO THAT WOULD TAKE US DOWN FROM, UM, YOU KNOW, AN ESTIMATED YEAR END, UH, DAYS CASH ON HAND OF ABOUT 309 DAYS, UH, DROP IT ABOUT 10 DAYS.
AND, AND AS I MENTIONED, UM, YOU KNOW, THROUGHOUT THE FORECAST PERIOD, WE, WE WOULD MAINTAIN, UH, YOU KNOW, STRONG LEVELS OF DAYS, CASH ON HAND, UH, STRONG LEVELS OF, OF, UM, DEBT SERVICE COVERAGE.
UH, NOW WHAT YOU DO SEE THOUGH IS, UM, THAT WE'RE, WE'RE NOT QUITE AT OUR TARGET LEVELS OF ANNUAL CIP P CASH FUNDING.
UM, AGAIN, I MENTIONED OUR TARGET IS BETWEEN 35 AND 50%.
AND SO IN THIS SCENARIO, WE ANTICIPATE KIND OF A SLOW REDUCTION, UH, FROM ABOUT, UH, 34% IN THE CURRENT YEAR, UH, TRENDING DOWN TO ABOUT 30%, UH, OVER THE FORECAST PERIOD.
AND THAT'S REALLY JUST A FUNCTION OF THE, THE NOT BEING ABLE TO KEEP UP WITH, UM, YOU KNOW, UH, 35% CASH FINANCING AS, AS OUR CAPITAL SPENDING PLAN GROWS.
UM, BUT, UH, AND, AND SO THAT REALLY REFLECTS KIND OF A BALANCE OF AFFORDABILITY, UM, AND, UH, AND INVESTMENT IN, UH, YOU KNOW, OUR, OUR CAPITAL SPENDING PLAN, UH, THIS SCENARIO, THIS, THIS IS THE ENHANCEMENT SCENARIO.
AGAIN, THIS IS, UH, WHAT WE WOULD, WHAT WE TYPICALLY SUBMIT IN TERMS OF, OF OUR FINANCIAL FORECAST.
UM, AND SO THIS SCENARIO DOES ASSUME WE, WE ADD FTES.
UH, IT DOES ASSUME THAT WE, WE MAKE, YOU KNOW, BOTH OPERATIONAL AND INFRASTRUCTURE ADJUSTMENTS AND, UM, OVER THE FORECAST PERIOD.
UM, SO REALLY THE, THE, THE BIGGEST DIFFERENCE BETWEEN, UH, THIS SCENARIO AND, AND THE, THE, THE BASE SCENARIO IS, YOU KNOW, THERE'S ADDITIONAL INVESTMENT IN, IN OUR OPERATIONS AND MAINTENANCE IN, IN THIS SERVICE ENHANCEMENT SCENARIO.
THE, THE CAPITAL SPENDING PLANS ARE IDENTICAL IN ALL THREE SCENARIOS BECAUSE, UM, YOU KNOW, THERE'S NOT REALLY ANY, ANY, UM, DISCRETIONARY PROJECTS IN, IN OUR CAPITAL SPENDING PLAN.
I MEAN, THEY'RE, THEY'RE, THEY'RE, THEY'RE PROJECTS THAT ARE IMPORTANT, UH, YOU KNOW, IN TERMS OF OUR OPERATIONAL RESILIENCY AND, AND, AND OPERATIONAL PERFORMANCE.
SO, UM, SO FOR ALL THREE SCENARIOS, THE CAPITAL, THE ASSUMED LEVEL OF CAPITAL SPENDING IS, IS THE SAME.
UM, SO HERE WE'VE GOT A LITTLE BIT BIGGER DEFICIT.
[00:35:01]
KNOW, IN 2022, WE, WE HAD ABOUT, UH, YOU KNOW, 25 MILLION MORE OF REVENUES THAN WE HAD ANTICIPATED BECAUSE OF THE HOT AND DRY SUMMER.UM, BUT YOU DO SEE IN, IN, UM, FISCAL YEAR 28, WE, WE'D EXPECT A, YOU KNOW, WE ARE PROJECTING ANOTHER DEFICIT.
AND, UH, BUT YOU KNOW, WE THINK WITH THE, THE THREE YEARS, WELL, FOUR YEARS EARLY OF, OF, OF RATE INCREASES THAT, THAT WE'D BE IN A POSITION TO, TO TAKE A PAUSE ON, ON, UH, RATE INCREASES.
WE'D HAVE A LITTLE BIT OF A DEFICIT, UH, AND WE'D HAVE ROOM TO DO THAT AND STILL MAINTAIN STRONG LEVELS OF, OF DAY'S CASH ON HAND AND DEBT SERVICE COVERAGE.
UM, BUT AS WE GET OVER THAT FISCAL YEAR 28 HUMP, WHICH AGAIN IS THE PEAK OF OUR DEBT SERVICE, UH, THAT WE EXPECT, YOU KNOW, SOME OF THE, THE, UM, FUNDING REQUIREMENTS TO START TO STABILIZE.
AND, AND SO, UH, WE'D EXPECT TO, TO TO BE A, BE IN A POSITION TO KIND OF REBALANCE OUR, OUR RATE STRUCTURE WITH OUR COST, UH, AT THAT TIME.
AND THEN THIS ONE, THIS IS OUR, OUR NO RATE INCREASE SCENARIO.
AND, AND WE SHOW THIS ONE, YOU KNOW, UH, TO, TO JUST GIVE A SENSE OF, OF, UM, WHAT OUR FINANCIAL CONDITION WOULD LOOK LIKE WITH NO RATE INCREASES THROUGH THROUGHOUT THE FORECAST PERIOD.
AND AS YOU CAN SEE, UH, YOU KNOW, WE HAVE DEFICITS THROUGHOUT THE FORECAST PERIOD, UM, WITH THE, THE LAST THREE YEARS BEING SIGNIFICANT, SIGNIFICANT DEFICITS OF, YOU KNOW, AROUND, UH, YOU KNOW, AVERAGING ABOUT 105 MILLION OUR DAYS, CASH ON HAND WOULD GO FROM A CURRENT LEVEL OF 309 DAYS TO, TO NEGATIVE CASH, UH, BY FISCAL YEAR, UH, 28, SO, SO NEGATIVE 100 DAYS.
THAT'S, UH, YOU KNOW, OVER THREE MONTHS OF, OF NEGATIVE CASH.
OUR, OUR DEBT SERVICE COVERAGE WOULD DROP BELOW THE 1.25, UM, BOND COVENANT LEVEL.
SO AT, AT THAT POINT, AGAIN, WE'D, WE'D HAVE TO GO TO COUNCIL TO, TO SEEK A RATE INCREASE, UM, TO, UH, TO IMPROVE LEVELS OF COVERAGE.
UM, AND AGAIN, BECAUSE THIS ASSUMES THE SAME LEVEL OF, OF C I P INVESTMENT, UH, YOU KNOW, UH, WE'VE GOT THAT SAME TAPERING DOWN OF CASH FINANCING INVESTMENT IN OUR, IN OUR CAPITAL PROGRAM.
NOW WRAP UP, UH, WITH, UM, YOU KNOW, THE, THE FORECAST RATE IMPACTS, AND, UH, BUT, UH, YOU KNOW, THIS CHART SHOWS A COUPLE OF THINGS.
IT SHOWS OUR HISTORIC RATING OR OUR HISTORIC, UH, AVERAGE BILL FOR, FOR OUR AVERAGE CUSTOMER, UM, GOING BACK TO, TO FISCAL YEAR 12.
AND THEN THE GREEN LINE SHOWS OUR, OUR, OUR LEVEL OF, OF DEMAND AND ASSUMED LEVEL OF DEMAND GOING FORWARD.
SO, YOU KNOW, AS I MENTIONED EARLIER, YOU KNOW, OUR, OUR, OUR LEVEL OF DEMAND DECREASED AS WE WENT THROUGH THE DROUGHT, UM, YOU KNOW, UH, FROM, FROM ABOUT 8,800 GALLONS IN FISCAL YEAR 11 DOWN TO ABOUT 7,600, UM, IN FISCAL YEAR 12, AND THEN TAPERED OFF TOWARDS THE END OF THE DROUGHT IN 2015 WHERE IT LEVELIZED.
AND THAT'S WHERE WE WERE, AGAIN, ABLE TO, TO KIND OF BALANCE OUR, OUR RATE STRUCTURE WITH OUR, OUR LEVEL OF DEMAND AND, AND, YOU KNOW, PUT US IN A POSITION TO HAVE THE, UM, THE RATE DECREASE IN FY 18 AND MAINTAIN STABLE RATES.
UM, WE PROJECT, UH, YOU KNOW, DEMAND TO, TO CONTINUE AT ITS CURRENT LEVELS.
EVEN, YOU KNOW, EVEN OVER THE LAST COUPLE YEARS, FISCAL YEAR 22 WAS A WET YEAR, AND SO WE WERE SLIGHTLY ABOVE 5,800 GALLONS OF AVERAGE CONSUMPTION.
UM, PRIOR YEAR, PRIOR TO THAT FISCAL YEAR, 21 WAS A WET YEAR.
AND, YOU KNOW, WE WERE AT ABOUT 5,600 GALLONS.
AND SO ON AVERAGE, YOU KNOW, BETWEEN WET YEARS AND DRY YEARS, WE, WE ST, YOU KNOW, MAINTAINED AN AVERAGE OF ABOUT 5,800 GALLONS.
AND SO WHAT'S REALLY HAPPENING OVER, OVER THE FORECAST PERIOD IS, IS REALLY A RESET IN TERMS OF OUR RATE STRUCTURE TO ALIGN IT WITH, UM, THE LEVEL, LEVEL OF INVESTMENT NECESSARY FOR OUR, OUR CAPITAL PROGRAM, THE LEVEL OF INVESTMENT IN OUR INFRASTRUCTURE TO, UM, YOU KNOW, TO, TO SERVE NEW GROWTH, TO, UM, TO BE MORE RESILIENT AND, AND THEN TO PLAN FOR THE FUTURE IN TERMS OF, OF WATER SUPPLY AND, AND, UH, WATER AVAILABILITY.
UM, SO YOU CAN SEE THAT, UH, YOU KNOW, OVER THE FORECAST PERIOD, WE'D EXPECT TO, TO RAMP UP FROM, FROM OUR CURRENT AVERAGE RESIDENTIAL BILL OF, OF $80 AND 79 CENTS, UM, UP TO, TO ABOUT
[00:40:01]
$103 AND 55 CENTS.UM, ALTHOUGH I WILL SAY WE'RE, UH, WORKING TO FINALIZE OUR, OUR, OUR BUDGET, UH, SUBMITTAL AND, AND WE THINK THAT, YOU KNOW, EVEN FOR NEXT YEAR, UM, THAT WE, YOU KNOW, WE MAY BE ABLE TO PULL BACK SOME ON, ON SOME OF THOSE RATE INCREASES.
UM, AND WITH THAT, I'LL OPEN IT UP TO ANY QUESTIONS AND THEN WE CAN TALK ABOUT THE PROCESS AND TIMELINE.
UM, DOES ANYBODY HAVE ANY QUESTIONS? I HAVE A COUPLE OF QUESTIONS.
UM, THANK YOU, JOSEPH, FIRST OF ALL, AND THEREA STAFF, UM, ON, UH, AUSTIN BOUGHT A BASELINE FORECAST, IT LOOKS LIKE.
UM, ON THE FTE IT SHOWS 1361 THROUGHOUT, SO 2018 AND 28.
SO IS THIS, UM, AS, AS THAT'S COMPLETELY FULL INCLUDING, UM, ALL THE FUTURE, UM, FTES THAT YOU'RE HIRING? OR IS IT, DO YOU HAVE 1361 NOW? WE HAVE 1361 NOW.
THIS IS, THIS IS THE BASELINE FORECAST.
AND IN TERMS OF THE, THE FORECAST OF MIDDLE, THIS WAS, THIS WAS THE, THE FORECAST THAT, UM, THAT AS A CITY WE, WE PRESENTED TO COUNCIL WAS A, A BASELINE LEVEL OF FORECAST THAT ASSUMED, UH, NO FTE, NO NEW FTES AND NO SERVICE ENHANCEMENTS, UM, WITH THE, WE ANTICIPATE MODEST, UM, FTE GROWTH OVER THE FORECAST PERIOD.
UM, YOU KNOW, FOR, UH, IN OUR SERVICE ENHANCEMENT, UH, LEVEL OF FORECAST, UH, WE, WE ANTICIPATED 27, BUT, UM, YOU KNOW, WE, WE'VE REFINED THAT AND WE EXPECT TO COME IN UNDER THAT.
IN TERMS OF OUR ACTUAL BUDGET SUBMITTAL, UM, I WILL SAY THAT HISTORICALLY WE'VE TRIED TO LIMIT OUR FTE GROWTH, UH, TO ABOUT THE RATE OF GROWTH OF, OF CUSTOMER GROWTH.
AND SO OUR CUSTOMER GROWTH HAS AVERAGED AROUND 2%.
AND SO THAT'S KIND OF BEEN OUR HISTORIC ANNUAL TARGET AND, AND WE EXPECT TO, TO STAY IN THAT RANGE, UM, OVER, OVER THE FORECAST PERIOD.
AND, AND, AND THAT EQUATES TO A 2%, UH, YOU KNOW, FTE GROWTH, YOU KNOW, UH, EQUATES TO ABOUT 26, 27 FTES, BUT HISTORICALLY WE'VE BEEN GENERALLY BEEN UNDER THAT, LIKE, UNDER, YOU KNOW, 20 OR LESS.
AND I THINK THAT'S, UH, WHERE WE WOULD END UP OVER THE FORECAST PERIOD.
UM, SO WHAT, WHAT'S THE NUMBER OF FTE NOW? 1361 S 61, THAT'S EXISTING NUMBER.
AND, AND AGAIN, THIS, THIS, THIS BASELINE FORECAST ASSUMES NO NEW ACTIVITIES.
THIS IS NOT THE SERVICE ENHANCEMENT FORECAST.
UM, SO ONE MORE QUESTION ON THE RATE PAYER COMBINED RATE INCREASE ON, UH, EITHER BASELINE OR ENHANCEMENT ENHANCEMENT.
SO FOR FY 25 AND 26, YOU KNOW, YOU HAVE AN ENHANCEMENT SERVICE, UH, SCENARIO YOU HAVE 8.7, 8.2, AND THE REST OF 'EM ARE BETWEEN THREE AND FIVE, RIGHT? SO IS THERE, I KNOW YOU HAVE SOME PROJECTS GOING ON IN THOSE YEARS, BUT IS THERE ANY WAY THAT YOU CAN, UH, WE CAN LEVEL THIS OUT LIKE, YOU KNOW, 4% OR 5% AND, YOU KNOW, FOR, FOR FUTURES TOO? YEAH.
I MEAN, AS OPPOSED TO YOUR, UH, THREE POINT AND THEN ALL OF A SUDDEN YOU HAD 8.2 AND THEN SEVEN, RIGHT.
WE WOULD LOOK FOR OPPORTUNITIES TO, TO DO THAT, YOU KNOW, AS, AS I MENTIONED EARLIER, WE'RE GOING THROUGH A COST OF SERVICE STUDY, UM, THAT'S GONNA LOOK AT, UM, UPDATING THE, YOU KNOW, THE, THE COST ALLOCATION TO OUR DIFFERENT CUSTOMER CLASSES AND, AND LOOK AT THE RATES REQUIRED TO, UM, TO MAINTAIN FULL COST OF SERVICE FOR, FOR ALL OF OUR CUSTOMER CLASSES.
UM, IN ADDITION, WE ANTICIPATE DOING, UH, SOME SIGNIFICANT, UH, PUBLIC OUTREACH AND CUSTOMER ENGAGEMENT, UM, TO, TO TALK TO 'EM ABOUT, UH, YOU KNOW, WHAT PROJECTS WE HAVE UPCOMING AND, AND TALK ABOUT THE WAYS THAT WE CAN PAY FOR IT.
UM, YOU KNOW, CERTAINLY THE EARLIER YOU DO A RATE INCREASE, THE LONGER IT'S IN EFFECT.
AND, AND SO THAT KIND OF BUYS DOWN FUTURE RATE INCREASES.
AND SO, SO THIS, THIS SCENARIO ASSUMES WE, WE FRONT END LOAD THOSE TWO YEARS, UM, TO, TO BUY DOWN THE, THE COST OF, YOU KNOW, SUBSEQUENT RATE INCREASES.
CERTAINLY, UH, THAT'LL BE ONE OF THE THINGS THAT WE LOOK AT IS WHAT IF WE COME IN A LITTLE BIT LOWER IN
[00:45:01]
25 AND 26 TO TRY AND SPREAD IT? UM, AND, AND SO WE'RE GONNA, WE'RE GONNA DO CUSTOMER, UH, ENGAGEMENT TO, TO SEE WHAT OUR CUSTOMERS WOULD PREFER, YOU KNOW, WOULD THEY, THEY'D RATHER US, UH, KIND OF FRONT END LOAD IT AND, AND, UM, GET IT OVER WITH, SPREAD IT OUT OVER A LONGER PERIOD OF TIME.UM, THIS, THIS OPTION, UH, REDUCES KIND OF THE CUMULATIVE SUM OF IT, BUT, BUT WE'RE CERTAINLY OPEN TO, UM, TO SPREADING IT OUT.
UM, YOU KNOW, UM, YOU KNOW, REALLY, AND, YOU KNOW, LISTENING TO FEEDBACK FROM, FROM, YOU KNOW, NOT ONLY POLICY MAKERS, BUT, BUT YOU KNOW, CUSTOMERS AND, AND LOOKING AT THE BEST WAY TO, TO IMPLEMENT, UM, YOU KNOW, AGAIN, ROUGHLY 25% COST INCREASES OVER, OVER THE NEXT FIVE YEARS.
SO, SO IS, IS STAFF COMMUNICATION WITH THE CUSTOMERS, IS THAT ONGOING NOW? UH, OR BEFORE THE BUDGET BUDGET GOES TO, TO THE COUNCIL? NO, AS, AS, AS I MENTIONED EARLIER, SO THE 3.6% THAT, THAT FIRST YEAR OR, OR IN THIS CASE 3.7% ON THE, ON THE ENHANCED SCENARIO, UM, THAT'S WHAT WE CONSIDERED LIKE AN INFLATIONARY ADJUSTMENT.
SO, UM, OUR, OUR PLAN IS TO, TO, YOU KNOW, PROPOSE SOMETHING IN THAT RANGE FOR, FOR THIS YEAR'S BUDGET.
AND, AND THEN AS SOON AS THE BUDGET PROCESS IS OVER, START TO TALK TO CUSTOMERS AND DO PUBLIC ENGAGEMENT, UH, THAT'S LOOKING TOWARDS NEXT YEAR'S BUDGET.
CAUSE WE DON'T WANT OUR CUSTOMERS TO GET CONFUSED WITH, UM, YOU KNOW, WHICH YEARS WE'RE TALKING ABOUT.
SO, SO THIS YEAR WE'RE, WE'RE, WE'RE TRYING TO KEEP IT SIMPLE AND FOCUS ON THE INFLATIONARY ADJUSTMENT, AND THEN IN TERMS OF THE BIGGER INCREASES, START THAT DISCUSSION AFTER THIS YEAR'S BUDGET PROCESS.
UM, SO IT WOULD, IT WOULD, UM, KIND OF GUIDE US AS WE, AS WE LOOK TO NEXT YEAR AND, AND IN SUBSEQUENT YEARS.
ANY MORE QUESTIONS? YES, I HAVE A GOOD QUESTION, JOSEPH.
UM, JUST FOR MY KNOWLEDGE, UH, SO THE TYPICAL RATE PAYER, THAT'S A COMBINED RATE INTERESTS, UH, AND I KNOW YOU HAVE DIFFERENT CLASSES, UH, BUT FROM, LIKE, FROM A RESIDENTIAL OR JUST ANY, UM, HOW DOES THAT WEIGHT IT WEIGHTED OVER THE TYPICAL, UH, TIERED RATE SYSTEM, UM, THAT Y'ALL HAVE? SURE.
OUR, SO AS I SAID, OUR, OUR AVERAGE CUSTOMER USES ABOUT 5,800 GALLONS A A MONTH.
UM, AND OUR, OUR CHAIRED STRUCTURE INTERIORS ONE AND TWO, WELL ACTUALLY TIERS TWO, TIER TWO, UH, ENDS AT 6,000 GALLONS.
SO, UM, BUT, BUT THAT'S AN AVERAGE, A WEIGHTED AVERAGE BILL THROUGH THROUGHOUT THE YEAR.
SO IT ASSUMES, YOU KNOW, AN INCREASE IN DEMAND DURING THE SUMMER.
BUT, BUT ON AVERAGE, YOU KNOW, WE TAKE THAT 5,800, WE ACTUALLY CALCULATE THE AVERAGE BILL, YOU KNOW, FOR, FOR ALL 12 MONTHS OF THE YEAR.
UM, SO FOR CUSTOMERS, YOU KNOW, THAT'S OUR, OUR AVERAGE CUSTOMER FOR COVER CUSTOMERS WHO USE LESS, UM, THEY WOULD SEE A SMALLER INCREASE THAN THAN LIKE THE 3.6%, UH, CUSTOMERS THAT, THAT GET INTO OUR HIGHER TIERS.
WE'LL SEE A BIGGER INCREASE IS, YOU KNOW, BECAUSE MORE OF THEIR CONSUMPTION WILL BE IN THOSE, THOSE HIGHER TIERS.
UM, WHAT WE TYPICALLY DO, YOU KNOW, IN TERMS, YOU KNOW, IS THE LAST TIME WE DID A RATE INCREASE IS WE, UH, YOU KNOW, WE, WE, UM, ACTUALLY PUBLISHED A, A CHART THAT'S, UH, YOU KNOW, IF YOU'RE AVERAGE CONSUMPTION IS 6,000, THIS IS KIND OF THE RANGE OF, OF RATE INCREASE YOU COULD EXPECT AND, AND, AND GO DOWN, YOU KNOW, IF YOU GET TO 10,000, THIS IS WHAT YOU CAN EXPECT.
AND, UM, SO IT, IT, IT WILL, UH, IT WILL INCREASE, UM, AS CUSTOMERS USE MORE WATER, THEN THAT'S CONSISTENT WITH, WITH OUR TIERED CONSERVATION BASED RATE STRUCTURE.
YEAH, I WAS JUST WONDERING BECAUSE LIKE IF THE AVERAGE IS 58 AND THEN YOU'RE, YOU KNOW, WAITING THE INCREASE FOR THE HIGHER TIERS, RIGHT? WELL, AND YOU'RE MISSING OUT ON RIGHT, THE ADDITIONAL REVENUE IF THE AVERAGE IS WELL AND, AND BE, YOU KNOW, BECAUSE THIS ISN'T A COST OF SERVICE BASED, UM, YOU KNOW, ADJUSTMENT, WHAT WE TRIED TO DO OR AS WE'RE, YOU KNOW, WE'RE WORKING THROUGH FINALIZING OUR BUDGET SUBMITTAL, UM, WHAT WE'RE TRYING TO DO IS REALLY TRYING TO KEEP THAT PERCENTAGE PRETTY EQUAL EVEN THROUGH THE TIERS.
SO WHEN YOU GET UP INTO THE HIGHER TIERS, UM, YOU KNOW, WE, THE ADJUSTMENTS ARE LIKE A THREE, YOU KNOW, ACTUALLY ON, ON THE WATER SIDE BECAUSE OUR, UH, IT IS A COMBINED, UM, SYSTEM-WIDE ADJUSTMENT.
ON THE WATER SIDE, IT'S ACTUALLY ABOUT A 2.8% CHANGE, UM, ON THE WASTE WATER SIDE, BECAUSE THE CAPITAL PROGRAM IS MORE WASTEWATER HEAVY, UH, IT'S ABOUT 4.4%.
[00:50:01]
UM, SO IT WON'T QUITE BE 3.6% ON THE WATER SIDE, UM, EVEN, EVEN IN THE HIGHER TIERS.UM, I WAS JUST WONDERING ON THE, ON THE, UM, WALNUT CREEK, THE SOUTH AUSTIN REGIONAL AND THE AQUIFER STORAGE RECOVERY AND THE ONES IN WASTE WATER SEP SEPARATOR, IS THAT, IS THAT SOUTH AUSTIN REGIONAL TRANS AMBIENT? DOES THAT GET US ANY MORE GALLONS PER, PER DAY? I MEAN, TREATMENTS CAPACITY? NO, THO THOSE ARE, UH, IT'S NOT A TREATMENT CAPACITY INCREASE.
YOU KNOW, I THINK, UM, YOU KNOW, SOUTH AUSTIN REGIONAL, UH, EXPANSION IS, IS MORE OF A, IS A HORIZON PROJECT, YOU KNOW, AS WE GET THROUGH THE WALNUT CREEK, UM, EXPANSION, WE'RE ALREADY PLANNING FOR THAT EXPANSION, BUT IT'S NOT IN OUR FIVE YEAR FORECAST YET.
AND THAT'S JUST TREATMENT PROCESS CHANGE, UH, OR TRADE AMBI IMPROVEMENTS TO UPGRADE EQUIPMENT.
AND, AND, UM, SINCE IT IS, YOU KNOW, SOME OF THE EQUIPMENT IS A LITTLE BIT OLDER, DO YOU KNOW WHEN THE SAR, UM, INCREASE OR SAR, UM, EXPANSION WOULD START IN THE CIP P SPENDING? I THINK FROM A DESIGN PERSPECTIVE, UM, IT WOULD HAPPEN, DESIGN WOULD START TO HAPPEN BEFORE 2030 AND MAY HAVE EVEN HAPPENED.
UM, I DON'T KNOW IF SAR IS IN THERE YET AT ALL.
I DON'T THINK SAR THE, UM, EXPANSION IS IN THERE JUST YET UNTIL WE GET THROUGH THE WALNUT EXPANSION AND THEN WE'LL GO INTO THE SAR EXPANSION.
SO IN THE 10 YEAR FORECAST, IT, IT'LL BE IN THE LAST FIVE YEARS WE WE'RE, WE'RE TRYING NOT TO, TO OVERLAP 'EM TOO MUCH, BUT, BUT CERTAINLY, UM, YOU KNOW, WE, WE RECOGNIZE THAT THAT SARR WILL, WILL NEED, UM, YOU KNOW, WE'LL NEED TO TURN OUR ATTENTION TO SAR PRETTY QUICKLY.
UM, WELL, THAT'S WHAT I THOUGHT I REMEMBERED SEEING WAS THAT SARR AND WALLOW WERE ALMOST, YOU KNOW, NECK AND NECK EXPANDING AT THE SAME TIME.
SO THAT'S WHY I WAS WORRIED THAT MAYBE OKAY, THANK YOU.
WE'VE GOT A LITTLE BIT MORE ROOM WITH SAR.
SO, UM, YOU KNOW, AND WE'VE BEEN PLANNING FOR, FOR A WHILE, UM, YOU KNOW, TO, TO GET THROUGH WALNUT AND, AND THEN TURN OUR ATTENTION TO SAR.
UH, THERE MAY BE A LITTLE BIT OF OVERLAP IN TERMS OF DESIGN AND PLANNING, BUT, UM, FROM A CONSTRUCTION PERSPECTIVE, UH, THERE SHOULDN'T BE MUCH, IF ANY OVERLAP.
UM, AND THANK YOU FOR THIS PRESENTATION.
UM, I'M LOOKING AT FULL-TIME EMPLOYEES.
YOU HAVE YOUR BASELINE OBVIOUSLY, THAT YOU WERE ASKED TO PROVIDE.
UM, I'M ASSUMING YOU HAVE A FULL-TIME EMPLOYEE ACCOUNT IN THESE OTHER ONES, OTHER SCENARIOS WITH THE ADDITION BASED ON THE GROWTH OF THE UTILITY, BASED ON THE GROWTH OF THE POPULATION THAT IT'S SERVING, RIGHT.
WE, WE DO, AND, AND LIKE I SAID, WE'RE, YOU KNOW, HISTORICALLY WE'VE, WE'VE, UM, YOU KNOW, AT 2% OR LESS, WE, WE'VE LOOKED AT AROUND 20, YOU KNOW, NEW EMPLOYEES PER YEAR AND WE EXPECT TO, TO KIND OF THAT TO BE KIND OF THE NORM OVER, OVER THE FIVE YEAR FORECAST PERIOD.
ONE OF THE THINGS THAT, UM, THAT WE, WE DIDN'T GIVE YOU, IT'S, IT'S, IT'S A LOT OF DETAIL AND IT'S, IT'S, UM, BUT WE'RE PLANNING TO SEND IT TO YOU IS, UM, THE, THE MEMO TO MAYOR AND COUNCIL, THE FIVE YEAR FORECAST REPORT.
AND IN THAT REPORT FOR EVERY DEPARTMENT INCLUDING AUSTIN WATER, IT, IT SHOWS THE, THE THREE SCENARIOS WHERE IT SHOWS THE FUN SUMMARY OF THE THREE SCENARIOS.
SO, SO LIKE YOU SEE ON SLIDE THREE, I THINK, UH, SORRY, YEAH.
SO SLIDE THREE, UM, IN, IN THAT REPORT AND, AND WE'RE, WE'RE PLANNING TO SEND THAT OUT AFTER, UH, FOR, FOR YOUR REVIEW, BUT IT'S, UH, IT'S THE, THE FORECAST REPORT THAT WENT TO MAYOR AND COUNSEL AND, AND FOR US AND FOR ALL DEPARTMENTS, IT SHOWS, UM, THE THREE SCENARIOS I CAN, I CAN TELL YOU THAT, UM, IN TERMS OF THE SERVICE ENHANCEMENT SCENARIO, UH, AGAIN, YOU KNOW, WE, WE HAD SUBMITTED ABOUT 27 FTES FOR FISCAL YEAR 24.
UM, WE WE'RE SINCE KIND OF PULLED BACK A LITTLE BIT ON THAT NUMBER AND WE'RE WORKING, FINALIZE THAT NUMBER.
UM, BUT, BUT THEN ABOUT 15 TO 20, UH, GOING FORWARD.
UM, SO IN THAT SCENARIO, WE LOOK TO GO FROM 1361 CURRENTLY TO ABOUT 1452 BY FISCAL YEAR 28.
[00:55:01]
UM, YOU KNOW, KEY INITIATIVES AGAIN, UM, YOU KNOW, WATER FORWARD, MY TX UH, WATER, UM, AND, AND KEEPING UP WITH GROWTH.DOES ANYBODY ELSE HAVE ANY OTHER QUESTIONS? THANK YOU VERY MUCH.
UM, NOW WE MOVE TO ITEM NUMBER FOUR, DEBT MANAGEMENT.
AND, AND THERE, UM, YOU KNOW, WE'VE, I, I SHOWED THE CHART, UM, UM, YOU KNOW, AGAIN, IT'S, IT'S BEEN, UH, YOU KNOW, A BIG FOCUS FOR US SINCE, SINCE 2016.
LIKE, LIKE I SAID, WE'VE, WE'VE ALREADY SAVED, UM, 497 MILLION IN, IN DEBT SERVICE COSTS SINCE 2016.
UH, WE ANTICIPATE IN THE FORECAST PERIOD, UM, ANOTHER 200 MILLION.
UM, AND, AND YOU KNOW, THAT WAS REFLECTIVE.
UH, YOU KNOW, AGAIN, ON CHART CHART FIVE WHERE YOU CAN SEE IN THOSE OUT YEARS, THAT'S A COMBINATION OF THE DEBT SERVICE SAVINGS THAT, THAT WE'VE ALREADY TRANSACTED IN DEFESENCE AND, AND REFINANCING, BUT, UM, ASSUMES, YOU KNOW, ABOUT 50 MILLION A YEAR IN, IN 40 TO 50 MILLION A YEAR IN EACH OF THE NEXT, UH, NEXT FIVE YEARS, IT'S 30,000,024.
BUT, BUT THEN, YOU KNOW, AVERAGING BETWEEN 40 AND 50, UM, FOR, FOR THE NEXT FEW YEARS.
UM, FISCAL YEAR 28 AGAIN IS OUR PEAK.
UM, SO IF YOU, IF YOU LOOKED AT OUR, OUR DEBT SERVICE REQUIREMENTS, IT WOULD PEAK IN 28 AND THEN START TO TO DROP.
AND SO OUR, YOU KNOW, A LOT OF OUR WORK IS FOCUSED ON TRYING TO TAKE OUT THAT PEAK AND LEVELIZE DEBT SERVICE, YOU KNOW, SO THAT WE CAN MAINTAIN, UM, DEBT SERVICE REQUIREMENTS IN, YOU KNOW, KIND OF THE MID 20% OF OUR OVERALL BUDGET RANGE.
I MEAN, IF WE'RE, IF WE'RE TAKING 93 MILLION, UM, YOU KNOW, OUT OF FISCAL YEAR 28, AND YOU THINK ABOUT THAT FROM A DEBT SERVICE COVERAGE PERSPECTIVE, UM, YOU KNOW THAT THAT'S ABOUT 160 MILLION OF REVENUE REQUIREMENTS THAT WE WOULD NEED, YOU KNOW, IF, IF NOT FOR THAT SAVINGS, WE WOULD NEED ANOTHER 160 MILLION IN REVENUE MM-HMM.
AND SO, SO, YOU KNOW, WE WANTED TO, UM, I, I DON'T HAVE ANYTHING ELSE TO PRESENT, BUT I WANTED TO TALK ABOUT IT, UM, AND, AND JUST PROVIDE AN OPPORTUNITY TO A ANSWER ANY QUESTIONS, YOU KNOW, UM, BEYOND, I, I THINK THAT'S IMPORTANT AND I JUST WANNA MAKE SURE EVERYBODY UNDERSTANDS WHAT THAT DEBT SERVICE REALLY MEANS.
UM, AND SO YOU SAID IT QUITE CLEARLY EARLY ON THE PROGRAM, BUT IT REALLY IS, IT, IT HAS TO DO WITH OUR BOND RATING.
IT HAS TO DO WITH A LOT OF THINGS ABOUT THE UTILITY.
UM, BUT IT'S BASICALLY HOW MUCH MONEY WE RECEIVE INCOME IN A YEAR MINUS OUR OPERATING COSTS.
AND THAT REMAINDER SHOULD BE A YEAR 1.75 OF OUR BUDGET.
AND IF WE DROP, WHEN DO THE FLAGS START TO RAISE WITH, UM, FUNDING AGENCIES? IF WE DROP, I THINK IF WE'RE CONSISTENTLY UNDER OUR FINANCIAL POLICY OF, OF 1 75.
SO IF, IF, IF WE WERE UNDER FOR TWO OR, UM, YOU KNOW, POSSIBLY THREE YEARS MM-HMM.
I MEAN, OKAY, THE, THE, THE TWO BIGGEST FINANCIAL METRICS THAT THEY FOCUS ON IS DEBT SERVICE COVERAGE, UM, AND, AND DAYS CASH.
SO IF WE SAW SIGNIFICANT DECLINES, LIKE, LIKE WE DID, UM, THROUGHOUT THE LAST DROUGHT MM-HMM.
AND, AND SO, YOU KNOW, AS, AS WE PREPARE OUR FORECAST AND, AND OUR BUDGET, YOU KNOW, WE'RE, WE'RE MINDFUL OF THAT.
AND, AND, AND THAT'S A BIG PART OF, OF THE RATE INCREASES AND JUST MAINTAINING STRONG LEVELS OF COVERAGE, STRONG LEVELS OF CASH.
YOU KNOW, WE'RE NOT LOOKING TO GROW, UM, YOU KNOW, YOU KNOW, WHEN WE'RE IN A PERIOD OF INCREASING CAPITAL SPENDING, YOU KNOW, WE'RE NOT LOOKING TO IMPROVE OUR FINANCIAL METRICS METRICS SURE.
WE'RE, WE'RE LOOKING TO KEEP 'EM STABLE AND, AND, UM, AND GET THROUGH THAT PERIOD MM-HMM.
UM, AND SO IT'S REALLY ABOUT, AGAIN, RESETTING OUR, OUR RATE STRUCTURE TO SUPPORT A GROWING CAPITAL PLAN.
AND IS OUR COST OF SERVICE STUDY GOING ON RIGHT NOW, OR IS IT PLAN FOR THE IMMEDIATE FUTURE? I KNOW YOU SAID SOMETHING ABOUT IT.
OUR COST OF SERVICE STUDY, WE STARTED WORK WITH,
[01:00:01]
WITH OUR COST OF SERVICE CONSULTANTS RIGHT NOW, UM, THEY ARE REVIEWING OUR EXISTING COST OF SERVICE MODEL THAT WAS PREPARED BY, BY A PREVIOUS CONSULTANT.UM, THEY'RE WORKING TO, UH, PROVIDE, YOU KNOW, OBSERVATIONS AND RECOMMENDATIONS OVER, OVER THE NEXT MONTH.
THEN THEY'LL START TO WORK ON A NEW COST OF SERVICE MODEL THAT LOOKS AT HOW WE ALLOCATE COSTS TO CUSTOMERS.
SO THAT WORK IS REALLY KIND OF ONGOING AND WE'LL KIND OF, YOU KNOW, ALIGN WITH THE COMPLETION OF, OF THIS YEAR'S BUDGET PROCESS AND THEN PUT US IN A POSITION, YOU KNOW, ONCE WE GET THROUGH THIS BUDGET PROCESS, WE CAN START TALKING ABOUT, YOU KNOW, FY 25 THROUGH THROUGH 28, UM, AND, AND, AND START THE CUSTOMER ENGAGEMENT START, YOU KNOW, UM, ON CONTINUE, UH, DISCUSSIONS WITH, WITH POLICY MAKERS AND, AND, AND THE COMMUNITY.
AND I, I DO KNOW THAT WE'RE IN A BETTER POSITION THAN WE WERE DURING THE LAST DROUGHT, AND I, I APPRECIATE YOU TOUCHING ON THAT IN THIS PRESENTATION AND HOW IT HIT US SO THAT WE REMEMBER THAT AS WE MOVE FORWARD.
UM, COMMISSIONERS, AS YOU REMEMBER IN OUR LAST COUNCIL, UH, COMMISSIONER MEETING, WE HAD A PRESENTATION ON THE STATE OF TEXAS AND DROUGHT, AND CURRENTLY IT'S NOT LOOKING VERY GOOD.
UM, SO THAT WAS HELPFUL INFORMATION.
UM, MOVING ON, IS THERE ANY OTHER COMMENTS ABOUT DEBT MANAGEMENT? NO.
MOVING ON, UH, PHYSICALLY YOUR 2024 BUDGET SCHEDULE.
I DON'T KNOW IF WE TOUCHED ON THIS A LITTLE BIT ALREADY.
UM, SORRY, I THAT MY SCREEN LOCK UP
SO YEAH, WE, I THINK WE DID TOUCH ON THIS, UH, MENTIONED THAT ON JULY 14TH THE, UH, CITY'S PROPOSED, UH, BUDGET WILL BE PUBLISHED AND, AND AVAILABLE TO THE PUBLIC, UM, WITH A SUBSEQUENT PRESENTATION TO COUNSEL ON JULY 19TH.
UM, YOU KNOW, IN TERMS OF, UM, YOU KNOW, THE BUDGET PROCESS, UH, THERE'S OPPORTUNITIES FOR, FOR PUBLIC INVOLVEMENT WITH, UM, YOU KNOW, BUDGET WORK SESSION ON JULY 26TH, UM, AND THEN AGAIN ON AUGUST 1ST AND AUGUST 3RD, UH, YOU KNOW, BUDGET WORK SESSIONS, UM, TWO MORE BUDGET WORK SESSIONS IN AUGUST ON AUGUST 8TH AND 10TH.
AND THEN, AS WE, WE DISCUSSED EARLIER, UH, BUDGET ADOPTION IS SCHEDULED FROM AUGUST 16TH THROUGH AUGUST 18TH.
AND SO, YOU KNOW, IN TERMS OF, OF THE COMMISSION, UM, YOU KNOW, WE, WE WORK AROUND, UM, THE COUNCIL BUDGET PROCESS, UH, TO, YOU KNOW, UH, TO DO OUR, OUR PRESENTATION TO COMMISSION, BUT BUT ALSO LOOK TO, TO GET A, A COMMISSION RECOMMENDATION IN ADVANCE OF, OF THE, THE BUDGET ADOPTION PROCESS.
SO, UH, WHICH IS WHY WE TYPICALLY TARGET, YOU KNOW, JULY, UH, THE JULY COMMISSION MEETING TO, TO DO OUR BUDGET PRESENTATION AND THEN GET THE RECOMMENDATION FROM FROM COMMISSION, UM, YOU KNOW, A COUPLE WEEKS AHEAD OF ADOPTION.
ANY OTHER QUESTIONS ABOUT THE BUDGET SCHEDULE? MOVING ON TO ITEM NUMBER SIX, UH, DISCUSSION OF FUTURE AGENDA ITEMS. COMMISSIONERS, DO YOU HAVE ANY THOUGHTS ON, UH, ADDITIONAL ITEMS TO DISCUSS AT NEXT MEETING? I ASKED, UM, JOSEPH ABOUT THIS EARLIER, BUT ON PROJECT CONNECT, I WAS JUST CONCERNED ABOUT HOW THE WATER WASTE SORT OF BUDGET WAS GONNA HANDLE THAT, BUT IT SOUNDS LIKE THEY'RE GONNA REIMBURSE US.
YOU THINK ABOUT ANY MONEY WE HAVE TO SPEND FOR MOVING LINES OR ANY OF THAT, AND THAT'LL BE OUT OF WAYS I WOULD GUESS TOO, RIGHT? WITH PROJECT CONNECT, WE CURRENTLY DON'T HAVE ANYTHING IN OUR, UM, OUR CAPITAL SPENDING PLAN FOR PROJECT CONNECT.
IT'S, YOU KNOW, WE'RE STILL WORKING THROUGH THAT.
UM, WE'RE STILL WORKING TO UNDERSTAND, UH, YOU KNOW, EXACTLY WHAT, UH, YOU KNOW, WHAT INFRASTRUCTURE WE, WE WOULD, UH, MOVE, REPLACE RESIZE, UM, AND, AND WHAT KIND OF REIMBURSEMENT WE MIGHT SEE.
UH, WE, WE DON'T EXPECT FULL REIMBURSEMENT, UM, BUT WE DON'T REALLY HAVE A SENSE RIGHT NOW OF WHAT, WHAT THAT LOOKS LIKE, WHAT, WHAT OUR SHARE OF THAT COST WOULD BE.
UM, SO I, I ANTICIPATE THAT, UM, THAT WON'T, WELL, I KNOW, I KNOW THAT WON'T FIRM UP IN TIME FOR THIS YEAR'S BUDGET.
UM, SO THAT WOULD BE SOMETHING THAT, YOU KNOW, WE WOULD START TO INCORPORATE.
YOU KNOW, AS SOON AS, AS SOON AS THIS BUDGET PROCESS IS DONE, WE START,
[01:05:01]
WE START OUR CAPITAL, YOU KNOW, START DEVELOPMENT OF OUR CAPITAL BUDGET FOR, FOR NEXT YEAR, UH, LIKE IN OCTOBER.SO, UH, HOPEFULLY WE GET, UH, WE GET SOME GUIDANCE THERE, YOU KNOW, EARLY IN THE PROCESS.
CAUSE WE, WE TRY AND WE TRY AND COMPLETE, YOU KNOW, OUR PROPOSED BUDGET, UH, CAPITAL SPENDING BUDGET, YOU KNOW, LIKE IN JANUARY, EARLY FEBRUARY.
UM, SO PART OF THAT, YOU KNOW, UM, YOU KNOW, SO WE NEED, UH, RELATIVELY QUICKLY FOR, FOR NEXT YEAR, BUT WE DON'T HAVE A TON OF GUIDANCE YET.
NO, I WAS JUST GONNA SAY, I MEAN, UM, I, WE, WE CAN CERTAINLY CIRCLE BACK AND, AND SEE IF, IF, IF WE'VE RECEIVED ANYTHING SINCE, SINCE I WAS LAST UPDATED, UM, TO, TO, TO GIVE YOU A SENSE.
BUT, UM, I'M NOT AWARE OF ANY, ANY FIRM NUMBERS YET.
THAT IS A GOOD QUESTION CUZ THE UTILITIES ARE GONNA HAVE TO BE DEALT WITH FIRST, SO THEY'LL PROBABLY BE SOONER THAN THE REST OF THAT PROJECT.
WELL WE, WE'VE, WE'VE BEEN AT THE TABLE AND WE'VE BEEN WORKING WITH THEM, UM, BUT THERE'S STILL A LOT OF UNKNOWNS RIGHT NOW.
I HAVE A QUESTION ON, ON THE FIVE YEAR CAPITAL PLAN.
UM, SO I HEARD THAT SOME OF THIS PROJECT'S HAPPENING AND THEN SOME OF THESE ARE ONE OR TWO OF EM COULD HAPPEN WITH THE FA LAST FIVE YEAR OF A 10 YEAR.
SO IS, IS THERE A WAY THAT, UM, THEY CAN TELL, UM, WHICH ONE OF THIS PROJECT IS HAPPENING, SAY IN 24, 25? YEAH, I, SO HISTORICALLY, YOU KNOW, THIS, THIS FIRST MEETING IS KIND OF FOCUSED ON FORECAST.
UM, YOU KNOW, OUR, THE FORECAST IS WHAT'S AVAILABLE TO, TO COUNSEL.
UH, NORMALLY WHAT WE DO WITH OUR SECOND MEETING IS, IS WE START TO, WE, WE'LL PROVIDE MORE DETAILS IN TERMS OF, YOU KNOW, ANTICIPATED CHANGES ON, ON THE OPERATION SIDE, BUT ALSO MORE DETAIL, UH, ON, ON THE CAPITAL SIDE.
AND SO, UM, YOU KNOW, I, I THINK, YOU KNOW, WHAT WE'RE, WE'RE LOOKING FOR IS, YOU KNOW, IF THERE'S ANYTHING SPECIFIC THAT YOU GUYS WANNA SEE, BUT THAT'S SOMETHING THAT WE TYPICALLY COVER IN THE SECOND MEETING.
UM, TO ADD TO THAT FOR THE SECOND MEETING, ONE THING I WOULD LIKE TO SEE IS, UM, YOU'VE DONE IT BEFORE, THE COMPARISON OF THIS IS WHAT WE SPENT LAST YEAR ON ALL THESE DIFFERENT ITEMS AND THIS IS A SIGNIFICANT CHANGE IN THE BUDGET.
SO, AND, AND THEN IT JUST HELPS US UNDERSTAND, LIKE FOR EXAMPLE, ONE YEAR TO THE NEXT, THERE WAS A HUGE BUMP ONE YEAR IN CHEMICAL USAGE, RIGHT? BECAUSE WE WERE DEALING WITH THE ZEBRA MUSCLES AND, AND, AND IMPROVEMENTS TO THE WATER PLANT.
AND, AND SO I, I WOULD LIKE TO SEE SOMETHING LIKE THAT WHERE WE CAN SEE, YOU KNOW, A TRENDING OF SIGNIFICANT SHIFTS RIGHT? AND UNDERSTANDING THOSE.
AND, AND THAT, THAT'S, UH, OUR PLAN IS TO OKAY, UH, FOR, FOR THAT LEVEL OF DETAIL.
SO SIGNIFICANT CHANGES ON THE O AND M SIDE, BUT, UM, YOU KNOW, MORE DETAIL, UM, YOU KNOW, UM, YOU'RE DOWN TO THE PROJECT LEVEL ON THE CAPITAL SPENDING SIDE.
COMMISSIONERS, ANY OTHER COMMENTS, QUESTIONS? HI JOSEPH.
I GUESS ON THAT MORE DETAILED, I WAS JUST THINKING ABOUT THAT, UH, THE EXTERNAL REVIEW MM-HMM.
UM, AND I DON'T KNOW IF ANY OF THESE ARE MAJOR, YOU KNOW, COST DRIVERS OR WHATEVER, BUT I GUESS TO MAKE SURE, TO SEE LIKE HOW THIS EXTERNAL REVIEW IS, ESPECIALLY THE FTES, HOW, IF THAT'S CHANGING THAT DEMAND FOR THAT OR SOMETHING.
SO JUST TO LINK THOSE TWO TOGETHER, I GUESS FROM A, A BUDGET STANDPOINT TO WHAT IS, YOU KNOW, KIND OF NEEDED OR REQUIRED THROUGH THE EXTERNAL REVIEW PROCESS? CERTAINLY, YEAH, WE, WE CAN DO THAT.
IN FACT, UM, WE'VE GOT, UM, AUSTIN WATER OVERSIGHT, UH, COMMITTEE MEETING ON WEDNESDAY AND WE'LL BE PROVIDING, UM, AN, AN UPDATE WITH THE CURRENT STATUS OF THE EXTERNAL REVIEW.
SO, UM, SO, AND, AND THAT DOES, IT DOESN'T GET INTO, I MEAN, THE LEVEL OF DETAIL TO TIE IT TO BUDGET, BUT WE CAN CERTAINLY TALK ABOUT THOSE RECOMMENDATIONS AND, UM, AND WE CAN HIGHLIGHT AREAS WHERE, WHERE THEY ARE, YOU KNOW, WHERE WE ANTICIPATE THEY WILL BE INCLUDED EITHER IN OUR O AND M BUDGET OR OUR CAPITAL BUDGET.
AGAIN, JUST TO LINK, YOU KNOW, THE, THOSE SUGGESTIONS FROM EXTERNAL REVIEW TO, YOU KNOW, MAYBE NEEDS, UH, IN THE BUDGET, ESPECIALLY IF IT'S A, A SIZABLE, UH, PORTION OF IT.
COMMISSIONERS, ANY OTHER QUESTIONS?
[01:10:02]
WONDERFUL.UM, AT, I GOT, I FOUND MY PHONE AT FOUR 18.