Jul 09, 2024 Water and Wastewater Commission

UM, ITEM NUMBER TWO, APPROVAL OF THE MINUTES FROM THE 2020 MAY 20TH, 2024 BUDGET COMMITTEE, UM, FOR THE WATER WASTEWATER COMMISSION.

[APPROVAL OF MINUTES]

UH, COMMISSIONERS, HAVE YOU HAD A CHANCE TO REVIEW THE DRAFT MEETING MINUTES? IS THERE ANY COMMENTS? YES.

NO.

HEARING NONE.

IS THERE AN MOTION I MOVE THAT WE PASS THE MINUTES.

SECOND.

I SECOND.

ALL IN FAVOR, AND IT'S, IMAGINE UNANIMOUS.

ALL THREE OF US HAVE APPROVED THEM.

ITEMS. ITEM NUMBER ONE, AUSTIN WATER FINANCIAL FORECAST VERSUS PROPOSED BUDGET UPDATE.

VERY WELL.

MOVING ON TO THE NEXT ITEM, DISCUSSION

[1. Austin Water Financial Forecast vs Proposed Budget Update]

ALRIGHT, UH, GOOD AFTERNOON, UH, BUDGET COMMITTEE.

UM, MY NAME IS JOSEPH GONZALEZ, ASSISTANT DIRECTOR OF FINANCIAL SERVICES WITH AUSTIN WATER.

AND, AND TODAY WE'RE GONNA GO OVER, UH, A COUPLE THINGS STARTING WITH THE, UM, YOU KNOW, A, A COMPARISON, UM, WITH SIGNIFICANT CHANGES FROM, FROM OUR FINANCIAL FORECAST TO, UH, OUR ANTICIPATED PROPOSED BUDGET.

AND, UM, I'LL HAND IT OVER TO SONG LEE FLOYD TO, TO WALK THROUGH THAT.

IF WE CAN BRING UP, UM, THE FIRST DOCUMENT FOR ITEM NUMBER ONE.

JUST ONE SECOND.

AM I SUPPOSED TO HEAR SOMETHING? I CAN'T HEAR ANYTHING.

WE WE'RE WAITING FOR THE DOCUMENT TO, UH OH, OKAY.

GOT COME UP ON SCREEN.

SONY FLOYD, AUSTIN WATER.

SO WHAT YOU SEE HERE, IT'S A PDF DOCUMENT THAT WE'VE PREPARED TO SHOW YOU THE DIFFERENCES, UH, BETWEEN WHAT WE HAVE DISCUSSED.

LAST COMMISSION BUDGET MEETING, WHICH WE PRESENTED FORECAST INFO, AND THEN, UH, THE PROPOSED, UH, BUDGET FOR THE FY 25.

SO YOU'LL SEE, OKAY, BETTER VIEW.

SO YOU'LL SEE ON THE TOP WE'VE STARTED WITH FY 25 PROPOSED NUMBERS.

UH, WE'VE TALKED LAST MEETING THAT AUSTIN WATER, THE BUDGET CONSISTS OF THREE DIFFERENT PARTS, RIGHT? SO OPERATING REQUIREMENTS, UH, DEATH SERVICES, ANYTHING, WHAT WE GENERALLY CALL TO TRANSFER OUT.

SO THIS SLIDE ONLY, UH, IS RELATED TO THE OPERATING REQUIREMENT.

AND, UH, SO IF YOU LOOK AT THE FIRST SET OF NUMBERS, YOU WILL SEE THAT WE HAVE FY 25 PROPOSED AMOUNT OF 355.2 MILLION, AND THEN WE HAVE CURRENT YEAR FY 2024 AMENDED BUDGET OF $338 MILLION.

SO THAT WOULD BE A DIFFERENCE OF 17.2 MIL.

UH, AND THEN THE SECOND SETS OF NUMBER IS WHAT WE DISCUSSED LAST MEETING.

SO THAT'S THE 20 FY 25 FORECAST NUMBER VERSUS FY 24, CURRENT YEAR BUDGET AMENDED NUMBER.

AND THAT DIFFERENCE BETWEEN THESE TWO NUMBERS ARE 14.1 MILLION, AND WE ARE GOING INTO A LITTLE MORE DETAIL, UM, ON THE BOTTOM PART.

AND YOU'LL SEE ACTUALLY THE MIDDLE COLUMN, THE TOTAL NETS HAVE TO BE 14.1 MILLION.

AND YOU'LL SEE SOME BLANKS HERE BECAUSE THERE ARE NUMBERS THAT, UH, WAS INCLUDED IN FORECAST THAT ARE NOT IN, UH, PROPOSED BUDGET, VICE VERSA.

SO WE'VE DISCUSSED EACH OF THESE LINE ITEMS LAST MEETING, AND WHAT WE DID IS WE JUST UPDATED THE NUMBER, UH, AND REFLECTED THE CURRENT NUMBER THAT'S ON THE PROPOSED BUDGET FOR EACH OF THESE ITEMS.

[00:05:01]

SO, UH, I CAN, UM, I WANT TO HIGHLIGHT A FEW THINGS.

SO IF YOU LOOK AT THE SECOND BOTTOM PART OF THE SLIDE, YOU'LL SEE THAT, UH, THE FIRST SECTION IS WAGES AND BENEFITS.

MOST OF THIS INFORMATION DID NOT CHANGE COMPARED TO WHAT WE HAVE DISCUSSED DURING FORECAST.

THE ONLY NUMBER THAT I WANT TO HIGHLIGHT IS THE SUPPLEMENTAL RETIREMENT CONTRIBUTION NUMBER.

THAT IS ACTUALLY A NUMBER CONTROLLED BY CONTROLLER'S OFFICE AND THE BUDGET OFFICE LAST, ACTUALLY CURRENT YEAR, CURRENT BUDGET YEAR, FY 24, UH, CONTROLLER'S, OFFICE AND BUDGET OFFICE.

THEY CHANGED THE WAY THEY CALCULATE AND ACCOUNT FOR THE SUPPLEMENTAL RETIREMENT CONTRIBUTION.

SO, UM, WE WERE TOLD THAT THEY, UM, AFTER RECONCILIATION, THEY REALIZED THAT THERE'S A BIT MORE THAN WHAT WE NEED IN FY 20 FOUR'S BUDGET.

SO, UH, EVEN THOUGH THEY GIVE US AN A POSITIVE NUMBER TO WHICH IS ADDITION, UH, TO, UH, INCLUDE IN OUR PROPOSED BUDGET, BUT THEN LATER ON, I MEAN IN FORECAST LATER ON, THEY TOLD US, OKAY, WE HAVE ENOUGH.

SO YOU DO NOT NEED TO, UM, INCLUDE OR BUDGET FOR ANY ADDITIONAL FUND.

IN FACT, WE'LL HAVE A LITTLE DECREASE.

CAN I ASK A REAL QUICK QUESTION BEFORE YOU DIVE TOO DEEP IN, UM, YOU HAVE PROPOSED AND THEN YOU HAVE FORECASTED.

CAN YOU EXPLAIN THE DIFFERENCE BETWEEN THE TWO? OKAY, SO FORECAST NUMBER IS WHAT WE HAVE DISCUSSED LAST WEEK, AND IT'S MORE TOP DOWN NUMBER.

IT'S WHEN WE DON'T HAVE ANY DETAIL INFORMATION.

BUT WE WANTED TO PROJECT THE BEST WE CAN FOR NEXT YEAR'S BUDGET.

SO A LOT OF THEM ARE MANAGEMENT ASSUMPTIONS AS WELL AS, UM, CORPORATE OFFICE BUDGET OFFICE WILL GIVE US SOME ASSUMPTIONS.

AND SO WE WILL, UH, COMPILE THE FORECAST BASED ON THE TOP LEVEL ASSUMPTIONS THAT WE HAVE.

NOW, PROPOSED NUMBER IS WHAT I WILL CONSIDER.

IT'S A COMBO OF TOP DOWN AND BOTTOM UP BECAUSE THAT'S WHEN OUR, EACH OF OUR DIVISIONS, THE MANAGEMENT WILL ACTUALLY INPUT WHAT THEY THINK THE NEXT YEAR'S BUDGET WILL BE.

THAT WILL ROLL UP.

AND THEN AT THE SAME TIME, WE ALSO HAVE THE BUDGET OFFICE AND THE UTILITY MANAGEMENT ASSUMPTIONS THAT WILL BE TOP DOWN.

SO IT'S A COMBO, BUT IT'S A LOT MORE DETAILED.

SEE FOR FORECAST, YOU ASKING ME ABOUT A PARTICULAR OBJECT CODE, I MIGHT NOT BE ABLE TO TELL YOU WHAT'S IN IT, BUT FOR BUDGET, PROPOSED BUDGET, WE CAN TELL YOU EVERY NUMBER.

MM-HMM, .

SO IT'S VERY DETAILED.

SO, OKAY.

SO THE FORECAST IS THE HIGH LEVEL INITIAL AND THEN THE PROPOSED, IS THIS KIND OF WHERE WE ARE NOW? EXACTLY.

PROPOSED IS THE ACTUAL BUDGET DEVELOPMENT.

GOOD, GOOD.

CONTRIBUTION TO RETIREMENT ACTUALLY ROLLED INTO ABOUT $22 MILLION, AND THAT INCLUDES THAT DECREASE OF THE, UH, 0.8 MILLION.

NO PROBLEM.

SO, UM, WE TRY TO UNDERSTAND, UH, WHAT'S DIFFERENT AFTER THE FORECAST WHEN WE DO THE BUDGET, WE WANT TO, WE KEEP TRACK OF WHAT'S CHANGING AND WHAT'S DIFFERENT.

SO WHAT'S ON THIS PAGE IS ESSENTIALLY THE MAJOR CHANGES AND UPDATES SINCE THE FORECAST.

SO ESSENTIALLY ANYWAY, THEY TOLD US, OKAY, FOR CONTRIBUTION, UH, UH, FOR THE SUPER RENTAL IN RETIREMENT, YOU DO NOT NEED TO INCLUDE ANY ADDITIONAL AMOUNT.

WE ACTUALLY HAVE A LITTLE EXTRA THAT'S BUDGETED IN CURRENT YEARS THAT WILL TRUE UP.

SO, UH, SO YOU SEE A NET OF $2.1 MILLION DECREASE COMPARED TO THE FORECAST NUMBER.

SO THAT'S ESSENTIALLY THE ONLY ONE OF THE, YOU KNOW, ONLY NUMBERS THAT'S CHANGED SINCE, UH, THE FORECAST WE DISCUSSED ABOUT THE WAGE AND BENEFITS.

SO, UM, ACTUALLY I STOP HERE.

ANY QUESTIONS ON THE FIRST PART? I DO HAVE A QUESTION.

SO YES, HOW MUCH WILL THERE BE IN, IN FISCAL YEAR 2025 FOR THE SUPPLEMENTAL RETIREMENT CONTRIBUTION? IS IT ZERO THEN OR IS IT 0.8 MILLION? UH, NO, UH, THE 0.8 MILLION IS JUST THE CHANGES, RIGHT? SO THE SUPPLEMENTAL RETIREMENT, YEAH, THE TOTAL

[00:10:02]

OKAY, SO 22 MILLION? YEAH.

THE SECOND PART OF THE DETAIL, YOU WILL SEE THAT IT'S RELATED TO CONTRACTUALS AND COMMODITIES.

AND, UH, A COUPLE THINGS TO HIGHLIGHT HERE.

ONE IS THAT YOU SEE THAT, UH, WE HAVE IN THE MIDDLE WE HAVE 3% 0.5% INFLATION FOR OTHER CONTRACTUALS AS WELL AS OTHER COMMODITIES.

THAT, UH, REFLECTS WHAT I WAS SAYING EARLIER FOR FORECAST, IT'S A TOP LEVEL, TOP DOWN, UH, UH, PROCESS.

SO WE ACTUALLY SAY, OKAY, WE ARE NOT SURE, RIGHT, HOW EACH OF THESE COMMANDING CONJUNCTURE ARE INCREASING.

SO WE SET A INFORMATION NUMBER AND WE APPLIED TO ALL OF THE, UH, OBJECT CODES, BUT THAT IS A HIGH LEVEL ESTIMATE.

SO WHEN WE DO THE ACTUAL PROPOSED BUDGET, UH, EACH OF THE INDIVIDUAL DIVISION MANAGERS WILL PUT IN WHAT THEY ARE THINKING THEY NEED AND INCREASED.

SO THESE NUMBERS WILL NO LONGER BUSIER DURING THE PROPOSED.

SO THAT'S WHY YOU WILL SEE THAT THERE'S A COUPLE BLANK, UH, NUMBERS THAT'S, THAT'S ON THE, UM, BLACK BLANK SECTIONS ON THE, UH, PROPOSED SIDE.

NOW HERE, UH, I'LL HIGHLIGHT A COUPLE CHANGES.

THAT'S, UM, THE PROPOSED BUDGET IS MORE DETAIL.

SO FOR PIPE AND FEEDING, WHEN WE DID THE FORECAST, WE DID NOT, UH, SPECIFICALLY FORECAST FOR THAT INCREASE.

AND WHEN WE RECEIVED THE BUDGET FROM THE FIELD, WE REALIZED THAT THERE WAS A SNIFF INCREASE IN PIPE AND FEEDING.

THIS IS ACTUALLY ALSO, UM, A GOOD, A GOOD LEARNING TOOL TOO.

WHEN WE SEE SOMETHING LIKE THIS, UH, NEXT YEAR, YOU KNOW, WE CAN REACH OUT BECAUSE WE ALWAYS DO A, UH, SORT OF LIKE A SURVEY.

WE REACH OUT TO EACH OF THE DIVISIONS UTILITY WIDE BEGINNING OF THE YEAR AND ASK THEM, SAY, HEY, CAN YOU GIVE US WHAT YOU THINK THAT YOU WILL NEED THAT, UH, SIGNIFICANT NEEDS THAT YOU THINK WE NEED TO INCLUDE IN THE FORECAST? SO, UH, THERE WILL ACTUALLY, UH, BE SOMETHING WE WILL, UH, CONTINUE TO DO AND ASK.

AND ALSO WHEN WE SEE THE SIGNIFICANT INCREASES THAT WE DID NOT FORECAST, UH, WE'LL MAKE A NOTE.

THEN NEXT YEAR WE'LL REACH OUT AND SEE THAT IF THERE'S ANY ADDITIONAL FUNDS THAT WE NEED TO CONSIDER.

AND THEN THE OTHER ONE, I DON'T SEE ANY OTHER BIG AMOUNT HERE.

UM, SO THE OTHERS, UM, SMALLER AMOUNTS THAT, AGAIN, WE DID NOT FORECAST, BUT WE, SINCE WE DO INCLUDE A GENERAL NUMBER, 3.5% INFLATION.

UH, SO MOSTLY THE INFLATION INCREASE COULD COVER SOME OF THESE SMALLER INCREASES.

AND THAT'S, THAT'S THE IDEA OF THE POP POPULATING THE INFLATION.

YOU TRY TO, IF THERE'S A SMALL.

SO ANY QUESTIONS ON THE CONTRACTUAL AND COMMODITY? OKAY.

IF NOT, THE LAST SECTION ACTUALLY DOES SHOW SOME CHANGES SINCE FORECAST.

UH, I KNOW THAT EACH ONE OF YOU PROBABLY HEARD ABOUT THE GOLD PURPLE INITIATIVES, RIGHT? AUSTIN WATER, UH, HAS BEEN, YOU KNOW, GOING ON FOR, FOR SEVERAL FOR, FOR THIS FISCAL YEAR, UH, A MAJORITY OF THIS FISCAL YEAR.

SO, UH, DURING THE FORECAST, WE, WE, WE, WE DID NOT HAVE A CONCRETE NUMBER, UH, WHAT WE THINK THE IMPACT WILL BE.

UM, SO FOR FORECAST, WE DID NOT INCLUDE ANY OF THE PROJECTIONS, UH, HOWEVER, FOR WE DID LATER ON, UH, AMENDED FY 24 BUDGET.

SO WE DID INCLUDE IT, UH, $4 MILLION IN CYE FOR CURRENT YEARS AGO, PURPLE AND FOR NEXT YEAR'S, UM,

[00:15:01]

GO PURPLE PROJECT.

WE ACTUALLY, SO ON THE OPERATING SIDE, YOU WILL SEE IT'S A INCREASE OF $4 MILLION.

AND THEN, UH, WE ACTUALLY HAVE ANOTHER $6 MILLION IN THE TRANSFER TO RECLAIM WATER CIP SIDE, WHICH IS NOT PART OF THIS SET OF NUMBER.

SO A TOTAL FOR 25, WE ACTUALLY INCLUDED $10 MILLION FOR GO PURPLE.

AND THEN, UM, THE SECOND NUMBER, INFRASTRUCTURE ACADEMY, THAT IS, I, HAVE Y'ALL HEARD ABOUT INFRASTRUCTURE ACADEMY? NO.

NO.

I CAN PROVIDE SOME, SOME BACKGROUND ON THE INFRASTRUCTURE ACADEMY.

SO, UM, IT'S, IT'S A CITYWIDE, UH, INITIATIVE TO, UM, TO, TO LOOK AT WORKFORCE DEVELOPMENT OPPORTUNITIES, UH, FOCUSING ON TRADES.

AND AS PART OF THAT INITIATIVE, UH, WE'VE IDENTIFIED AUSTIN WATER HAS IDENTIFIED, UH, A NUMBER OF TITLES THAT, UM, WE WANT TO FOCUS ON TITLES THAT WE HAVE CHALLENGES FILLING OR DEVELOPING A PIPELINE OF, OF CANDIDATES FOR, FOR THOSE TYPES OF POSITIONS.

AND, UH, THAT INCLUDES, YOU KNOW, ELECTRICIANS AND OPERATORS AND, UM, INSTRUMENT AND CONTROL TECHNICIANS, UM, METER TECHNICIANS.

SO, SO THERE'S A, A HANDFUL OF TITLES THAT WE'VE IDENTIFIED, UM, THAT, UH, WILL BE A FOCUS FOR, UH, RELATED TO AUSTIN WATER OF THIS WORKFORCE DEVELOPMENT PROGRAM.

UM, THAT WILL HAVE KIND OF A BROADER FOCUS, NOT ONLY ON SPECIFIC TITLES THAT THAT BENEFIT CONTRIBUTING DEPARTMENTS, UH, BUT, BUT ALSO, UH, POSITIONS THAT SUPPORT THE COMMUNITY AS A WHOLE, WHETHER IT'S, UM, EMPLOYEES TO HELP WITH, WITH, UH, ROADWAY CONSTRUCTION PROJECTS OR, OR SOME OF OUR, OUR LARGER, YOU KNOW, NEW DEVELOPMENT AND, UH, TYPE PROJECTS.

YOU KNOW, THINKING ABOUT THINGS LIKE PROJECT CONNECT OR, UM, YOU KNOW, THE SAMSUNG, UH, PLANT OUT OUT IN TAYLOR.

SO, SO LARGE SCALE PROJECTS OF THAT AND YOU, UM, SO THAT'S THE FOCUS OF THE, THE BROADER FOCUS OF THE PROGRAM.

BUT MORE SPECIFICALLY FOR AUSTIN WATER, YOU KNOW, WE ANTICIPATE GETTING A BENEFIT FOR, FOR HARD TO FILL POSITIONS THAT, UM, YOU KNOW, WE WANT TO DEVELOP A PIPELINE.

INTERESTING.

JOSEPH, DOES THIS INCLUDE THE, UM, I GUESS MAYBE YOU GUYS HAVE A, A OR ARE INVOLVED WITH A CC AT AUSTIN COLLEGE? IS THAT PART OF IT, OR NO, IT, I SAW SOMETHING ON THE NEWS ABOUT THAT.

IT MAY BE.

WE ARE, UM, SO WE'RE IN THE EARLY STAGES.

WE'VE IDENTIFIED, SO AT, AT THIS POINT, WE'VE BEEN ASKED TO PROVIDE FUNDING, UM, JUST WITHIN THE LAST WEEK, ACTUALLY YESTERDAY, WE PROVIDED THE LIST OF TITLES THAT WE WANT TO FOCUS ON AND, AND WE'LL BE PARTNERING WITH A THIRD PARTY ENTITY TO, TO OVERSEE THE PROGRAM.

BUT WE ENVISION IT REACHING OUT TO, UM, YOU KNOW, A C, C, BUT EVEN, EVEN HIGH SCHOOL, UM, PROGRAMS TO, TO DEVELOP OPERATORS.

UH, ONE OF THE GOALS OF THE PROGRAM WOULD BE TO, TO HAVE, UM, STUDENTS GRADUATE FROM HIGH SCHOOL WITH A D LICENSE AND, AND BE ABLE TO, UH, TO CONTRIBUTE AFTER GRADUATION AND THEN START WORKING TOWARDS, UM, YOU KNOW, HIGHER LICENSES.

BUT, UM, YOU KNOW, PART OF IT IS EDUCATION AND, AND, AND, AND LETTING STUDENTS KNOW THAT, UH, YOU KNOW, WATER AND WASTEWATER TREATMENT IS, IS A THING THAT, UH, YOU MAY, YOU MIGHT BE INTERESTED IN.

AND, AND PROVIDING THE TRAINING TO, TO GET CERTIFICATION AND GET THEIR LICENSES, UH, AS AS THEY GRADUATE.

UM, SO I THINK IT WOULD BE A MULTI-PRONGED APPROACH, YOU KNOW, PARTNERING WITH COMMUNITY COLLEGES, PARTNERING WITH TRADE SCHOOLS, UM, AND THEN WHERE, WHERE APPLICABLE PARTNERING WITH, UH, YOU KNOW, LOCAL SCHOOL DISTRICTS.

YEAH, IT, UM, I GUESS STRIKES A SIMILARITY WITH THE SETH PROGRAM.

I'M SURE YOU'RE FAMILIAR WITH THAT AS WELL.

THANK YOU FOR THE BACKGROUND.

SURE.

FOR FORECASTED 25 NUMBER, COMPARING TO THE AMENDED CURRENT YEAR 24 BUDGET IS $14.1 MILLION.

SO THIS WAS SUMMARIZED TO, UM, FOR, FOR PROPOSED FFY 25 PROPOSED OPERATING REQUIREMENT.

COMPARED TO THE AMENDED BUDGET, UH, WE ARE SEEING A $17.2 MILLION INCREASE.

AND THEN

[00:20:01]

AND SO AS YOU CAN SEE, THE NET DIFFERENCE IS $3 MILLION.

AND SO, UM, SO WE COVERED, UH, WE COVERED MOST OF THESE FIRST MEETING, AND THEN NOW WITH AN UPDATE, YOU HAVE A FULL COMPLETE PICTURE OF THE DIFFERENCES, THE MAJOR DIFFERENCES BETWEEN THE TWO YEARS BUDGET.

SO ANY QUESTIONS? ANY OTHER QUESTIONS, COMMISSIONERS? NO.

NOPE.

EXPERIENCE AND, UH, AND IS A SUCCESSFUL CANDIDATE, BUT, BUT IT, IT WOULD BE OPEN TO, UH, YOU KNOW, COMPETITIVE HIRING PROCESS.

NO.

SO THE SECOND PART OF THE ITEM NUMBER ONE IS ACTUALLY A FOLLOW UP.

LAST MEETING, WE PRESENTED A SUMMARY FORMAT OF OUR NEW PROPOSED FTES.

WE WERE ASKING FOR 29 TOTAL NEW FTES.

AND, UH, UH, THAT WOULD INCLUDE OPERATIONAL OPTIMIZATION OF 10, INFRASTRUCTURE, PERFORMANCE OF FIVE, UH, ENTERPRISE RESILIENCY, ALSO FIVE CUSTOMER SATISFACTION, AND THE EMPLOYEE LEADERSHIP DEVELOPMENT.

EACH HAS THREE.

AND THEN, UM, FACILITY IMPROVEMENT TWO AND, UH, AFFORDABILITY ONE.

UH, SO WE WANTED TO PROVIDE A LITTLE MORE DETAIL ON EACH OF THESE POSITIONS THAT WE ARE ASKING.

AND, UH, THE, UM, SO YOU WILL SEE THAT WE'LL PROVIDE THE DETAIL WITH POSITION TITLE AND THE EX EXPLANATION, REALLY THE JUSTIFICATION WHY WE NEED THE NEW, NEW POSITION, AS WELL AS THE, UH, UTILITY OM, UH, CATEGORY, WHAT WE THINK THAT ALIGNS TO.

SO, UH, ANOTHER QUESTION THAT WE HAD LAST, UH, MEETING WAS THAT WE SAID SEVEN OUT OF THESE 29, UH, NEW FTS, WE ARE ASKING, WERE ACTUALLY EITHER TEMPORARY CONVERSIONS OR A CONTRACTOR, UH, CONVERSION.

SO I WANTED TO, UM, HIGHLIGHT THESE SEVEN.

UH, IF YOU READ THE WHOLE DOCUMENT, YOU'LL PROBABLY SPA THEM, BUT I, I WENT THROUGH AND HIGHLIGHT THEM SO YOU KNOW WHICH ONES.

SO THE ADMINISTER, ACTUALLY, EACH OF THESE ONES HAS THE WORD EITHER TEMPORARILY OR CONTRACTOR CONVERSION IN THE, THIS EXPLANATION, EXCEPT FOR ONE.

SO THE ADMINISTRATIVE SENIOR ON PAGE ONE, UH, HUMAN RESOURCE ADVISOR, WHICH IS SECOND TO THE LAST IT APPLICATION DEVELOPMENT DEVELOPER SENIOR.

THAT ONE POSITION ACTUALLY, UH, WE WERE TOLD BY THE IT MANAGER, WE ELIMINATE TWO CONTRACTORS.

BUT YEAH, WE ONLY COUNTED THE ONE NEW FTE ON PAGE TWO, BUSINESS PROCESS CONSULTANT SENIOR, THAT'S ALSO A TEMPORARY POSITION, UH, CONVERSION.

AND THEN ON PAGE FIVE, THERE'S ALSO TWO ADMINISTRATIVE SENIOR, UH, SPECIALIST AS WELL AS A HUMAN RESOURCE SPECIALIST.

HERE COMES A TRICKY ONE.

THE LAST ONE, THE LAST ONE IN THE DESCRIPTION.

IT DID NOT SAY IT'S A TEMP CONVERSION, BUT IT IS A TEMP CONVERSION, WHICH IS ON PAGES SIX, AND IT'S THE MAINTENANCE WORKER THREE.

SO THESE ARE THE SEVEN POSITIONS.

SO THREE ON THE FIRST PAGE, ONE ON THE SECOND PAGE, TWO ON THE FIFTH PAGE, AND ONE ON THE LAST PAGE.

SO HOPEFULLY THAT HELP WITH YOUR QUESTIONS.

LAST, LAST MEETING, JUST FOR CLARIFICATION, SEVEN OF THESE FULL-TIME EMPLOYEES ARE CONVERTING A TEMPORARY EMPLOYEE TO A FULL-TIME EMPLOYEE, EITHER TEMPORARY OR A CONTRACTOR POSITIONS.

ARE THEY CURRENTLY FILLED WITH THESE TEMPORARY STUFF? AND THEN IT'LL BE THE SAME STUFF THAT CONTINUES, OR ARE YOU BRINGING ON NEW STUFF? YEAH, ANY, ANY OF THESE POSITIONS ARE CURRENTLY FILLED WITH EITHER A TEMPORARY OR A CONTRACTOR.

UM, AND, UH, SO ADDING THE NEW FTES WILL ALLOW US TO POST THOSE POSITIONS TO BE FILLED COMPETITIVELY.

UM, YOU KNOW, IN SOME CASES WHEN WE'VE DONE THIS IN THE PAST, UH, YOU KNOW, THE INCUMBENT HAS

[00:25:01]

GOT IT.

HOW MANY TEMPORARY EMPLOYEES DO YOU HAVE RIGHT NOW ON STAFF? I DO NOT HAVE THE NUMBER.

UM, WE'LL, WE'LL PROVIDE IT TO, UH, BLANK.

I SEND IT TO YOU.

WE HAVE THE NUMBER, WE DID, UH, UH, ANALYSIS, UH, DURING THE BUDGET FOR THE TEMPORARY NEEDS.

SO WE KNOW THAT'S A, IT'S A, IT'S A MOVING NUMBER, BUT WE HAVE A VERY CLOSE NUMBER.

HOW MANY, BUT I'LL, I'LL PROVIDE THAT TO YOU.

WE CAN UPDATE NUMBER, AND THEN THERE'S A FEW OF THESE THAT SAY FOR THE SPAN OF CONTROL, WHAT IS YOUR, IS YOUR, YOU KNOW, IDEAL SPAN OF CONTROL THAT YOU TALK ABOUT SPAN OF CONTROL FOR THE REASON FOR HIRING? I THINK THAT VARIES AT, AT, UM, THAT VARIES PER, YOU KNOW, AT, AT VARYING LEVELS OF SUPERVISION.

UM, I DON'T HAVE THAT INFORMATION, BUT, UH, I KNOW, UM, WE, WE HAVE BEEN GOING THROUGH AN ORGANIZATIONAL REVIEW OF, OF OUR ORGANIZATIONAL STRUCTURE, AND WE ANTICIPATE, UM, SOME RECOMMENDATIONS TO, TO MAKE CHANGES TO, UM, TO IMPROVE OR SPAN OF CONTROL, UH, YOU KNOW, PARTICULARLY AT, UM, AT, YOU KNOW, HIGHER LEVELS, YOU KNOW, WHETHER IT'S, UM, YOU KNOW, OPERATION MANAGERS OR ABOVE, YOU KNOW, EXECUTIVE LEVELS.

CAN YOU REMIND US WHAT THE EUM STANDS FOR? EFFECTIVE UTILITY MANAGEMENT? I REMEMBER THE CATEGORIES, BUT I COULDN'T REMEMBER.

EFFECTIVE UTILITY MANAGEMENT COMMISSIONERS.

ANY OTHER QUESTIONS ON THIS DATA INFORMATION I SHOULD SAY? NO.

AND IT WILL PROVIDE THE TOTAL TEMPORARY EMPLOYEE NUMBERS.

YEAH, I'D LIKE TO GET THAT.

NUMBER TWO, AUSTIN WATER COST OF SERVICE UPDATE.

WONDERFUL.

THANK YOU.

UH, MOVING ON TO ITEM

[2. Austin Water Cost of Services Update]

ALRIGHT.

AND, UM, SO I'LL BE PROVIDING A, UM, AN OVERVIEW OF THE COST OF SERVICE PROCESS AS WE WIND DOWN THAT PROCESS.

UM, YOU KNOW, WE'VE, WE'VE, UH, HAD IT, THIS PROCESS STARTED BACK IN JANUARY, UH, WITH THE, WITH THE PUBLIC INVOLVEMENT COMMITTEE.

THAT INCLUDES, UH, INCLUDED TWO, TWO COMMISSIONERS, UM, COMMISSIONER, UH, PENN AND NAVARRO.

UM, IN ADDITION, WE'VE HAD CUSTOMER CLASS REPRESENTATIVES FROM, FROM ALL OF OUR CUSTOMER CLASSES, AS WELL AS, UM, A RESIDENTIAL RATE ADVOCATE, WHICH WE, UM, WHICH WE HAVE HIRED TO REPRESENT THE RESIDENTIAL COMMUNITY.

AND, UM, YOU KNOW, AS WE, AS WE WIND DOWN THAT PROCESS, WE'RE, WE'RE IN A POSITION NOW TO HAVE, UM, RATE RECOMMENDATIONS, UH, FOR FY 25 SPECIFICALLY, BUT ALSO, UH, GUIDANCE FOR, FOR FUTURE YEARS AS WELL.

UM, NEXT SLIDE.

SO, TODAY I'LL PROVIDE, UH, AN OVERVIEW OF THE PUBLIC ENGAGEMENT PROCESS AND ACTIVITIES THAT WE'VE UNDERTAKEN AS PART OF OUR COST OF SERVICE STUDY.

YOU KNOW, WE'VE, UH, GENERALLY WE'VE HAVE A COST OF SERVICE STUDY EVERY FIVE TO SEVEN YEARS.

AND, AND HISTORICALLY THAT'S ALWAYS INVOLVED A PUBLIC INVOLVEMENT COMMITTEE WHERE WE HAVE CUSTOMER CLASS REPRESENTATIVES.

UM, BUT, BUT THIS YEAR WE TOOK OUR PUBLIC ENGAGEMENT TO, UH, ANOTHER LEVEL AND, UH, I'LL, I'LL TALK ABOUT THOSE ACTIVITIES.

UM, AND THEN I'LL GO THROUGH, UM, SOME OF THE FEEDBACK THAT WE GOT, UH, FROM OUR D DIFFERENT PUBLIC ENGAGEMENT ACTIVITIES AND, AND HOW THAT, UM, HELPED US FORM OUR, OUR FINAL RATE RECOMMENDATIONS.

AND WE'LL TALK ABOUT NEXT STEPS, NEXT SLIDE.

SO IN TERMS OF, OF PUBLIC ENGAGEMENT, UM, YOU KNOW, WE'VE, UH, HAD 10 PUBLIC INVOLVEMENT COMMITTEE MEETINGS WITH, WITH THE COMMITTEE.

AND AS WE WRAPPED UP THOSE MEETINGS, WE, UM, WE SENT OUT SURVEYS TO THOSE COMMITTEE MEMBERS, UM, GETTING FEEDBACK ON, ON, UH, VARIOUS TOPICS RANGING FROM, YOU KNOW, RATE SETTING PRIORITIES TO, UM, YOU KNOW, PRETTY DETAILED COST OF SERVICE, UM, YOU KNOW, WHETHER IT'S ALLOCATION QUESTIONS OR REVENUE REQUIREMENT

[00:30:01]

QUESTIONS.

AND I'LL GO WALK THROUGH SOME OF THE FEEDBACK WE RECEIVED, UH, FROM, FROM THE PUBLIC INVOLVEMENT COMMITTEE.

AND 10 RESPONSES, UH, REPRESENTS, UH, A A LITTLE BIT OVER HALF OF, OF THE PUBLIC INVOLVEMENT COMMITTEE, UM, WHO PROVIDED RESPONSES.

UH, IN ADDITION, WE HAD SEVERAL PUBLIC INPUT OPPORTUNITIES.

UH, WE HAD 10 IN-PERSON OPEN HOUSES WITH ONE EACH, UH, CONDUCTED IN EACH COUNCIL DISTRICT.

WE HAD A CITYWIDE VIRTUAL OPEN HOUSE, UH, OPEN TO, TO ANYBODY WHO, WHO, UH, WAS INTERESTED IN JOINING VIRTUALLY.

UM, IN ADDITION, WE, UM, HAD THREE FOCUS GROUPS AND WE HAD A LOT OF, UM, INTEREST IN PARTICIPATING IN THE FOCUS GROUP.

THOSE FOCUS GROUPS, UH, LOOKED AT TRYING TO HAVE, YOU KNOW, A BROAD REPRESENTATION OF OUR DIFFERENT COUNCIL DISTRICTS AS WELL AS, UM, YOU KNOW, UH, DIFFERENT, UH, YOU KNOW, RACE AND ETHNIC BACKGROUND, UM, AND, AND INCOME BACKGROUND.

SO, SO, UM, THE FOCUS GROUPS WE FELT LIKE GAVE US THE MOST REPRESENTATIVE SAMPLE OF, OF OUR COMMUNITY.

UM, AND THEN THROUGHOUT THE PROCESS, WE, WE MAINTAINED INFORMATION ON, UH, SPEAK UP AUSTIN, WHICH IS A CITY'S, UM, YOU KNOW, PRIMARY, UM, COMMUNICATION FORUM, UH, FOR, UH, PROVIDING INFORMATION TO THE COMMUNITY, BUT ALSO SEEKING INPUT FROM THE COMMUNITY.

AND WE HAD, UH, SURVEYS POSTED ON, ON THE SPEAK UP AUSTIN WEBSITE RELATED TO OUR COST SERVICE STUDY AS WELL.

SO IN TERMS OF, OF THE NUMBERS OF, OF ALL OF THOSE ACTIVITIES, YOU KNOW, AS WE WENT THROUGH THE PROCESS, WE, WE, YOU KNOW, THERE WERE STORIES RUN BY, YOU KNOW, SIX LOCAL MEDIA OUTLETS, UM, IN, IN TERMS OF TRYING TO LET THE PUBLIC KNOW WHAT WE WERE DOING.

UM, YOU KNOW, THROUGH, UH, THROUGH OUR, MY A TX WATER SYSTEM, WE WERE ABLE TO SEND OUT, YOU KNOW, ALMOST 175,000 EMAILS, UH, WITH, UH, AN OPEN RATE OF ALMOST 69%.

UM, AND THEN CLICKING, FOLLOWING THROUGH, UM, TO THE LINKS IN THE EMAIL ABOUT 11.5%.

UM, AND, AND THOSE, THOSE PERCENTAGES ARE PRETTY HIGH NUMBERS FOR, UH, EMAILS, UM, THAT, THAT ARE SENT TO, TO THE GENERAL PUBLIC, PARTICULARLY THE PERCENT OPEN RATE TYPICALLY, YOU KNOW, AND I DON'T REMEMBER THE EXACT NUMBERS, BUT, UH, YOU KNOW, I THINK TYPICALLY WE WOULD EXPECT TO SEE SOMETHING BELOW 30% IN TERMS OF, OF AN OPEN, UH, RATE.

UM, IN ADDITION, WE HAD 63 POSTS ON, ON SOCIAL MEDIA REACHING ABOUT, UH, ALMOST 40,000 PEOPLE.

AND, AND THOSE PEOPLE, UM, YOU KNOW, HAD ABOUT 45,000 IMPRESSIONS, IN OTHER WORDS, CLICKING THROUGH, UM, THE, THE VARIOUS LINKS.

UM, ON NEXTDOOR WE HAD ABOUT 16,000 IMPRESSIONS.

AND ON SPEAK UP, AUSTIN, YOU KNOW, 21,000 VIEWS AND A NI 196, UH, RESPONSES TO OUR SURVEYS.

UH, WE HAD OVER A HUNDRED, UH, PEOPLE ATTEND OUR IN-PERSON OPEN HOUSE MEETINGS, UM, AND 20 ATTEND THE, THE VIRTUAL OPEN HOUSE.

UM, IN ADDITION, WE, UM, WE HAD, UM, A ONLINE MEETING WITH THE, YOU KNOW, AUSTIN NEIGHBORHOOD COUNCIL, WHICH IS A COUNCIL OF DIFFERENT NEIGHBORHOOD GROUPS THROUGHOUT THE CITY.

AND WE HAD, UH, REPRESENTATIVES FROM, FROM, UH, WELL, WE HAD 32 ATTENDEE ATTENDEES REPRESENTING COMMUNITIES THROUGHOUT, THROUGHOUT THE CITY.

AND THEN, AS I MENTIONED, OUR FOCUS GROUPS.

UH, YOU KNOW, WE HAD 27 PARTICIPANTS ACROSS THREE SESSIONS.

UM, AND, UH, YOU KNOW, THAT WAS MORE OF A SCREENING PROCESS, AGAIN, TRYING TO GET A REPRESENTATIVE SAMPLE OF, OF THE COMMUNITY.

UM, SO OF THE 300, UH, INDIVIDUALS THAT APPLIED, WE SELECTED 27 FOLKS TO, TO PARTICIPATE.

AND, UH, WE GOT 56 SURVEY RESPONSES FROM, FROM THE FOCUS GROUPS.

THE, THE, THE HIGHEST RATED, UM, THE HIGHEST RATED ATTRIBUTES.

SO, THE PRIMARY QUESTION THAT WE WERE ASKING AT, UM, YOU KNOW, OUR IN-PERSON, OPEN HOUSES, A VIRTUAL OPEN HOUSE, UM, AND, AND ON SPEAK UP AUSTIN SITE, UM, WAS, UM, ABOUT RATE SETTING PRIORITIES, YOU KNOW, WHAT, UH, WHAT DID THE COMMUNITY VALUE IN TERMS OF PRIORITIES AND RATE SETTING? AND THEN WHEN WE GOT TO THE FOCUS GROUPS, IT WAS MORE DETAILED IN TERMS OF THE, THE SURVEYS AND QUESTIONS WE WERE ANSWERING, BUT WE ALSO ASKED ABOUT THEIR RATE SETTING PRIORITIES.

AND YOU CAN SEE THAT IT VARIED, YOU KNOW, BASED ON THE, THE, THE TYPE OF PUBLIC ENGAGEMENT THAT WE WERE DOING, YOU KNOW, IN TERMS OF OUR IN-PERSON, OPEN HOUSE MEETINGS, UM, THEY'RE, THEY'RE SORTED BY

[00:35:01]

SO, UH, THE FOLKS THAT ATTENDED IN PERSON, UH, VALUED EQUITY, MAKING SURE THAT OUR CUSTOMER CLASSES PAY THEIR FAIR SHARE.

AND THAT'S, THAT'S THE UNDERLYING GOAL OF OUR COST OF SERVICE PROCESS, IS TO TRY AND SET RATES THAT, UM, ARE EQUITABLE AND BASED ON THE COST TO SERVE OUR DIFFERENT CUSTOMERS AND CUSTOMER CLASSES, UM, THEY, THEY VALUED REVENUE STABILITY IN MAKING SURE THAT WE HAD THE REVENUES THAT WE NEED TO, TO HAVE, UM, YOU KNOW, RESILIENCE AND RELIABLE SERVICE.

SO, AS YOU SEE, RESILIENCE WAS THE, THE NEXT HIGHEST RATED ATTRIBUTE.

AND THEN CONSERVATION WAS ALSO, UH, A, A HIGH HIGHLY RATED ATTRIBUTE FOLLOWED BY AFFORDABILITY, BOTH FOR, UH, ESSENTIAL USE.

IN OTHER WORDS, UM, YOU KNOW, NON-DISCRETIONARY USE.

SO, SO MAKING SURE THAT OUR, OUR RATES ARE AFFORDABLE FOR THINGS LIKE COOKING AND CLEANING AND, UM, BUT NOT AS MUCH NECESSARILY FOR, UH, FOR IRRIGATION OR, OR, YOU KNOW, NOT, OR, YOU KNOW, DISCRETIONARY USE.

UM, AFFORDABILITY FOR LOW INCOME WAS, WAS RATED NEXT.

AND, AND THEN, YOU KNOW, MINIMAL IMPACT TO BUILD.

SO, SO THERE WAS A STRONG FOCUS ON REVENUE, STABILITY, RESILIENCE, AND MAKING SURE THAT WHEN, UM, YOU KNOW, WHEN WE TURN ON THE FAUCET, THAT, UH, YOU KNOW, WE'RE PROVIDING, UM, YOU KNOW, QUALITY, UM, YOU KNOW, QUALITY WATER AND, AND, AND THAT THE, THE WASTEWATER THAT WE RETURN TO, UM, TO THE COLORADO RIVER IS, IS, YOU KNOW, HIGHLY, YOU KNOW, TREATED AS AS WELL.

YOU KNOW, IN TERMS OF THE SPEAK UP AUSTIN SURVEY, YOU KNOW, THERE'S STILL A HIGH FOCUS ON, ON REVENUE STABILITY AND EQUITY.

THOSE TWO FLIPPED.

UM, BUT MINIMIZING IMPACTS WAS, WAS SCORED, UH, MUCH MORE HIGHLY, UH, FROM SPEAK UP AUSTIN PARTICIPANTS THAN IT DID.

YOU KNOW, THE IN-PERSON PARTICIPANTS.

UM, THERE WAS A, UM, YOU KNOW, A STRONG FOCUS ON AFFORDABILITY FOR LOW INCOME CUSTOMERS, UH, FOLLOWED BY CONSERVATION, RESILIENCE, AND THEN AFFORDABILITY FOR, FOR ESSENTIAL USE.

AND THEN WHEN WE LOOKED AT OUR VIRTUAL OPEN HOUSE, AFFORDABILITY FOR ESSENTIAL USE WAS, WAS THE HIGHEST RATED ATTRIBUTE, UH, FOLLOWED, UH, BY, YOU KNOW, A TIE WITH CONS, CONSERVATION AND RESILIENCE, UM, AND THEN LOW INCOME AFFORDABILITY AND EQUITY.

AND THEN, UM, MINIMAL IMPACTS TO BILLS AND REVENUE STABILITY WERE THE, THE LOWEST RATED ATTRIBUTES.

UM, AND THEN FOR OUR FOCUS GROUPS, AFFORDABILITY, BOTH FOR ESSENTIAL SERVICES AND LOW INCOME CUSTOMERS, AS WELL AS EQUITY, YOU KNOW, WERE, WERE, UH, SCORED HIGHLY FOLLOWED BY CONSERVATION AND, AND RESILIENCE.

SO YOU SEE, UM, YOU KNOW, BASED ON WHO WE ASKED AND WHERE WE ASKED THERE, THERE WAS SOME, UM, SOME, SOME VARIATION IN TERMS OF THE RESPONSES.

UH, BUT I THINK IN, IN, IN GENERAL, UM, YOU KNOW, AFFORDABILITY SCORED HIGHLY REVENUE STABILITY AND RESILIENCE SCORED HIGHLY.

AND, AND I THINK THAT'S TO, TO BE EXPECTED, YOU KNOW, IN TERMS OF WHERE WE, WHERE WE ARE AS UTILITY TODAY AND WHERE WE'VE BEEN OVER, OVER RECENT YEARS.

UM, SO OUR, OUR CUSTOMERS, YOU KNOW, VALUE AFFORDABILITY, BUT THEY, THEY ALSO WANNA MAKE SURE WE'RE PROVI PROVIDING RESILIENT AND RELIABLE SERVICES.

HAVE, UM, A, YOU KNOW, AN ECONOMIC DEVELOPMENT FOCUS.

SO IN TERMS OF THE PICK, UH, OUR PUBLIC INVOLVEMENT COMMITTEE, WE ASKED THEM THE SAME QUESTIONS.

AND, UM, HERE, UH, YOU KNOW, WE GOT A LITTLE BIT DIFFERENT RESULTS THAT, AGAIN, THERE WAS A, A, A REALLY STRONG FOCUS ON CONSERVATION AND AFFORDABILITY.

AND I WILL SAY THAT, YOU KNOW, AT, FROM A RESIDENTIAL RATE PERSPECTIVE, THOSE TWO THINGS FOR US KIND OF GO HAND IN HAND WITH OUR INCLINING BLOCK RATE STRUCTURE.

YOU KNOW, OUR, OUR RATES ARE LOWER AT THE LOWER END FOR ESSENTIAL USE, UM, BUT THEY INCLINE STEEPLY, UM, TO, TO DISCOURAGE DISCRETIONARY USE, UM, AT HIGHER LEVELS.

UM, SO, YOU KNOW, WHEN WE THINK ABOUT CONSERVATION AND AFFORDABILITY, WE, YOU KNOW, WE THINK WE'RE GETTING AT BOTH OF THOSE WITH OUR, OUR TIERED BLOCK RATE STRUCTURE.

UM, AND THEN MINIMIZING CUSTOMER IMPACTS AGAIN, UM, YOU KNOW, MINIMIZING RATE SWINGS AND, AND, YOU KNOW, BIG INCREASES, UH, FOLLOWED BY FINANCIAL STABILITY, FULL COST RECOVERY.

NOW, WHEN WE ASKED THE PICK, WE ASKED THEM EARLY ON, AND, UM, WE INCLUDED ECONOMIC DEVELOPMENT AS, AS, UM, YOU KNOW, POTENTIALLY A FOCUS AREA.

BUT AS WE GOT INTO THE PUBLIC ENGAGEMENT, UH, WE, WE SWITCHED ECONOMIC DEVELOPMENT, UH, WITH RESILIENCE IN TERMS OF, UM, TRYING TO GET RANKINGS.

UM, 'CAUSE REALLY AT THE END OF THE DAY, FROM AN ECONOMIC DEVELOPMENT PERSPECTIVE, OUR RATES DON'T

[00:40:01]

UM, FOR EXAMPLE, UM, YOU KNOW, IF OUR RATES GOT CHEAPER, UH, AS, AS YOU MOVED UP IN, INTO HIGHER TIERS, UM, PARTICULARLY, YOU KNOW, OR IF WE HAD A, A, LIKE A DECLINING BLOCK RATE STRUCTURE FOR, FOR OUR LARGE INDUSTRIAL CUSTOMERS, WHERE THE MORE WATER YOU USE, THE CHEAPER IT WAS, THAT WOULD HAVE MORE OF AN ECONOMIC DEVELOPMENT FOCUS.

AND THAT'S NOT, WE DON'T HAVE THAT ANYWHERE IN OUR RATE STRUCTURE.

WE WERE JUST HIGHLIGHTING THAT AS, AS, UM, AN ATTRIBUTE THAT UTILITIES SOMETIMES LOOK AT.

BUT, BUT NOT SO MUCH US.

UH, NEXT SLIDE, PLEASE.

SO ONE OF THE BIG QUESTIONS THAT WE ASKED THE PUBLIC INVOLVEMENT COMMITTEE THROUGHOUT THE PROCESS, AND WE TALKED A LOT ABOUT, WAS, UH, THE PERCENTAGE OF CASH FINANCING FOR, FOR MAJOR LONG-TERM PROJECTS.

NOW, AS YOU KNOW, UM, WE, YOU KNOW, WE RECENTLY WENT, CAME TO COMMISSION AND THEN TO COUNCIL, UM, FOR APPROVAL TO MOVE FORWARD WITH, UM, UH, CONSTRUCTION MANAGER AT RISK FOR OUR WALNUT CREEK EXPANSION PROJECT.

THAT PROJECT ALL TOLD IS, UH, APPROACHING A A BILLION DOLLARS.

AND, AND SO WHEN YOU THINK ABOUT OUR FINANCIAL POLICY RELATED TO CASH FINANCING OF, OF CAPITAL PROJECTS, UM, IN GENERAL, UM, THE FINANCIAL POLICY, UH, SAYS THAT WE WOULD TARGET A RANGE OF 35% CASH FINANCING OF, OF OUR CAPITAL PROGRAM UP TO, TO 50%.

UM, AND, AND THAT RANGE WAS SET A FEW YEARS BACK.

IT WAS SET, UH, BACK IN 21 TO BE EFFECTIVE, UM, IN FISCAL YEAR 22.

UM, SO, UM, WE WERE IN THE PANDEMIC, BUT WE HADN'T START TO STARTED TO SEE SOME OF THE, UM, SOME OF THE SIGNIFICANT INCREASES IN, IN CAPITAL DELIVERY COST OR IN OPERATING COST.

UM, AND, AND OUR CIP AT THAT TIME, OUR, OUR FIVE-YEAR CAPITAL SPENDING PLAN, UH, WAS JUST OVER A BILLION DOLLARS.

NOW, WHEN YOU LAYER A WALNUT CREEK EXPANSION ON THAT AT ANOTHER BILLION, AND YOU, UM, AND, AND THE COST INCREASES FOR CAPITAL DELIVERY WITH A $2.3 BILLION, UM, CAPITAL SPENDING PLAN, 35% OF, OF EVEN JUST WALNUT, UM, AND ASKING OUR CUSTOMERS TO PAY FOR MORE THAN A THIRD OF A PROJECT LIKE WALNUT OVER OVER FIVE TO SIX YEARS, UM, IS, IS A BIG ASK.

AND SO THIS WAS SOMETHING THAT WE TALKED ABOUT, UH, AT LENGTH IN, IN THE PUBLIC INVOLVEMENT COMMITTEE PROCESS.

UM, AND WE RECOGNIZE THE, THE BURDEN THAT THAT PLACES ON TODAY'S CUSTOMERS FOR A PROJECT THAT'S GONNA SERVE CUSTOMERS FOR THE NEXT 50 PLUS YEARS.

UM, AND, AND SO, UM, HAVING A, A CASH FINANCING PERCENTAGE THAT HIGH FOR MAJOR LONG-TERM PROJECTS, UM, YOU KNOW, DOESN'T GET AT GENERATE GENERATIONAL EQUITY AND MAKING SURE THAT THE CUSTOMERS WHO ARE SERVED IN THE FUTURE BY THESE IMPROVEMENTS ALSO PAY FOR A SHARE OF THE IMPROVEMENTS.

SO WE ASKED THE PICK, UM, YOU KNOW, SHOULD WE FUND, UM, MAJOR LONG-TERM PROJECTS AT, UM, 35%, WHICH IS AGAIN, THE, THE MINIMUM FINANCIAL POLICY TARGET, OR, OR SHOULD WE FINANCE IT AT LOWER PERCENTAGES? YOU KNOW, AND WE LOOKED AT 20% UP TO, UH, UP TO THE 35% MINIMUM, AND FOUR OF THE, THE RESPONDENTS SAID WE SHOULD FINANCE IT AT 20%.

UH, ONE SAID 25%, THREE SAID 30%, WHICH IS, UM, THE LEVEL AT WHICH NUGEN, WHO'S OUR RATE CONSULTANT, UM, YOU KNOW, THEY INCLUDED, UH, THEY DROPPED IT FROM 35% TO 30% IN THEIR MODEL.

SO THEIR INITIAL DRAFT RATES WERE, WERE BASED ON AN ASSUMPTION OF 30% ACROSS THE BOARD.

UM, ONE RESPONDENT SAID, WE SHOULD MAINTAIN FINANCIAL POLICY COMPLIANCE AT 35%, AND, AND ONE RESPONDENT SAID THEY DIDN'T KNOW O UM, NEXT SLIDE.

UM, SO THE NEXT QUESTION WE ASKED WAS WAS HOW SHOULD WE APPLY RATE INCREASES ACROSS THE FIVE TIERED, UH, VOLUMETRIC UH, RATES FOR, FOR OUR RESIDENTIAL CUSTOMERS? UM, AND, AND WE PROVIDED A COUPLE OF OPTIONS, UM, YOU KNOW, UH, A LEVEL, YOU KNOW, 10% ACROSS THE BOARD, UM, LOWER INCREASES FOR, FOR LOWER BLOCKS, YOU KNOW, STARTING IN THE 7% RANGE, AND THEN, UH, PUSHING UP TO ABOUT 12% FOR THE, FOR THE HIGHER BLOCKS.

SO, UM, SMALLER PERCENTAGE

[00:45:01]

INCREASES IN TIERS ONE AND TWO AND SCALING UP, UM, NUGEN RATES, UM, THEIR, THEIR INITIAL DRAFT RATES, UH, WAS, WAS THE OPPOSITE.

THEY HAD HIGHER RATES IN, IN THE LOWER BLOCKS, UH, HIGHER RATE INCREASED PERCENTAGES IN THE LOWER BLOCKS, UH, WITH LOWER RATE INCREASED PERCENTAGES IN THE HIGHER BLOCKS, UM, TO, YOU KNOW, SO FROM A NUGENT RATE SETTING RATE DESIGN PERSPECTIVE, THEY WERE PRIORITIZING REVENUE STABILITY.

SINCE, YOU KNOW, OVER 60% OF OUR CUSTOMERS PRIMARILY STAY IN BLOCKS ONE AND TWO, THEY WERE TRYING TO ENSURE THAT IN THOSE BLOCKS THAT WE WERE MORE ADEQUATELY COVERING OUR COSTS.

UM, SO WE HAD ONE PERSON RESPOND THAT WE SHOULD, UM, WE SHOULD, UM, YOU KNOW, MAYBE RECOMMEND THE RATES THAT WERE IN LINE WITH NUGENT'S DRAFT RATES.

UM, AND THEN WE, WE PROVIDED, UH, THE OPTION TO, TO PROVIDE OTHER RESPONSES.

UM, THIS, THE SECOND ONE IS LIKE NUGENTS HIGHER INCREASES FOR THE LOWER BLOCKS, BUT, UM, YOU KNOW, NOT AS STEEP AN INCLINE.

SO THEY PROVIDED SOME SPECIFIC, UM, YOU KNOW, A SPECIFIC RANGE THAT WAS A LITTLE LESS AGGRESSIVE OR, OR, UH, THAN, THAN NUGEN IN TERMS OF THE LOWER BLOCKS VERSUS THE UPPER BLOCKS.

UM, AND THEN SAME THING FOR, FOR, UH, THE OTHER, THE, THE DARKER GREEN.

UM, SO WE HAD, UH, FOUR PEOPLE PROVIDE, UH, OTHER OPTIONS.

UM, BUT, BUT BY AND LARGE THE, THE PUBLIC INVOLVEMENT COMMITTEE FELT LIKE WE SHOULD HAVE LOWER INCREASES, UH, FOR OUR LOWER BLOCKS.

AND THAT REALLY, UM, IS IN KEEPING WITH OUR, OUR, YOU KNOW, INCLINING BLOCK RATE STRUCTURE IS, UH, YOU KNOW, TRY AND MAINTAIN, UH, AFFORDABLE RATES FOR ESSENTIAL USES.

UM, AND THEN WHEN WE LOOKED AT RATE MOVING, THIS WAS GETTING BACK TO THE, ONE OF THE QUESTIONS THAT, THAT WE TALKED ABOUT AT THE LAST MEETING WAS WHEN, WHEN WE LOOKED AT OUR FIVE YEAR FORECAST, WE ASSUMED TWO LARGER INCREASES IN YEAR ONE AND TWO, UM, TWO NINE PLUS PERCENTAGE INCREASES IN YEAR ONE AND TWO, AND THEN, UM, A 6% AND A 5% IN, IN BLOCK IN YEARS THREE AND FOUR.

UM, SO WE ASKED THE PUBLIC INVOLVEMENT COMMITTEE SHOULD, SHOULD, UM, YOU KNOW, HOW SHOULD WE SMOOTH RATES OVER THE FORECAST PERIOD? SHOULD WE KEEP THAT, YOU KNOW, OUR, OUR FORECAST OPTION, WHICH, UH, CAME OUT TO ABOUT A TOTAL OF 31.5% ACROSS FIVE YEARS? UH, SHOULD WE, SHOULD WE DO THE OPPOSITE AND START LOW AND, AND BUILD UP? UM, NOW DOING THAT WOULD REQUIRE A 41.5%, UH, CUMULATIVE RATE INCREASE OVER THE FIVE YEAR PERIOD.

UM, IF WE WENT LEVEL AT ABOUT, YOU KNOW, SEVEN, 7.7%, THAT WOULD BE ABOUT 38.5% OVER FIVE YEAR PERIOD.

UM, AND THEN ONE INDIVIDUAL, UH, CHOSE THE OTHER WITH NO SMOOTHING.

SO, SO BY AND LARGE, THE, UH, WELL, THE, THE PUBLIC INVOLVEMENT COMMITTEE WAS, WAS SUPPORTIVE OF, UM, YOU KNOW, HAVING TWO LARGER INCREASES UPFRONT AND, AND TAPERING IT DOWN, UM, FOR A LOWER, UH, COMBINED, UM, RATE INCREASE, UH, CUMULATIVE RATE INCREASE OVER THE FIVE YEAR FORECAST PERIOD.

DISCOUNT, THE PERCENTAGE BILL DISCOUNT HAS CHANGED OVER TIME.

ALRIGHT, SORRY.

UM, AND THEN WE, WE ASKED ABOUT CAP RATES.

UM, SO RECALL THAT, UM, YOU KNOW, WHILE WE HAVEN'T HAD, WHILE WE, UNTIL 24, WE HADN'T HAD A RATE INCREASE, UM, OVER THE PRIOR FIVE YEARS.

AND THEN OUR LA LAST RATE ACTION PRIOR TO THAT WAS A RATE REDUCTION IN, IN 2018, UM, FOR CAP CUSTOMERS.

UM, NOT ONLY HAVE THEY NOT HAD RATE INCREASES, UM, SINCE THEN, THEY ACTUALLY HAD, UH, YOU KNOW, RATE REDUCTION IN FISCAL YEAR 20, A 10% COVID RATE REDUCTION.

WE ALSO HAD A CORRESPONDING 10% REDUCTION ON THE RESIDENTIAL SIDE, UM, FOR, FOR OUR RESIDENTIAL CUSTOMERS.

BUT THAT RATE REDUCTION WAS TEMPORARY.

IT EXPIRED AT THE END OF FISCAL YEAR 20, UH, BUT WE DID NOT RAMP THE, WE DID NOT ROLL BACK, UM, THE CAP RATE REDUCTION.

SO, UM, IN ADDITION TO NOT HAVING RATE INCREASES, THEY ACTUALLY SAW, UH, RATE REDUCTIONS SINCE FISCAL YEAR 2018.

AND SO AS A RESULT, UM, THE PERCENTAGE

[00:50:01]

AND I THINK WE TALKED ABOUT THIS LAST TIME, HOW, YOU KNOW, IN THE, WHEN, WHEN WE STARTED RAMPING UP THE CUSTOMER ASSISTANCE PROGRAM, THE BILL DISCOUNT STARTED IN, IN, YOU KNOW, AROUND A 35% RANGE.

AND, AND AS A RESULT OF CHANGES OVER TIME, THAT BILL DESK DISCOUNT HAS, UH, UM, HAS MOVED UP TO ABOUT 53, ALMOST 53 POINT A HALF PERCENT, UH, FOR, FOR THE CURRENT YEAR.

AND SO WE WERE ASKING CUSTOMER OR THE, THE PICK, UM, YOU KNOW, HOW SHOULD, HOW SHOULD WE, UM, TARGET RATE INCREASES FOR, FOR CAP CUSTOMERS? SHOULD THEY SEE A, A LOWER PERCENTAGE THAN RESIDENTIAL, WHICH WOULD RESULT IN A, A, AN EVEN BIGGER DISCOUNT THAN THE 53.4%? SHOULD THEY HAVE A HIGHER RATE INCREASE TO, TO START TO, TO, TO PULL BACK AND MAYBE GET BACK TO AROUND THE 50% LEVEL WHERE WE WERE, UH, PRIOR TO FISCAL YEAR 24? SO SHOULD THEY HAVE KIND OF A CORRESPONDING SIMILAR OVERALL RATE INCREASE, UM, TO, TO RESIDENTIAL, UM, AND THEN JUST KIND OF TRY AND MOVE THEM IN STEP GOING FORWARD, UM, OR NO INCREASE.

AND, AND YOU, UM, AND THEN OTHER, UH, OTHER COMMENT, UM, BUT, UH, THREE, THREE OF THE RESPONDENTS SAID WE SHOULD HAVE, UH, UH, THE CAP CUSTOMER SHOULD HAVE A LOWER PERCENTAGE THAN RESIDENTIAL, UH, WHICH AGAIN WOULD GIVE A BIGGER BILL DISCOUNT.

ONE SAID HIGHER PERCENTAGE THAN THAN RESIDENTIAL.

UM, AND THEN ANOTHER THREE SAID SIMILAR PERCENTAGE AS AS RESIDENTIAL, UM, AND TWO SAID NO INCREASE.

NOW, UM, OBVIOUSLY THE NO INCREASE WOULD, YOU KNOW, IF, IF RESIDENTIAL GOES UP, THAT WOULD RESULT IN A BIGGER BI BUILD DISCOUNT AS WELL.

AND THEN I WOULD JUST HIGHLIGHT THAT, UM, YOU KNOW, IN 'CAUSE OF, UM, CAP PROGRAM EXPANSION, UM, CURRENTLY THE COMMUNITY BENEFIT CHARGE ISN'T GENERATING ENOUGH REVENUE TO, TO COVER, UH, CAP BENEFITS FOR, FOR THE EXISTING NUMBER OF CUSTOMERS.

SO WE'RE ALSO KIND OF WORKING THROUGH HOW DO YOU BALANCE THE CAP DISCOUNT WITH THE AMOUNT OF AVAILABLE REVENUE.

UM, AND THEN WE ASKED ABOUT, UM, HAVING A SEPARATE RATE, UH, FOR NON-RESIDENTIAL CUSTOMERS WITH IRRIGATION METERS.

SO, UM, YOU KNOW, OUR RESIDENTIAL RATES HAVE A PRETTY HEAVY PRICE SIGNAL, UH, FOR, FOR, UM, FOR NON-DISCRETIONARY USE, UH, UH, OR FOR, I'M SORRY, FOR DISCRETIONARY USE.

UM, BUT WE DON'T REALLY HAVE, UH, A SIMILAR PRICING MECHANISM FOR, FOR NON-RESIDENTIAL CUSTOMERS.

WE DO HAVE PEAK AND OFF PEAK RATES WITH JUST A, A, A 10% INCREASE.

SO, UM, YOU KNOW, OUR, OUR PEAK RATES DURING PEAK IRRIGATION MONTHS ARE 10% HIGHER THAN OUR NON-PEAK RATE FOR THE OTHER EIGHT MONTHS OF, OF THE YEAR.

UM, SO WE ASK SHOULD WE HAVE A, A SEPARATE RATE? UM, AND HERE WE ACTUALLY, HALF OF THEM SAID, SAID NO.

UM, SO, UH, FIVE SAID NO, THREE SAID YES, AND TWO SAID, UH, I, I DON'T KNOW.

UM, WE DID COMMUNICATE THAT ONE OF THE CHALLENGES OF OF HAVING A SEPARATE IRRIGATION RATE FOR SPECIFICALLY FOR CUSTOMERS FOR COMMERCIAL MULTIFAMILY, LARGE VOLUME CUSTOMERS WITH, UH, AN IRRIGATION METER IS NOT ALL OF CUSTOMERS IN THOSE CLASSES HAVE AN IRRIGATION METER TODAY.

YOU KNOW, NEW DEVELOPMENT IS REQUIRED TO HAVE A SEPARATE IRRIGATION METER IF YOU'VE GOT AN IRRIGATION SYSTEM.

UM, BUT THAT, BECAUSE THAT HASN'T ALWAYS BEEN THE CASE, UH, TWO, TWO BUSINESSES RIGHT ACROSS THE STREET FROM EACH OTHER, UH, IF ONE WAS A NEWER DEVELOPMENT MIGHT HAVE AN IRRIGATION METER.

AND SO IF WE HAD HIGHER IRRIGATION RATES FOR THAT CUSTOMER WITH THE IRRIGATION METER, WE WOULDN'T HAVE A MECHANISM REALLY TO TARGET THE CUSTOMER ACROSS THE STREET WHO DIDN'T HAVE, UM, AN, AN IRRIGATION METER.

AND SO, UM, I THINK THAT WAS ONE OF THE CONSIDERATIONS IN TERMS OF NOT RECOMMENDING, UM, ADDING, UM, A SEPARATE IRRIGATION RATE FOR, FOR CUSTOMERS WITH IRRIGATION METERS.

WALK THROUGH QUICKLY, UM, YOU KNOW, THE FINAL RATE RECOMMENDATIONS, NEXT SLIDE.

ALRIGHT, SO WE, WE TOOK ALL OF THAT INPUT, UM, AND, AND THE EXECUTIVE TEAM ALSO, UM, YOU KNOW, UH, PARTICIPATED IN THE SURVEY FOR RATE SETTING PRIORITIES.

UM, SO WE, WE TOOK THE RESULTS FROM, FROM THE SURVEY, UH, YOU KNOW, THAT, UH, I, I THINK INFLUENCED, YOU KNOW, SOME OF, SOME OF OUR THINKING, UH, IN TERMS OF THE EXECUTIVE TEAM, BUT, BUT REALLY HELPED US GET TO FINAL RATE RECOMMENDATIONS.

SO I'LL

[00:55:01]

UM, SO IN TERMS OF THE WATER MODEL CHANGES, AGAIN, NUGEN, OUR RATE CONSULTANT PROVIDED DRAFT RATES AND A DRAFT, UH, WATER COST OF SERVICE MODEL AND A DRAFT WASTEWATER COST OF SERVICE MODEL.

AND SO AS WE, UM, KIND OF WORKED THROUGH THE, UM, INPUT THAT WE RECEIVED FROM, FROM ALL OF OUR PUBLIC ENGAGEMENT ACTIVITIES AND INPUT FROM THE PICK, UM, WE, WE MADE SOME, SOME MODEL CHANGES AND SOME RATE DESIGN CHANGES.

SO ON THE WATER SIDE, FROM A, YOU KNOW, A MODEL CHANGE PERSPECTIVE, UM, WE UPDATED, UM, YOU KNOW, RATE DESIGN TO, TO FOCUS MORE ON AFFORDABILITY, MAINTAIN OUR CONSERVATION BASED RATE STRUCTURE, UM, AND, AND FOCUS ON FINANCIAL STABILITY.

AND, AND YOU'LL SEE THAT IN, IN KIND OF THE, THE RATE DESIGN CHANGES.

UM, WE ALSO, UM, INCREASED THE COMMUNITY BENEFITS FUND SURCHARGE FROM 15 CENTS TO 30 CENTS TO, TO HELP MAINTAIN, UM, CAP BUILD DISCOUNTS ROUGHLY IN THE SAME, UM, THE SAME, UM, ROUGHLY AT THE SAME LEVEL THAT WE'RE CURRENTLY AT.

SO WE'RE AROUND 50%.

UM, AND IN TERMS OF RATE DESIGN CHANGES, AGAIN, YOU KNOW, UM, YOU KNOW, FOCUSING ON AFFORDABILITY FOR, FOR ESSENTIAL SERVICES, FOCUSING ON CONSERVATION SYSTEM RESILIENCY AND, AND, AND FINANCE FINANCIAL STABILITY, UM, WE, UM, LOWERED HAD, HAD LOWER PERCENTAGE INCREASES IN THE LOWER BLOCKS, UM, AND HIGHER INCREASES IN IN THE HIGHER BLOCKS.

ALTHOUGH, UM, I WILL KIND OF WALK THROUGH, UM, A CHANGE THAT WE MADE IN OUR TIERED FIXED, UH, FEE IN, IN BLOCK FOUR.

ONE OF THE THINGS THAT WE HEARD, UH, FROM, FROM SEVERAL CUSTOMERS AT OUR OPEN HOUSE MEETINGS WAS, UM, WHEN, WHEN YOU LOOK AT OUR ADDITIONAL FIXED FEE OR OUR TIERED FIXED FEE FOR RESIDENTIAL CUSTOMERS, UM, THE FEARED THE TIERED FIXED FEE GOES FROM, FROM ABOUT A DOLLAR IN BLOCK ONE, UM, UP TO $9 IN BLOCK THREE, AND THEN IT JUMPS TO $29 IN BLOCKS FOUR AND FIVE.

AND SO, UM, YOU KNOW, WE HAD CUSTOMERS WITH LARGER FAMILIES SAY THAT, YOU KNOW, THEY, THEY, THEY USE MORE WATER AS A, YOU KNOW, AS A RESULT OF HAVING A LARGER FAMILY SIZE.

AND, AND SO WHEN THEY GET INTO, YOU KNOW, BLOCK FOUR, WHICH STARTS AT 11,000 GALLONS, UM, YOU KNOW, THEY, THEY SEE, YOU KNOW, A $20 INCREASE IN THE TIERED FIXED FEE ALONE.

AND SO THAT, UM, YOU KNOW, THEY FELT LIKE THAT WAS, UM, YOU KNOW, MADE IT CHALLENGING FOR, FOR CUSTOMERS WITH, WITH LARGE FAMILIES TO AFFORD ESSENTIAL SERVICES.

UM, AND THEN AS WE LOOKED AT OUR NON-RESIDENTIAL PEAK RATES, UM, WE ARE RECOMMENDING, UM, INSTEAD OF THAT 10% INCREASE FROM, FROM NON-PEAK TO PEAK DURING IRRIGATION MONTHS, UH, A 15%, UM, INCREASE.

SO, SO, UH, THE RATES WOULD BE HIGHER DURING, DURING THE FOUR, UM, PEAK IRRIGATION MONTHS.

UM, AND THEN THE RATE WOULD BE A LITTLE BIT LOWER THAN IT MIGHT OTHERWISE BE, UH, DURING THE NON-PEAK IRRIGATION MONTHS.

AND, AND, AND, UH, YOU KNOW, HOPEFULLY THAT'S WILL PROVIDE, YOU KNOW, MORE OF A CONSERVATION INCENTIVE TO COMMERCIAL AND MULTIFAMILY CUSTOMERS TO, TO USE LESS WATER DURING PEAK UH, IRRIGATION SEASON.

UM, AND THEN AS I MENTIONED, YOU KNOW, WE WERE TARGETING, YOU KNOW, KIND OF A 50% COMBINED CAP CUSTOMER DISCOUNT, SO PULLING BACK A LITTLE BIT, UH, FROM THE CURRENT LEVEL OF 53%, UM, AND TRYING TO, TO, YOU KNOW, KEEP IT RELATIVELY IN LINE WITH CURRENT LEVELS, BUT UNDERSTANDING THE, THE FUNDING CONSTRAINTS OF THE COMMUNITY BENEFIT CHARGE.

ON THE WASTEWATER SIDE, HERE'S WHERE WE HAD KIND OF THE, THE, THE BIGGEST ADJUSTMENT IN TERMS OF THE MODEL.

UM, AS I MENTIONED EARLIER, THE MODEL ASSUMED, UH, 30% CASH FINANCING ACROSS THE BOARD, BOTH ON THE WATER SIDE AND ON THE WASTEWATER SIDE.

UM, BUT BECAUSE WALNUT CREEK WAS SO BIG, WE, WE, UM, WE DECIDED TO DROP THE CASH FINANCING LEVEL TO 20% FOR WALNUT CREEK, UH, WHICH RESULTED IN, UM, YOU KNOW, IN ABOUT A $13.7 MILLION DECREASE IN, UH, CASH FINANCING, UM, AND, AND ULTIMATELY REVENUE REQUIREMENTS, UM, THAT WOULD NEED TO BE RECOVERED THROUGH RATES.

IN ADDITION, WE MADE THE SAME ADJUSTMENT ON THE, UH, COMMUNITY BENEFITS, UH, COMMUNITY BENEFIT CHART OR SURCHARGE, UH, TO INCREASE IT FROM 15 CENTS

[01:00:01]

TO 30 CENTS.

UM, AND THEN ON THE WASTEWATER SIDE, YOU KNOW, NUGEN HAD TWO, TWO DIFFERENT RATE CONSULTANTS, UH, DEVELOPING OUR WATER MODEL AND OUR, OUR WASTE WATER MODEL.

UM, AND THE, THE ALLOCATION OF RETURN CHECK FEES, UH, WHICH IS REVENUE THAT WE GENERATE, BUT IT, IT BASICALLY BUYS DOWN.

UM, SO IT'S CONSIDERED NON RATE REVENUE.

IT BUYS DOWN OUR REVENUE REQUIREMENT, AND WE TRY AND ALLOCATE THOSE COSTS BACK TO, UM, THE CUSTOMERS THAT ARE LARGELY RESPONSIBLE, UH, FOR, FOR THOSE FEES.

AND, AND BECAUSE RETURN CHECK FEES ARE, ARE MORE PREVALENT FOR RESIDENTIAL CUSTOMERS, BY SWITCHING THAT ALLOCATION FROM BEING ALLOCATED BASED ON, UH, WASTEWATER FLOWS TO CUSTOMER COUNT, IT MORE CLOSELY MATCHED, UM, YOU KNOW, HOW, WHO'S, WHO'S, UM, WHERE THAT REVENUE IS COMING FROM.

AND SO, UM, SO THAT WE FELT LIKE IT WAS A BETTER ALLOCATION, BUT ALSO ALLOWED IT TO BE CONSISTENT WITH THE WATER MODEL.

AND THEN FROM A RATE DESIGN CHANGE, AGAIN, FOCUSING ON AFFORDABILITY FOR BASIC SERVICES AND SYSTEM RESILIENCE, UM, AND, AND TARGETING AN OVERALL 50% COMBINED CAP CUSTOMER DISCOUNT.

SO AS WE LOOK AT THE WATER RATES, UM, THERE, THERE'S KINDA TWO, TWO TABLES HERE.

ONE THAT SHOWS THE INITIAL NEWGEN DRAFT RATES IN, IN THEIR WATER MODEL.

UM, AND THEN WHAT WE RECOMMENDED, UM, FOLLOWING ALL THE PUBLIC ENGAGEMENT AND, UM, PUBLIC INPUT THAT WE RECEIVED.

UH, BUT HERE, YOU KNOW, YOU SEE THAT, LIKE FOR THE TIER FIXED FEE, UM, YOU KNOW, THEY WERE IN THE 15 AND A HALF TO, TO 16% RANGE IN TERMS OF, OF INCREASING THE, THE TIERED FIXED FEE.

AND THEN I, I'LL AGAIN POINT OUT THAT THE TIERED FIXED FEE JUMPS FROM $9 AND 25 CENTS, UH, IN BLOCK THREE CURRENTLY TO 29 75 IN BLOCK FOUR.

AND SO WE HAD, UH, AGAIN, CUSTOMERS WITH LARGE FAMILIES TELL US THAT THAT, UH, PROVIDED A SIGNIFICANT BURDEN.

UM, AND THEY, THEY ALSO DESCRIBED, YOU KNOW, CROSSING THE THRESHOLD FROM, UH, 11,000 GALLONS TO 11,001 GALLONS AS A, YOU KNOW, KNOW A $20 FLUSH.

UM, AND THEN AS WE LOOK AT NUGENT'S VOLUMETRIC RATES, HERE'S WHERE, UM, YOU KNOW, THEY HAD THE BIGGER INCREASES IN BLOCKS ONE AND TWO, UM, AND SMALLER INCREASES IN, IN BLOCKS THREE AND FIVE, ALTHOUGH, UM, A, A REDUCTION IN, IN, UH, BLOCK FOUR.

AND THAT WAS JUST TO, THEY, THEY HAD KIND OF A STAIR STEP APPROACH TO, UM, THE, THE, THE TIER INCREASES.

AND SO THAT THEY WEREN'T NECESSARILY TARGETING A REDUCTION, BUT THEY WERE TRYING TO PROVIDE, UM, A BETTER FRAMEWORK FOR HOW THOSE RATES STEPPED UP.

UM, AND SO BASED ON THE NUGENT DRAFT RATES, UM, THEY WERE PROPOSING ABOUT A $6 29%, $6 29 CENTS INCREASE, UM, TO THE AVERAGE WATER BILL AT 5,800 GALLONS, UH, WHICH WOULD'VE BEEN ALMOST, UH, 15% INCREASE.

UM, AND WHERE WE LANDED, UM, IN TERMS OF OUR RECOMMENDATION, UM, WAS TWO THINGS.

YOU KNOW, AGAIN, LOOKING AT THE TIERED FIXED FEE, UH, WE RECOMMENDING, YOU KNOW, NOT JUMPING STRAIGHT TO $29 AND 75 CENTS IN, IN BLOCK FOUR.

AND SO STAIR STEPPING THAT UP AND, BUT BOTH FROM A TIERED FIXED FEE PERSPECTIVE AND A VOLUMETRIC RATE PERSPECTIVE, UM, YOU KNOW, HAVING, YOU KNOW, MORE OF A, A TAPERED INCREASE.

SO LOWER INCREASES AT THE LOWER TIERS AND HIGHER INCREASES AT THE HIGHER TIERS TO, TO MAINTAIN, YOU KNOW, OUR STRONG CONSERVATION SIGNAL.

UM, BUT, BUT TRY AND MAINTAIN AFFORDABILITY FOR ESSENTIAL USE.

AND THEN AS WE LOOK AT THE WASTE WATER, UH, RATES RELEASE, WATER RATES ARE, UH, A LITTLE MORE SIMPLE AND, YOU KNOW, LESS, UH, DIALS TO TURN.

UM, BUT, UH, NUGEN AGAIN, UM, FOCUSED, UM, YOU KNOW, WITH A HIGHER INCREASE, UH, IN BLOCK ONE WHERE ALMOST EVERYBODY RUNS THROUGH, WELL, EVERYBODY DOES RUN THROUGH BLOCK ONE, UM, AND THEN A LOWER PERCENTAGE INCREASE, UM, TO, TO BLOCK TWO FOR, FOR AN AVERAGE OF ABOUT 13.5% INCREASE.

UM, AND THEN FOR US, WE TOOK THE SAME APPROACH, UH, AS WE DID ON THE WATER SIDE.

UM, YOU KNOW, A LOWER INCREASE IN BLOCK ONE, A BIGGER INCREASE IN IN BLOCK TWO, UM, TO BRING, UH, THE OVERALL INCREASE DOWN FROM $5 AND 75 CENTS, UH, TO $4 AND 10 CENTS.

UM, SO THIS IS THE COMBINED BILL FOR BOTH NON CAP OR STANDARD RESIDENTIAL CUSTOMER AND CAP CUSTOMERS.

[01:05:02]

UM, YOU CAN SEE THAT BILL WOULD BE 93 13, UM, AS COMPARED TO $84 AND 33 CENTS CURRENTLY.

UM, AND THEN THE CAP BILL WOULD, UH, JUMP UP TO 47 55 FROM, UM, $39 AND, AND, AND CHANGE.

UM, NOW WE WEREN'T QUITE ABLE TO HIT THE 50% BILL DISCOUNT, BUT WE, WE GOT TO ALMOST 49%.

UM, AND UM, YOU JUST, UH, AS WE WORKED THROUGH IT, YOU KNOW, EVERY TIME WE MADE A CHANGE ON THE RESIDENTIAL SIDE, IT IMPACTED THE CAP DISCOUNT.

AND SO, UM, YOU KNOW, THERE'S A LOT OF CIRCULAR YOU CHANGES HAPPENING IN TERMS OF, OF, OF TRYING TO BALANCE ALL OF OUR PRIORITIES, BUT WE FELT LIKE, UH, THIS WAS A GOOD BALANCE.

UM, I'LL ALSO POINT OUT THAT THE, THE CAP BILL AT 47 55, UH, WOULD STILL BE LESS THAN THE FISCAL YEAR 2018 RATE WHEN WE HAD, UM, YOU KNOW, OUR, OUR RATE REDUCTION IN IN 2018.

SO, SO WE'RE NOT QUITE GETTING BACK TO 2018 FOR OUR CAP CUSTOMERS.

WE HAVE TO DO IS UPDATE THE FEE SCHEDULE TO SUPPORT THE REVENUE ESTIMATES THAT WE HAD SUBMITTED IN OUR PROPOSED BUDGET.

UM, AND THEN I'LL GO THROUGH JUST REAL QUICK, MULTIFAMILY AND COMMERCIAL.

UM, IN TERMS OF COMBINED BUILD DISCOUNT FOR MULTIFAMILY, UM, YOU KNOW, BASED ON COST OF SERVICE, IT WOULD BE ABOUT 16.8% FOR MULTIFAMILY, UM, ACCOUNTS.

AND THEN ON THE COMMERCIAL SIDE, E EVEN BIGGER AT ABOUT 22.7.

AND, AND PART OF THAT IS SHIFTS IN IN DEMAND SINCE THE LAST COST OF SERVICE, UM, PARTICULARLY OVER THE LAST COUPLE OF YEARS AS, UM, AS WE STARTED TO SEE SOME, SOME RECOVERY FROM, FROM COVID, I, UM, YOU KNOW, WE SAW A SHIFT, UM, IN, INTO COMMERCIAL IN TERMS OF, OF DEMANDS ON OUR SYSTEM.

AND WITH THAT, UM, NEXT STEPS, UH, THIS COMING FRIDAY, THE CITY MANAGER WILL BE PRESENTING, UH, THE PROPOSED BUDGET, UH, TO, TO COUNCIL.

UM, UH, IN THE MEANTIME, YOU KNOW, BECAUSE WE WERE STILL WORKING THROUGH THE COST OF SERVICE STUDY, WE HAD NOT UPDATED OUR FEE SCHEDULE IN THE PROPOSED BUDGET.

SO THAT WILL COME IN THE FORM OF A BUDGET AMENDMENT, UM, THAT COUNCIL WILL CONSIDER.

UM, SO IT WILL NOT BE INCLUDED IN THE PROPOSED, THE FEE SCHEDULE WILL NOT BE INCLUDED IN THE PROPOSED BUDGET, ALTHOUGH THE REVENUE THAT WE HAD ANTICIPATED IS GENERALLY GONNA BE IN LINE WITH WHAT WE HAD SUBMITTED.

SO THERE WON'T BE A REALLY, UH, THE, THE BIGGEST CHANGE WILL BE JUST UPDATING THE FEE SCHEDULE TO GENERATE THE REVENUE THAT WE HAD ANTICIPATED NEEDING WHEN WE SUBMITTED OUR PROPOSED BUDGET.

UM, BUT THAT'LL COME IN THE FORM OF A BUDGET AMENDMENT THAT COUNCIL WOULD CONSIDER WHEN, WHEN THEY CONSIDER THE CITY'S, UH, OVERALL BUDGET.

UM, AND THOSE BUDGET READINGS WOULD HAPPEN AUGUST 14TH THROUGH 16TH.

IN ADVANCE OF THAT, UH, THERE'LL BE SEVERAL, UH, PUBLIC HEARINGS, UH, OVER THE BUDGET PROCESS AND BUDGET WORK SESSIONS.

AND, AND I WOULD EXPECT THAT THERE WOULD BE A, UH, AN ENTERPRISE THAT HISTORICALLY THERE'S BEEN AN ENTERPRISE BUDGET WORKSHOP WHERE, WHERE THEY'LL GET INTO MORE DEPTH ON, UM, THE ENTERPRISE FUNDS AND, AND, UM, LIKELY OURS, YOU KNOW, WHEN WHEN AUSTIN ENERGY HAD THEIR LAST BIG INCREASE, THERE WAS A BIG FOCUS ON AUSTIN ENERGY'S RATES.

AND SO I WOULD EXPECT, UM, A HEAVY FOCUS THROUGH, THROUGH THE BUDGET WORKSHOPS ON, ON OUR PROPOSED CHANGES AS WELL.

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

COMMISSIONERS, DOES ANYBODY HAVE ANY QUESTIONS? COULD YOU EXPLAIN, UM, AGAIN, JUST BRIEFLY WHAT YOU WERE JUST TALKING ABOUT, ABOUT THE, THE, UM, THE RATES NOT BEING IN THE BUDGET, JUST DIDN'T QUITE UNDERSTAND.

SO OUR, OUR BUDGET, WHEN WE THINK ABOUT OUR RATES, UM, THERE'S REALLY TWO COMPONENTS.

WE, YOU KNOW, OUR FORECAST KIND OF GAVE US A SENSE OF WHERE WE THOUGHT WE NEEDED TO LAND IN TERMS OF REVENUE.

UM, SO WE, WE SUBMIT OUR, OUR FUND SUMMARY AND WE SUBMIT, UM, YOU KNOW, WHAT OUR, WHAT WE THINK OUR PROPOSED REVENUES ARE GONNA BE, WHAT WE THINK OUR PROPOSED EXPENSES WERE GONNA BE.

AND SO WE HAD CALCULATED THAT BASED ON OUR FORECAST.

UM, THE MISSING PIECE WAS OUR FEE SCHEDULE DID NOT INCLUDE ANY UPDATES THAT WOULD SUPPORT THAT REVENUE INCREASE.

IN OTHER WORDS, WE SAID TO BE DETERMINED AS WE WRAPPED UP OUR COST OF SERVICE STUDY.

SO NOW WE HAVE TO UPDATE OUR FEE SCHEDULE, UM, 'CAUSE ALL OF OUR FEES ARE DICTATED BY WHAT'S ON THE FEE SCHEDULE.

ONCE THE FEE SCHEDULE IS ADOPTED, THAT ALLOWS US TO, TO ACTUALLY CHARGE THOSE FEES.

AND SO WHAT

[01:10:01]

SO IT'S THE SECOND PIECE OF MAKING SURE THAT THE FEES GENERATE THE REVENUE WE THOUGHT WE NEEDED.

UM, I, I DON'T THINK WE HAVE ANY OTHER QUESTIONS.

I, ALRIGHT.

I KNOW THAT WAS A LOT.

THIS NEXT ONE WILL GO A WHOLE LOT QUICKER.

DO YOU WANT THAT DISPLAYED AS WELL? UH, YES.

UM, AND NEXT ONE, UM, I FOCUS ON, ON THE FIRST PAGE, SO I DUNNO IF YOU WANNA CALL YEAH, I KNOW.

OH, SURE.

UM, ONE MORE QUESTION ABOUT SURE.

THE RATES IS THIS, UH, COMPLETE AT THIS POINT? WE ARE DOING RECONCILIATIONS, YES.

UM, TO, AGAIN, MAKE SURE THAT THE RATES WILL RECOVER THE REVENUE.

UM, BUT WE ANTICIPATE THAT THESE RATES, NOW I DIDN'T, I DIDN'T GO INTO THE DETAIL OF EVERY LARGE VOLUME CUSTOMER, SO, UH, WE DIDN'T PROVIDE ALL THE RATES, UM, THAT WOULD BE INCLUDED ON THE FEE SCHEDULE.

BUT YES, WE, WE, WE BELIEVE WE'RE, YOU KNOW, WE'RE WRAPPING UP THE COST OF SERVICE PROCESS THAT'S GIVEN US THE INFORMATION WE NEED TO FINALIZE OUR FEE SCHEDULE.

AND WE'RE, WE'RE WORKING TO DO THAT BY END OF THE WEEK.

AND THAT WILL, UM, BE AMENDED TO THE BUDGET, CORRECT.

ONCE 'CAUSE IT'S COMING IN JUST BEHIND THE YES.

NUMBER THREE, AUSTIN WATER CAPITAL SPENDING PLAN UPDATE.

SUSAN, I HAVE ONE QUICK QUESTION THAT I JUST THOUGHT OF.

UM, IS THERE PLANS IN THE FUTURE TO, UM, TRY TO GET NON-RESIDENTIAL CUSTOMERS THAT DON'T HAVE IRRIGATION METERS TO PUT THEM IN? YEAH, I THINK SO.

I THINK THE WAY, THE BEST WAY AT GETTING AT THAT, BECAUSE, YOU KNOW ALL OF OUR CUSTOMERS ARE DIFFERENT, AND NOT ALL OF OUR CUSTOMERS HAVE IRRIGATION METERS.

UM, WHAT OUR A MI METER INFRASTRUCTURE WILL ALLOW US TO DO IS HAVE A BETTER SENSE OF ALL OF OUR CUSTOMERS DEMANDS, BOTH DURING OFF PEAK PERIODS, AND, UM, AND WE ALREADY DO, YOU KNOW, WINTER AVERAGING FOR, FOR WASTEWATER.

SO WE HAVE A SENSE OF WHAT CUSTOMERS, UM, YOU KNOW, OUR, OUR MULTIFAMILY COMMERCIAL AND, AND LARGE VOLUME CUSTOMERS, YOU KNOW, WINTER AVERAGES OR, OR NON-PEAK DEMAND IS.

UM, SO WE THINK THAT A BETTER WAY TO GET AT THOSE CUSTOMER CLASSES IS WITH WATER BUDGETING.

SO, UH, AND THE A MI METER DATA WILL, WILL KIND OF REINFORCE WHAT WE ALREADY DO FROM A WINTER AVERAGING PERSPECTIVE AND ALLOW US TO SET A BUDGET BY CUSTOMER, UM, THAT GETS AT THEIR, UM, YOU KNOW, NON-DISCRETIONARY USE THEIR, THEIR TYPICAL DEMAND LOOK TO SEE WHAT KIND OF INCREASES THEY HAVE DURING IRRIGATION PERIODS, AND THEN SET A, A UNIQUE PRICING STRUCTURE FOR THOSE CUSTOMERS AS, AS THEY GO ABOVE THEIR BUDGET THAT WE WOULD GET A, WE WOULD BE ABLE TO BETTER GET AT, UM, YOU KNOW, THEIR DISCRETIONARY USE.

AND IT'S GOT IT, THAT'S GONNA TAKE FULL IMPLEMENTATION OF OUR A MI SYSTEM.

AND THEN, UM, OUR, OUR UTILITY BILLING SYSTEM IS, IS SET UP TO DO IT.

WE WOULD JUST NEED TO GET THE CUSTOMER LEVEL DATA LOADED IN.

UM, SO IT'S NOT SOMETHING THAT, FOR EXAMPLE, WE THINK WE COULD DO NEXT YEAR, BUT, BUT I THINK WITHIN THE NEXT TWO TO THREE YEARS HAVE A BETTER WAY AT GETTING AT ALL OF OUR CUSTOMERS AND NOT JUST THE ONES THAT ARE NEWER DEVELOPMENTS THAT ALREADY HAVE AN IRRIGATION METER.

UH, MOVING ON TO ITEM

[3. Austin Water Capital Spending Plan Update]

ALRIGHT.

AND, AND SO FOR THIS, UM, FOR THIS, UM, DOCUMENT, THE FIRST PAGE PROVIDES A HIGH LEVEL SUMMARY OF OUR PROPOSED CAPITAL SPENDING PLAN.

AND THIS WAS INCLUDED, UM, IN OUR, OUR, OUR FORECAST.

IT HASN'T CHANGED.

UM, YOU KNOW, AS WE MOVE FROM FORECAST TO TO, TO BUDGET, WE SET OUR, OUR CAPITAL SPENDING PLAN PRETTY EARLY BECAUSE IT HAS A BIG IMPACT ON OUR OVERALL BUDGET, BOTH IN TERMS OF DEBT SERVICE AND IN TERMS OF CASH FINANCING.

UM, SO, UM, YOU KNOW, AND WE, WE PROVIDED, UH, A HIGH LEVEL SUMMARY, NOT, UH, SO THIS IS A LITTLE BIT MORE DETAILED, GETTING INTO SPECIFIC COMPONENTS.

FOR EXAMPLE, WHAT WE'RE, WHAT WE ANTICIPATE HAPPENING FROM A TREATMENT PLANT PERSPECTIVE, BOTH ON THE WATER AND THE WASTEWATER SIDE.

SO THIS IS A LITTLE BIT MORE DETAILED THAN WE PROVIDED AT THE LAST MEETING, BUT YOU CAN SEE THAT THE 2.3 BILLION, OH, OVER THE FIVE YEAR, UM, CAPITAL SPENDING

[01:15:01]

PLAN PERIOD, UH, PEAKING IN, UH, FISCAL YEAR 27, WHICH IS, UH, WHEN WE EXPECT, UM, YOU KNOW, WALNUT CREEK EXPANSION TO BE, UM, AT ITS PEAK IN TERMS OF, OF, UM, COST.

AND, UM, AND, AND SO YOU CAN ALSO SEE, UM, THAT, UM, BECAUSE WALNUT CREEK IS, IS AGAIN ABOUT A BILLION DOLLAR PROJECT THAT, UH, IF YOU BACKED THAT OUT, THAT OUR INVESTMENT IN, UM, OR WATER INFRASTRUCTURE AND OUR INVESTMENT IN THE WASTEWATER INFRASTRUCTURE WOULD BE REALLY PRETTY CLOSE.

UM, IN ADDITION, UM, YOU KNOW, WE'VE GOT ABOUT 56 MILLION ON RECLAIMED.

WHAT I WILL SAY IS, AGAIN, THE CAPITAL SPENDING PLAN WAS DEVELOPED, UM, IN ADVANCE OF OUR FORECAST.

SO, UM, WHEN IT WAS DEVELOPED, WE HAD NOT YET IMPLEMENTED, UM, THE, THE PURPLE CHOICE COMMUNITY BENEFIT CHARGE RATE.

SO WHAT YOU DON'T SEE HERE IS INCREASE INVESTMENTS IN OUR RECLAIMED NETWORK YET, UM, THAT WE ANTICIPATE, YOU KNOW, WE WILL, WE'LL SEE THE BENEFIT OF FROM, FROM THAT GO PURPLE, UH, COMMUNITY BENEFIT CHARGE REVENUE.

AND SO I WOULD EXPECT THAT TO START TO FLOW IN WITH NEXT YEAR'S CAPITAL SPENDING PLAN.

NOW THE REST OF THE DOCUMENT LIST AND, AND WE CAN GO FORWARD ONE PAGE JUST TO GIVE YOU A SENSE OF, OF HOW IT LOOKS.

IT'S PRETTY SMALL, UM, BUT IT LISTS EVERY, EVERY PROJECT INCLUDED IN, IN OUR CAPITAL SPENDING PLAN.

AND IF YOU'VE HAD A CHANCE TO LOOK THROUGH IT AND, AND IF YOU HAVE ANY QUESTIONS THAT, UM, YOU TRY AND ANSWER QUESTIONS AS AS, AS BEST I CAN.

UH, BUT IF NOT, IF YOU, IF YOU, AS YOU LOOK THROUGH IT, YOU HAVE QUESTIONS, UM, WE, WE CAN CERTAINLY, WE WILL TURN AROUND RESPONSES TO ANY QUESTIONS ABOUT SPECIFIC CAPITAL PROJECTS AS QUICKLY AS WE CAN.

OH, THAT'S A LOT.

UM, YEAH, WE DO, WE DO A LOT OF PROJECTS.

ME TOO.

UH, I DON'T HAVE ANY QUESTIONS.

COMMISSIONERS, DO YOU HAVE ANY QUESTIONS ON THIS? UH, I, I DIDN'T GO THROUGH IT, BUT LINE BY LINE.

BUT , IF I HAVE QUESTIONS, I'LL GIVE BACK TO YOU.

THANK YOU THOUGH, THIS IS HELPFUL.

JUST, I MEAN, IN LOOKING AT THE RATE CHANGES, AND OBVIOUSLY, YOU KNOW, WE HAVE TO, WHEN WE REPORT TO COUNCIL MEMBERS AND WHATNOT, IF THEY HAVE QUESTIONS, THIS IS GOOD INFORMATION, IT'S BACK UP FOR, FOR WHY EVERYTHING'S HAPPENING AND WHY THINGS ARE INCREASING.

SO THANK YOU.

ABSOLUTELY.

WITH NO MORE QUESTIONS, I AM EXCITED ABOUT THE RE RECLAIMED WATER INITIATIVE AND LIKE YOU SAID, NEXT YEAR WE'LL PROBABLY SEE ALL THAT BUMP UP A LITTLE BIT.

NUMBER FOUR, DISCUSSION OF THE WATER AND WASTEWATER COMMISSION BUDGET RECOMMENDATION REPORT.

UM, SO THE, AS AS SONG LEE MENTIONED, IN TERMS OF THE OPERATIONAL CHANGES, SO THE, THE GO PURPLE COMMUNITY WEALTH OF CHARGE WILL GENERATE, UM, YOU KNOW, A LITTLE OVER 10 MILLION.

ABOUT 4 MILLION WILL, WILL GO FOR INCENTIVES FOR, UM, ONSITE REUSE AND, YOU KNOW, DOING FOR NEW DEVELOPMENTS OR EXISTING DEVELOPMENTS.

UM, AND RIGHT NOW WE'RE ALLOCATING ABOUT SIX AND A HALF MILLION, UM, EITHER INTO, UM, OUR CAPITAL, OUR RECLAIM CAPITAL PROGRAM.

SO IT WILL BE THERE AS WE START TO SEE NEW PROJECTS.

UM, AND IF WE DON'T SEE A BIG UPTICK LIKE RIGHT AWAY, WE CAN ALSO USE IT TO DEFE DEBT.

UM, 'CAUSE DEBT SERVICE IS THE BIGGEST EXPENSE FOR OUR RECLAIMED FUND.

UM, YOU KNOW, AN ANNUAL DEBT SERVICE FOR RECLAIMED IS ABOUT $8 MILLION.

UM, AROUND 6 MILLION OF THAT IS SUBSIDIZED FROM, FROM THE WATER FUND, UM, BECAUSE OF, UM, YOU KNOW, BECAUSE IT'S AN EXTENSION OF OUR WATER SUPPLY.

SO, UM, WE WILL ALMOST BE DOUBLING, YOU KNOW, THE CAPACITY IN TERMS OF DEBT SERVICE.

THAT'S GOOD.

VERY GOOD.

WITH NO MORE QUESTIONS, WE'LL MOVE TO ITEM

[4. Discussion of the Water and Wastewater Commission Budget Recommendations Report]

RIGHT.

AND SO WE DIDN'T INCLUDE THIS AS, UM, A, A, A DOCUMENT 'CAUSE IT WOULD STILL BE LAST YEAR'S DOCUMENT, BUT WE'LL SEND YOU OUT THE LAST YEAR'S DOCUMENT AND, AND AS WE HAVE IN THE PAST.

UM, YOU KNOW, IF THERE'S ANYTHING YOU WANT TO PRIORITIZE, YOU'LL CERTAINLY GIVE YOU AN OPPORTUNITY TO MAKE CHANGES.

WE'LL, WE'LL GO IN AND PROVIDE, UM, INFORMATION, YOU KNOW, SPECIFIC NUMBERS, UM, THAT, YOU KNOW, YOU WOULDN'T HAVE OR, UM, AND, AND, UM, AND THEN WE, AS FOR, FOR OUR NEW COMMISSIONERS TO, TO THE COMMITTEE, IT'S, IT'S HISTORICALLY BEEN KIND OF A BACK AND FORTH PROCESS WHERE, UM, YOU KNOW, THE COMMITTEE AND, AND THE CHAIR, UM, FOCUS ON ON THE PRIORITIES THAT THEY WANT TO INCLUDE IN THE RECOMMENDATION.

[01:20:01]

THE RECOMMENDATION, UM, YOU KNOW, GOES ALONG WITH, UM, THE COMMISSION'S RECOMMENDATION OR OR NON RECOMMENDATION OF OUR BUDGET, UM, THAT WOULD GO TO COUNCIL.

AND, AND THE, THE RECOMMENDATION JUST KIND OF OUTLINES, UM, BUDGET HIGHLIGHTS, UM, YOU KNOW, MAYBE KEY CONCERNS OR INITIATIVES.

AND, AND SO IT'S KIND OF A BACK AND FORTH PROCESS WHERE WE, WE LOOK AT YOUR PRIORITIES, UM, WE PROVIDE NUMBERS, UM, YOU KNOW, FROM FROM THE BUDGET THAT, THAT CORRESPOND TO, TO THOSE PRIORITIES.

, UM, COMMISSIONERS TO TALK ABOUT THE, THE AGENDA, THE, THE AGENDA, THE TABLE OF CONTENTS OF THIS RECOMMENDATION.

UM, I'D LIKE TO LAY OUT WHAT I SEE AS THE TOPICS THAT ARE ON THIS RECOMMENDATION AND SEE IF YOU AGREE AND IF YOU MAY WANNA ADD ANY ADDITIONAL TOPICS.

SO, UM, OBVIOUSLY THE, THE FIRST THING I'D LIKE TO TALK ABOUT IS THE, UM, THE DIFFERENCES IN THIS YEAR'S BUDGET COMPARED TO LAST.

UM, SO BASICALLY WHAT WE COVERED ON ITEM GEN NUMBER ONE, UH, JUST ONLY THE ITEMS THAT ARE SIGNIFICANTLY DIFFERENT AND WITH A LITTLE BIT OF EXPLANATION OF WHY, UM, IN PARTICULAR, UH, I LIKE TO TALK ABOUT THE FULL-TIME EMPLOYEES.

UM, I DON'T REALLY WANNA FOCUS TOO MUCH ON WHAT THE BUDGET FINANCE GROUP TOLD US WE CAN AND CAN'T DO BECAUSE COUNCIL, THAT'S REALLY OUT OF OUR HANDS.

UM, SO FOR EXAMPLE, THE, THE, UM, INFLATION, UH, WE WERE INSTRUCTED NOT TO ADD THAT TO OUR BUDGET, RIGHT? WELL, SO THE INFLATION IS KIND OF A PLACEHOLDER IN OUR FORECAST PROCESS.

SO WE DON'T KNOW ALL OF THE INCREASES THAT, THAT WE SEE, UM, IN TERMS OF NEW CONTRACTS.

SO THAT INFLATIONARY ADJUSTMENT IS REALLY MORE OF A PLACEHOLDER BECAUSE WE KNOW THERE'S INCREASES.

WE JUST DON'T KNOW IF IT'S GONNA BE, YOU KNOW, HOW MUCH OF IT'S GONNA BE IN CHEMICALS VERSUS, UM, YOU KNOW, VERSUS LINE DETECTION.

UM, SO IT WASN'T NECESSARILY SOMETHING THAT WE WERE ASKED TO TAKE OUT.

IT WAS, IT WAS OUR HIGH LEVEL ESTIMATE FOR FORECAST THAT IS BETTER REFINED AS WE, AS WE FINALIZE OUR BUDGET.

SO THAT'S WHY IT COMES OUT.

WE'RE GENERALLY ON TRACK FOR ABOUT $30 MILLION AGAIN, SO, SO WE LOST ABOUT A QUARTER OF OUR CAPITAL RECOVERY FEES, WHICH FROM A REVENUE REQUIREMENT PERSPECTIVE, WHEN YOU CONSIDER DEBT SERVICE COVERAGE AT ONE, YOU KNOW, OUR, OUR FINANCIAL POLICY TARGET OF 1 7 5, UM, $10 MILLION OF DE FEES, ADDITIONAL DE FEES DEBT ACTUALLY SAVES US ABOUT 17 AND A HALF MILLION DOLLARS, UM, IN, IN TERMS OF REVENUE REQUIREMENTS.

UM, SO YEAH, SO THE FIRST SECTION WOULD TALK ABOUT THE CHANGES THAT WERE DIFFERENT, SIGNIFICANT, AND THEN, UM, I DEFINITELY THINK WE SHOULD HAVE A LITTLE BIT ON THE COST OF SERVICE UPDATE.

UM, AND UM, I USUALLY TALK ABOUT DEBT AND WHAT WE'VE DONE THE NUMBERS THERE FOR THE YEAR.

UM, SO I'D LIKE TO INCLUDE THAT AS WELL.

UM, THE CAPITAL IMPROVEMENT SPENDING PLAN, I, I THINK MAYBE WE CAN TOUCH ON THE, UM, RECLAIM WATER, ALTHOUGH MAYBE NOT 'CAUSE IT'S REALLY NEXT YEAR WHEN WE'RE GONNA SEE SOMETHING IN THAT AREA.

UM, BUT I THINK WE SHOULD HIGHLIGHT FROM THE COST OF SERVICE UPDATE, HOW WE'RE FINANCING, FOR EXAMPLE, WALNUT CREEK BEING SUCH A BIG, BIG PROJECT, I THINK IT'D BE REALLY GOOD TO TOUCH ON THAT.

UM, AND THAT'S WHAT COMES TO MIND TO ME.

DOES ANYTHING, DOES IT, DO YOU DO COMMISSIONERS? DO YOU HAVE ANY COMMENTS ON WHAT I SUGGESTED OR ANY ADDITIONS OR THOUGHTS? I THINK JUST EXPLAINING THAT WALNUT CREEK IS DRIVING A LOT OF THE CHANGES, BUT THINK YOU GUYS DO THAT REGULARLY ANYWAY.

, RIGHT? YEAH.

WAL WALNUT CREEK IS, IS CERTAINLY A BIG DRIVER.

UM, AND I THINK WE TALKED ABOUT THIS LAST TIME, UH, BUT IN TERMS OF OUR, OUR DEBT MANAGEMENT, UM, YOU KNOW, ONE OF OUR, OR OUR BIGGEST TOOL IN TERMS OF DEBT MANAGEMENT, CAPITAL RECOVERY FEES FOR DEFIANCE, UM, YOU KNOW, WE'VE SEEN A SLOWDOWN IN TERMS OF DEVELOPMENT, UH, RELATED TO INTEREST RATES AND, AND THE ECONOMY.

UM, FROM FISCAL YEAR 20 THROUGH 20, UM, TO EVEN 19 THROUGH 22, WE AVERAGED ABOUT $40 MILLION A YEAR IN CAPITAL RECOVERY FEES.

NOW RECALL WE USED CAPITAL RECOVERY FEES TO, TO DEFE DEBT, UM, ESSENTIALLY TO CREATE CAPACITY FOR OUR NEW PROJECTS, UM, AND, AND TRY AND LEVELIZE DEBT.

UM, BUT IN 23, CAPITAL RECOVERY FEES CAME IN ABOUT $30 MILLION.

UM, AND WE'RE ON TRACK,

[01:25:01]

AND SO, UM, IN ADDITION TO WALNUT AND THE INCREASED CAPITAL DELIVERY COSTS, UM, WE, WE HAVE A LITTLE BIT LESS RESOURCES TO WORK WITH TO MANAGE OUR DEBT LEVELS.

AND SO I THINK, UM, YOU KNOW, WHEN YOU TALKED ABOUT DEBT, I THINK THAT'S SOMETHING THAT, UM, HIGHLIGHT, YOU MAY WANNA HIGHLIGHT.

DEFINITELY.

UM, SO IT, IT MIGHT BE A LITTLE QUITE A BIT DIFFERENT IN THE LAST YEAR, NOT QUITE A BIT, BUT SOME AREAS, UH, ANY OTHER COMMENTS COMMISSIONERS ON NO, NO.

SO THE CA THE, UH, CUSTOMER ASSISTANCE PROGRAM IS THAT MUCH DIFFERENT THIS COMING YEAR THAN IT HAS BEEN BEFORE AS FAR AS WHAT THE SAVINGS THAT THEY'LL SEE.

SO THEY, AGAIN, THEIR, THEIR BILL, WE ANTICIPATE THEIR BILL GOING UP FROM $39 UP TO, YOU KNOW, 47 AND CHANGE 47, 30 SOMETHING.

UM, SO IT'S, IT'S, UH, ABOUT AN $8 INCREASE.

UM, BUT THE OVERALL BILL DISCOUNT, UH, WILL BE ABOUT 49% AS COMPARED TO THE CURRENT BILL DISCOUNT AT FOUR 53%.

SO, UM, AND, AND AGAIN, AS I MENTIONED, UM, THAT AVERAGE CUSTOMER ASSISTANCE PROGRAM BILL WOULD STILL BE LESS THAN IT WAS IN 2018 WHEN WE HAD THE RATE REDUCTION, BUT THAT, THAT MAY BE SOMETHING SUSAN THAT WE WANT TO INCLUDE IS THE CAP.

AND ONE OF THE THINGS WE TALKED ABOUT AT, AT THE EXECUTIVE TEAM LEVEL WAS, YOU KNOW, AS, AS WE HAD, EVEN IN THE CURRENT YEAR, RIGHT, WE, WE HAD THE 4% INCREASE, UH, FOR RETAIL RATES.

UM, BUT WE DIDN'T APPLY THAT TO OUR CAP PROGRAM AND OUR CAP BILLS BECAUSE WE WANTED TO GET THROUGH THE COST OF SERVICE STUDY.

UM, BUT BECAUSE OF SOME OF THE CHANGES OVER TIME, WE'VE KIND OF LOST, UM, KIND OF OUR, YOU KNOW, GUIDELINES IN TERMS OF HOW SHOULD WE BE SETTING, UM, YOU KNOW, OUR CUSTOMER ASSISTANCE PROGRAM RATES.

YOU KNOW, WE, WE, WE HAD, UM, YOU KNOW, RATE REDUCTION ON THE CAP SIDE THAT WE DIDN'T HAVE ON, ON, UM, THE RESIDENTIAL SIDE.

UM, IN ADDITION WE HAD THE INCREASE THIS YEAR THAT WE DIDN'T HAVE.

SO, SO WE, YOU KNOW, WE'VE LOST THE, THE PERCENTAGE HAS INCREASED FROM 35% TO 53% OVER TIME.

AND SO ONE OF THE THINGS WE TALKED ABOUT WAS WHAT, WHAT'S THE RIGHT NUMBER? HOW SHOULD WE BE SETTING CAP CAP RATES? 'CAUSE WE'RE NOT ADJUSTING IT WHEN WE ADJUST RESIDENTIAL RATES, THEN THE BILL DISCOUNT IS, IS IS GETTING BIGGER.

AND, AND, AND THAT'S OKAY IF WE CAN AFFORD TO DO IT, BUT WHAT WE'VE SEEN WITH PROGRAM EXPANSION IS, UM, THERE'S A LOT MORE DEMANDS ON THE COMMUNITY BENEFIT CHARGE FUNDING.

AND SO IT'S, IT'S DIFFICULT TO MAINTAIN THE EXISTING LEVEL OF DISCOUNT WITHOUT, UM, YOU KNOW, HAVING SIGNIFICANT INCREASES ON THE COMMUNITY BENEFIT CHARGE.

AND SO, SO, AND WHEN YOU DO THAT, THAT INCREASES THE RESIDENTIAL BILL.

AND SO IT'S, IT'S THAT CIRCULAR, UM, YOU KNOW, CIRCULAR BILL SETTING PROCESS THAT I TALKED ABOUT EARLIER.

UM, THE CAP RATES AS COMPARED TO, UH, NON CAP RATES GOING FORWARD.

, RIGHT? WE DO HAVE THE, IS IS IT A WRITTEN GOAL ABOUT THE 50%? NO, UM, IT'S NOT, AND IT'S NOT ANYTHING THAT HAD BEEN FORMALLY EVEN BEEN SET.

LIKE, UM, IT'S JUST KIND OF EVOLVED OVER TIME AND WE HAVEN'T, SHAY WAS OUT WHEN, WHEN WE KIND OF, WHEN WE TALKED ABOUT IT, UH, AS, AS AN EXECUTIVE TEAM.

UM, SO I WOULDN'T EVEN SAY THAT WE'VE LANDED ON A 50% DISCOUNT.

THAT'S WHERE WE, THAT'S WHAT WE'RE PROPOSING TO TRY AND MINIMIZE, UM, THE CHANGE.

BUT THERE WILL BE MORE DISCUSSION CERTAINLY AT THE EXECUTIVE TEAM LEVEL ABOUT WHAT THE RIGHT GUIDELINE IS.

YOU KNOW, IF WE HAVE A FRAMEWORK THAT SAYS IT SHOULD BE, YOU KNOW, WHETHER IT'S A, A PERCENTAGE OF, OF BILL DISCOUNT OR WHETHER, WHETHER THE INDIVIDUAL RATES, YOU KNOW, TIER ONE IS 75% OF, YOU KNOW, RESIDENTIAL RATES.

WE WE'RE, WE'RE LOOKING TO DEVELOP A, UH, A BETTER FRAMEWORK TO, TO SET AND MANAGE,

[01:30:01]

UM, REVIEW AND POSSIBLE ACTIONS OF FUTURE MEETING SCHEDULE, UM, COMMISSIONERS.

ANY OTHER COMMENTS? UM, ITEM NUMBER FIVE,

[5. Review and possible action for future meeting schedule]

I DON'T THINK WE NEED, I DON'T THINK THERE'S ANY OTHER INFORMATION TO GO THROUGH.

UM, I DO THINK WE'LL HAVE A COORDINATED EFFORT WORKING ON THE RECOMMENDATION.

UM, SO I'LL TRY MY BEST TO COME UP WITH A DRAFT, UH, WITH JOSEPH'S HELP AND THEN WE'LL, WE'LL SEND IT OUT FOR YOU, YOU BOTH TO LOOK AT AND, AND ADD COMMENTS.

UM, DOES EVERYBODY AGREE WITH ME OR, YEAH.

NEXT ITEM IS NO LONGER, UH, RELEVANT.

UM, SO THE

[FUTURE AGENDA ITEMS]

IT SAYS FUTURE AGENDA ITEMS. I'M SURE YOU'RE GONNA BE PRESENTING THE, UM, RATES, THE COST OF SERVICE UPDATE TO THE REGULAR COMMISSION AT SOME POINT.