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[00:00:02]

I'D LIKE TO CALL

[CALL TO ORDER]

THE WATER AND WASTEWATER COMMISSION BUDGET COMMITTEE MEETING TO ORDER.

IT IS 3 0 6.

AND THE BUDGET COMMITTEE MEMBERS IN ATTENDANCE INCLUDE MYSELF, SUSAN RIETTA AND JUDY MUSGROVE AND MARCELLA TOON OWN.

GREAT.

UH, DO WE HAVE ANYBODY SIGNED UP FOR PUBLIC COMMUNICATION? NO PUBLIC SPEAKERS.

ALL RIGHT.

UH, WITH NO, UH, PUBLIC SPEAKERS, LET'S MOVE TO DISCUSSION

[DISCUSSION ITEMS]

ITEMS. ITEM NUMBER ONE, AUSTIN WATER FINANCIAL FORECAST, PHYSICAL YEAR 2025 TO 2029.

UPDATE.

GOOD AFTERNOON.

UH, JOSEPH GONZALEZ, AUSTIN WATER ASSISTANT DIRECTOR OVER FINANCIAL SERVICES.

AND, UH, TODAY WE'LL HAVE OUR, OUR FIRST MEETING FOR, UH, THE FISCAL YEAR 2025, UH, BUDGET COMMITTEE.

UH, TODAY WE'LL HAVE, UH, FOUR DISCUSSION ITEMS. UH, WE'LL PROVIDE AN OVERVIEW OF THE AUSTIN WATER, UH, FINANCIAL FORECAST.

UH, WE'LL PROVIDE AN, AN OVERVIEW OF, UH, THE COST OF SERVICE STUDY THAT IS ONGOING.

UM, AND THEN WE'LL, WE'LL CLOSE WITH, UH, YOU KNOW, AN AUSTIN WATER, UH, DEBT MANAGEMENT UPDATE, AND A, AND THEN GO OVER, UH, THE FISCAL YEAR 2025 BUDGET SCHEDULE.

UH, NEXT SLIDE, PLEASE.

UH, ONE MORE.

ALL RIGHT.

SO AS, AS WE GENERALLY DO, UH, EVERY YEAR, YOU KNOW, WE, WE START OUR ANNUAL BUDGET PROCESS AND OUR ANNUAL FORECAST PROCESS, UH, WITH, UH, JUST LOOKING AT THE FINANCIAL GOALS THAT WE WANNA BUILD THOSE PROCESSES AROUND.

AND, AND, AND CERTAINLY FOR THE LAST SEVERAL YEARS, UH, OUR, OUR FORECAST AND AND BUDGET PROCESS HAS REALLY BEEN BUILT, UH, AROUND SUPPORTING OPERATIONAL AND INFRASTRUCTURE RESILIENCY.

UM, IN FACT, THAT'S, THAT'S BEEN A PRIORITY FOR AUSTIN WATER, UH, EVEN BEFORE WINTER STORM URI.

UM, SO DATING BACK TO, TO AROUND 2019.

UM, YOU KNOW, IN TERMS OF THE FORECAST AND, AND IN TERMS OF INFRASTRUCTURE RESILIENCY, UH, WE, WE ARE ANTICIPATING A FIVE YEAR CIP SPENDING PLAN, UH, TOTALING $2.3 BILLION.

AND AS WE GET, UH, YOU KNOW, UH, INTO TO DEBT MANAGEMENT, AND, UH, YOU KNOW, A LOT OF THAT IS, UM, DEPENDENT ON WHAT WE DO FROM A CIP SPENDING PLAN PERSPECTIVE.

AND SO WE'LL GO INTO MORE DETAIL ON THE CIP SPENDING PLAN, UH, IN THE DEBT MANAGEMENT, UH, UPDATE.

UM, SO OUR GOAL ALSO IS TO, TO MAINTAIN FINANCIAL STRENGTH AND STABILITY.

YOU KNOW, WE CLOSED FISCAL YEAR 23 WITH, UH, ABOUT 645 MILLION IN, IN TOTAL REVENUE, UH, WHICH WAS A LITTLE OVER 20 MILLION, UH, ABOVE OUR, OUR, YOU KNOW, FY 23 BUDGETED REVENUE.

UM, NOW AS, AS OF MARCH, UH, REVENUES CONTINUE TO TRACK ABOVE BUDGET, UH, AT, AT ABOUT 5.1 MILLION ABOVE BUDGET.

ALTHOUGH, UH, WE'VE, WE'VE PULLED BACK A LITTLE BIT, UH, SINCE THEN.

UH, WITH, WITH APRIL, UH, YOU KNOW, THE, UH, RECENT RAINS HAVE, HAVE, UH, HELPED REDUCE DEMAND.

UM, SO WE, WE ARE A LITTLE BIT SHORT IN APRIL, UM, ALTHOUGH WE'RE STILL CLOSING OUT THE MONTH OF, UH, WELL, ACTUALLY WE FINISHED CLOSING THE MONTH OF APRIL, BUT, UM, THOSE RESULTS AREN'T FINAL YET.

UM, BUT WE'RE MORE ABOUT BREAK EVEN THROUGH THROUGH APRIL.

UM, AND, AND CERTAINLY WHEN WE LOOK AT, YOU KNOW, HOW DO WE MAINTAIN FINANCIAL STRENGTH AND STABILITY, YOU KNOW, UH, A BIG PART OF THAT IS, UH, LOOKING AT RESERVES AND, AND DEBT SERVICE COVERAGE.

YOU KNOW, THOSE ARE TWO FINANCIAL METRICS THAT, UH, THAT WE TRACK CLOSELY AND THAT OUR RATING AGENCIES TRACK CLOSELY.

AND, AND, UH, SO WHEN, WHEN WE BUILD A BUDGET, WHEN WE, YOU KNOW, LOOK AT FORECASTING, WE, WE LOOK AT MAINTAINING OUR CASH RESERVES, UH, SO THAT WE'VE GOT FINANCIAL FLEXIBILITY AND, AND LOOKING AT DEBT SERVICE COVERAGE LEVELS, UH, THAT ARE ABOVE OUR FINANCIAL POLICIES.

AND THOSE ARE TWO KEY INDICATORS FOR OUR FINANCIAL HEALTH.

UM, NOW YOU MAY RECALL OVER, UM, THE, THE LAST SEVERAL YEARS, WE HADN'T HAD ANY RATE INCREASES.

AND IN FACT, PRIOR TO THE CURRENT YEAR, UH, OUR LAST RATE ACTION WAS IN FISCAL YEAR 2018.

UH, AND THAT, AND THAT WAS A 4.8%, UH, RATE REDUCTION.

UH, SUBSEQUENT TO THAT, WE HAD FIVE YEARS WITH, WITH NO RATE INCREASES.

UM, BUT FOR THE CURRENT FISCAL YEAR, FOR FISCAL YEAR 24, WE DID HAVE A 3.4%, UM, INFLATIONARY,

[00:05:01]

UH, RATE INCREASE, UH, IN ADVANCE OF OUR COST OF SERVICE STUDY, WHICH, WHICH AS I MENTIONED, IS, IS ONGOING.

UM, WE CONTINUE TO, UH, MAKE CUSTOMER ASSISTANCE PROGRAM IMPROVEMENTS.

UH, EARLIER IN THE FISCAL YEAR, WE, UM, COMPLETED THE, THE IMPLEMENTATION OF OUR MULTI-FAMILY CUSTOMER ASSISTANCE PROGRAM.

UH, PRIOR TO 2022, OUR CUSTOMER ASSISTANCE PROGRAM WAS FOCUSED ENTIRELY ON, UH, SINGLE FAMILY RESIDENTIAL CUSTOMERS WHO QUALIFIED FOR THE, THE CUSTOMER ASSISTANCE PROGRAM.

UH, BUT, BUT IN 22, WE, UM, IMPLEMENTED PHASE ONE OF A MULTI-FAMILY CUSTOMER ASSISTANCE PROGRAM, UH, WHICH PROVIDED A A $17 A MONTH CREDIT FOR, UM, FOR MULTI-FAMILY CUSTOMERS, CUSTOMERS THAT ARE SERVED BY A MASTER METER FOR WATER AND, AND WASTEWATER SERVICE.

UM, SO THOSE CUSTOMERS, BECAUSE THEY'RE SERVED BY A MASTER METER, EITHER THROUGH AN APARTMENT COMPLEX OR A CONDO COMMUNITY OR, OR SOMETHING ALONG THOSE LINES, UM, BECAUSE THOSE CUSTOMERS DON'T GET A DIRECT BILL FROM, FROM AUSTIN WATER, WE HADN'T BEEN ABLE TO PROVIDE THEM CAP BENEFITS PREVIOUSLY.

SO WE WORKED WITH AUSTIN ENERGY TO, UH, PROVIDE A $17 A MONTH CREDIT ON THE ELECTRICITY PORTION OF THEIR BILL FOR THOSE CUSTOMERS WHO RECEIVE, UH, SERVICE FROM BOTH AUSTIN WATER AND AUSTIN ENERGY.

AND THEN, UM, EARLIER THIS FISCAL YEAR, WE COMPLETED OUR PHASE TWO IMPLEMENTATION, UH, WHICH INVOLVED CUSTOMERS WHO, UM, ARE WATER ARE AUSTIN WATER CUSTOMERS, BUT THEY ARE OUTSIDE OF THE AUSTIN ENERGY, UH, SERVICE TERRITORY.

SO, YOU KNOW, WE WEREN'T ABLE TO APPLY A CREDIT ON THEIR, UM, ELECTRIC BILL DIRECTLY.

AND SO WE SET UP A PROGRAM TO, UM, TO ACTUALLY PROVIDE CHECKS FOR, FOR THOSE CUSTOMERS, UH, USING THE SAME MECHANISM TO IDENTIFY, UM, ELIGIBLE CUSTOMERS THAT WE USE FOR, FOR THE ENTIRETY OF OUR, UH, CUSTOMER ASSISTANCE PROGRAM CUSTOMERS.

AND THEN FINALLY, UH, IN MARCH, UM, WE HAD WHAT, WHAT WE WERE CALLING, UH, GO GO PURPLE DAY, UH, WHERE WE BROUGHT FORWARD A HOST OF, OF, OF RECLAIMED AND, UM, INITIATIVES TO, TO EXPAND, UH, RECLAIM THROUGHOUT THE COMMUNITY.

AND, AND PART OF THAT INVOLVES SETTING UP A GO PURPLE COMMUNITY BENEFIT CHARGE OF 15 CENTS PER THOUSAND GALLONS, WHICH MIRRORS THE, UM, ALREADY ESTABLISHED CUSTOMER ASSISTANCE PROGRAM COMMUNITY BENEFIT CHARGE.

UM, SO THAT GO PURPLE COMMUNITY BENEFIT CHARGE, UH, WILL HELP US EXPAND OUR RECLAIM SYSTEM AND PROVIDE INCENTIVES FOR REUSE TO REDUCE DEMAND ON OUR POTABLE WATER SYSTEM, UM, FOR NON-POTABLE USES.

NEXT SLIDE, PLEASE.

AND, UH, FEEL FREE TO ASK QUESTIONS AS, AS WE GO.

UH, THERE'LL BE, CERTAINLY BE OPPORTUNITIES, UH, YOU KNOW, WE'LL HAND IT OFF A A COUPLE TIMES THROUGHOUT, BUT, UH, YOU KNOW, IF YOU HAVE QUESTIONS AS WE GO, FEEL FREE TO ASK.

NOW, THIS IS THE, UM, FORECASTED LEVEL OF, OF RATE INCREASES, UH, FOR THE FIVE YEAR FORECAST PERIOD FROM FISCAL YEAR 2025 THROUGH 2029.

UM, AND YOU CAN SEE WE ANTICIPATE, UM, YOU KNOW, A 9.5, UH, PERCENT COMBINED RATE INCREASE IN FISCAL YEAR 25, FOLLOWED BY A 9.8% COMBINED RATE INCREASE FISCAL YEAR 26.

UM, AND THEN, SORRY.

THAT'S OKAY.

I, I CAN KEEP GOING.

OKAY.

UM, SO IN, SO AGAIN, 9.8 IN FISCAL YEAR 2026, FOLLOWED BY, UH, 6.9% IN, UH, 2027, UM, AND THEN A 5.3% IN 2028.

AND AT THAT POINT, YOU KNOW, WE FEEL LIKE, UH, OUR RATE STRUCTURE WILL BE BETTER ALIGNED WITH, UM, WITH OUR, YOU KNOW, CURRENT AND, AND EXPECTED COST STRUCTURE, BOTH FROM, UM, AN OPERATIONS AND MAINTENANCE COST STRUCTURE, BUT, BUT ALSO FROM A CAPITAL PROGRAM COST STRUCTURE.

AND THEN THAT'S GONNA BE THE REALLY THE BIGGEST DRIVER IN TERMS OF, UM, YOU KNOW, OUR COST STRUCTURE OVER, OVER THE NEXT FIVE YEARS.

AND I KIND OF LIKEN IT TO WHERE WE WERE, UM, COMING OUT OF OUR LAST COST OF SERVICE STUDY, WHICH IT

[00:10:01]

WAS IN 2017.

SO IN 2017, WE WERE COMING OUT OF PREVIOUS DROUGHT THAT ENDED IN 2015.

AND AT THAT TIME, UM, WE HAD SEEN CUSTOMER DEMAND DROP FROM ABOUT, UH, FOR OUR RESIDENTIAL CUSTOMERS, DROP FROM ABOUT 8,800 GALLONS A MONTH OF AVERAGE CONSUMPTION AT THE BEGINNING OF THE DROUGHT DOWN TO ABOUT 5,800 GALLONS BY THE END OF THE DROUGHT.

AND SO THROUGHOUT THAT LAST DROUGHT, WE WERE TRYING TO FIND THAT RIGHT LEVEL OF RATE, YOU KNOW, STRUCTURE AND, UH, RATE, UM, YOU KNOW, RATE INCREASES, UH, TO ALIGN WITH, WITH OUR COST STRUCTURE.

AND, AND NOW WE'RE KIND OF WORKING BACK THE, THE OPPOSITE DIRECTION.

UM, YOU KNOW, IN 2018, AS I MENTIONED EARLIER, WE, WE HAD THE RATE REDUCTION, UM, BECAUSE PART OF WHAT THE OTHER THING WE WERE DOING WITH, WITH THOSE PREVIOUS RATE INCREASES LEADING UP TO 2017 WAS, WAS TRYING TO ADDRESS OUR FINANCIAL CONDITION THROUGHOUT THE DROUGHT.

WE HAD, UH, SEVERAL YEARS OF, OF SIGNIFICANT BUDGET SHORTFALLS.

AND AS A RESULT, UM, IN 2014, WE ACTUALLY SAW OUR WASTEWATER CASH, OUR, OUR WATER CASH GO NEGATIVE.

UM, OUR DEBT SERVICE COVERAGE, UH, WAS AT THE BARE MINIMUM LEVEL REQUIRED BY OUR BOND COVENANTS.

AND SO PART OF THE RATE INCREASES UP TO THAT POINT WERE TO, AGAIN, ALIGN OUR RATE STRUCTURE WITH OUR LEVEL OF DEMAND, BUT ALSO TO TRY AND IMPROVE OUR FINANCIAL CONDITIONS.

SO TRY AND IMPROVE CASH, IMPROVE COVERAGE.

AND SO THERE WAS SOME ELEMENT OF, OF TRYING TO REBUILD OUR FINANCIAL POSITION, AND ONCE WE DID THAT, WE WERE IN A POSITION TO PULL BACK A LITTLE BIT, UM, WITH THE RATE REDUCTION, AND WE WERE ABLE TO MAINTAIN THAT FOR FIVE YEARS AS OUR COST STRUCTURE, UH, REMAINED.

UM, YOU KNOW, PRETTY CONSTANT.

AND, AND SO THESE, UH, INCREASES WOULD, WOULD BE ABOUT A 6% AVERAGE ANNUAL INCREASE OVER THE, THE FIVE YEAR FORECAST PERIOD.

UM, BUT ONCE AGAIN, WE'RE, WE'RE GOING THROUGH A COST SERVICE STUDY THAT WILL HELP US INFORM, UH, YOU KNOW, WHAT OUR 25 FISCAL YEAR 25 WILL INCREASE, WILL, WILL LOOK LIKE, AND, AND, UM, ALSO HELP US, UM, PLAN FOR, FOR THOSE FUTURE INCREASES.

SO THOSE INCREASES COULD, COULD LOOK SLIGHTLY DIFFERENT.

NEXT SLIDE, PLEASE.

AND, AND THIS IS OUR, UH, OUR FUND SUMMARY.

IT'S A, IT'S A HIGH LEVEL SUMMARY OF, YOU KNOW, OUR, OUR REVENUES ARE, AND, YOU KNOW, TRANSFERS IN THE FUNDS THAT ARE AVAILABLE TO, TO COVER OUR COST.

UM, AND THEN OUR REQUIREMENTS, UH, YOU KNOW, OUR OPERATING EXPENDITURES, DEBT SERVICE AND TRANSFER OUT, WHICH ARE THREE, UH, PRIMARY CATEGORIES OF, UM, OF BUDGETARY REQUIREMENTS.

AND, AND WE START WITH OUR BEGINNING FUND BALANCE.

UH, YOU KNOW, YOU CAN SEE, UM, YOU KNOW, OVER THE, CERTAINLY OVER THE CURRENT YEAR, UM, AND IN FISCAL YEAR 26, UH, YOU SEE SOME DEFICITS THERE, UM, IN THE CURRENT YEAR THAT THAT DEFICIT IS, IS PLANNED AS IS THE, THE, THE 2026, UH, DEFICIT.

UH, IN TERMS OF WHAT WE WERE TRYING TO DO FOR FISCAL YEAR 2024, YOU KNOW, WITH THE HOT AND DRY WEATHER CONDITIONS, WE SAW EXCESS REVENUES, UM, IN FISCAL YEAR 22 AND 23.

SO DURING THE CURRENT YEAR, WE PLAN TO SPEND DOWN SOME OF THAT TO HELP FUND THE FEES TRANSACTIONS TO HELP SMOOTH OUR, OUR DEBT SERVICE.

UM, AND IN 26, YOU KNOW, WE PLAN TO SPEND DOWN A LITTLE BIT OF FUN BALANCE AGAIN, UM, JUST TO, TO MANAGE THE, THE, THE GROWTH IN, IN OUR BUDGET AND OUR COST STRUCTURE.

SO, UM, YOU KNOW, IT'S GONNA TAKE US ABOUT THREE YEARS TO, TO ALIGN, UM, YOU KNOW, OUR RATE STRUCTURE.

SO YOU CAN SEE IN FISCAL YEAR 27, UH, OUR AVAILABLE FUNDS WE ANTICIPATE WILL BE ABOUT $880 MILLION, UH, WHICH IS ABOUT 3 MILLION ABOVE OUR, OUR BUDGETARY REQUIREMENTS.

AND THEN FROM, FROM THAT POINT ON, WE, WE EXPECT TO BE MORE IN A MAINTENANCE MODE WITH PERIODIC RATE INCREASES.

UM, THE OTHER THING I WOULD, I WOULD HIGHLIGHT IS, UM, YOU CAN SEE, UH, AN ANTICIPATED INCREASE IN FISCAL YEAR 2025, UH, IN TERMS OF DEBT SERVICE, UH, RIGHT IN THE MIDDLE OF THE, OF, OF THE, THE CHART, UM, AT 181 MILLION.

UH, BUT WE'RE WORKING OUR WAY TOWARDS PEAK LEVELS OF DEBT SERVICE, UM, IN, IN FISCAL YEAR 2028.

SO, UM, OUR DEBT MANAGEMENT EFFORTS WILL, WILL BE, UM, YOU KNOW, A BIG PART OF OUR FOCUS AREA OVER, OVER THE NEXT THREE TO FOUR YEARS AS WE TRY AND PULL, UM,

[00:15:01]

YOU KNOW, SOME OF THOSE DEBT SERVICE NUMBERS BACK DOWN, BOTH THROUGH DEFIANCE TRANSACTIONS, UM, AND, AND, UH, REFUNDINGS OR, UM, REFINANCING OF, OF EXISTING DEBT SERVICE.

AND, AND WHEN, WHEN WE TALK ABOUT THE FEES AND TRANSACTIONS WE TALK, WE'RE TALKING ABOUT, UH, BASICALLY MAKING EXTRA PAYMENTS ON OUR DEBT SERVICE TO TRY AND SMOOTH, UH, DEBT SERVICES WITH, WITH THE FEES AND TRANSACTIONS, WE'RE ABLE TO, UH, ACTUALLY TARGET SPECIFIC YEARS.

SO FOR EXAMPLE, YOU KNOW, OUR, OUR PEAK LEVEL OF DEBT SERVICE, UH, UM, IS IN 2028.

NOW, THESE, THESE NUMBERS HERE, UH, ALSO INCLUDE ANTICIPATED NEW ISSUANCES, UH, TO FUND OUR GROWING CAPITAL PLAN.

BUT, UM, SO OUR, YOU KNOW, WE'LL CONTINUE TO WORK OVER THE NEXT FEW YEARS TO PULL DOWN, UM, EVEN BELOW THESE LEVELS OF, YOU KNOW, $210 MILLION IN DEBT SERVICE FOR 26, 220 3 MILLION, UH, IN 2027, AND THEN THE, THE 2 58 THAT PEAK YEAR.

AND FROM THERE, WE HAVE MORE OF A DECLINING LEVEL OF, OF DEBT SERVICE.

SO AS WE LAYER NEW DEBT ON, WE'LL, WE'LL DO IT IN A WAY THAT, UM, AGAIN, SMOOTHS OUR DEBT SERVICE REQUIREMENTS GOING FORWARD.

UM, AND THEN AT THE BOTTOM, YOU CAN SEE, YOU KNOW, I, I TALKED ABOUT OUR, OUR KEY FINANCIAL METRICS IN TERMS OF DEBT SERVICE COVERAGE, UH, DAYS, CASH ON HAND, AND, AND THEN A THIRD, UH, FINANCIAL METRIC IS THE PERCENTAGE OF CASH THAT WE USE TO, TO BASICALLY BUY DOWN OUR CAPITAL SPENDING PLAN.

AND, UM, AND THERE OUR FINANCIAL POLICY, MINIMUM DESIRED, MINIMUM TARGET IS, IS ABOUT 35%.

BUT AS WE HEAD INTO A PERIOD OF, OF INCREASING CAPITAL SPENDING, WE RECOGNIZE THAT MAINTAINING A MINIMUM CASH FINANCING OF 35%, UH, PARTICULARLY WHEN YOU CONSIDER, UM, YOU KNOW, THE WALNUT PROJECT, YOU KNOW, FOR EXAMPLE, UH, THAT'S GONNA BE ABOUT A BILLION DOLLAR PROJECT.

IF WE WERE TO CASH FUND 35% OF THAT, UH, THAT'S MORE PAYING FOR MORE THAN A THIRD OF THE PROJECT OVER THE NEXT FIVE TO SIX YEARS.

AND, AND THAT'S A BIG ASK FOR, FOR OUR CUSTOMERS.

AND, AND SO WE, UH, OVER THE FORECAST PERIOD, WE, WE EXPECT TO BE, UH, BETWEEN 25 AND 30% IN TERMS OF OUR CASH SPENDING FOR CIP, JUST TO, TO MANAGE AFFORDABILITY AND, AND BALANCE, YOU KNOW, THE LEVEL TO WHICH WE ADD TO DEBT SERVICE WITH THE, THE IMPACT OF THAT CA CASH FINANCING, UH, FINANCIAL POLICY.

UM, BUT FROM A COVERAGE AND A CASH ON HAND PERSPECTIVE, UH, YOU KNOW, THROUGHOUT THE FORECAST PERIOD, WE EXPECT TO BE, UH, ABOVE THE FINANCIAL POLICY LEVEL FOR DEBT SERVICE COVERAGE OF 1 7 5 AND, AND ABOVE THE DAYS CASH ON HAND, UH, FINANCIAL POLICY TARGET OF OF 245 DAYS.

NEXT SLIDE PLEASE.

AND WITH THAT, I'LL TURN IT OVER, UM, TO SONG LEE FLOYD TO TALK ABOUT OUR OPERATING REQUIREMENTS.

AND BEFORE WE DO THOUGH, I JUST WANNA SET THE FRAMEWORK.

I KNOW, UH, CHAIR RIETTA, YOU, YOU'VE BEEN THROUGH THIS PROCESS BEFORE AND YOU'RE FAMILIAR.

UM, BUT IN TERMS OF THE WAY OUR BUDGET PROCESS WORKS, YOU KNOW, WE, WE TURN IN OUR, UH, FINANCIAL FORECAST TO, TO THE BUDGET OFFICE IN MARCH.

IT'S PRESENTED TO COUNCIL IN APRIL.

AND ONCE IT BECOMES, UH, PUBLIC AND PRESENTED TO COUNCIL, THEN WE, YOU KNOW, WE BASICALLY HAVE THE GREEN LIGHT TO TO, TO GO THROUGH IT.

UM, SAME, SAME, UH, GENERAL PROCESS APPLIES FOR, FOR OUR BUDGET.

WE TURNED IN OUR BUDGET, OUR PROPOSED BUDGET, ALTHOUGH WE'RE STILL WAITING ON A COUPLE OF NUMBERS.

UM, IN FACT, UM, YOU KNOW, JUST BEFORE THIS MEETING, UH, WE WERE ON A RATING, UM, NOT A RATING, A, A PRE PRICING CALL FOR OUR NEWEST DEBT ISSUANCE THAT'S GONNA PRICE TOMORROW.

UM, AND SO ONE OF THE THINGS THAT'S NOT FINAL YET, EVEN THOUGH WE'VE TURNED IN OUR BUDGET, IS OUR DEBT SERVICE REQUIREMENTS FOR, FOR NEXT YEAR.

UM, SO THE PRICING THAT WE GET TOMORROW FOR OUR NEW ISSUANCE WILL IMPACT NEXT YEAR'S BUDGET.

AND SO, YOU KNOW, ONCE WE HAVE THAT, THAT'LL HELP US FINISH, UM, THE DEBT SERVICE PIECE OF OUR BUDGET.

AND THERE'S A COUPLE OF OTHER CITYWIDE TRANSFERS THAT WE'RE STILL WAITING ON.

SO WE DON'T HAVE FINAL, UM, FINAL OPERATING BUDGET NUMBERS YET.

BUT WHAT WE TRY AND DO IN THIS PROCESS IS JUST WALK THROUGH THE SIGNIFICANT CHANGES TO GIVE YOU A SENSE OF HOW OUR BUDGET IS CHANGING YEAR OVER YEAR.

AND UNTIL THE BUDGET'S PRESENTED TO COUNCIL, WE CAN'T, WE CAN'T GIVE YOU, UH, BUDGET DOCUMENTS, BUT WE CAN TALK ABOUT WHAT'S CHANGING.

AND SO THAT'S, THAT'S HOW WE GENERALLY WORK THROUGH THIS PROCESS IS TO HIGHLIGHT, YOU KNOW, THOSE SIGNIFICANT CHANGES IN SONG LEAF FLOYD.

WE'LL, WE'LL GO OVER THAT.

[00:20:02]

GOOD AFTERNOON.

SONY FLOYD, FINANCIAL MANAGER, AUSTIN WATER.

SO I WILL PROVIDE A BIT MORE INFORMATION ON OPERATING REQUIREMENTS.

A LOT OF TIMES WE ALSO CALL A PROGRAM REQUIREMENT.

SO THIS ACTUALLY IS A PIECE, UH, THE PART OF THE BUDGET THAT COVERS EACH PROGRAM AREA'S DAY TO DAY OPERATIONS.

SO THE SLIDE YOU ARE SEEING NOW IS, UM, SHOWS THE SIGNIFICANT CHANGES FOR THE OPERATING REQUIREMENT BETWEEN FY 2025 FORECAST AND CURRENT BUDGET YEAR FY 2024, UH, BUDGET.

SO AS YOU CAN SEE, THAT CURRENT YEAR, WE HAVE ABOUT $338 MILLION, UH, IN OUR PROGRAM REQUIREMENTS.

AND WE ARE FORECASTING $352 MILLION, WHICH IS A DIFFERENCE OF $14 MILLION.

SO A LOT OF THESE SIGNIFICANT CHANGES ACTUALLY ARE PROVIDE INFORMATION ARE ACTUALLY PROVIDED BY THE BUDGET OFFICE.

SO WE'VE HIGHLIGHTED THESE ITEMS IN BLUE, AND THE YES, THE REST OF THEM ARE AUSTIN WATER FORECAST ASSUMPTIONS.

EACH YEAR, THE BUDGET OFFICE WILL PROVIDE US A PERCENTAGE OF WAGE ADJUSTMENT FOR FORECAST.

SO ONCE WE RECEIVE, THE PERCENTAGE WILL LOAD IN OUR FORECAST.

RIGHT NOW, UH, IT'S AT 3%, BUT, UH, LIKE JOSEPH SAID, ONCE THEY REVIEW THE FORECAST AND WE GO THROUGH THE PROPOSED BUDGET, UH, PROCESS, THE PERCENTAGE COULD CHANGE.

SO IT'S AT ABOUT 4 MILLION AT 3%.

AND WE'VE ALSO SEEN, UH, CONTINUE TO SEE CHEMICAL PRICES INCREASES.

SO WE'VE SEEN LIME PRICES INCREASE, CORING HAS INCREASED, AND ALSO SULFUR DIOXIDE HAS INCREASED AS WELL.

SO TO ME, THE DEMAND WAVE, UM, FORECASTED AND ARE PUTTING $4 MILLION ADDITIONAL TO COVER THE RISING CHEMICAL COST.

SO FOR 25, UH, WE HAVE PROPOSED TO INCREASE, UM, ASK FOR 29 ADDITIONAL EMPLOYEES.

AND SO I WILL, I HAVE ANOTHER SLIDE THAT I'LL GO IN A LITTLE MORE DETAIL ON WHAT THESE 25 FTS ARE ACTUALLY COVERING.

AND THEN THE NEXT, UH, SIGNIFICANT BIG CHANGES IS ALSO PROVIDED BY THE BUDGET OFFICE, WHICH IS ABOUT 10%.

HEALTH INSURANCE CHANGES.

WE GOT A NUMBER, UH, WE GOT AN UPDATED NUMBER LAST WEEK.

IT'S SLIGHTLY, UH, LESS SO I THINK IT WILL END UP BEING AROUND 9%.

SO, AND THEN, UH, THE, THE NEXT NUMBER, ACTUALLY I'LL TALK ABOUT THIS NUMBER TOGETHER WITH, UH, UM, INFLATION OVER COMMODITY AS WELL.

SO EACH YEAR WHEN WE DO THE FORECAST, WE DECIDE ASSUMPTION ON THE INFORMATION RATE.

SO WE LOADED THE FORECAST WITH 3.5% INFORMATION FOR BOTH CONTRACTUALS AND THE COMMODITIES.

SO, UM, OUR FORECAST MODEL WILL CALCULATE AND GIVE US $2 MILLION FOR THE CONTRACTUAL, AND THEN, UH, LESS THAN A MILLION DOLLAR FOR THE COMMODITIES.

UH, AND THEN I WOULD JUST HIGHLIGHT, UM, YOU KNOW, WE HAVE SEEN, UM, INFLATIONARY IMPACTS SLOW SOME, YOU KNOW, WE SAW, UH, AS LONG WE MENTIONED, ESPECIALLY WITH CHEMICALS, WE'VE SEEN SOME SIGNIFICANT PRICE INCREASES, UH, OVER THE LAST COUPLE OF YEARS, ESPECIALLY LAST YEAR.

UH, WE, WE'VE SEEN SOME OF THAT STARTING TO SLOW.

AND SO THE THREE AND A HALF PERCENT IS, IS A LITTLE BIT LOWER.

I DIDN'T, WE USE 5% LAST YEAR, 4% LAST YEAR.

UM, BUT, UH, YOU KNOW, WE'RE HOPEFUL THAT THAT INFLATION, UM, YOU KNOW, IS, IS MODERATING AND, AND WON'T BE AS BIG AN IMPACT, UH, YOU KNOW, OVER THE NEXT COUPLE OF YEARS.

SO DURING FY 24, THE CITY ACTUALLY, UM, CONDUCTED SEVERAL ROUNDS OF MARKET STUDIES OVER DIFFERENT TITLES.

SO THE MARKET STUDY ADJUSTMENT NUMBER YOU SEE HERE IS BECAUSE WHEN THEY DO THE MARKET STUDY, WE DIDN'T BUDGET FOR IT FOR DURING THE CURRENT YEAR, SO THEY WANTED US TO COMPENSATE IT FOR THE COMING, UH, FORECAST.

IN FACT, THIS AMOUNT HAS BEEN

[00:25:01]

INCLUDED IN THE, UM, UH, BUDGET SOFTWARE BECAUSE WHEN THEY MOVE THE ACTUAL, UH, EMPLOYEE'S PAY RATE OVER, UH, INTERFACE EVERY MARCH, ALL OF THE MARKET STUDY IMPACT HAS ALREADY BEEN, UM, INCLUDED.

SO, UH, WE JUST HAD TO PULL THIS AMOUNT OUT BECAUSE IT IS A CHANGE IF YOU LOOK AT 24TH BUDGET VERSUS WHAT'S IN THE SYSTEM, WHICH IS 25 BUDGET, I MEAN FORECAST NUMBER.

SO, UM, NEXT NUMBER IS ACTUALLY, UH, ONE OF OUR ASSUMPTIONS.

WE HAVE PLANS TO INCREASE THE METER NUMBERS FOR THE FLOW MONITORING ENGINEERING CONTRACT.

SO, UH, WE'VE IN INCLUDED $1 MILLION ADDITIONAL FUNDING FOR THAT TO COVER THE COST.

SO, AND UM, Y'ALL PROBABLY FAMILIAR, WE USE, OF COURSE AE FOR OUR BILLING, UM, CUSTOMER CARE.

SO, UM, THEY HAVE PROVIDED DURING THE FORECAST, THEY PROVIDED US AN ADDITIONAL $1 MILLION, UH, FOR NEXT YEAR'S COST.

SO THAT'S WHAT YOU SEE HERE, THE POINT, UH, NINE SIX NUMBER.

SO OUR ELECTRIC COST HAS, HAS BEEN PRETTY STEADY THE PAST FEW YEARS.

UH, SO WE DIDN'T INCLUDE ANYTHING ADDITIONAL THAN, UH, THE INFLATION.

WE JUST APPLIED THE THREE POINT 0.5% INFLATION RATE OVER THE ELECTRICAL AS WELL.

SO THIS, THE NEXT FEW NUMBERS WERE, UH, OH, ACTUALLY, OH, I SEE.

ONE NUMBER IS NOT HIGHLIGHTED BLUE.

UM, THE, UH, O COMING FROM THE BUDGET OFFICE, UH, THE ADDITIONAL SUPPLEMENTAL RETIREMENT CONTRIBUTION, THE, UM, FLEET, THEY USUALLY GIVE US SOME PLACEHOLDERS FOR, UH, THESE INTERDEPARTMENTAL TRANSFERS.

SO THEY TOLD US, UH, DURING FORECAST 5% FOR FLEET MAINTENANCE AND, UH, 3% FOR FREE FUEL.

BUT DURING THE PROPOSED BUDGET PROCESS, WE MIGHT SEE SOMETHING SLIGHTLY DIFFERENT.

UH, SO FAR WE STILL HAVEN'T GOT THE ACTUAL NUMBERS YET INCREASED NUMBER YET FOR THE PROPOSED BUDGET.

SO WE HAVE FOR, THESE ARE THE PERCENTAGES THAT WE HAVE FOR THE FORECAST.

AND SIMILAR WITH AC CREW PAYROLL, BUT CREW PAYROLL ACTUALLY DOESN'T CHANGE MUCH.

SO, AND THEN, UH, YOU SEE THE TWO, UM, DECREASED NUMBERS, THE COMPOSITION ADJUSTMENT NUMBERS SMALL, IT'S ALSO JUST YEAR TO YEAR CHANGES OF THAT'S PROVIDED BY THE BUDGET OFFICE.

UH, THE NEXT NUMBER IS A LOT BIGGER.

UH, THAT'S BECAUSE IN FY 2 0 2 4, WE HAVE INCLUDED A WHOLE YEAR 10% STIPEND COST, WHICH IS ABOUT 8 MILLION, UH, DOLLARS UTILITY WIDE.

BUT FOR 25, WE ARE NOT EXPECTING THIS 10% RETURN RETENTION PROGRAM TO CONTINUE.

SO, UH, WE ARE REMOVING THAT FROM THE, UH, CURRENT FORECAST.

SO, UM, AND THEN I'M JUST, UH, RELATED TO THE 10% RETENTION STIPEND, UH, THAT WENT INTO EFFECT, UH, IN MARCH OF, OF 2023, UM, AT A TIME WHEN WE WERE REALLY STRUGGLING WITH, WITH, WITH VACANCIES.

AND AS LY MENTIONED, UH, THERE THERE'S BEEN SEVERAL, UH, MARKET STUDIES THAT WERE IMPLEMENTED WITHIN THE LAST YEAR.

UH, IN ADDITION, UM, THERE WAS A, A CITYWIDE LIVING WAGE ADJUSTMENT.

UM, AND, AND AS A RESULT OF THOSE INCREASES, YOU KNOW, TO, TO HAVE AN ACROSS THE BOARD 10% STIPEND DOESN'T REALLY MAKE, MAKE SENSE ANYMORE SINCE WE'VE BEEN ABLE TO TOUCH, UM, SO MANY OF OUR EMPLOYEES WITH, WITH MARKET STUDIES AND OTHER ADJUSTMENTS AND, UM, UM, THAT DOESN'T MEAN THAT WE THINK THAT, UM, YOU KNOW, ALL THE WORK IS DONE.

UM, BUT IT'S, IT'S PUT US IN A POSITION NOW TO, TO HAVE A MORE LIKE TITLE SPECIFIC FOCUS IN TERMS OF, OF TITLES THAT WE'RE STILL STRUGGLING WITH IN TERMS OF, OF VACANCIES AND, UM, TITLES THAT MAYBE HAVEN'T BEEN TOUCHED, UH, WITH ANY OF THE OTHER, UM, YOU KNOW, WAGE, UM, AND COMPENSATION REVIEWS.

SO ALL OF THESE UP AND DOWN, INCREASED DECREASE TOGETHER WOULD, RESULTING ABOUT $40 MILLION DIFFERENCE, UH, COMPARING TO CURRENT YEARS.

UH,

[00:30:01]

FY BUDGET WEIGHS THE 2025 FORECAST THAT WE SUBMITTED, SO, EXCELLENT, PLEASE.

SO THIS SLIDE GIVE YOU A LITTLE MORE DETAIL ON WHAT THE 29 FTES THAT WE ARE PROPOSING.

WE USUALLY ALIGN THESE NEW FT NEW POSITIONS WITH THE EFFECTIVE UTILITY MANAGEMENT ATTRIBUTES.

SO AS YOU CAN SEE, WE ARE PROPOSING 10 ADDITIONAL FTES FOR THE OPERATIONAL OPTIMIZATION.

UH, OF COURSE THAT'S ONE OF OUR MOST IMPORTANT FOCUSES, UH, FOR THE UTILITY.

AND THEN, UH, WE ALSO PROPOSED FIVE NEW FTES FOR INFRASTRUCTURE PERFORMANCE AND, UH, THREE EACH FOR CUSTOMER SATISFACTIONS AND, UH, EMPLOYEE LEADERSHIP AND DEVELOPMENT.

AND THEN WE, UM, ALSO PROPOSED TWO NEW FTES FOR THE FACILITY IMPROVEMENT, AND THEN ONE FOR THE AFFORDABILITY THAT'S RELATED TO AFFORDABILITY EFFORTS.

SO, SO THESE ARE THE 29, UH, NEW FTES THAT WERE PROPOSING.

SO THERE'S A LITTLE NOTE HERE.

SO WHAT WE ARE SEEING HERE IS THAT SEVEN OUT OF THESE 29 NEW FTES ARE ACTUALLY EITHER, RIGHT NOW WE ARE USING TEMPORARIES TO DO THESE KIND OF WORK, OR WE'RE USING CONTRACTORS TO DO THE, TO DO THE JOB.

SO WE ARE ACTUALLY CONVERTING THESE SEVEN TO NEW FTES.

SO, WHICH MEANS THAT THERE'S A GOING TO BE A COST OFFSET.

SO ONCE WE BRING THE NEW FTES ON BOARD, THEN WE WOULDN'T NEED THE, EITHER THE TEMPLE CONTRACTUAL ANYMORE.

SO I'M CURIOUS WHICH ONES ARE TEMPORARY? UH, WE HAD A, I DIDN'T BRING IT, BUT I WILL PROVIDE THE INFORMATION TO BLANCA.

SHE CAN DISTRIBUTE IT.

YEAH, WE HAD HANDPICK ONES.

DO YOU KNOW THE EXACT SEVEN? I JUST, WE MIGHT HAVE A SPREADSHEET I DIDN'T PRINT OUT.

UM, WHILE YOU LOOK FOR THAT, I HAVE ANOTHER QUESTION.

YES.

HOW MANY VACANCIES DO WE CURRENTLY HAVE? VACANCY NUMBER, SO THIS IS A REPORT THAT I PRINT ON MAY 15TH.

UH, SO, YOU KNOW, EVERY DAY THEY ARE HIRING, SO THEY'RE GONNA BE UP AND DOWN.

SO THIS REPORT SHOWS 138, AND WE HAVE A TOTAL OF 1381.

I THINK I HAD TO DO THE MASS DECREAS 29.

YEAH, 1381 TOTAL FTES RIGHT NOW BEFORE THE 29.

SO WE HAVE 1381 TOTAL FTES BEFORE THE 29.

SO AFTER THE 29 IT WILL BE 1410.

AND THE TOTAL VACANT, UH, FTES PER THIS REPORT I PRINTED A COUPLE, UH, A WEEK OR SO AGO IS 138.

SO RIGHT NOW AROUND 10%.

YES, WHICH IS WHERE, WHERE, UM, BEEN HING FOR, FOR MOST OF THE YEAR.

ALRIGHT, SO IN TERMS OF THE TITLES THAT ARE EITHER TEMP OR CONTRACT CONVERSION, UM, THERE'S TWO POSITIONS IN HUMAN RESOURCES.

UM, A HUMAN RESOURCE ADVISOR SENIOR AND A HUMAN RESOURCE, UH, SPECIALIST, UM, IN POSITION AND ON THREE LEADERSHIP AND DEVELOPMENT, UM, AND ADMINISTRATIVE SPECIALIST IN THE RISK MANAGEMENT AREA.

UM, IN OUR UTILITY DEVELOPMENT SERVICES, THERE'S A BUSINESS PROCESS CONSULTANT SENIOR, SO THEY REPLACING, UM, IN BUSINESS SERVICES THERE'S TWO POSITIONS.

ONE IS ADMINISTRATIVE SENIOR AND A MAINTENANCE WORKER THREE.

AND THEN ON THE IT SIDE, UM, THERE'S AN APP IT APPLICATION DEVELOPER SENIOR, UM, THAT WILL ACTUALLY ALLOW US TO REDUCE TWO CONTRACT POSITIONS.

BUT WE'LL BE, WE CAN PROVIDE THAT DETAIL SPECIFICALLY.

AND GENERALLY WE, UM, YOU KNOW, THE THIS FIRST MEETING IS, IS KIND MORE HIGH LEVEL.

[00:35:01]

NO PROBLEM.

THANK YOU.

NO PROBLEM.

SORRY, UM, FIRST TIME IN THE ROOM.

UM, BUT, UM, FOR, UM, FOR THE SUBSEQUENT MEETING, WE GENERALLY START TO GET INTO MORE DETAIL IN TERMS OF, OF OF BUDGET.

AND SO THIS, THIS FIRST MEETING IS, IS GENERALLY, YOU KNOW, MORE OF AN OVERVIEW, UM, AND, AND WE'LL BE PROVIDING THAT INFORMATION.

ANY OTHER QUESTIONS FOR ME? OKAY, THANK YOU.

GOOD AFTERNOON, BUDGET COMMITTEE.

I'M CHRISTINA ROMERO, I'M FINANCIAL MANAGER, UH, OVER THE FINANCIAL MANAGEMENT DIVISION FOR AUSTIN WATER.

AND I'LL BE, UM, GOING OVER THE FINANCIAL FORECAST, KEY FINANCIAL BENCHMARKS IN CIP SPENDING.

NEXT SLIDE PLEASE.

THIS SLIDE RIGHT HERE IS OUR DEBT SERVICE COVERAGE RATIO FOR AUSTIN WATER.

AND AS SHOWN IT'S ABOVE THE FINANCIAL POLICY THRESHOLD INDICATING A HEALTHY FINANCIAL POSITION, UH, PROJECTIONS FOR FISCAL YEARS 25 THROUGH 29, SHOW THAT THE, UH, DEBT SERVICE COVERAGE IS EXPECTED TO MEET OR EXCEED POLICY THRESHOLD OF 1.75 TIMES ENSURING AUSTIN WATER'S ABILITY TO STEADILY MEET ITS DEBT OBLIGATIONS.

NEXT SLIDE PLEASE.

THIS SLIDE IS OUR DAY'S CASH ON HAND THAT JOSEPH, UM, BRIEFLY TOUCHED ON IN A PREVIOUS SLIDE.

AND OUR DAY'S CASH ON HAND METRICS SHOWCASES STRONG LEVELS OF CASH RESERVES SIGNIFICANTLY EXCEEDING OUR TARGET OF 245 DAYS CASH THROUGHOUT THE FORECAST PERIOD.

NEXT SLIDE PLEASE.

THIS IS OUR CASH FINANCING OF CAPITAL PROGRAM AND AUSTIN WATER HAS A STRONG CAPITAL PLAN IN PLACE, AS JOSEPH PREVIOUSLY MENTIONED, WHICH INCLUDES SEVERAL MAJOR PROJECTS IN THE PIPELINE, UH, INCLUDING THE WALNUT CREEK WASTEWATER TREATMENT PLAN EXPANSION.

CURRENTLY, WE'RE FORECASTING CONSISTENT FINANCING, UH, FOR PEGO, UH, WITH A FOCUS ON CUSTOMER AFFORDABILITY.

UH, NEXT SLIDE PLEASE.

THIS SLIDE OUTLINES THE PROJECTED IMPACT ON BILLS FOR AN AVERAGE NON, UH, CAP RESIDENTIAL CUSTOMER OVER THE NEXT FIVE YEARS.

IT'S CRUCIAL TO UNDERSTAND THAT BILLS ARE EXPECTED TO RISE DURING THIS PERIOD AS WE WORK TOWARDS FORTIFYING OUR ENTERPRISE RESILIENCY AND ENSURING WE HAVE THE NECESSARY RESOURCES TO MEET OUR GROWING CAPITAL PLAN.

NEXT SLIDE, PLEASE.

IS THAT MONTHLY? UH, YES.

THIS IS, UM, MONTHLY AVERAGE BILL IMPACT AND THIS INCLUDES, UH, SURCHARGES AS WELL FOR THE, UH, CBC AND GO PURPLE.

OKAY, THIS SLIDE IS OUR AVERAGE NON CAP RESIDENTIAL BILL SHOWING HISTORICALLY FROM FISCAL YEAR 2012 ALL THE WAY THROUGH OUR FORECAST PERIOD OF 2029.

AND YOU CAN SEE THAT AS OF 2023, WE WERE AT $80 AND 79 CENTS AVERAGE BILL, WHICH IS JUST SLIGHTLY HIGHER OF THE 2016 ACTUAL BILL OF $80 AND 24 CENTS.

SO WE ARE, UM, STILL WITHIN A GOOD RANGE OF FOR AFFORDABILITY, AND WE HAVE INCLUDED THOSE RATE INCREASES, UH, IN THAT FORECAST, UH, BAR CHART SHOWING WHAT THAT AVERAGE BILL WOULD LOOK LIKE, LIKE IN COMPARISON.

NEXT SLIDE PLEASE.

SO THIS IS OUR CUSTOMER ASSISTANCE PROGRAM THAT JOSEPH, UH, BRIEFLY MENTIONED.

UH, OUR CUSTOMER ASSISTANCE PROGRAM HAS REALLY GROWN OVER THE LAST YEAR.

UH, WE'VE SEEN OVER 20,000 RESIDENTIAL CAP PARTICIPANTS AND OVER 38,000 MULTIFAMILY CAP PARTICIPANTS, AND WE ARE ON TRACK TO CONTINUE TO GROW THAT DUE TO COUNCIL INITIATIVES.

UM, THE RESIDENTIAL, UH, CUSTOMERS GET WAIVED MONTHLY WATER AND WASTEWATER FIXED FEES AND, UH, DISCOUNTED VOLUMETRIC WATER AND WASTEWATER RATES.

IN ADDITION, MULTIFAMILY CAP GETS THAT $17 MONTHLY AC UH, CREDIT THAT JOSEPH MENTIONED EARLIER.

AND SO YOU CAN SEE THAT THE RESIDENTIAL AVERAGE DISCOUNT IS ABOUT 53.4% OF THE NON CAP AVERAGE MONTHLY RESIDENTIAL BILL.

AND THIS IS WHERE WE'RE HELPING OUR MOST VULNERABLE CUSTOMERS IN THIS CITY.

NEXT SLIDE, PLEASE.

THIS IS OUR AFFORDABILITY BENCHMARK.

UM, THIS IS THE AVERAGE ANNUAL BILL PERCENT OF MEDIAN HOUSEHOLD INCOME.

AND, UM, THIS SHOWS, UH, FROM 2011 ACTUALS ALL THE WAY THROUGH, UH, 2024, UH, WHICH IS STILL, UH, IN A FORECAST DUE TO THE CENSUS DATA FOR MHI

[00:40:01]

AND THE METRIC EVALUATES THE YEARLY COST OF WATER AND WASTEWATER BILLS FOR AUSTIN WATER'S CUSTOMERS AS A PERCENTAGE OF THE MHI OVER TIME.

AND WE AIM TO ENSURE THAT BILLS REMAIN BELOW THE 1.5% OF MHI AND OUR PROJECTIONS FOR 23 AND 24 INDICATE THAT WE'RE ON TRACK TO CONTINUE TO MEET THIS OBJECTIVE.

WE EXPECT WITH MHI GROWTH AND INCREASED RATES, WE ANTICIPATE TO CONTINUE TO STAY WELL BELOW THE 1.5% RANGE.

NEXT SLIDE PLEASE.

SO THIS SLIDE REPRESENTS THE APPROVED CAPITAL PLAN SPENDING FOR EACH PERIOD.

AS YOU CAN SEE, THIS LAST FIVE YEAR SPENDING PLAN WAS NOTICEABLY HIGHER THAN PREVIOUS PLANS DUE TO RENEWAL AND REPLACEMENT OF CRITICAL INFRASTRUCTURE INVESTMENTS IN NEW TECHNOLOGY, INCLUDING, UM, THE SMART METER TECHNOLOGY AND SYSTEM EXPANSION FOR WALNUT CREEK AND IS FOCUSED ON CAPITAL IMPROVE INVESTMENTS TO BUILD AND IMPROVE WATER AND WASTEWATER TREATMENT FACILITIES AND COLLECTION FACILITIES.

AND THIS IS JUST OUR SNAPSHOT OF THE FIVE-YEAR CAPITAL SPENDING PLAN BY, UM, BY FUND.

YOU SEE THERE'S WATER WASTEWATER RECLAIMED AND THEN ARE COMBINED AND WE ARE IN A PERIOD OF WASTEWATER HEAVY PROJECTS AT 1.6, UH, BILLION DOLLARS.

AND, UM, WHAT IT IS ATTRIBUTING TO THAT IS THE WALNUT CREEK WASTEWATER TREATMENT PLAN EXPANSION.

NEXT SLIDE, PLEASE.

THIS IS OUR STRATEGIC PROJECTS, AND AS YOU CAN SEE THAT WALNUT CREEK, UH, EXPANSION IS AT THE TOP OF THE LIST, AND THE PLAN IS 794 MILLION OF, UH, THE $1 BILLION PROJECT THAT JOSEPH MENTIONED, UH, RIGHT AFTER.

THAT'S OUR AQUIFER STORAGE AND RECOVERY, UH, WHERE WE'RE BEGINNING THAT AT THE END OF THE PLAN, BUT WE ARE, UM, BEGINNING THE AQUIFER STORAGE AND RECOVERY PILOT ALREADY.

NEXT SLIDE, PLEASE.

THIS IS OUR GROWTH AND ENHANCEMENT IN PRIORITY IMPROVEMENTS.

UH, JUST TO LIST A FEW PROJECTS OUT, UM, THAT WE'RE ALSO WORKING ON, UH, THERE'S A SAR R WASTEWATER TREATMENT PLANT, TRANS, UH, TRAINS A AND B IMPROVEMENT, WHICH IS THE LARGEST RIGHT AFTER, THAT'S WILLIAMSON CREEK AND THEN CENTER STREET PUMP STATION, AND THEN A FEW OTHERS RIGHT AFTER THAT WE WANTED TO HIGHLIGHT FOR YOU.

AND NOW I'LL TAKE ANY QUESTIONS IF YOU HAVE ANY ON THOSE SLIDES.

BEFORE I TURN IT OVER TO JOSEPH, I COULD YOU, UM, EXPLAIN WHAT THE DIFFERENCE IS BETWEEN THE FIRST AND THE SECOND? WELL, I MEAN, I KNOW THAT THE PRICE AND THE TOTAL AND ALL THAT, BUT I DIDN'T CATCH WHY STRATEGIC PROJECTS ARE DIFFERENT FROM THE CAPITAL IMPROVEMENT SPENDING PLAN PROJECTS.

SURE.

ARE YOU ON PAGE, UM, ON 20 THE STRATEGIC? YEAH.

THE, WHAT IS THE DIFFERENCE BETWEEN THE GROWTH ENHANCEMENT AND PRIORITY IMPROVEMENTS PROJECT AND THEN THE STRATEGIC PROJECTS? SURE.

SO, UM, THE STRATEGIC PROJECTS ARE, UM, MORE ALONG THE LINES THAT EXCEED OUR GROWTH AND ENHANCEMENT AND PRIORITY IMPROVEMENTS.

UM, THE GROWTH AND ENHANCEMENT AND PRIORITY IMPROVEMENT PROJECTS, UM, ARE BASICALLY WHAT THEY SAY, UH, ONE TO ATTRIBUTE TO GROWTH.

UH, THE OTHER ONES JUST ENHANCING OUR SYSTEM, UH, AND, AND THOSE PROJECTS AND THE OTHERS JUST PRIORITY PROJECTS AS WELL AS TECH PROJECTS OR SERVICE EXTENSION PROJECTS.

SO THOSE ARE THE PROJECTS THAT ARE WITHIN THE GROWTH ENHANCEMENT AND PRIORITY.

UM, AND THEN STRATEGIC ARE THOSE, UH, THAT, UH, ARE PART OF, UH, OUR PLAN OR SOMETHING THAT WE HAVE TO DO IN ADDITION TO THOSE GROWTH AND ENHANCEMENT AND PRIORITY PROJECTS.

AND THAT'S WHY THAT LIST IS, IS A LOT SHORTER, UM, THAN, UH, THE LIST OF GROWTH ENHANCEMENT AND PRIORITY.

SO THE, THE SPENDING PLAN AND MILLIONS THAT, YOU KNOW, HOW DO I LOOK AT THE, BECAUSE I KNOW THERE'S WA THERE'S WATER IN HERE AND WASTEWATER.

SO IS THERE, ARE THESE NUMBERS SHOWN UP SOMEWHERE ELSE? UM, THOSE NUMBERS, WE CAN PROVIDE YOU THE, UH, BACKUP.

UM, WE ARE WORKING ON PREPARING THAT, UH, FOR THE ENTIRE PLAN.

UH, NORMALLY IN MEETING TWO, WE PROVIDE YOU A DETAILED LISTING OF THE ENTIRE PLAN, UH, THAT WE HAVE BY PROJECT, UH, IN TOTAL BY FUND.

UH, SO THAT'S SOMETHING THAT WE DO PRI PROVIDE THE, UM, BUDGET COMMITTEE.

OKAY, THANK YOU.

I'M SURE IT'LL BE CLEAR ONCE I GET THAT ADDITIONAL INFORMATION.

THANK YOU.

YES, YOU ARE WELCOME.

THANK YOU.

AND NOW I'LL TURN IT OVER TO JOSEPH IF THERE'S NO MORE FURTHER QUESTIONS.

THANK YOU.

ALRIGHT, WELL, UH, REAL QUICKLY, I'LL, I'LL GO OVER, UH, PROVIDE A COST OF SERVICE UPDATE.

I KNOW, UM, THAT, UH, MEMBERS OF THE

[00:45:01]

COMMISSION THAT HAVE BEEN, UH, PARTICIPATING IN THE COST SERVICE STUDY, UH, HAVE BEEN PROVIDING UPDATES AT, AT OUR COMMISSION MEETINGS.

BUT I JUST WANTED TO PROVIDE, UM, YOU KNOW, A A LITTLE BIT MORE BACKGROUND.

UM, SO WE, WE ENGAGED WITH, UH, NUGEN, UH, STRATEGIES AND SOLUTIONS AS OUR COST OF SERVICE RATE CONSULTANTS, UM, BACK IN 23 ACTUALLY.

AND, UM, YOU KNOW, THEY'VE BEEN WORKING TO, TO DEVELOP, UM, UPDATED RATE MODELS.

UM, AND HOWEVER, UH, EARLIER THIS YEAR WE STARTED A, UM, THE, THE PUBLIC INVOLVEMENT PART OF OUR COST OF SERVICE STUDY.

AND, AND THAT'S INVOLVED, UM, PUBLIC INVOLVEMENT COMMITTEE MEETINGS THAT, UH, INCLUDE REPRESENTATIVES FROM, UH, YOU KNOW, OUR RESIDENTIAL COMMUNITY, MULTIFAMILY, UH, COMMERCIAL LARGE VOLUME AS WELL AS, UH, WATER AND WASTEWATER, UH, COMMISSION, UH, MEMBERS.

UM, IN ADDITION TO, UM, TO RESIDENTIAL COMMUNITY MEMBERS.

WE ALSO PAY FOR A RESIDENTIAL RATE ADVOCATE, UH, RELLA CONSULTANTS WHO'S PERFORMING THAT ROLE, UM, TO, TO PROVIDE A, YOU KNOW, A COST OF SERVICE RATE CONSULTANT WHO IS, UH, ACTING ON BEHALF OF THE RESIDENTIAL CUSTOMERS.

SINCE, YOU KNOW, RESIDENTIAL CUSTOMERS DON'T NECESSARILY HAVE, UM, THE, THE RESOURCES OR ABILITY TO, TO BRING THEIR OWN RATE CONSULTANTS, UH, TO BEAR IN, IN, IN THIS TYPE OF PROCESS.

SO, UM, AND THAT'S SOMETHING THAT WE'VE DONE, UH, FOR THE LAST SEVERAL, UH, COST OF SERVICE STUDY, UH, UPDATES.

AND, AND SO THIS, UH, PUBLIC INVOLVEMENT COMMITTEE OR PIC AS WE REFER TO IT, UM, YOU KNOW, THEY HAVE BEEN, UH, RECEIVING REGULAR UPDATES.

WE'VE HAD, UH, SEVEN MEETINGS.

WE'LL HAVE OUR EIGHTH, UH, TOMORROW.

UM, BUT RECEIVING REGULAR UPDATES, UH, FROM, FROM BOTH, UH, AUSTIN WATER AS WELL AS, UH, YOU KNOW, NUGEN, OUR, OUR RATE CONSULTANTS, UH, WITH, UM, COST OF SERVICE METHODOLOGY, LOOKING AT, YOU KNOW, SOME OF OUR KEY COST DRIVERS, HOW COSTS ARE ALLOCATED, WHAT, YOU KNOW, WHAT DRIVES COST OF SERVICE ALLOCATION.

UM, AND SO THEY, UM, THROUGHOUT THE PROCESS WERE, YOU KNOW, EXAMINING THE METHODOLOGY THAT WE'VE HISTORICALLY USED TO, TO ALLOCATE COST TO OUR DIFFERENT CUSTOMER CLASSES.

UM, AND, UM, YOU KNOW, UH, PROVIDING INPUT ABOUT MODIFYING METHODOLOGY WHERE APPLICABLE, UM, WITH THE END GOAL OF, YOU KNOW, IDENTIFYING THE COST TO SERVE, YOU KNOW, EACH OF OUR, OUR, OUR CUSTOMER CLASSES, RESIDENTIAL, MULTIFAMILY, COMMERCIAL, AS WELL AS OUR LARGE VOLUME AND WHOLESALE CUSTOMERS.

SO, UH, THE GOAL IS TO IDENTIFY THE, THE COST TO SERVE EACH CUSTOMER CLASS OR INDIVIDUAL LARGE CUSTOMERS, UM, AND THEN GET FEEDBACK, UM, THROUGHOUT THE PROCESS, UM, AND PARTICULARLY AS WE WRAP IT UP, GET FEEDBACK, UM, TO HELP US FINALIZE THE COST OF SERVICE PROCESS AND ULTIMATELY MAKE, UH, RATE RECOMMENDATIONS.

UM, SO WE'VE PROVIDED A PROCESS OVERVIEW, UH, REVIEW DATA.

UM, WE'VE HAD OVER A HUNDRED QUESTIONS ASKED FROM, FROM OUR PUBLIC INVOLVEMENT COMMITTEES.

WE'VE, UH, ANSWERED I THINK IN THE, TO THE TUNE OF ABOUT, WE'VE ANSWERED A HUNDRED.

YEAH, YEAH, WE'VE HAD 103 QUESTIONS AND WE'VE ANSWERED ABOUT 80, UH, 85 TO 90 OF, OF THOSE QUESTIONS.

AND WE'RE WORKING TO TRY AND WRAP THOSE UP THIS WEEK.

UM, THE MEETING THIS WEEK, WE'LL, WE'LL BE SEEKING SPECIFIC INPUT OVER, UM, YOU KNOW, DIFFERENT QUESTIONS ABOUT, UH, HOW SHOULD WE, UM, IMPLEMENT RATE IMPROVEMENTS OR RATE INCREASES.

SO FOR EXAMPLE, YOU KNOW, FOR OUR RESIDENTIAL CUSTOMERS, WE HAVE A FIVE, UH, FIVE BLOCK TIERED RATE STRUCTURE, UM, WHERE THE, THE LOWER TIERS ARE LESS EXPENSIVE AND THE HIGHER TIERS ARE, ARE MORE EXPENSIVE, AND IT'S CONSERVATION BASED RATE STRUCTURE TO, UM, INCENTIVIZE CONSERVATION.

UM, AND SO, YOU KNOW, WE'RE ASKING QUESTIONS LIKE, YOU KNOW, SHOULD, SHOULD THE RATE INCREASES BE SPREAD EVENLY AMONGST THE BLOCKS SHOULD, YOU KNOW, WE APPLY, UM, LARGER RATE INCREASES AT THE LOWER TIERS TO REDUCE REVENUE VOLATILITY OR LARGER INCREASES FOR THE HIGHER TIERS TO, TO CONTINUE TO SEND THAT PRICE SIGNAL.

AND, UM, WE'LL BE ASKING QUESTIONS ABOUT THE, THE RIGHT LEVEL

[00:50:01]

OF, UM, CUSTOMER ASSISTANCE PROGRAM BENEFIT OR DISCOUNT, UM, AS WELL AS THE, THE OVERALL PLAN IN TERMS OF RATE INCREASES AS, AS YOU SAW IN OUR FORECAST, UM, ASSUMPTIONS FROM A RATE INCREASE PERSPECTIVE.

UM, WE'VE MODELED, YOU KNOW, LARGER INCREASES IN THE FIRST TWO YEARS AND THEN TAPERING DOWN AS WE REACH THAT ALIGNMENT OF OUR COST STRUCTURE VERSUS OUR, OUR REVENUE STRUCTURE.

UM, BUT CERTAINLY WE COULD, WE, YOU KNOW, WE COULD HAVE, WE COULD SMOOTH IT TO HAVE MAYBE MORE SIX TO 7% INCREASES, OR WE COULD TAKE THE OPPOSITE APPROACH AND KIND OF TAPER IT UP.

UM, THE, YOU KNOW, THE, THE WAY THAT WE MODELED IT WITH THE BIGGER INCREASES UPFRONT, YOU KNOW, THOSE RATE INCREASES, THE, YOU KNOW, THE BIGGER RATE INCREASES WOULD BE IN EFFECT FOR A LONGER PERIOD OF TIME.

AND SO THE CUMULATIVE RATE INCREASE WOULD BE, YOU KNOW, THAT ROUGHLY 30, 31% RANGE.

IF WE WERE TO SMOOTH IT, YOU START TO GET, YOU KNOW, INTO THE UPPER THIRTIES OR LOWER FORTIES.

UM, AND, AND ABOVE 40, IF WE TOOK THE OPPOSITE APPROACH WITH LOWER INCREASES THAT, THAT WERE TAPERED UP.

AND SO, SO WE'LL BE ASKING, UH, QUESTIONS ABOUT, UM, YOU KNOW, WOULD YOU RATHER SEE IT SMOOTH, ALBEIT WITH A HIGHER OVERALL INCREASE OR, UM, OR HAVE BIGGER INCREASES UPFRONT TO HAVE A, A LOWER OVERALL INCREASE.

UM, NEXT SLIDE PLEASE.

SO, UH, IN ADDITION, UM, YOU KNOW, WE, WE'VE HAD, YOU KNOW, DISCUSSIONS THROUGH, THROUGH ALL THE MEETINGS, AS I MENTIONED, WE'VE RECEIVED 105 QUESTIONS, UH, BUT ALSO THIS WEEK WE'RE KICKING OFF PUBLIC, UH, INPUT SESSIONS.

WE'LL BE HOSTING OPEN HOUSES IN EACH OF THE 10 COUNCIL DISTRICTS, UH, STARTING ON THURSDAY, UM, GOING THROUGH THROUGH JUNE 22ND.

AND, UM, IN ADDITION WE'LL HAVE A VIRTUAL, UM, OPEN HOUSE, UM, AND THROUGH, IN THOSE OPEN HOUSES, DURING THOSE OPEN HOUSES, UH, CUSTOMERS AND COMMUNITY MEMBERS, WE'LL HAVE, UM, YOU KNOW, WE'LL BE PROVIDING INFORMATION ABOUT OUR CIP PLAN AND VARIOUS OTHER OPERATIONS, UM, AND BE AVAILABLE TO ANSWER QUESTIONS AND WE'LL SEEK TO CONTINUE TO GET INPUT ON SOME OF THOSE SAME QUESTIONS THAT WE'LL BE ASKING THE PUBLIC INVOLVEMENT COMMITTEE THIS WEEK.

UM, AND THEN WE'LL ALSO, UH, HOST TWO FOCUS GROUPS TO, TO GET MORE DETAILED INFORMATION, UM, TO, TO FORM, UH, TO HELP US FINALIZE OUR CUR COST OF SERVICE STUDY.

AND SO WE ANTICIPATE OUR LAST MEETING WILL BE JUNE 10TH, WHERE WE'LL, UH, WE'LL PROVIDE RESULTS THAT TAKE, YOU KNOW, THE FEEDBACK WE'RE GETTING AND, AND, AND, AND HELP US AGAIN FINALIZE COST SERVICE STUDY, UM, FINALIZE OUR, OUR, UH, RATE INCREASE PROPOSAL THAT WILL ULTIMATELY BE PRESENTED TO COUNCIL.

ALRIGHT.

AND WITH THAT, I'D BE HAPPY TO ANSWER ANY QUESTIONS.

YES.

SORRY, YOU MENTIONED THAT, UM, YOU'RE GONNA MEET AGAIN WITH THE ON JUNE 10TH TO FINALIZE EVERYTHING, BUT WE ALSO HAVE PUBLIC INPUT SESSIONS ON JUNE 22ND.

I GUESS MY QUESTION, I'M, I'M TRYING TO GET A BETTER UNDERSTANDING OF THE SCHEDULE.

YES.

SO WE, WE ARE TRYING TO WRAP UP THE PUBLIC INVOLVEMENT COMMITTEE PORTION.

SO WE WILL, UM, WE WILL GET THEIR INPUT, YOU KNOW, WITH THIS MEETING THIS WEEK, AND THAT'LL HELP US, UM, FINALIZE, UM, THE COST OF SERVICE PROCESS.

WE WILL HAVE MADE IT THROUGH BY, BY JUNE 10TH, WE WILL HAVE MADE IT THROUGH EIGHT OF THE 10 DISTRICTS.

UM, BUT WE'RE ALSO WORKING AGAINST A BUDGET TIMELINE, UH, PROPOSED BUDGET BEING PRESENTED TO COUNCIL ON JULY 12TH.

UM, SO THE IMPACT THAT WE GET FROM THE FIRST EIGHT OPEN HOUSES AND FROM THE PUBLIC INVOLVEMENT COMMITTEE WILL HELP US FORM OUR PROPOSED BUDGET.

UM, BUT WE'LL CONTINUE TO SEEK PUBLIC INPUT, YOU KNOW, BOTH THROUGH THE LAST TWO DISTRICTS, AND I THINK ONE OF THE FOCUS GROUPS WILL BE LATER TOO.

UM, WE WILL HAVE THE OPPORTUNITY AFTER OUR FINAL PROPOSED BUDGET IS SUBMITTED TO MAKE ANY, ANY FINAL MODIFICATIONS.

SO, UM, SO OUR, OUR FINAL BUDGET PROPOSAL WILL BE INFORMED BY THE PUBLIC INVOLVEMENT COMMITTEE PROCESS AND FEEDBACK THAT WE'VE RECEIVED FROM EIGHT OF THE 10 COUNCIL DISTRICTS.

AND IF WE GET ANY, ANYTHING, UM, THAT, YOU KNOW, WOULD CHANGE, YOU KNOW, OUR RECOMMENDATION, THEN WE WOULD DO THAT AS PART OF THE PROPOSED BUDGET PROCESS AND WE

[00:55:01]

WOULD, WE WOULD MAKE A RECOMMENDATION, UM, TO CHANGE THE RATE INCREASE OR CHANGE SOME OTHER PART OF OUR PROPOSAL.

AND, AND THAT CAN STILL HAPPEN AFTERWARDS, BUT, UM, WE'RE TRYING TO GET THROUGH THE BULK OF IT IN TIME TO, TO BE INCLUDED IN THE PRESENTATION TO COUNSEL ON JULY 12TH.

OKAY.

UH, CHRISTINA ROMERO, AGAIN, FINANCIAL MANAGER THREE WITH AUSTIN WATER.

I'M GONNA GO OVER, UH, DEBT MANAGEMENT.

UM, SO CAPITAL RECOVERY FEES FOR 24, WE'RE ON TRACK TO BE SIMILAR TO THAT OF, UH, WHAT WE SAW IN PRIOR YEAR IN CAPITAL RECOVERY FEE COLLECTIONS AROUND $30 MILLION.

UH, WE DID HAVE A DEBT DEFIANCE TRANSACTION, UM, BACK IN DECEMBER OF $60 MILLION, UH, TO, UM, REDUCE THE DEBT SERVICE REQUIREMENTS AS JOSEPH MENTIONED BEFORE ABOUT SMOOTHING OUT DEBT.

WE ALSO CONTINUE TO LOOK FOR LOW INTEREST FINANCING OPPORTUNITIES, AND I'M HAPPY TO REPORT THAT LAST WEEK WE SUBMITTED A TEXAS WATER DEVELOPMENT BOARD SWIFT LOAN APPLICATION, UH, FOR $25 MILLION.

IN ADDITION, WE SUBMITTED AN EEPA WIA LETTER OF INTEREST, UH, FOR WALNUT CREEK WASTEWATER TREATMENT PLAN EXPANSION FOR A TOTAL OF $446 MILLION.

AND SO WE'RE LOOKING FORWARD TO, UM, HEARING BACK FROM THE EPA WITHIN ABOUT THREE MONTH TIMEFRAME.

THEY SAID IN ADDITION, UM, THE, UH, SWIFT APPLICATION, THEY'RE ALREADY WORKING ON IT.

SO WE ARE, WE ARE WORKING WITH TEXAS WATER DEVELOPMENT BOARD, UH, AS OF TODAY, THEY'VE ALREADY STARTED REVIEWING EVERYTHING.

NEXT SLIDE.

SO THIS IS, UM, A GRAPH SHOWING OUR DEBT MANAGEMENT EFFORTS, UM, THROUGH DEBT FEES AND TRANSACTIONS AND REFUNDING SAVINGS ON OUR DEBT, UM, AND LOW INTEREST LOANS.

WE HAVE A TOTAL SAVINGS OF $556 MILLION TO DATE.

AND SO THIS GRAPH RE REPRESENTS HISTORICAL AND FUTURE PROJECTIONS REGARDING OUR DEBT SERVICE REQUIREMENTS.

AND SO, UH, THE FUTURE DEBT AND TRANSACTIONS INCLUDING 2025 WILL TARGET 2026 AND 2027 TO SMOOTH DEBT SERVICE TO GET PAST THAT 2028 PEAK, AS JOSEPH MENTIONED EARLIER.

AND I ALSO WANNA ADD FOR EVERY ADDITIONAL DOLLAR OF DEBT SERVICE, UM, THAT WE HAVE, UM, IT REQUIRES THE DEBT SERVICE REQUIREMENT OF A DOLLAR 75 FROM OUR CUSTOMERS.

AND, AND THAT'S REALLY BEEN THE BIGGEST DRIVER IN TERMS OF, UH, YOU KNOW, OUR DEBT MANAGEMENT EFFORTS.

UH, YOU KNOW, CERTAINLY WE LOOK TO CONTROL ALL OF OUR COSTS, UH, YOU KNOW, OPERATING AND, UM, OPERATING CAPITAL AND, AND DEBT SERVICE.

BUT BECAUSE OF DEBT SERVICE COVERAGE, UM, HAVING THAT MULTIPLIER EFFECT, YOU KNOW, WITH THE FINANCIAL POLICY OF 1.75, KNOWING THAT EVERY DOLLAR OF DEBT SERVICE HAS, YOU KNOW, A DOLLAR, AT LEAST A DOLLAR 75 IMPACT ON OUR REVENUE REQUIREMENTS, UM, THAT WE WOULD HAVE TO RECOVER THROUGH, THROUGH RATES, UM, THAT'S REALLY BEEN THE BIGGEST DRIVER FOR OUR FOCUS ON, ON MANAGING AND, AND, AND SMOOTHING OUR DEBT SERVICE REQUIREMENTS OVER TIME.

UH, YOU ALSO SEE HERE THAT, UM, YOU KNOW, WE HAVEN'T REALLY STARTED TO HIT 26, 27 AND 28, UM, IN TERMS OF DEFE AND TRANSACTIONS, WE HAVE HAD SOME SAVINGS, BUT, UM, YOU KNOW, WITH OUR DEFE AND TRANSACTION THAT WOULD BE PLANNED FOR FISCAL YEAR 25, UH, WE WOULD, WE WOULD EXPECT TO HIT FISCAL YEAR 26 PRETTY HEAVILY IN TERMS OF THE FEES AND TRANSACTION.

SO PRIMARILY SPLIT SPLIT BETWEEN 26 AND 27.

AND THEN, SO E EVERY YEAR IS THE FEES AND TRANSACTION OVER THE NEXT FEW YEARS.

WE'LL HEAVILY TARGET THOSE NEXT TWO YEARS.

UM, AND SO WE WOULD LOOK TO AGAIN, START TO PULL DOWN THAT, THAT PEAK IN 2028.

THANK YOU, JOSEPH.

SO NOW I'LL GO OVER THE REVIEW OF THE FISCAL YEAR 2025 BUDGET SCHEDULE.

SO JOSEPH MENTIONED JULY 12TH, OUR PROPOSED BUDGET, UM, WILL BE PRESENTED TO COUNCIL, UH, AFTER THAT, UM, ON JULY 17TH, WE'LL GO BEFORE THE WATER AND WASTEWATER COMMISSION, UH, FOR A REVIEW.

AND THEN JULY THROUGH AUGUST 8TH, UM, COUNCIL WILL HAVE BUDGET WORK SESSIONS AND THERE'S ALSO AN INPUT MEETING ALONG WITH PUBLIC HEARINGS THAT WILL TAKE PLACE.

AUSTIN WATER WILL HAVE, UM, A PUBLIC HEARING ON OUR RATES

[01:00:01]

AS WELL, UH, DURING THAT TIMEFRAME.

UM, USUALLY THAT'LL BE, UH, EITHER JULY 24TH OR UH, AUGUST 1ST USUALLY.

UM, AND THEN AUGUST 14TH THROUGH THE 16TH, UH, IS BUDGET ADOPTION.

AND UH, NEXT SLIDE PLEASE.

AND THAT CONCLUDES OUR PRESENTATION, AND NOW WE'RE OPEN TO ANY QUESTIONS THAT YOU MAY HAVE.

I KNOW I MIGHT HAVE A FEW OF SOME OF THE GRAPHS.

UM, DOES ANYBODY ELSE HAVE ANY QUESTIONS OFF THE BAT? WERE THERE ANY, UM, DO YOU HAVE ANY OF THE, THE DIFFERENCES BETWEEN US AND LIKE SAN ANTONIO OR ARLINGTON OR ANY OF THOSE OTHER CITIES IN TEXAS THAT WE MAY NEED? YOU MIGHT, IT SEEMS LIKE ALWAYS BEFORE WE SAW SOME COMPARISON OF WHAT WAS IN OUR CITY WATER AND WASTEWATER RATES VERSUS SOMEONE ELSE'S TO SEE IF WE WERE IN LINE WITH EVERYBODY.

YEAH, WE, WE DO AN ANNUAL AFFORDABILITY STUDY THAT WE COMPARE OURSELVES NOT ONLY TO MAJOR CITIES WITHIN TEXAS, BUT SOME OF OUR BENCHMARK CITIES THROUGHOUT THE NATION.

UH, WE'RE WORKING TO FINALIZE THAT.

UM, AND GENERALLY THAT COMES OUT, UM, YOU KNOW, JUNE, IN JUNE IN JUNE, WE DON'T HAVE, WE HAVE NOT COMPLETED THIS YEAR'S STUDY, UM, BUT WE DO HAVE LAST YEAR'S THAT WE COULD PROVIDE, UM, AS WE WORK TO FINALIZE THAT STUDY.

UM, AND WE CAN CERTAINLY, YOU KNOW, UH, HAVE THE, THE CURRENT YEAR UPDATE, UH, WE WOULD EXPECT TO HAVE BY THE END OF JUNE.

SO BEFORE, UM, BEFORE, UM, COUNCIL, I MEAN COMMISSION REVIEW OF, OF OUR PROPOSED BUDGET ON JULY 17TH.

YES.

AND I'LL ADD THAT, UM, I CAN GO AHEAD AND GIVE, UH, BLANCA THE LINK, UH, TO OUR CURRENT, UM, 2023 REPORT AND SHE CAN SEND THAT OUT.

AND IT HAS, UM, THE MHI METRIC IN IT AS WELL AS COMPARISON BENCHMARKS, UM, TO 36 CITIES AND, UH, SHOWS THE AVERAGE RESIDENTIAL CAP BILL, UM, AS WELL AS THE AVERAGE RESIDENTIAL NON CAP.

DOES IT HAVE THE FUTURE RATES.

AND I GUESS YOU CAN'T TELL WHAT THEIR FUTURE RATES WOULD BE EITHER, BUT JUST, I, I'M JUST REALLY BOTHERED BY THIS RATE INCREASE OF 9.8%.

IT JUST SEEMS LIKE THAT'S AN AWFUL LOT.

YOU SAY IT'S AVERAGE JUST 6%, BUT THAT'S 'CAUSE THAT LAST YEAR IS ZERO, SO, RIGHT.

UM, NO, WE, YOU KNOW, WE DON'T, UH, YOU KNOW, UNTIL WE PROPOSE IT IN OUR BUDGET, WE, YOU KNOW, WE, WE HAVE AN IDEA OF WHERE WE THINK WE MIGHT NEED TO BE, BUT UM, UNTIL IT'S ACTUALLY PART OF OUR PROPOSED BUDGET, WE, WE, UM, GENERALLY DON'T INCLUDE IT IN, IN OUR AFFORDABILITY REPORT.

UM, BUT WE ALSO WOULDN'T HAVE THE ABILITY THEN TO COMPARE IT AGAINST WHAT OTHER CITIES ARE DOING, UM, BECAUSE, YOU KNOW, THEY ALSO HAVEN'T, YOU KNOW, UM, MADE THOSE CHANGES YET.

SO OUR, OUR AFFORDABILITY REPORT IS, IS A COMPARISON OF THE RATES IN EFFECT FOR, FOR EACH OF THOSE FISCAL YEARS.

UM, SO THE ONE THAT WE'RE WORKING ON NOW, UH, IS A COMPARISON OF FISCAL YEAR 24 RATES, SAME SUBJECT.

UM, PART OF THAT PERCENT INCREASES THE NEW SURCHARGES, LIKE THE PURPLE PIPE.

RIGHT.

UM, WELL THE, THE PURPLE PIPE SURCHARGE HAS ACTUALLY BEEN UPDATED IN, IN OUR SCHEDULE HERE.

UM, SO IF YOU, IF YOU LOOK AT, UM, SLIDE 14, UM, THE UPDATED NUMBER OF 84 91 INCLUDES THE, THE ADDITIONAL 15 CENT, UH, FOR THE GO PURPLE SURCHARGE, SO THAT THAT CURRENT BILL OF 84 91 INCLUDES THE UPDATED.

SO WE'RE RAISING THE RATES, BUT THERE'S ALSO THE, THAT'S ALSO PART OF THAT 9% ADDITION OR IS THAT ALREADY FACTORED IN THERE? UM, STARTED DOING WELL, THE, THE 9.5% WAS, UM, THE ASSUMPTION BEFORE THE GO PURPLE.

UM, AGAIN, YOU KNOW, AS WE GET THROUGH, AS WE FINALIZE COST OF SERVICE, AS WE FINALIZE OUR BUDGET, UM, YOU KNOW, THERE MAY BE PARTICULARLY WITH, UM, THE DEBT ISSUANCE TOMORROW, I THINK IT MAY COME IN A LITTLE BIT LOWER THAN THAN WE HAD FORECASTED.

UM, SO THERE'S STILL SOME MOVING PARTS THERE.

UM, AND AS WE GET TO

[01:05:01]

FINALIZING OUR PROPOSED BUDGET EACH YEAR, YOU KNOW, WE, WE, WE SHARPEN OUR PENCILS TO TRY AND TRY AND MITIGATE, UM, YOU KNOW, RATE INCREASED TO, TO THE BEST OF OUR ABILITY.

UM, BUT THE NINE AND A HALF IS, WAS WHAT WE HAD ASSUMED AT FORECAST.

UM, AND AS WE FINALIZE THE COST OF SERVICE STUDY, UM, YOU KNOW, THE HOPE IS TO, TO COME IN UNDER THAT.

BUT, UH, AGAIN, THERE'S STILL SOME NUMBERS THAT WE'RE TRYING TO WORK THROUGH.

HMM.

THAT'LL BE INTERESTING.

JUST TO CONFIRM THAT SURCHARGE, DOES THAT APPLY TO THE CAP? NO, UM, THE SURCHARGE, THE, THE GO PURPLE SURCHARGE AND THE CUSTOMER ASSISTANCE PROGRAM SURCHARGE ARE RUN THROUGH OUR COMMUNITY BENEFIT CHARGE FUND AND UM, CAP CUSTOMERS DO NOT PAY COMMUNITY BENEFIT CHARGE.

UH, I DON'T KNOW WHAT SLIDE NUMBER IT IS 'CAUSE IT'S NOT NUMBERED ON HERE, BUT, UM, THE TABLE THAT SHOWS, OR THE, THE GRAPH THAT SHOWS THE DEBT SERVICE COVERAGE RATIO, SLIDE 11, NOT THAT ONE.

SLIDE 11.

THERE WE GO.

IS IT THAT ONE? OKAY.

YES.

UM, IT LOOKS LIKE YOUR, YOUR AXIS MIGHT BE INCORRECT 'CAUSE OUR GOAL IS 1 7 5, BUT IT SHOWS THAT IT ABOVE 1.8 SO THAT THE, THE GREEN LINE REPRESENTS THE FINANCIAL POLICY TARGET OF 1 7 5.

OH, OKAY.

AND, UM, COMING OUT OF OUR PREVIOUS COST OF SERVICE STUDY IN 2017, WE HAD SET A MANAGEMENT TARGET OF OF 1 8 5.

UM, AND, AND SO RIGHT NOW THAT REPRESENTS A, A LITTLE BIT OF A CUSHION, UH, BETWEEN, UM, THE FINANCIAL POLICY LEVEL AND, UM, THE, THE MANAGEMENT TARGET.

BUT AGAIN, YOU KNOW, AS WE, AS WE GO INTO A PERIOD OF INCREASED CAPITAL SPENDING, UM, YOU KNOW, WE'LL, WE EXPECT TO HOVER CLOSER TO THE FINANCIAL POLICY TARGET INSTEAD OF BEING ABOVE THE MANAGEMENT TARGET LIKE WE'VE BEEN FOR, FOR, YOU KNOW, SEVERAL OF THE LAST FEW YEARS.

AND FOR THE NEWER PEOPLE, UH, JUDY'S BEEN WITH A UTILITY VERY LONG TIME, BUT, UM, CAN YOU EXPLAIN THAT RATIO IN REALLY SIMPLE TERMS? SURE.

SO DEBT SERVICE COVERAGE IS, UM, YOU KNOW, IF YOU START WITH REVENUES THAT ARE AVAILABLE TO PAY FOR DEBT SERVICE AND YOU BACK OUT YOUR OPERATING EXPENSES, THE, THE LEFTOVER AMOUNT, UM, IS MEASURED, UH, AGAINST YOUR ANNUAL DEBT SERVICE COST.

SO, UM, AT A, AT A TARGET OF 1 7 5, THE LEFTOVER AMOUNT SHOULD BE AT LEAST, UH, 175 TIMES YOUR ANNUAL DEBT SERVICE COSTS.

AND IT'S, UM, IT'S A MEASURE TO, UM, REALLY IT MEASURES YOUR FINANCIAL FLEXIBILITY, RIGHT? AND YOUR ABILITY TO ABSORB UNEXPECTED OCCURRENCES, WHETHER IT'S, YOU KNOW, LIKE WINTER STORM URI, UM, IT'S, IT'S, UM, IT GOES HAND IN HAND WITH DAYS CASH BECAUSE, UM, YOU KNOW, YOUR, YOUR DEBT SERVICE COVERAGE, UH, IF IT, IF IT'S 1 7, 5 OR HIGHER, UM, YOU KNOW, IT, IT'S, IT'S THE BASICALLY THE EXCESS AMOUNT THAT YOU'RE COLLECTING A ABOVE AND BEYOND YOUR OPERATING REQUIREMENTS AND DEBT SERVICE, UH, TO FUND OTHER THINGS.

I WOULD NOTE THOUGH THAT, UM, OUR GENERAL FUND TRANSFER IS PAID OUT OF THOSE DEBT SERVICE COVERAGE.

IT'S NOT CONSIDERED AN OPERATING EXPENSE.

IT'S MORE LIKE A, YOU KNOW, IT'S PAYMENT IN LIEU OF TAXES IS, IS HOW WE CONSIDER IT, BUT IT'S, IT'S KIND OF BELOW THE LINE IN TERMS OF THAT REVENUES AND OPERATING EXPENSES.

IT'S PAID OUT OF, YOU KNOW, THE LEFTOVER AMOUNT.

SO, SO, UM, SO AS WE LOOK AT DEBT SERVICE COVERAGE, PART OF THAT IS USED TO, TO PAY FOR OUR GENERAL FUND TRANSFER, BUT IF WE DIDN'T HAVE IT, IT WOULDN'T TRANSFER CORRECT.

, SO THAT MAKES SENSE.

WELL, I MEAN, WE WOULD, WE WOULD, THE FINANCIAL POLICY SAYS WE WILL TRANSFER IT, BUT YEAH, I, I UNDERSTAND IT CERTAINLY WOULD BE LOOKED AT .

UM, ANYBODY ELSE HAVE QUESTIONS ON THE FTES? UM, I WAS JUST WONDERING HOW MANY WERE REQUESTED LAST YEAR.

I'D HAVE TO TAKE A LOOK, BUT IT WAS, I THINK IT WAS AROUND 28, 29 ALSO, ALTHOUGH

[01:10:01]

LAST YEAR, I THINK IT WAS 29 LAST YEAR AND WE HAD 10, UM, CONVERSIONS OF, OF TEMPS OR, OR CONTRACT POSITIONS.

SO IF I RECALL CORRECTLY, AND WE'LL, WE'LL, WE'LL CONFIRM IT.

UM, BUT WE HAD ACTUALLY, LET, LET ME CONFIRM THAT.

UH, I WAS JUST WONDERING, DID THE MY A TX, IS THAT LOWER EMPLOYEES AT ALL IN THAT AREA? BECAUSE YOU, WE GOT THE METERING GOING ON, NOT HAVING THE CONTRACT PEOPLE OUT THERE.

UM, MY A TX OR LET ME GET BACK THERE.

YEAH, MY, UM, LEMME, LET ME TAKE A LOOK AT THAT.

THE, THE MIT A TX WATER POSITIONS ARE, COULD, COULD BE MIXED.

WELL, THERE ARE SOME IN THE CUSTOMER SATISFACTION LINE, UH, BUT I'M NOT SURE THAT THOSE ARE ALL MY A TX WATER.

IT'S OKAY.

I'M HITTING YOU WITH ALL THESE QUESTIONS THAT, THAT'S, YOU WEREN'T PREPARED TO ANSWER.

I UNDERSTAND THAT FOR FUTURE MEETINGS, BUT I'M SORRY ABOUT THAT.

I SHOWING YOU WHAT WE LAST YEAR OKAY, SO LAST, I'M SORRY.

YEAH, LAST YEAR WAS ACTUALLY 20 FTES.

UM, AND 10 OF THOSE WERE CONVERSION.

SO, UM, IN 10 NEW FTES LAST YEAR, WE DID PULL BACK SOME LAST YEAR.

UM, OVERALL THE CITY WAS NOT ALLOWING ANY DEPARTMENT.

AND, AND SAME THING THIS YEAR, CITY'S NOT ALLOWING ANY DEPARTMENT WITH THE VACANCY RATE ABOVE 15% TO EVEN ASK <