>> WE ARE READY TO GET STARTED.
[00:00:02]
TODAY IS THURSDAY, MAY 16, 2024.THIS IS A SPECIAL WORK SESSION TO DISCUSS SPECIFICALLY WATER RATES.
I AM CALLING THE MEETING TO ORDER AND GIVING NOTICE THAT WE MAY VOTE TO GO INTO EXECUTIVE SESSION, WHICH WILL NOT BE OPEN TO THE PUBLIC.
THIS IS STRICTLY FOR DISCUSSION AND CONSULTATION WITH THE CITY'S ATTORNEYS FOR LEGAL ADVICE ON ANY ITEM LISTED ON THE FOLLOWING AGENDA. CAN I HAVE ROLL CALL?
>> THANK YOU. I WILL LEAD US IN THE PLEDGE OF ALLEGIANCE AND THEN COUNCILMEMBER SWEET, IF YOU WOULD DO OUR MISSION STATEMENT, AND COUNCILMEMBER HARRIS, OUR LAND ACKNOWLEDGMENT.
>> THE MISSION OF THE CITY OF FLAGSTAFF IS TO PROTECT AND ENHANCE THE QUALITY OF LIFE FOR ALL.
>> MAYOR, I HAVE TO PULL UP THE LAND ACKNOWLEDGMENT BECAUSE I DON'T KNOW IT BY HEART.
THE FLAGSTAFF CITY COUNCIL HUMBLY ACKNOWLEDGES THE ANCESTRAL HOMELANDS OF THIS AREA'S INDIGENOUS NATIONS AND ORIGINAL STEWARDS.
THESE LANDS STILL INHABITED BY NATIVE DESCENDANTS, BORDER MOUNTAINS, SACRED TO INDIGENOUS PEOPLES.
WE HONOR THEM, THEIR LEGACIES, THEIR TRADITIONS, AND THEIR CONTINUED CONTRIBUTIONS.
WE CELEBRATE THEIR PAST, PRESENT, AND FUTURE GENERATIONS WHO WILL FOREVER KNOW THIS PLACE AS HOME.
>> THANK YOU. WE HAVE A HARD STOP TODAY AT 5:00 PM.
WE WILL HOPEFULLY WRAP UP BY THEN, BUT IF NOT, WE WILL HAVE TO CONTINUE THE CONVERSATION.
I DO HAVE SOME SPEAKER REQUEST CARDS, SO WE WILL TAKE PUBLIC COMMENT FOR THOSE OF YOU WHO WOULD LIKE TO SPEAK A LITTLE BIT LATER, BUT WE'RE GOING TO START WITH THE PRESENTATION. THANK YOU.
>> THANK YOU, MAYOR. MY NAME IS ERIN YOUNG.
[4. Water, Sewer, and Reclaimed Water Rates and Fees Study Special Work Session City staff and the City's Consultant, Stantec, are addressing questions from the City Council related to the assumptions used in the rate model. City staff and Stantec will facilitate a discussion on financial planning scenarios and how those might influence the outcome of the proposed rates for water, sewer, and reclaimed water rates and fees. The desired outcome is for the Council to provide their direction on the financial planning scenarios.]
I'M THE CITY WATER RESOURCES MANAGER.WE HAVE A THREE PART PRESENTATION FOR YOU, STARTING WITH AN UPDATE ON OUTREACH, AND THEN FOLLOWED BY A TALK THAT'S GEARED TO ANSWERING A LOT OF QUESTIONS WE'VE BEEN GETTING.
THAT'LL BE DELIVERED BY SHANNON JONES, OUR DIRECTOR, FOLLOWED BY STANTEC PRESENTING ON THE FOUR SCENARIOS THAT THEY RAN AS A SENSITIVITY ANALYSIS, WHICH WAS THE MAIN PURPOSE OF THIS MEETING.
WITH THAT, I'D LIKE TO INTRODUCE SARAH JABLON.
SHE IS OUR WATER SERVICES COMMUNITY ENGAGEMENT SPECIALIST.
ARE YOU THREE WEEKS TO THE JOB?
>> A MONTH. SHE HAS HIT THE GROUND RUNNING.
SHE'S AMAZING, AND SHE'LL PROVIDE YOU WITH AN UPDATE ON OUTREACH. THANK YOU.
>> THANKS, ERIN. HELLO, MAYOR.
I'M GOING TO PROVIDE YOU AN UPDATE ON OUTREACH WITHIN THE PAST I'D SAY A MONTH OR SO SINCE WE GAVE THE LAST OUTREACH UPDATE.
TO BEGIN WITH, WE DO HAVE A COMMUNITY DROP IN EVENT COMING UP THIS SATURDAY.
WE'RE HOSTING IT AT THE AQUAPLEX 11:00 TO 2:00.
I BELIEVE MAYOR THAT YOU ARE ALREADY PLANNING TO ATTEND, SO THANK YOU VERY MUCH AND I HOPE THAT WE'LL BE ABLE TO SEE COUNCIL MEMBERS THERE AS WELL.
WE'RE LOOKING FORWARD TO THIS EVENT.
WE'RE GOING TO HOPE FOR A LARGE TURNOUT.
WE HAVE CONTINUED TO HOLD MULTIPLE COMMUNITY ENGAGEMENT EVENTS.
MOST RECENTLY, EARTH DAY AT BUSHMASTER PARK.
WE MET WITH THE TOURISM COMMISSION AND THE FRIENDS OF FLAGSTAFF'S FUTURE.
WE MET WITH THE FRIENDS OF THE RIO AT SCHULTZ BASIN.
WE PARTICIPATED IN AN ADEQ ROADSHOW, MET WITH THE NORTHERN ARIZONA CLIMATE CHANGE ALLIANCE, THE AIRPORT COMMISSION.
AND THEN UPCOMING, WE HAVE OUR COMMUNITY DROP IN EVENT, AND IMMEDIATELY FOLLOWING THAT IN ADVISORY COMMITTEE MEETING WITH ECONA.
[00:05:02]
THESE ARE STATISTICS FROM TODAY.AS OF TODAY, WE HAVE HAD OVER 9,000 VISITORS TO OUR SITE, ALMOST 6,000 WITHIN THE LAST 30 DAYS, AND I BELIEVE ABOUT 1,850 IN THE PAST WEEK.
I DIDN'T INCLUDE A CHART, BUT IF YOU LOOK AT THE STATISTICS OF SITE VISITS, IT'S GOING UP LIKE THIS.
WE HAVE CONTINUED TO HAVE INCREASED VISITATION.
WHEN PEOPLE GO TO OUR SITE, THEY CAN WATCH PAST MEETINGS, SEE UPCOMING ENGAGEMENT OPPORTUNITIES, RESOURCES.
MOST NOTABLY, WE POSTED THE RATE CALCULATOR. IT WORKS.
PEOPLE HAVE BEEN USING IT AND INFORMING US AND ASKING QUESTIONS, SO THAT'S GREAT AND WE ALSO HAVE POSTED THE DRAFT REPORT AND APPENDICES.
>> CAN I CLARIFY THAT YOU'RE TALKING ABOUT FLAGSTAFF CLEAN WATER?
>> YES, THIS IS CLEANWATERFLAGSTAFF.COM.
CAN YOU ALSO GET TO THAT SITE FROM WATER SERVICES ON THE CITY'S WEBSITE?
THE APPENDICES IN THE REPORT ARE POSTED ON THE CITY WEBSITE, BUT THE CALCULATOR IS LOCATED WITHIN CLEAN WATER FLAGSTAFF, WHICH IS JUST A CLICK AWAY.
>> ALL OF THAT INFORMATION IS THERE.
>> JUST A REAL QUICK QUESTION.
I TALKED TO A COUPLE OF PEOPLE WHO HAVE BEEN HAVING ISSUES WITH THE RATE CALCULATOR.
WILL THERE BE A VIDEO COMING SOON THAT MAYBE YOU CAN WALK THEM THROUGH?
>> YES, THERE WILL BE, AND SO THAT'S IN JUST A FEW SLIDES.
SO I WILL BE TOUCHING ON THAT. YES.
>> EXCUSE ME. BEFORE YOU CONTINUE.
[LAUGHTER] SORRY. COUNCILMEMBER HOUSE ALSO HAS A QUESTION.
I WAS JUST WONDERING WHAT THE OUTREACH METHOD WAS FOR ENGAGING WITH SOME OF THE LOCAL NEIGHBORHOODS AND COMMUNITIES TO ENSURE THAT FOLKS ARE KNOWING THAT THIS IS THE WEBSITE TO GO TO AND HAVE ACCESS TO THAT.
>> YEAH, I'M GOING TO GO TO THE NEXT SLIDE, WHICH IS OUR MARKETING AND ADVERTISING.
SO WE HAVE PUT OUT DIGITAL ADS.
WE HAVE DONE SOCIAL MEDIA BLASTS.
WE HAVE RADIO ADVERTISEMENTS AS WELL WITH KNAU.
WE PRINTED WATER BILL INSERTS WHICH WENT THROUGH MAIL INSERTS.
AND WE ALSO DISTRIBUTED FLYERS DOWNTOWN AT VARIOUS LOCAL BUSINESSES AND MAJOR POINTS WITHIN THE COMMUNITY.
DOES THAT ANSWER YOUR QUESTION COUNCILMEMBER HOUSE?
>> THANK YOU. HOLD ON, NOT YET. [LAUGHTER] SHANNON ANDERSON.
>> MAYOR, I JUST WANTED TO QUICKLY ADD BECAUSE BEFORE SARAH JOINED OUR TEAM, WE ALSO TALKED ABOUT DOING A SPECIFIC POSTCARD.
THAT WAS MAILED TO OUR SOUTH SIDE NEIGHBORHOODS AS WELL AS OUR SUNNYSIDE NEIGHBORHOODS, AND IT WAS INTRODUCING THE CLEAN WATER FLAGSTAFF WEBSITE, AS WELL AS THE RATE CALCULATOR.
SO WE DID DO SOME VERY SPECIFIED OUTREACH AS WELL, BASED ON SOME FEEDBACK THAT WE RECEIVED FROM COUNCIL. THANKS, SHANNON.
>> [LAUGHTER] WITHIN OUR DIGITAL AD CAMPAIGN, WE'VE HAD 259,000 TOTAL IMPRESSIONS TO DATE AND 1,353 CLICKS.
THIS AD CAMPAIGN BEGAN IN APRIL 17, AND IT WENT UNTIL MAY 15.
THEN MOVING ON TO YOUR QUESTION ABOUT VIDEOS, WE HAVE COMPLETED A VIDEO FOR RESIDENTS THAT'S GEARED TOWARDS RESIDENTS, HOW THE RATE CHANGE WILL IMPACT YOU.
WE ARE WORKING CURRENTLY ON THE CALCULATOR DEMO THAT IS PROJECTED TO BE COMPLETED BY SATURDAY'S EVENT.
WHEN PEOPLE ATTEND ON SATURDAY, THEY'LL BE ABLE TO VIEW THAT.
IT WILL ALSO BE MADE AVAILABLE ON BOTH OF OUR WEBSITES, AND ALSO THROUGH EMAIL OUTREACH, ETC.
ALSO WE HAVE AN UPCOMING VIDEO SPECIFICALLY FOR BUSINESSES AND DEVELOPERS.
WE MAY BE REQUESTING SOME HELP FOR THAT UPCOMING VIDEO.
I'M GOING TO SHOW YOU A MINUTE AND A HALF VIDEO ON FUTURE OF WATER RATE STUDY FOR RESIDENTS.
AND THEN THAT WILL CONCLUDE MY PRESENTATION AND WE CAN FINISH WITH MORE QUESTIONS IF YOU HAVE THEM.
[MUSIC] IF YOU'RE A FLAGSTAFF RESIDENT, YOU MAY BE WONDERING ABOUT UPCOMING CHANGES TO YOUR WATER BILL.
THE PROPOSED RATE CHANGES IMPACT DRINKING WATER, WASTEWATER, AND RECLAIMED WATER SERVICES.
FLAGSTAFF HAS NOT SEEN AN INCREASE IN WATER AND SEWER RATES SINCE 2020.
MEANWHILE, WE HAVE SEEN RISING COSTS DUE TO INFLATION AND COST ESCALATION FOR MATERIALS.
THESE RISING COSTS HAVE BEEN ABSORBED BY DELAYING CRITICAL PROJECTS AND PUTTING OFF MAINTENANCE, BUT THIS IS NOT SUSTAINABLE IN THE LONG RUN.
[00:10:02]
FLAGSTAFF'S CITY COUNCIL HAS MET NUMEROUS TIMES TO CONSIDER THE NEW RATE PROPOSALS.WATER SERVICES SHARED CONCERNS FROM CUSTOMERS AND COUNCIL MEETINGS, AND COUNCIL PRIORITIZED REDUCING THE IMPACT TO RESIDENTS WHO USE WATER EFFICIENTLY IN THEIR HOME.
THE PROPOSED WATER, WASTEWATER, AND RECLAIMED WATER RATE CHANGES WILL ULTIMATELY SAVE CUSTOMERS MONEY FROM THE COST OF DEFERRED MAINTENANCE.
THESE NEW RATES WILL PAY FOR THE REPLACEMENT OF AGING INFRASTRUCTURE, IMPROVING THE RESILIENCE OF OUR WATER SYSTEMS, AND PREVENTING COSTLY SYSTEM FAILURES.
INVESTING IN OUR WATER SYSTEMS NOW MEANS WE ARE BETTER POSITIONED TO PROVIDE SAFE, HIGH QUALITY DRINKING AND RECLAIMED WATER TO CUSTOMERS, FULFILL STATE AND FEDERAL REGULATORY REQUIREMENTS, INVEST IN EFFICIENCY, AND SECURE A RELIABLE WATER SUPPLY NOW AND INTO THE FUTURE.
>> THANK YOU. A COUPLE OF QUESTIONS.
ON THOSE MAILERS, DID WE SEND ANY MAILERS OUT TO THE BUSINESS COMMUNITY?
>> I BELIEVE WE'VE BEEN USING OUR CONSTANT CONTACT TO GO OUT TO THE BUSINESS COMMUNITY.
I CAN PULL UP THOSE LISTS OF INDIVIDUALS THAT WE'VE BEEN COMMUNICATING TO FROM OUR PREVIOUS PRESENTATIONS, AND I'LL PUT IT IN THE CHAT FOR YOU.
>> THEN THE VIDEO IS VERY GOOD, AND I THINK WE ALL GET ON BOARD WITH SAYING, YES, WE NEED THESE CAPITAL IMPROVEMENT PROJECTS UNTIL PEOPLE FIND OUT HOW MUCH IT'S GOING TO COST.
I WAS HOPING FOR A LITTLE BIT MORE EMPHASIS ON, PLEASE CHECK IT OUT.
ALSO ON THE RATE CALCULATOR, I'VE HAD A LOT OF FEEDBACK.
I FOUND THIS AS WELL, THAT IT WASN'T REALLY CLEAR THAT WE HAD TO GO YEAR-OVER-YEAR BECAUSE OF THE COMPOUNDING RATE INCREASE.
THEY JUST DO IT ONE TIME AND THINK THAT'S WHAT THEIR INCREASE IS GOING TO BE.
IF THERE WAS ANY WAY WE COULD ADD THAT TO THE CALCULATOR, THAT WOULD BE GREAT.
>> ABSOLUTELY. THAT INFORMATION WILL BE WITHIN THE DEMO, AND WE CAN ALSO MAKE IT A LITTLE BIT MORE CLEAR WITHIN THE WEBSITE AS WELL.
CAN YOU REPEAT YOUR FIRST COMMENT?
>> THE FIRST COMMENT WAS SENDING OUT MAILERS TO NOTIFY THE BUSINESS COMMUNITY BECAUSE THEY'RE GOING TO LESS MOST IMPACTED.
>> SORRY, YOUR SECOND COMMENT.
>> JUST SO YOU KNOW, SANTEK HAS BEEN WORKING ON THAT.
YOU ONLY RUN IT ONCE AND YOU SEE THE FIVE-YEAR IMPACT ALL AT ONCE, BUT IT'S COMPLEX.
WE HAVEN'T MADE THAT HAPPEN YET, AND I THINK AUDREY IS TRYING TO GET US SOMETHING PROBABLY EARLY NEXT WEEK, I'M GUESSING, BUT WE ARE WORKING ON IT.
>> BECAUSE WHEN PEOPLE GO THROUGH THE CALCULATOR AND THEY DO THE YEAR THAT IT'S DEFAULTED TO, THAT'S JUST ONE IMPACT, BUT THAT ISN'T THE REAL PICTURE OR THE BIG PICTURE, AND SO THEY'RE GLAZING OVER THE IMPACT BECAUSE THEY DON'T REALIZE THAT IT GOES FROM THERE AND THEN INCREASES AGAIN AND AGAIN AND AGAIN.
>> WE TRIED TO PUT UP AT THE TOP THAT YOU CAN CYCLE THROUGH THE FIVE YEARS AND AT THE BOTTOM, SHOWING THAT IT WAS YEAR 1 OUT OF YEAR 5.
BUT HAVING IT PRESENT ITSELF ALL AT ONCE, WE'VE HEARD THAT FEEDBACK AND WE'RE TRYING, BUT THE BACKEND CALCULATION IS NOT AS SIMPLE AS SOME OF THE OTHER PARTS OF IT FOR US TO UPDATE QUICKLY, BUT WE'RE WORKING ON THAT.
>> ANY OTHER QUESTIONS, COMMENTS? THANK YOU SO MUCH.
>> THANK YOU, SARAH. MAYOR, VICE MAYOR, CITY COUNCIL, SHANNON JONES, WATER SERVICES DIVISION DIRECTOR.
I WISH I WOULD HAVE THOUGHT OF THAT.
BUT WHAT I HAVE IS SPREADSHEETS AND SLIDES, AND SO WE WILL WORK WITH THAT.
I GET A CHANCE TO JUST SAY AGAIN SOME OF THE FRAMEWORK AGAIN ABOUT WHY.
WHY ARE WE HERE? WHAT ARE THE THINGS WE'RE WORKING THROUGH? IT STARTS AT A MORE HOLISTIC PICTURE OF LOOKING AT CITY SERVICES BECAUSE FOR MOST OF OUR DEPARTMENTS IN SOME FORM OR FASHION, WE'RE PROVIDING A SERVICE TO THE CITY.
THROUGH THOSE SERVICES, THEY ARE INTERCONNECTED.
THEY HAVE CAUSE AND EFFECT THAT RIPPLES THROUGH, WHETHER YOU'RE TALKING ABOUT THE FIRE DEPARTMENT AND THEIR CONNECTION WITH WATER SERVICES OR WATER SERVICES AND HOW WE IMPACT HOUSING.
THE WORKLOAD THAT WE PUT ON OUR ENGINEERING SECTION AS THEY HELP US TO COMPLETE SOME OF OUR PROJECTS.
THEY ARE INTERCONNECTED, ALL HELD TOGETHER BY COUNCIL'S POSITION TO LEAD AND GUIDE US THROUGH THOSE DIRECTIONS AND THE POLICIES ULTIMATELY TO ACHIEVE A GOAL OF A QUALITY OF LIFE FOR US ALL IN FLAGSTAFF.
[00:15:03]
A LITTLE BIT AGAIN ABOUT US, FOUR TREATMENT PLANTS; TWO DRINKING WATER, TWO WATER RECLAMATION FACILITIES, REALLY OVER 16 STORAGE TANKS OF STORING WATER THROUGHOUT OUR CITY, 30 DRINKING WATER WELLS, DEEP WATER DRINKING WATER WELLS DELIVERING WATER INTO OUR SYSTEM.WE CURRENTLY MAINTAIN ALMOST 450 MILES OF WATER DISTRIBUTION AND ALMOST 300 MILES OF SEWER COLLECTION SYSTEM ON AND ON.
IN ADDITION, I WOULD SAY OUR INDUSTRY IS A VERY HIGHLY REGULATED INDUSTRY.
A LOT OF BOTH FEDERAL, STATE, AND LOCAL GUIDANCE AND DIRECTION THAT WE TAKE VERY SERIOUSLY AND WE WORK TO STRIVE THAT WE'RE MEETING THOSE REGULATORY EXPECTATIONS ALL IN THE SENSE THAT WE'RE ABLE TO DO THAT THROUGH SUSTAINABILITY, THROUGH MULTIPLE LENSES, BUT SPECIFICALLY THAT WE'RE ABLE TO DO TOMORROW THE SERVICES THAT WE'RE DOING TODAY AND FIND WAYS TO DELIVER THOSE BETTER AND MORE EFFICIENTLY, AND DOING THAT THROUGH CONSERVATION.
AGAIN, KEEPING IN MIND THAT ALL THREE OF THESE ARE ENTERPRISE FUNDS WHERE THEY'RE EXPECTED TO PERFORM THOSE SERVICES BASED ON THE RATES THAT THEY RECEIVE IN ORDER TO DO THAT.
BUT UNLIKE MANY BUSINESSES, IT'S NOT PROFIT-DRIVEN, IT'S ABOUT THAT DELIVERY OF SERVICE, WHICH IS INTERESTING BECAUSE THROUGH CONSERVATION IS WHERE WE'RE ENCOURAGING PEOPLE TO USE LESS OF THE PRODUCT WE PROVIDE KNOWING THAT THERE'S A CONSEQUENCE AND A RIPPLE EFFECT THROUGH HOW REVENUES SUPPORT THE SERVICES THAT WE PROVIDE.
IT'S NOT OUR ABILITY JUST TO SELL MORE PRODUCT TO GET MORE REVENUE TO PROVIDE THE HIGHER LEVEL OF SERVICE.
COUNTER-INTUITIVE, WE ENCOURAGE PEOPLE TO USE LESS PRODUCT, AND WE STILL STRIVE TO ADD THOSE INNOVATIONS AND PROVIDE THAT RESILIENCY AND REDUNDANCY.
WE DO THAT WITH CURRENTLY 97 FULL-TIME EMPLOYEES WITHIN OUR DIVISION.
JUST TAKING A MINUTE TO AGAIN BREAK IT DOWN BETWEEN THE OPERATION AND MAINTENANCE VERSUS THE CAPITAL.
I KNOW CAPITAL HAS BEEN A BIG PART OF OUR CONVERSATIONS AND WE'LL CONTINUE THROUGH OUR PRESENTATIONS AND THROUGH THE LEVERS.
BUT KEEP IN MIND THAT WHEN WE LOOK AT OUR OPERATIONAL BUDGET, HOW WE FUND THE DAY-TO-DAY STUFF THAT OPERATORS AND OUR STAFF ARE WORKING, THAT THIS IS HOW WE FUND MODIFICATIONS AND OPERATIONS OF OUR PROCESS TREATMENT EQUIPMENTS, HOW WE UPGRADE AND MAINTAIN OUR BUILDINGS AND MATERIALS, HOW WE COVER OUR PARTS AND LABORS, OUR CONTRACT WORK, ALONG WITH OUR UTILITY-TYPE BILLS, CHEMICALS, SERVICING THE VEHICLES AND EQUIPMENT MACHINERY THAT WE USE DAILY TO PERFORM THOSE SERVICES AND HOW WE ALSO SUPPORT OUR PERSONNEL EXPENSES.
I DID PULL OUT FOUR OF THOSE PARTICULAR OPERATION COSTS BECAUSE THEY DO MAKE UP ALMOST 60% OF OUR OPERATING BUDGET FALL INTO THESE FOUR CATEGORIES AND I DID TAKE A LOOK BACK OVER THE LAST FIVE YEARS AND ADDED CURRENT WHERE WE'RE AT TODAY.
I'M SEEING THAT COST ESCALATION FROM BEING JUST UNDER THOSE FOUR FOR ALL THREE OF THOSE ENTERPRISE FUNDS JUST UNDER THE 10 MILLION TO EXCEEDING 12 MILLION AND FOR THIS CURRENT FISCAL YEAR, I THINK WE'VE STILL GOT ABOUT A MONTH AND A HALF LEFT WHERE THOSE EXPENSES ARE STILL COMING IN.
BUT YOU CAN SEE THAT ESCALATION, ESPECIALLY OVER THE LAST TWO YEARS.
WHAT HAPPENS WHEN WE HAVE INSUFFICIENT FUNDING, AND WHAT IS THE IMPACT ON THOSE OPERATIONAL COSTS? WHAT HAPPENS IS WE BEGIN TO DEFER THOSE REPAIR AND REPLACEMENT OF OUR AGING INFRASTRUCTURES AND WE BEGIN TO NEGLECT UPDATING OUR TECHNOLOGY WITHIN OUR FACILITIES AND WE BEGIN TO MOVE AWAY FROM THAT RESILIENCY AND ROBUSTNESS THAT WE'RE STRIVING TO MAINTAIN.
I THINK A PRIME EXAMPLE IS IN OUR FACILITIES THAT YOU HAVE BACKUP EQUIPMENT IN THE EVENT OF FAILURE AND SO YOU WILL HAVE TWO PUMPS THAT YOU NEED IN ORDER TO PROVIDE THE SERVICE AND YOU WILL HAVE A SPARE PUMP.
WHEN A PIECE OF EQUIPMENT FAILS, YOU BRING THE SPARE PUMP ONLINE AND YOU MAINTAIN THE SAME LEVEL OF SERVICE BUT IF YOU HAVE INADEQUATE FUNDING AND YOU'RE NOT ADDRESSING THAT SPARE WHEN THE NEXT FAILURE OCCURS, NOW YOU'VE MOVED INTO A MORE REACTIVE AND NOW YOU'VE CREATED A FIRE THAT YOU'RE HAVING TO INCREASE THE URGENCY OF GETTING THAT REPAIR.
WHEN WE HAVE INSUFFICIENT FUNDING, IT'S EASIER NOT TO INVEST IN THAT BECAUSE YOU ARE MEETING THE SERVICE AND THINGS SEEM TO BE OKAY ON THE SERVICE, BUT YOU BEGIN TO DEGRADE THAT RESILIENCY AND ROBUSTNESS AND ALL THE TIME DOING ALL OF THIS WITH YOUR LIMITED PERSONNEL RESOURCES.
WHEN THINGS ARE SUBSTANTIALLY FUNDED, IT ALLOWS US TO SHIFT OUR FOCUS TO THAT SUSTAINABLE USE DEVELOPING OUR WATER RESOURCES, MAKING SURE THAT WE'RE DOING EFFECTIVE METHODS IN ADMINISTRATION.
WE'RE NOT GOING THROUGH THOSE DRILLS, WHICH TAKES AWAY DISTRACTION, IT TAKES AWAY ENERGY, IT TAKES AWAY TIME WHEN WE'RE HAVING TO RESPOND INSTEAD OF WORKING THE PLANS THAT HAVE BEEN DEVELOPED.
WE CAN BEGIN TO MAKE SURE WE'RE PUTTING MORE EMPHASIS ON MAKING SURE WE'RE MEETING WATER QUALITY AND OUR TREATMENT GOALS, FINDING WAYS TO INVEST IN REPAIRING THAT AGING INFRASTRUCTURE AND MOVING MORE INTO ASSET MANAGEMENT, AND ALSO WORKING TO RETAIN OUR QUALIFIED STAFF AND MAKING SURE THAT WE'RE INVESTING INTO THE TRAININGS AND MAINTAINING THOSE RESOURCES.
[00:20:03]
A COUPLE OF FUN FACTS THAT I WOULD SHARE THAT COME OUT OF OUR ANNUAL REPORTS.FLAGSTAFF AVERAGES ABOUT SIX MAIN BREAKS PER 100 MILE A PIPE.
THAT EQUATES TO ABOUT 25 ANNUALLY.
AGAIN, THIS IS PART OF THE BUSINESS SAY WE'RE IN.
WE DO EXPECT IT TO MEAN MAIN BREAKS, AND WE ARE BUILT TO ADDRESS THOSE.
BUT ON THE OPERATIONAL SIDE, IF EACH ONE OF THOSE MAIN BREAKS COSTS ABOUT $100,000 TO DO A REPAIR, YOU'RE TALKING ABOUT $2.5 MILLION ANNUALLY, AND ADDRESSING THAT REACTION.
ON THE WASTEWATER SIDE, AGAIN, ALMOST 300 MILES OF SEWER LINE, 8,000 MANHOLES, PUT A FEW FEATURES THAT SHOW ROUTES, INTEGRATING INTO SEWER SYSTEMS, GREASE BACKUPS, AGING INFRASTRUCTURE THAT ALL AGAIN TIE INTO WHEN WE'RE ABLE TO FOCUS ON THE OPERATION AND MAINTENANCE, WE'RE ADDRESSING THESE THINGS IN A METHODICAL PROCESS AND NOT REACTING TO THE THINGS THAT HAPPEN WHEN THAT DOESN'T OCCUR.
THAT'S REALLY WHAT CAPITAL HELPS US TO ACCOMPLISH.
CAPITAL DOES ADDRESS CAPACITY NEEDS TO MEET THE COMMUNITY'S FUTURE.
IT DOES TAKE A LOOK AT THE MASTER PLANNING AND INCORPORATES THOSE PROJECTS IN BUT IT HELPS US TO ALSO BEGIN TO INVEST INTO THOSE WATER SUPPLIES AND THOSE COLLECTION SYSTEMS, INTEGRATING THAT ASSET MANAGEMENT, AGAIN, THAT MORE PROACTIVE APPROACH AND LESS REACTIVE AND FINDING WAYS TO INTEGRATE, AGAIN, MORE TECHNOLOGY AND INNOVATION AND OTHER THINGS THAT WE DO.
FOR OUR CIP, WE KNOW THAT THAT INCLUDES THE APPROVED, THE INFORMED, AND THE UNFUNDED, WHICH WILL BE A PART OF OUR CONVERSATION AS WE GO FURTHER INTO THE PRESENTATION.
BUT I WOULD LIKE TO MENTION THAT I WOULD SAY THAT THAT PLAN IS CONSERVATIVE, AND IT'S CONSERVATIVE ON A COUPLE OF MEASURES.
ONE, THE NUMBERS THAT ARE USED IN THE PLANS, I WILL SAY, DO NOT REFLECT 2024 NUMBERS.
WE THINK THE POINT OF TIME THAT WE'RE IN MAY NOT BE AS REPRESENTATIVE BUT ULTIMATELY, WE STILL NEED TO DRAW A LINE IN THE SAND, AND SO THOSE NUMBERS HAVE BEEN HELD IN PLACE.
I ALSO WOULD LIKE TO POINT OUT THAT THE CAPITAL IMPROVEMENT PLAN DOESN'T ALWAYS INDICATE ALL THE THINGS THAT HAVE TO HAPPEN.
THIS IS OUR PLAN THAT WE WORK TO CHOOSE, BUT WE DO KNOW, AND COUNSEL KNOWS AS WELL BECAUSE WE BRING THOSE BEFORE YOU WITH PROJECTS THAT COME UP THAT WE DO NEED TO EITHER PIVOT, ADDRESS, AND THEN WORK TO GET BACK TO THAT PLAN.
WHILE OUR CIP PLAN DOES RELY ON SOME EXTERNAL FUNDING, BOTH THROUGH GRANTS AND THROUGH DEBT, JUST BEING CONSCIENTIOUS ABOUT THE DEPENDENCY THAT THE PROJECTS CAN CONTINUE TO BE COMPLETED ARE NOT WHOLLY DEPENDENT ON THE EXTERNAL FUNDING AND MAKING SURE THAT WE HAVE CAPACITY TO ALSO SUPPORT THOSE OTHER SECTIONS IN THE CITY AND OTHER CITY-WIDE INITIATIVES.
WE DID PRINT OUT THE HANDOUTS.
I KNOW YOU'VE SEEN THESE THROUGH THE SLIDES, BUT AGAIN, WE WANT TO MAKE THOSE AVAILABLE AND COMPREHENSIVE IN ONE PRESENTATION, SO IN THE CONSIDERATION OF TIME, BUT WE HAVE THE WATER CIP FOLLOWED BY THE UNFUNDED.
WE GIVE YOU THE HANDOUTS, OF COURSE, THEY'RE IN THE PRESENTATION, THE WATER CIP AND THE UNFUNDED LIST HAVE TO RECLAIM AND THE UNFUNDED LIST.
I'M HAPPY TO DISCUSS OR GO THROUGH ANY OF THOSE BUT AGAIN, AS WE GO THROUGH THE PRESENTATION, WE'LL BE TALKING ABOUT THE CAUSE AND EFFECT OF THE CIP.
BUT ALSO, WHAT WE DID IS WE ADDED A MAP.
WE TOOK THOSE PROJECTS AND WE OVERLAID THEM ONTO A MAP TO SEE, WELL, WHERE IS THIS OCCURRING IN OUR CITY AND SO CREATING A GOOD VISUAL THAT IT IS DISPERSED ACROSS THE CITY BECAUSE THE NEEDS ARE DISPERSED AND OUR SERVICES STRETCH ACROSS THE CITY.
I'LL HIGHLIGHT A COUPLE THAT HAVEN'T BEEN ON YOUR RADAR WILL BE PART OF OUR CONVERSATIONS IS A BIG INITIATIVE ON ADDRESSING A WILDCAT INTERCEPTOR LINE IDENTIFIED IN THE CIP WAS ON OUR LIST OF THINGS TO DO AND NOW IT'S MOVED.
WE'VE HAD TO MOVE IT TO THE FRONT, AND WE'RE REALLY PUSHING HARD TO SEE HOW WE CAN GET THAT ADDRESSED ALONG WITH THE LAKE MARY SEDIMENTATION BASIN.
AGAIN HAS BEEN ON OUR LIST OF THINGS TO DO, AND WE'RE PUTTING A TREMENDOUS AMOUNT OF EFFORT AND FOCUS ON BRINGING THOSE PROJECTS UP AND GETTING THOSE DELIVERED.
I SHARED A COUPLE OF OTHER PICTURES THAT WE HAD ON FILE FOR LAKE MARY SEDIMENTATION TO SOME OF THE ITEMS THAT WE'RE LOOKING TO ADDRESS THROUGH THAT REHABILITATION.
ALL IN ALL, I'LL GO BACK TO THAT CAPITAL FUNDING.
AGAIN, THIS IS A SLIDE I KNOW THAT YOU'VE SEEN, WHERE IT TALKS ABOUT THE LEVEL OF MAGNITUDE OF EACH ONE OF THOSE CATEGORIES OF THAT APPROVED CIP, ARE CIP BUILT TO BE SUCCESSFUL WITHIN THE RESOURCES THAT WE HAVE AVAILABLE, AND THAT A FORM CIP WE'RE SAYING, BUT THIS IS REALLY THE LEVEL THAT WE NEED TO BE EXECUTING, AND THEN THAT INCLUDING THE UNFUNDED, WHAT WOULD IT LOOK LIKE TO FULLY FUND THE CIP.
AGAIN, I DEMONSTRATED THOSE NUMBERS.
WHAT ARE THE IMPACTS ON INSUFFICIENT FUNDING ON THE CAPITAL PLAN? WE TALKED A LITTLE BIT ABOUT THE OPERATIONAL SIDE, BUT WHAT ABOUT ON THE CAPITAL PLAN? I DO FEEL I TRIED TO INCORPORATE WHAT DOES THAT PROCESS LOOK LIKE THAT WE GO THROUGH.
WHEN A PROJECT COMES FORWARD AND IT HAS INSUFFICIENT FUNDING TO EXECUTE THAT PROJECT, WE GO THROUGH THIS PROCESS WHERE WE BEGIN TO LOOK AT VALUE ENGINEERING.
WHAT ARE THINGS THAT WE CAN CHANGE IN ORDER TO SAVE MONEY TO LOWER THOSE COSTS.
WHEN THAT'S BEEN EXHAUSTED, WHAT ARE THE THINGS THAT THIS PROJECT CAN DO
[00:25:02]
WITHOUT AND WE BEGIN TO STRIP COMPONENTS OUT, PRIORITIZING THOSE I WOULD SAY SOMETIMES TO A FAULT WHERE AT THE END OF THE DAY WE DID A PROJECT WHERE WE'RE ABLE TO ACCOMPLISH WHAT WE STARTED OUT TO DO WITH THE PROJECT.IF WE'RE NOT ABLE TO REMOVE ENOUGH THE COMPONENTS TO BRING THAT INTO BUDGET, THEN WE GO THROUGH THIS REPRIORITIZATION WHERE WE LOOK AT OTHER PROJECTS THAT MAY HAVE PARTIAL OR FULL FUNDING THAT WE'RE SAYING DO NOT NEED TO OCCUR BEFORE THIS PROJECT AND WHAT WE DO IS WE BEGIN TO BORROW MONEY FROM THAT FUTURE PROJECT TO FUND THE ONE THAT WE'RE DOING TODAY.
THAT REDUCES FUNDING FOR OTHER PROJECTS AND POTENTIALLY COULD MOVE THE PROJECT TO THE UNFUNDED, WHICH IS THE THIRD POINT.
IT DOES MOVE TO THE FUNDED WHERE NOW IT'S STILL SOMETHING THAT WE PLAN TO DO, STILL SOMETHING THAT SHOULD HAPPEN, BUT WE'VE NEEDED THAT MONEY.
WE'VE HAD TO REPRIORITIZE IT TO DO THE THINGS THAT WE'RE WORKING ON TODAY.
THE INTENT WAS JUST AGAIN GO OVER OUR BACKGROUND.
THOSE OBJECTIVES OF THE RATE STUDY, WE ASKED TO BUILD A FINANCIAL MODEL, PROCESS THROUGH A COST OF SERVICE STUDY, REVIEW THAT RATE STRUCTURE, AND ADJUST THE RATES AND FEES, AND WE'VE BEEN WORKING THROUGH THAT PROCESS AS WE GO.
THE LAST RATE STUDY WAS COMPLETED IN 2015, AND THE LAST RATE EFFECT FROM THAT STUDY WENT INTO EFFECT IN 2020.
WE BEGAN DISCUSSIONS ON THIS IN SEPTEMBER OF '23, AND WE'RE HERE TODAY AND LOOKING TO MOVE ALL THE WAY IN THROUGH JUNE AND END OF JULY WITH THE RECOMMENDATION THAT WE CAN GET THIS RATE APPROVED AND IN EFFECT FROM SEPTEMBER 1ST IS THE PLAN THAT WE'RE WORKING.
THOSE PRIORITIES GOES BACK TO MAKING SURE THAT WE HAVE HIGH-QUALITY WATER THAT WE DEVELOP RELIABLE RESOURCES.
WE DO ADDRESS OUR INFRASTRUCTURE NEEDS THAT WE USE RECLAIMED WATER TO OFFSET OUR WATER DEMANDS AND THAT WE'RE CONSTANTLY FULFILLING OUR REGULATORY REQUIREMENTS AS IS EXPECTED.
AS WE BEGIN TO TRANSITION OVER TO STANTEC, THEY'LL BE GOING THROUGH, AGAIN, WHAT I CALL THE LEVERS, I REFER TO THEM, BUT REALLY WHAT THEY ARE THE MODEL ASSUMPTIONS.
I KNOW YOU'VE SEEN THIS SLIDE IN ADDITION.
BUT AGAIN, HIGHLIGHTING WHAT THOSE ASSUMPTIONS ARE AND IT'LL BE PART OF OUR CONTINUED DIALOGUE TONIGHT AND ONGOING.
WE DID TAKE A LOOK AT SOME OF THOSE AS ASSUMPTIONS ARE BEING DEVELOPED.
WE COME BACK AND WE LOOK BECAUSE THERE ARE DIFFERENT LENSES. THAT'S WHY THEY ARE ASSUMPTIONS.
THERE'S DIFFERENT MODELS, DIFFERENT OPINIONS, AND DISCUSSIONS THAT WE WILL HAVE.
BUT INTERNALLY, I WANTED TO TAKE A LOOK TO SEE HOW DO WE MEASURE AGAINST THOSE ASSUMPTIONS? ONE THAT WE WILL TALK ABOUT IS GROWTH.
AGAIN, YOU MAY BE HEARD TO SAY IT, BUT I TOOK A LOOK AT HOW MANY NEW METERS ARE WE INSTALLING? WHICH HAS BEEN ABOUT 200 METERS A YEAR, WHICH DOES EQUATE TO PRETTY CLOSE TO THAT ONE PERCENT GROWTH IN ACCOUNTS THAT WE'RE SEEING.
AS FAR AS INFLATION, THE COST MODEL IS USING A 3.5 PERCENT ESCALATOR, SIX PERCENT FOR CHEMICAL, ELECTRICAL, AND MAINTENANCE.
BUT OVERALL, YOU CAN SEE THAT THAT'S BEEN CLOSER TO 29 PERCENT COST ESCALATIONS OVER THE LAST TWO YEARS, WHILE THE MODEL HAS TAKEN A MORE CONSERVATIVE APPROACH AND SAYING, HOW DO WE NORMALIZE THAT? WE'RE NOT GOING TO RUN THE MODEL AT THIS PEAK AND WERE IN INFLATION, BUT KNOWING THAT EXPECTING THAT THAT IS GOING TO NORMALIZE AND TAKEN A MORE CONSERVATIVE APPROACH.
THE RATE PRIORITIES, WE WORKED THROUGH THOSE DISCUSSIONS ABOUT HAVING A STABLE REVENUE, MAKING SURE THAT WE INTEGRATE CONSERVATION INTO OUR RATE STRUCTURES.
ADMINISTRATIVE BURDEN IS SOMETHING THAT WE CAN IMPLEMENT AND HOW CAN WE COMMUNICATE THAT IN A CLEAR AND EFFECTIVE WAY OF WHAT YOUR RATES LOOK LIKE AND WHAT DO THEY PAY FOR? MAKING SURE THERE'S PROPORTIONALITY BETWEEN THOSE CLASSES THROUGH THE COST OF SERVICE, AND ALL THE TIME, LOOKING THROUGH THAT LENS OF AFFORDABILITY.
AGAIN, I KNOW YOU'VE SEEN THESE PROPOSED RATES.
AGAIN, WE WANT TO INCLUDE THEM INTO THE PACKAGE, BUT WE'LL CONTINUE TO WORK THROUGH THOSE AS WE MOVE THE LEVERS FOR BOTH WATER, SEWER, AND RECLAIM.
WE ALSO HAD DISCUSSIONS OVER THE CAPACITY FEES.
A LOT OF DISCUSSION AROUND USING LOADINGS, USING ACTUAL FLOWS, BUT ALSO INCLUDED WHERE WE'RE AT TODAY PROPOSED FOR COUNSEL'S CONSIDERATION.
THEN THOSE MISCELLANEOUS FEES, WHERE AGAIN, IT SEEMED LIKE I WAS COMING BACK AGAIN ON WHAT IT IS THAT WE CHARGE? I TRIED TO COMMUNICATE THEN AND I'LL RE EMPHASIZE NOW, THE IMPORTANCE OF BEING THAT GRANULAR ON YOUR FEES BECAUSE WHEN YOU APPLY THE COST OF THE SERVICE TO THE PEOPLE USING THE SERVICE, YOU MINIMIZE THE IMPACT OF THE RATE PAYER THROUGH THAT MONTHLY BILL, SPECIFICALLY SOME THAT WE IDENTIFIED LIKE THE MUD SUMP THE HAULERS THAT ARE HAULING MUD, SCAVENGER WASTE, GREASE.
WHEN THOSE FEES ARE PROPORTIONAL, THEY COVER THE COST TO PROVIDE THAT SERVICE AND IT MINIMIZES THE IMPACT ON THAT MUNICIPAL BILL THAT GOES OUT EVERY MONTH.
AGAIN, HIGHLIGHTING THE RATE CALCULATOR, WHICH SARA DID A GOOD JOB OF GOING OVER, WE APPRECIATE THE FEEDBACK, CONTINUING TO WORK TO DEVELOP THAT OUT.
WE'LL GET THE INSTRUCTIONAL VIDEO AND CONTINUE TO WORK WITH OUR GROUPS. WE ARE AVAILABLE.
WE DO HELP PEOPLE ALSO WORK THROUGH THAT TO UNDERSTAND WHAT THE IMPACT IS TO THEM SPECIFICALLY.
[00:30:01]
WHEN YOU CAN'T USE THE RECALCULATOR, WE MAKE ASSUMPTIONS.AGAIN, ASSUMING A THREE-QUARTER INCH METER, ASSUMING THEY USE 4,577 GALLONS A MONTH, WHAT WOULD THAT LOOK LIKE? WE INCLUDE THOSE EXAMPLES IN FOR YEAR 1 THROUGH FIVE.
AGAIN, THE PRESENTATIONS, THESE ARE ALSO GOOD REFERENCE POINTS FOR US TO COME BACK TO WHEN WE GET TOO FAR TO THE GRANULAR THAT WE CAN COME BACK TO LOOK AT IT THROUGH A DIFFERENT LENS, AND WE DID THE SAME FOR THE COMMERCIAL, AND THOSE ARE ALSO INCLUDED IN YOUR PACKET.
THROUGH THIS PROCESS THAT WE'VE BEEN DOING, I THINK NINE MONTHS THAT WE'VE BEEN PAINSTAKINGLY WORKING THROUGH STEP BY STEP, BUT I JUST WANT TO TAKE A MINUTE FRAME, REALLY HAS COUNSEL BEEN ABLE TO ACCOMPLISH THROUGH YOUR FEEDBACK AND DIRECTION? HOW ARE WE MINIMIZING THE IMPACT TO THE RATE PAYER THROUGH THIS COST SERVICE? THESE ARE THE ONES THAT I HIGHLIGHTED.
ONE THAT'S UTILIZING THE ACTUAL FLOW VERSUS DESIGN FLOW WAS THE DIRECTION GIVEN BY COUNSEL, AND THAT MINIMIZED THE CAPACITY FEES INCREASED TO NEW DEVELOPMENT.
COUNSEL DIRECTION TO ADD SOLIDS LOADING COMPONENT TO THOSE CAPACITY FEES ALSO MINIMIZE THE IMPACT TO THOSE NEW DEVELOPMENTS AND ALIGN COSTS MORE OF THOSE PRODUCING THE HIGHER SOLIDS, AGAIN, MAKING SURE THERE'S PROPORTIONALITY BETWEEN THE CLASSES.
COUNSEL'S DIRECTION ALSO REDUCE THE REVENUE RECOVERED BY THE WATER BASE FEE FROM 29-25 PERCENT, WHICH I SAY EMPOWERS THAT END USER TO CONTROL WHAT THEIR BILL LOOKS LIKE.
UNDER COUNSEL'S DIRECTION, WE ALSO HAVE A 90% EXECUTION RATE ON THE O&M, A REALIZATION THAT WE ARE EXPECTED TO WORK WITHIN BUDGET.
RIGHT NOW, THE MODEL ASSUMES THE NEED FOR THE OPERATING BUDGET, 90 PERCENT OF THAT WILL BE RECOVERED FROM RATES AND THAT WE WILL WORK WITHIN THAT BUDGET.
ALSO MINIMIZING THE IMPACT TO THE RATE PAYER.
THERE WAS ADJUSTMENTS MADE TO THE RESIDENTIAL CHEER RATES WHICH REDUCED BILLS FOR THOSE SMART WATER CUSTOMERS BOTH IN TIER 1 AND TIER 2.
COUNSEL'S DIRECTION ALSO CONSOLIDATED SOME CUSTOMER CLASSES THAT MADE THE STRUCTURE SIMPLER TO UNDERSTAND, AND IT ALSO REDUCED THE RATE OR MINIMIZED THE IMPACT TO SOME MORE SPECIFIC CUSTOMER CLASSES.
THEY ALSO ADJUSTED THE MISCELLANEOUS FEES AS I ALLUDED TO THAT REQUIRES THOSE REVENUES TO BE RECOVERED BY THE PEOPLE PROVIDING THE SERVICE.
AGAIN, I FEEL LIKE A PRETTY EXTENSIVE CHECKLIST OF WHERE THROUGH EACH STEP OF THE PROCESS, I FEEL COUNSEL HAS LOOKED TOUGH LENS OF THAT AFFORDABILITY SAYING, WELL, WE HAVE A COUPLE OF OPTIONS.
WHAT IS THE AFFORDABILITY? HOW CAN WE MINIMIZE THE IMPACT TO THE END USER? I JUST WANTED TO HIGHLIGHT A COUPLE OF THOSE AS WELL.
ANOTHER HANDOUT THAT WE HAD, WE ARE GETTING TO SOME OF THE QUESTIONS.
BUT ONE OF THE QUESTIONS IS A GENERAL TIMELINE OF WHEN WE'RE EXPECTING THINGS TO START.
I WOULD SAY THAT IS OUR CAPITAL IMPROVEMENTS PLAN.
WHEN YOU LOOK AT THE YEAR THAT'S GOING TO OCCUR, THAT'S WHEN THE FUNDING BEGINS, EITHER AT DESIGN OR CONSTRUCTION, AND THEN THE MULTIPLE YEARS THAT IT'S FUNDED WOULD IDENTIFY OUR CURRENT PLAN OF HOW LONG THE PROJECT WILL OCCUR.
I WILL SAY IN OUR CIP, WE DO HAVE SEVERAL PROGRAMS THAT YOU WILL SEE THAT ARE TYPICALLY FUNDED AT THE SAME AMOUNT OVER THE COURSE OF THE PLAN SOMETHING SIMILAR TO REPLACEMENT OF WATER METERS.
THERE'S NOT AN ENDING TO THAT PROJECT.
WE WANT TO INVEST. WE'RE LOOKING AT A 20-YEAR LIFE CYCLE FOR METER REPLACEMENTS.
WE NEED TO CHANGE 1,000 METERS A YEAR, AND BY THE TIME WE GET TO THE END, WE GET TO START OVER AND YOU JUST CONSTANTLY MANAGE THAT ASSET.
WHEN YOU SEE MULTIPLE FUNDINGS ACROSS THE COURSE OF THE PLAN FOR THE SAME AMOUNT, I WOULD SAY THAT'S A PROGRAM WHERE THE PROJECTS IF THEY'RE NOT CLEARLY DEFINED BY THE TITLE, BUT YOU'LL SEE THEY'LL HAVE A START AND END DATE.
IF THERE'S A LAPSE IN-BETWEEN, IT MAY BE MULTIPLE PHASES OR MULTIPLE INITIATIVES.
HOPEFULLY THAT SHARES A LITTLE BIT.
WE'LL CONTINUE TO WORK WITH YOU AND ANYONE AS WE TALKED THROUGH ABOUT THE EXPECTATION OF THE TIMELINES, BUT WE THOUGHT THIS WAS A GREAT START TO LOOK AT. ADDITIONAL QUESTIONS ABOUT BREAKING DOWN THE CITY'S CAPACITY TO DELIVER ON OUR CURRENT CIP.
I WILL SAY, AGAIN, THANKS TO COUNCIL, AND OUR CURRENT FISCAL YEAR DID ADD A PROJECT MANAGER TO WATER SERVICES, WHICH WE HAVE FILLED, SO THAT POSITION IS FILLED.
WE ALSO INCLUDE FUNDING WITHIN THE ENGINEERING SECTION TO LEVERAGE SOME OUTSIDE CONTRACT PROJECT MANAGEMENT IF THAT NEED IS TO ARISE.
WATER SERVICES IS ALSO INTEGRATED ON MONDAY.COM AS A SOFTWARE FOR MANAGING OUR PROJECTS, BOTH SMALL, MEDIUM, AND LARGE, WHICH REALLY INCREASE SOME ACCOUNTABILITY, BUT IT FORCES US TO COME BACK.
EVERY OTHER WEEK, WE'RE MEETING TO GO OVER THOSE ON THE UPDATES TO MAKE SURE THAT WE'RE TRACKING, AND WE'RE ON PROGRESS, AND IF THINGS ARE STUCK, WHY ARE THEY STUCK, AND HOW DO WE MOVE THEM.
AGAIN, LOOKING AT THE WAY WE'RE EXECUTING PROJECTS A LITTLE BIT DIFFERENT.
IN ADDITION, WATER SERVICES WORK VERY CLOSELY WITH OUR CAPITAL ENGINEERING GROUP.
WHILE THEY DO CURRENTLY HAVE SEVERAL VACANCIES, THEY ARE WORKING DILIGENTLY TO FILL THOSE, BUT THAT IS ANOTHER RESOURCE THAT WE HAVE, AND THOSE GUYS ACTUALLY DO AN EXCELLENT JOB AT DELIVERING PROJECTS.
[00:35:04]
I THINK INTERBASIN PIPELINE IS ONE THAT SPECIFICALLY COMES TO MIND, ALONG WITH LOOKING OUT OUR BEST INTERESTS AND SOME LARGER PROJECTS SUCH AS THE BEULAH ROAD IMPROVEMENTS, WHICH DOES HAVE A PORTION THAT THEY DO MANAGE THOSE FOR US.WE'RE COMMITTED TO CONTINUE TO HELP THEM BE SUCCESSFUL IF THERE'S ANYTHING WE CAN DO WITH THEIR RECRUITMENT, AND AGAIN, WE WORK WITH THEM VERY CLOSELY.
WE DO EXPECT ONCE THOSE POSITIONS ARE FILLED THAT THEY WILL ALSO GAIN SOME MORE CAPACITY, AND WE'RE COMMITTED TO HELP THEM DO THAT AS WELL.
WHAT HAS BEEN COMPLETED AND WHAT HAS OUTSTANDING SINCE 2016? VERY SIMILAR TO THE LIST THAT I PRINTED OUT AND HANDED OUT TO YOU, I IMAGINE BACK IN 2016, THEY ALSO HAD A VERY EXTENSIVE LIST.
BUT SOME OF THE INFORMATION THAT I COULD FIND, I WAS ABLE TO BRING FORWARD.
JUST TO HIGHLIGHT A FEW, BUT ULTIMATELY, THERE'S SOME INITIATIVE.
ONE IS ABOUT AGING INFRASTRUCTURE.
ON THE WATER SIDE, OVER THE LAST SEVEN YEARS, WE HAVE REPLACED OVER 15 MILES OF WATER PIPELINE, WHICH EXCEEDED OUR TWO MILE PER YEAR GOAL.
ON THE SEWER SIDE, WE'VE ONLY DELIVERED ABOUT 91% OF THAT GOAL WITH ABOUT SIX MILES OF SEWER WITH THE GOAL OF DOING ONE MILE PER YEAR.
BUT BOTH OF THOSE HAVE BEEN VERY WELL EXECUTED.
I THINK, AGAIN, CONSCIOUS WHEN YOU JUST DO THE MATH NUMBERS.
AGAIN, I THINK I POINTED OUT YOU HAVE 450 MILES OF WATER LINE, AND IF YOU REPLACE TWO MILES EVERY YEAR, THAT MEANS THE WATER LINE YOU'RE PUTTING IN ONLY HAS TO LAST 225 YEARS BEFORE YOU GET BACK TO IT.
WHILE WE DID SET GOALS AND WITHIN OUR CURRENT BUDGET, WE ARE EXECUTING AT THAT LEVEL, I THINK YOU CAN SEE WHERE WE'RE LOOKING FOR THAT OPPORTUNITY TO SAY, MAYBE I DON'T NEED TO GET TO FOUR MILES, BUT DOING THREE MILES HELPS US MOVE THAT NEEDLE AND TAKES PRESSURE OFF OF WATER LINES THAT I PICTURE BEING 225 YEARS OLD AND SOME OF THE CHALLENGES THAT THOSE WOULD COME.
IN ADDITION, WE DID COMPLETE THE WOODY MOUNTAIN CLARIFIER, SWITZER CANYON, PHASE 4 IS BEING COMPLETED RIGHT NOW.
IT'S RIGHT AT THE TAIL END OF THAT, AND WE'LL BE MOVING INTO PHASE 5, BUT I AM SAYING THAT WE'VE COMPLETED FOUR OF THE FIVE PHASES.
THE LAKE MARY ELECTRICAL UPGRADE SYSTEM WAS COMPLETED.
RAILROAD SPRINGS, TANK NUMBER 1 REHAB COMPLETED.
LAKE MARY SEDIMENTATION BASIN COMES BACK UP AS OUTSTANDING.
I WON'T GO INTO HOW WE'RE WORKING ON THAT.
WATER STORAGE TANKS, BOTH CHESHIRE AND RAILROAD SPRINGS WERE TWO PROJECTS IDENTIFIED.
FORT TUTHILL WATERLINE LOOP ARE OUTSTANDING AND CURRENTLY RESIDE WITHIN OUR CURRENT CIP, AND WE'RE AWARE OF THAT AND THROUGH OUR CONSTANT PRIORITIZATION, MAKING SURE THAT WE HAVE ADEQUATE CAPACITY, STORAGE, AND TREATMENT, DOING THE RIGHT THING AT THE RIGHT TIME.
THERE'S A QUESTION ABOUT, SOMETIMES IT MAY SEEM LIKE WE'RE A LITTLE FAST TRACKED.
I KNOW WE'VE BEEN WORKING ON IT FOR NINE MONTHS.
IT SEEMS LIKE A LONG DRAWN OUT PROCESS.
BUT AS WE COME TO THE END, THINGS BEGIN TO GET ACCELERATED.
EVEN WITH THE ADDITION OF THIS WORKSHOP, THIS WORK SESSION THAT WAS ADDED IN, BECAUSE WE'RE TRYING TO WORK THROUGH THESE ISSUES.
BUT WE DO BELIEVE AS LONG AS WE'RE ACTIVELY WORKING ON THE RATE INCREASE THAT THERE SHOULDN'T BE A NEED TO POSTPONE, THAT WE CAN CONTINUE TO GET TO THE RESULTS THAT WILL BE SUCCESSFUL FOR WATER SERVICES AND THE COMMUNITY.
IF WE DO BEGIN TO MISS SOME OF THOSE DEADLINES, WE'RE THINKING WORST CASE SCENARIO WOULD BE REISSUE A NOTICE OF INTENT TO MAKE SURE THAT THAT IS CURRENT AT LEAST PRIOR TO 60 DAYS BEFORE THOSE PUBLIC HEARINGS.
IF THAT DOES BECOME AN ISSUE, WE'LL WORK THROUGH.
WE'LL MAKE SURE THAT COUNCIL IS APPRISED WORKING WITH OUR CITY ATTORNEY'S OFFICE THAT WE'RE DOING EVERYTHING ABOVE PAR.
EXTERNAL FUNDING SOURCES FOR SPECIFIC PROJECTS.
AGAIN, JUST KEEP IN MIND THROUGH THE RATE MODEL THAT THE FUNDING SOURCES ARE IDENTIFIED IN THE CIP.
THE MODEL DOES INCLUDE DEBT WHICH IS BONDS AND LOANS, AND THE CIP IS OVER 10 YEARS.
IT IS A 10-YEAR WINDOW FOR OUR CIP, EVEN THOUGH OUR RATE STRUCTURE IS FIVE YEARS.
THE RATE MODEL IS ASSUMING THOSE NUMBERS, THOSE AMOUNT OF NEW DEBT TAKEN BY EACH ONE OF THOSE ENTERPRISE FUNDS OVER THE DURATION OF THE 10-YEAR PLAN.
AT THIS POINT, I WOULD LIKE TO EMPHASIZE THAT THERE ARE CURRENTLY PROJECTS FOR WATER AND SPECIFICALLY WASTEWATER THAT WERE FUNDED THROUGH PROPOSITION 441.
THAT THOSE AREN'T INCLUDED IN OUR CIP, AND THEY'RE NOT INCLUDED IN THE FUNDING, THE REVENUES TO RECOVER, BECAUSE THOSE PROJECTS WERE HANDLED A LITTLE BIT DIFFERENT.
WITH PROPOSITION 441, THE REVENUE THAT RECOVERS THAT DEBT SERVICE COMES FROM SECONDARY PROPERTY TAX, NOT FROM WATER SERVICES REVENUES.
THOSE AMOUNTS DON'T SHOW UP IN OUR CIP.
THOSE PROJECTS LIVE A LITTLE BIT SEPARATE, BUT I'M HAPPY TO TALK ABOUT ANY OF THOSE PROJECTS.
BUT AS FAR AS THE IMPACT ON THE RATES, THAT THOSE ARE DIFFERENT AND THAT ULTIMATELY, I WOULD SAY THE RATE MODEL ASSUMES THAT THOSE ARE DONE AND THOSE ARE COMPLETE, AND IT'S LOOKING AT EVERYTHING OTHER THAN
[00:40:02]
THOSE FIVE PROJECTS FUNDED THROUGH PROPOSITION 441.MAYBE A QUESTION ABOUT, WHAT WOULD BE THE IMPACT OF EXTENDING THE CIP TIMELINE AN ADDITIONAL 10 YEARS? THAT'S HOW I READ THE QUESTION BECAUSE, AGAIN, WE'RE ALREADY LOOKING AT A 10-YEAR WINDOW, SO IT WOULD MEAN, WHAT IF WE TOOK OUR CURRENT CIP AND WE PULLED IT OUT 20 YEARS? I THINK A COUPLE OF THINGS, OUR CIP RATE MODEL IS A 10-YEAR PLAN, AND THE CITY ALSO OPERATES ON A 10-YEAR PLAN.
IF I PULLED THE CIP OUT 20 YEARS, I WOULD HAVE TO PULL IN, WHAT ARE THE OTHER PROJECTS WE'RE GOING TO DO IN THE 20 YEARS.
AGAIN, I'M NOT SAYING IT CAN'T BE DONE, RIGHT NOW, THE WAY WE'RE FRAMED AND OUR WORK WITH STANTEC WAS A 10-YEAR WINDOW.
I FEEL LIKE I'VE HEARD STANTEC TALK ABOUT COMMUNITIES THAT DO DIFFERENT PLANNING PERIODS, SO I'M NOT SAYING THAT IT'S NOT FEASIBLE, BUT CURRENTLY, THE REASON WE'RE FOCUSING ON 10 YEARS, IT MATCHES OUR 10-YEAR FINANCIAL PLAN AND OUR CIP.
WHAT IS THE IMPACT OF DROPPING THE LEAST IMPORTANT CIP PROJECTS? I THINK THE WAY THAT WE'RE STRUCTURED WHEN YOU LOOK AT THE CIP AND THE INFORMATION WE GAVE, WHEN YOU SEE THAT THEY'RE OCCURRING INFORMATION ALMOST PAINTS A PICTURE OF WHAT THINGS SHOULD HAPPEN FIRST AND CREATES THAT PORTALIZATION.
WHEN YOU LOOK AT THE THINGS ON THE UNFUNDED LIST, WHAT WE'RE SAYING MAYBE ARE LEAST IMPORTANT THAN THE THINGS THAT ARE CURRENTLY FUNDED.
THERE'S A REASON THE CIP LOOKS THE WAY IT IS.
THE IMPACT OF DROPPING THE LIST IS IMPORTANT.
CIPS, I WOULD SAY WOULD PROBABLY START WITH BEGINNING TO DROP THE UNFUNDED LIST FROM THE RATE MODEL CONSIDERATION, YOU WOULD BE REMOVING THE LEAST IMPORTANT AND THEN WORKING YOUR WAY FROM RIGHT TO LEFT THROUGH THE CIP.
THE 10 YEAR CIP IS STRUCTURED.
AGAIN, WE'RE LOOKING AT THOSE MOST CRITICAL PROJECTS OCCURRING PROBABLY IN THAT 1-3 YEARS THAT YOU SEE THE FIRST THREE COLUMNS AND LESS CRITICAL, MORE PLANNING DRIVEN OUT MORE THAN 5-10 YEAR PUT IN THOSE INTO TWO GROUPS.
AGAIN, WITH THE EXCEPTION OF THE PROGRAMMED ITEMS THAT I SAID YOU COULD IDENTIFY THAT HAVE THAT MULTIPLE FUNDING CONSTANTLY THROUGHOUT THE 10 YEAR PLAN.
THE IMPACT OF USING BOND CAPACITY AND RESERVES FOR CIP.
RIGHT NOW, THE MODEL DOES ASSUME THAT WE ARE MAXIMIZING OUR DEBT CAPACITY.
WHILE ALSO MAINTAINING THE MINIMUM CASH RESERVE.
AGAIN, WE BUILD IN THOSE BOOK ENDS AND WE'RE ASKING STAN TECH TO RUN THE MODEL THAT WE ARE LOOKING TO MAXIMIZE THE DEBT, BUT AT THE 20% OF THE OPERATING REVENUES WHILE MAINTAINING A MINIMUM CASH RESERVE, WHICH IS 90 DAYS, WHICH IS A REQUIREMENT THAT WE HAVE THAT WE MUST MAINTAIN 90 DAYS CASH ON HAND.
WE DO SET THOSE BOOK ENDS AND THE MODEL IS WORKING TO MAXIMIZE BOTH OF THOSE AND FIND THE MOST EFFICIENT WAY TO RUN THE NUMBERS WHILE STILL MEETING THOSE TWO CRITERIA, WHICH I'M SURE WE'LL BE TOUCHED ON AGAIN LATER.
OTHER QUESTIONS WILL COME UP ABOUT WHY WE'RE NOT USING ECONA'S POPULATION GROWTH PROJECTIONS.
I THINK, ALONG WITH OTHER GROWTH PROJECTIONS.
AGAIN, I FEEL LIKE THE SIMPLEST ANSWER, I WOULD SAY IS WHEN YOU LOOK AT THE CITY'S FIVE YEAR FINANCIAL PLANNING, IT INCLUDES A ONE PERCENT GROWTH RATE. MATCHING THAT.
AGAIN, GOING BACK THROUGH THAT WE DID LOOK AT OUR WATER PRODUCTION CHANGES OVER THE LAST YEAR. AGAIN, AROUND THE 1%.
WE LOOKED AT THE REGIONAL PLAN THAT GAVE A RANGE RIGHT FROM THAT 0.8-1.3.
THEN I TALKED A LITTLE BIT ABOUT THOSE RESIDENTIAL METER INSTALLS, WHICH ACTUALLY CALCULATES ABOUT 0.7% ANNUAL GROWTH IN RESIDENTIAL METERS INSTALLED EACH YEAR.
AGAIN, THOSE ARE JUST A COUPLE OF LENSES, BUT THAT'LL BE A LEVER AND A CONVERSATION THAT WE WILL HAVE FURTHER ON WHEN I HAND IT OVER TO STANTECH TO LOOK AT THAT.
WHY ARE WE NOT USING AN INFLATION RATE OF 2.4%? ACTUAL WATER SERVICES EXPENSE FORECAST IS 3.5% ON, I BELIEVE, 70, 75% OF THE OPERATING COSTS.
WE DID PULL OUT CHEMICALS AND ELECTRICAL COSTS BECAUSE I SEE THOSE IS HIGHER THAN.
THE INCREASE HAS BEEN HIGHER THAN THE OTHERS.
BUT WHEN WE LOOK AT OTHER METRICS AND THE QUESTION COMES UP ABOUT LIKE, WELL, THIS IS NOT A TYPICAL TIME THAT WE'RE LIVING IN, AND ARE WE SETTING RATES BASED ON THESE PEAKS THAT WE'RE EXPERIENCING.
I WOULD SAY THAT THAT'S NOT TRUE.
AGAIN, WE TOOK A CONSERVATIVE APPROACH.
WHILE WE'RE SEEING THINGS LIKE PLASTIC PIPE AND CHEMICALS ESCALATING ANYWHERE FROM 30-130%, WE DID NOT USE 130% COST ESCALATIONS.
WHEN I GO BACK TO THOSE FIVE YEAR LOOK AND THOSE FOUR LARGEST OPERATIONAL ITEMS, HOW DOES THAT ALIGN? AGAIN, THOSE FOUR OR 60% OPERATING BUDGETS IN THE LAST FEW YEARS, I'M SEEING MORE OF THAT 29% INCREASE.
WHILE, AGAIN, WE'RE NOT USING THAT NUMBER AS OUR COST ESCALATOR, ASSUMING 29%.
AGAIN, I FEEL TAKING A CONSERVATIVE APPROACH ON THE 3.5.
[00:45:01]
THAT BEING SAID, THAT IS THE LEVER WITHIN THE MODEL, AND STANTECH WILL BE WALKING US THROUGH WHAT THOSE DIFFERENT INFLATIONARY ASSUMPTIONS WOULD LOOK LIKE IN THE MODEL.WHAT IS INCLUDED IN FUNDED PROJECTS WAS A QUESTION? THOSE ARE COVERED IN THE SLIDES, AND ALSO HANDED OUT ON WHAT THOSE ARE.
WHAT IN THE RATES IS INCLUDED IN RED GAP RANCH? IS ALSO A QUESTION THAT I HEAR.
OVER THE 10 YEAR PLAN, IT DOES INCORPORATE ABOUT SIX MILLION DOLLARS OF EXPENDITURES OVER THE 10 YEARS.
THAT DOES INCLUDE 4.4 MILLION COMING FROM CASH ARE RATE BASED AND ABOUT 1.5 MILLION FROM GRANTS.
THEN THERE'S A LIST OF THINGS FROM THE CIP THAT THOSE ARE LOOKING TO COVER.
BUT THROUGH THE PLAN, YOU'LL SEE WHEN THOSE ARE PROGRAMMED TO OCCUR AND THE MAGNITUDE OF WHAT AMOUNT OF MONEY WE'RE INVESTING TO CONTINUE TO SECURE IN THAT WATER.
USING A HARD BID VERSUS A CONSTRUCTION MANAGER AT RISK APPROACH FOR COMPLETING PROJECTS.
I THINK MY ANSWER WOULD BE, THAT THERE'S TIMES WHERE CONSTRUCTION MANAGER AT RISK IS MORE EXPENSIVE BECAUSE THE CONTRACTOR DOES ASSUME MORE RISK THAT'S IN THEIR TITLE.
BUT I FEEL WATER SERVICES CONSIDERS MULTIPLE FACTORS BEFORE MOVING TO A CONSTRUCTION MANAGER AT RISK.
I IDENTIFIED A COUPLE LEAD TIMES OF EQUIPMENT AS ONE, COMPLEXITY OF A PROJECT.
BUT ULTIMATELY, I THINK KNOWING THAT EVERYTHING WE DO IS NOT CONSTRUCTION MANAGER AT RISK, WE TRY TO LEVERAGE ALL PROCUREMENT AND SOLICITATIONS THAT ARE APPROPRIATE FOR EACH JOB.
SOMETIMES A HARD BID PROJECT IS THE RIGHT WAY TO GO AND WE DO BELIEVE SOMETIMES A CONSTRUCTION MANAGER RISK BRINGS ADVANTAGE AND MINIMIZES THE RISK FOR THE CITY, AND WE DO APPLY THAT.
I DON'T THINK THAT'S A BLATANT STATEMENT THAT WE'RE ALWAYS USING THE CONSTRUCTION MANAGER AT RISK.
I THINK WE TRY TO USE IT APPROPRIATELY, AND WE TRY TO WORK THROUGH AS WE BRING THOSE SOLICITATIONS FORWARD FOR COUNCIL'S APPROVAL ON WHY WE CHOSE OR WHY WE BELIEVE WE'RE RECOMMENDING, THAT IS THE BEST APPROACH FOR THAT PROJECT.
THE ABILITY TO REFUND CAPACITY FEES FOR PROJECTS NOT COMPLETED IN 2016.
EIGHTY PERCENT OF THAT 10 YEAR PLAN DEVELOPED IN 2016 AND COMPLETE PROJECTS ARE NOT IDENTIFIED IN THE CIP BASED ON COMMUNITY NEEDS.
I WOULD SAY WHEN YOU PAY INTO A CAPACITY FEE, YOU'RE BUYING INTO OUR SYSTEM, BOTH REIMBURSE THE CITY ON SOME INVESTMENTS THAT WE'VE MADE TO BUILD SOME CAPACITY AND YOU'RE PAYING A PORTION OF THAT FUTURE CAPACITY THAT WE'RE GOING TO NEED TO ADD.
BASED ON THAT, WHEN ANYONE THAT HAS PAID INTO THE CAPACITY SYSTEM, I SAY EVERY DAY, INCLUDING TODAY, WE PROVIDED THEM THAT CAPACITY.
WHEN THEY TURNED ON THEIR FAUCET, THE WATER WAS THERE, AND WHEN THEY PUT IT DOWN THE DRAIN, WE TOOK IT AND WE TREATED IT.
THEIR PURCHASE INTO THE CAPACITY WASN'T SPECIFIC FOR A PROJECT, IT'S FOR BUYING INTO A CONCEPT OF, DO WE HAVE THE RESOURCES AVAILABLE TO PROVIDE THE SERVICES THAT WE'VE COMMITTED TO DO? SO THAT I BELIEVE THAT WE HAVE DONE AND WE STRIVE AND WE WILL CONTINUE TO DO.
I ALSO FEEL LIKE POLICY SETS THE TRIGGERS OF WHEN CAPACITY PROJECTS NEED TO OCCUR.
AGAIN, ABOUT DOING THE RIGHT THING AT THE RIGHT TIME, AND THAT CAPACITY FEES ARE SET ASIDE RESTRICTED FUNDS USED FOR CAPACITY AND NOT FOR THINGS OUTSIDE OF THAT.
I WOULD ALSO POINT OUT THAT THE CAPACITY FEES DO NOT COVER THE COMPLETE COST OF ALL THE GROWTH PROJECTS.
SOME OF THAT COST IS BURDENED BY THE MONTHLY BILL THAT GOES OUT BECAUSE WE ALSO BENEFIT FROM THAT ADDITIONAL CAPACITY WITHIN THE SYSTEM.
BUT IT DEFINITELY DOESN'T COVER ALL OF THE COSTS.
IN THE DURATION OF WHAT I'VE BEEN WORKING HERE, MCCALLISTER WELL HAS BEEN BROUGHT ONLINE.
THAT IS WORKING. I THINK THE LAST THING WE'RE DOING IS TRYING TO FIX THE DRIVEWAY, WHICH WILL BE DONE I THINK WITHIN THE NEXT COUPLE OF WEEKS.
BUT THAT LAW HAS BEEN ONLINE AND BEEN PROVIDING WATER TO THE CITY.
FORT TUTHILL TO WELL HAS BEEN DRILLED. THOSE ARE COMPLETE.
WE'RE MOVING FORWARD TO SEE HOW WE CAN LEVERAGE FORT TUTHILL TO GAIN SOME OTHER EFFICIENCIES WITHIN THE WATER SYSTEM.
ALSO, A QUESTION ABOUT THE AMOUNT OF CIP CARRIED OVER FOR WATER SERVICES.
I WILL MENTION THAT AS WE DO CARRY FORWARDS, THERE'S A COUPLE OF THINGS I FEEL DRIVES THAT.
ONE WOULD BE MANY OF THE PROJECTS ARE MULTIPLE YEAR PROJECTS, AND SO THAT FUNDING WILL CARRY OVER MULTIPLE YEARS.
IN ADDITION, I WOULD ALSO SAY WHEN PROJECTS ARE INADEQUATELY FUNDED, THERE'S THIS PROCESS WHERE I CAN'T ADD BUDGET TO IT THIS YEAR, BUT LET'S CARRY THAT FORWARD, AND I'M GOING TO TRY TO GET YOU BUDGET THE FOLLOWING YEAR TO ADD TO THAT TO GET IT DONE.
I FEEL LIKE THOSE ARE TWO THINGS WHY YOU WOULD EXPECT TO SEE THAT CARRY FORWARD OF A PROJECT.
THEN COST ESTIMATING FOR PROJECTS IN THE CIP.
COST ESTIMATES ARE INCLUDED IN OUR ANALYSIS AND OUR MASTER PLANS.
WE DO USE COST COMPARISONS ACROSS OUR COMPLETED PROJECTS.
WHAT ARE WE CURRENTLY SEEING THAT HAPPENS? WE ALSO USE SOME INDUSTRY PRACTICES OF WATER CURRENT UNIT PRICES, THAT DOLLAR PER FOOT PER INCH, HOW MUCH IS IT PER YARD?
[00:50:02]
WE DO TRY TO QUANTIFY THAT.I FEEL LIKE COST ESTIMATES ARE UP TO THESE FIVE CLASSES.
THE HIGHER YOU GO UP IN YOUR COST ESTIMATING IS THE MORE YOU PAY FOR THAT ESTIMATE AND WHEN YOU WANT TO PAY FOR THAT ESTIMATE IS WHEN IT'S CLOSER TO WHEN THE PROJECT IS GOING TO BE DONE.
I DO FEEL THAT WE INVEST THE LEVEL OF ESTIMATING IN THAT SHORT NEAR TERM, THAT 1-3 YEARS.
WE'RE TRYING TO GET VERY SPECIFIC ON WHAT IT'S GOING TO COST TODAY DUE TO A PROJECT IN 10 YEARS, WE FEEL IS PROBABLY A LITTLE LESS IMPORTANT.
WHAT WE NEED IS A LOWER CLASS, MAYBE A CLASS OR TWO TYPE ESTIMATE.
I NEED TO BE A BALLPARK, AND WE PUT OUR RESOURCES AND OUR EMPHASIS ON THE THINGS THAT OCCURRING SHORT TIME BECAUSE WE KNOW IN OUR ENVIRONMENT, THE WORLD CHANGES FAST AND WE DON'T WANT TO SPEND A LOT OF TIME AND EFFORT IN TRYING TO PREDICT WHAT'S GOING TO HAPPEN IN 10 YEARS UNTIL IT'S CLOSER THAT WE CAN DO THAT.
WHILE TYPICALLY A MASTER PLAN, I THINK WOULD USE MAYBE A CLASS 2 OR CLASS 3 TYPE ESTIMATE FOR A PROJECT.
WE COULD DO CLASS 5, BUT THAT IS GOING TO COST US MORE MONEY TO DO A CLASS 5 AND THAT WILL BECOME LESS VALUABLE BY THE TIME WE DO THAT PROJECT IS MY BELIEF.
THERE'S ALWAYS QUESTIONS ABOUT HOW WE COMPARE.
I WILL TELL YOU THIS IS INTERESTING TO ME BECAUSE I FEEL IN MY CONVERSATIONS WITH THE COMMUNITY IS WHEN I TRY TO COMPARE.
I SAY, WELL, DID YOU KNOW THAT, I'M JUST GOING TO PICK ONE OF THESE IN AVONDALE, AND THEY SAID, WE DON'T LIVE IN AVONDALE.
BUT WHEN I COME UP TO TALK ABOUT RATES, EVERYBODY WANTS TO KNOW HOW DO WE COMPARE AGAINST EVERYONE ELSE.
I TRIED TO PUT A COUPLE OF THEM TOGETHER, EACH RATE STRUCTURE IS A LITTLE BIT DIFFERENT.
IT DOES TAKE A WHILE TO PARSE OUT, HOW DO YOU NORMALIZE IT.
BUT WE DID TRY TO PUT A FEW MORE IN.
WE'RE CONSTANTLY DOING THAT EVALUATION.
WE TOOK A MORE LOOK AT LOCAL COMMUNITIES.
I DID INCLUDE IN THE YEAR 1 PROPOSED RATE AND THE YEAR 5 FOR THAT COMPARISON.
AGAIN, WE'RE CONTINUING TO BUILD THAT OUT AND HAPPY TO CONTINUE TO SHARE THAT WITH COUNCIL.
WE KNOW THAT THE QUESTIONS COME UP AND WE'RE WILLING TO DO THE WORK TO DO THOSE COMPARISONS.
I WILL SAY THAT I WILL COMPARE OUR UTILITY TO ANY UTILITY IN THE STATE ANYTIME THEY WANT TO COMPARE.
BUT WITH THAT, I WILL STAND FOR QUESTIONS, AND I APOLOGIZE IF I TOOK A LITTLE BIT LONGER THEN I SHOULD HAVE.
>> THAT WAS GREAT. THANK YOU SO MUCH.
COUNCIL MEMBER MCCARTHY FIRST, AND THEN COUNCIL MEMBER MATTHEWS?
>> THANK YOU, MAYOR. I'M JUST CURIOUS WHY, LET ME PUT IT THIS WAY.
I LIVED IN TUCSON FOR A WHILE AND I LIVED IN PHOENIX FOR A WHILE, AND I DON'T REMEMBER THEM REPLACING PIPES ALL THE TIME.
I DON'T REMEMBER THEM HAVING BREAKAGES LIKE WE TEND TO HAVE UP HERE.
IS THAT BECAUSE OF THE FREEZE CYCLE OR DO YOU HAVE ANY COMMENTS ON THAT FIRST? THAT'S MY FIRST COMMENT QUESTION.
>> I THINK THAT'S A GREAT QUESTION. DEFINITELY THE FREEZING THOUGHT DOES HAVE AN IMPACT.
IF YOU WERE TO MAP OUT WHEN THOSE BREAKS OCCUR, YOU SEE THAT SPRING AND FALL WINDOW SHIFTS.
I WOULD ALSO WHEN PEOPLE SAY THAT THEY DON'T HEAR ABOUT IT, I FEEL FLAGSTAFF DOES A BETTER JOB OF COMMUNICATING WHAT'S GOING ON.
I THINK WE'RE A LITTLE MORE TRANSPARENT.
I'M NOT SAYING THAT'S NOT WHAT THE OTHER UTILITIES ARE DOING.
BUT DID YOU NOT HEAR ABOUT THEIR MAIN BREAKS BECAUSE THEY DIDN'T PUT IT ON THEIR FACEBOOK PAGE OR SEND AN EMAIL WITH AN UPDATE WHERE I THINK WE TRY TO DO A LITTLE BIT ABOVE AND BEYOND, IF SOMETHING'S HAPPENING IN THE SYSTEM, WE DO WANT PEOPLE TO KNOW ABOUT IT SO THAT THEY CAN BE AWARE.
I THINK THOSE WILL BE TWO THINGS, SO I AGREE WITH YOU THE FREE THOUGH, BUT I THINK WE DO A GOOD JOB OF COMMUNICATING WHAT'S HAPPENING AND BEING MORE TRANSPARENT AS WELL.
>> IT'S PARTLY THAT THERE'S MORE KNOWLEDGE OF IT, AND THE OTHER THING IS WE ACTUALLY DO HAVE MORE BREAKAGES THAN THESE OTHER COMMUNITIES.
>> ARE WE OLDER THAN THOSE OTHER COMMUNITIES?
>> PEOPLE LIVE THERE? YEAH, I USED TO.
>> NOT THE PEOPLE, THE INFRASTRUCTURE.
>> OH, THE INFRASTRUCTURE. I GUESS I MISHEARD THAT.
WE'VE HEARD SOME COMMENTS ABOUT WE NEED TO REACH OUT TO THE PUBLIC TO LET THEM KNOW WHAT THESE PROPOSED RATES ARE GOING TO COST.
WELL, THE OTHER SIDE OF THAT EXACT SAME COIN IS WE NEED TO REACH OUT AND LET THE PUBLIC KNOW IF WE DON'T INCREASE THESE COSTS, WHAT THE IMPACTS ARE GOING TO BE AND THEY COULD BE VERY SIGNIFICANT.
OUR NEW THREE WEEK FOUR WEEK PERSON WEEK.
WE NEED TO REACH OUT AND LET THE PUBLIC KNOW THAT THIS IS NEEDED.
WE'RE NOT JUST ARBITRARILY ASKING FOR MORE MONEY.
THIS IS BASED ON ANALYSIS AND ENGINEERING AND GOOD RECORDS.
OBVIOUSLY, ANY ESTIMATE HAS SOME DEGREE OF UNCERTAINTY WITH IT.
THE OTHER THING I'LL JUST IS A REAL MINOR POINT.
[00:55:03]
PROPERTY 441, THAT'S SUBSIDIZING WATER BECAUSE IF IT'S BEING PAID BY PROPERTY TAXES, THAT'S A CHARGE THAT'S NOT BEING PAID BY THE RATE PAYERS. THANK YOU, MAYOR.>> THANK YOU. COUNCIL MEMBER MATTHEWS AND THEN COUNCIL MEMBER SWEET.
>> THANK YOU, MAYOR. I WANT TO START OUT BY AT LEAST EXPLAINING OR CLARIFYING WHY I FEEL I'M ASKING THE QUESTIONS AND I FELT THIS WAS NECESSARY TO HAVE.
THERE'S A LOT OF REASONS WHY WE GOT HERE, PASSED COUNSEL, KICKED THE CAN DOWN THE ROAD.
WHATEVER NOW WE HAVE A HUGE LIST.
BUT THE STRUGGLE IS THAT AND ONE OF OUR CONSTITUENTS SAID IT REALLY WELL, IT'S LIKE DYING BY 1,000 CUTS, MINIMUM WAGE, STORMWATER, THIS COST OF LIVING, EVERYTHING.
WE NORMALLY, I WOULD ASSUME NOT TRY TO DRILL DOWN INTO THE WEEDS LIKE WE HAVE BEEN, AND IT'S NOT THAT WE'RE QUESTIONING YOUR IN STANTEK METHODOLOGY TO THAT POINT.
IT'S JUST THAT WE'RE TRYING TO FIND AN ANGLE AND OUT TO MINIMIZE THIS IMPACT FOR THE PEOPLE THAT HAVE RAN THE SCENARIO AND UNDERSTOOD IT.
I DON'T THINK I'M EXAGGERATING BY SAYING THAT WE COULD VERY LIKELY IN FIVE OR 10 YEARS, BE A GHOST TOWN.
WE COMPLAINED ABOUT THE BOARDED UP BUILDINGS THAT NAU HAD ON THE CORNER AT MILTON FOR MANY YEARS AND PEOPLE COMPLAINED THAT THEY DIDN'T WANT TO SEE ANY MORE THAN THAT.
BUT I'M HEARING FROM BUSINESS OWNERS SAYING, I CAN'T TAKE ANOTHER HIT.
IT'S NOT THAT WE'RE SO AND I KNOW YOU GUYS ARE TAKING THE BRUNT OF IT BECAUSE YOU'RE TELLING US AND I TOTALLY BELIEVE YOU.
I KNOW WE NEED ALL THESE CIP PROJECTS.
I'M TRYING TO FIGURE OUT A WAY THAT WE CAN GET ALL THOSE CIP PROJECTS DONE BECAUSE I SEE THE NEED FOR THEM, BUT AT A DIFFERENT APPROACH BECAUSE NOW WE ARE TALKING HUNDREDS OF MILLIONS OF DOLLARS AND PEOPLE HAVEN'T EVEN FELT THE IMPACT FROM THE STORMWATER RATE INCREASES THAT WE APPROVED.
IT'S NOT FOR ME THAT WE'RE QUESTIONING YOU ALL AND ALL THE HARD WORK THAT YOU'VE DONE.
IT'S JUST BECAUSE IT DOES COME BACK ON COUNSEL TO GIVE THE FINAL APPROVAL.
IT'S LIKE, WE RECOGNIZE THAT WE NEED ALL THESE PROJECTS.
BUT NOW THAT IT'S GOTTEN SO BIG AND NOW WE'RE FACED WITH, WE'RE THE ONES THAT ARE GOING TO HAVE TO SOLVE THE PROBLEM, IS THERE A DIFFERENT APPROACH THAN WHAT WE'RE LOOKING AT BECAUSE I CAN'T TELL YOU THE EMOTIONAL RESPONSES THAT WE'RE GETTING FROM THE PEOPLE THAT ARE TAKING A HARD LOOK AT THIS.
I JUST WANTED TO CLARIFY THAT AND LET YOU KNOW THAT IT'S NOT THAT WE'RE QUESTIONING YOUR ABILITIES AND YOUR INTELLIGENCE AND YOUR EXPERIENCE BECAUSE NONE OF US, I DON'T THINK, OUR WATER EXPERTS OR UNDERSTAND THE MAGNITUDE OF THESE PROJECTS.
IT'S JUST THAT NOW FOR US TO MAKE A DECISION ON THIS, WE HAVE TO TAKE CARE OF OUR BUSINESS AND RESIDENTIAL COMMUNITY AND SAY, OKAY, HOW CAN WE GET THERE? I DON'T KNOW YET WHAT THE ANSWER IS.
BUT THE QUESTIONS I'VE BEEN ASKING IS JUST TRYING TO FIND A WAY.
HOW CAN WE STILL GET THERE BUT MAKE IT LESS PAINFUL? I JUST WANTED TO PUT THAT OUT FRONT.
MAYBE WE DO DO IT IN A LITTLE BIT MORE OF A CREATIVE WAY AND I LIKE THE IDEA THAT I'VE HEARD OF DOING THREE YEARS AND ADJUSTING TO THE CURRENT MARKET BECAUSE WE HAVE SEEN JUST OVER THE TOP INFLATION COST, SUPPLY CHAIN ISSUES, THINGS THAT HAVE BEEN UNPRECEDENTED OVER THE LAST COUPLE OF YEARS.
I'M HOPING THAT THAT WON'T CONTINUE MOVING FORWARD, MAYBE IT WILL CALM DOWN.
MAYBE IT MAKES SENSE TO DO SOMETHING A LITTLE BIT MORE CREATIVE TO SAY, WELL, WE CAN'T PREDICT THE FUTURE WITH ACCURACY 100%.
BUT LET'S START OFF WITH A TRANSITION AND THEN EVALUATE IN THREE YEARS.
I THINK YOU'D SAID THAT YOU DO REEVALUATE YOUR PROJECTS EVERY THREE YEARS OR SOMETHING,
[01:00:06]
BUT JUST THIS RATE INCREASE BECAUSE I KNOW I SAID IT TO ED, WHEN THE GOVERNMENT DECIDES TO DO AN INCREASE, THEY DON'T EVER GIVE IT BACK.WE ALWAYS FIND USES FOR THAT MONEY.
I JUST WANTED YOU TO KNOW THAT THAT IT'S NOT CRITICIZING OR JUDGING OR WHATEVER, WE'RE JUST TRYING TO FIGURE OUT, HOW DO WE GET WHAT WE NEED IN WATER AND YOU COME ON BOARD AND YOU'RE SLAPPED WITH THIS HUGE TASK? IT'S NOT YOU, IT'S JUST LIKE HOW DO WE BALANCE BETWEEN THE TWO. HAVING SAID THAT.
ONE QUESTION I WOULD LIKE CLARIFY IN YOUR KEY ASSUMPTIONS UNDER BASE OPERATING BUDGET.
LOOK BACK ON THE WATER FUND PAGE FOR YOUR PERSONNEL SERVICES AND VERITABLE AND FIXED O&M.
AND THAT FIRST YEAR 2024-2025, THAT'S A SIGNIFICANT INCREASE IN ALL OF THOSE LINE ITEMS. CAN YOU JUST CLARIFY WHY THAT'S SUCH A SIGNIFICANT JUMP?
>> I THINK I DON'T KNOW WHAT YOU'RE REFERRING TO THE SLIDE OR YOU'RE REFERRING TO.
BECAUSE I KNOW THERE'S OTHER DOCUMENTS.
IT DOES. NO. I THINK I'M TRACKING RIGHT WITH YOU.
I'M HAPPY TO ANSWER THAT QUESTION, BUT I JUST WANTED TO SAY WATER SERVICES DOESN'T TAKE THE QUESTIONS THAT WAY.
ACTUALLY, WE APPRECIATE YOUR WILLINGNESS TO COME AND SIT AND ENGAGE IN A CONVERSATION AS WE TRY TO PROCESS THROUGH, SO THANK YOU FOR THAT AND WE DO APPRECIATE IT.
IT'S WE DON'T TAKE IT THAT WAY.
I THINK ONE OF THE MAIN TAKEAWAYS OF WHY YOU SEE THAT IMMEDIATE INCREASE, WHY IS IT SO DRASTIC THAT FIRST YEAR? I'M GOING TO SAY IT'S PROBABLY TWO THINGS.
ONE, BECAUSE THE LAST RATE INCREASE WENT INTO EFFECT 2020, THERE'S THIS FOUR YEAR LAPSE WHERE REGARDLESS OF HOW YOU ARGUE THE COSTS, THEY DID GO UP AND WE WERE ABSORBING THOSE, AND WE HAVE TO CATCH UP.
HOW ARE WE ABSORBING THOSE? WELL, EVEN TODAY, YOU'VE HEARD ME SAY MULTIPLE TIMES THROUGH THE LAST COUPLE OF YEARS OF BUDGET DEVELOPMENT THAT WE'RE HAVING TO USE ONE TIME MONEY TO PAY FOR THE RE OCCURRING COSTS.
THAT RIGHT SIZE AND IN THAT FIRST YEAR IS AN INITIATIVE AND A GOAL THAT I FEEL LIKE WE WERE WORKING TOWARDS IS THAT I NEED THE RE-OCCURRING COST TO BE COVERED WITH THE RE-OCCURRING MONEY, AND THAT'S THAT TRUE UP THAT'S HAPPENING TO GAIN IN THAT FIRST YEAR THAT YOU SEE BEFORE IT STABILIZES OUT TO THE 15 YEAR.
>> THANK YOU, MAYOR. I DO HAVE SEVERAL QUESTIONS AS WELL, BUT I'M NOT GOING TO ASK ALL OF THEM RIGHT NOW.
I DO WANT TO START BY THANKING STAFF.
THE QUESTIONS THAT YOU ANSWERED THUS FAR, A LOT OF THEM ARE FROM ME, AND I APPRECIATE YOUR TIME AND WILLINGNESS TO NOT ONLY ANSWER THEM TONIGHT PUBLICLY SO THAT THE COMMUNITY MEMBERS CAN ALSO HEAR WHAT YOU'RE SAYING.
BUT YOU TOOK MY CALLS, SEVERAL OF THEM.
I KNOW IT'S A LOT OF YOUR TIME, AND I JUST REALLY DO APPRECIATE THAT.
COUNSEL MEMBER MATHEWS TOUCHED ON WHAT I WAS GOING TO SAY, THIS IS JUST ONE IMPACT TO OUR COMMUNITY.
WE ARE FACED WITH A LOT RIGHT NOW.
AS A SMALL BUSINESS OWNER, I KNOW MY RENTS GONE UP, MY PAYROLL.
NOW I HAVE THIS, MY APS BILL, AND THAT'S FOR THE COMMUNITY IN GENERAL.
I JUST WANT TO KEEP THAT IN THE FOREFRONT AS WE MOVE THROUGH THIS.
MY ONE QUESTION RIGHT NOW AND COUNSEL MEMBER MATHEWS DID TOUCH ON IT, BUT I'D LIKE TO HEAR SHAN AND YOU AND I TALKED ABOUT IT EARLIER BEFORE THE MEETING THAT WE CAN DO AND WE WERE TALKING ABOUT DOING A YEARLY REVIEW AND MAYBE COMING TO COUNSEL WHERE WE ARE AND CAN WE MAKE TWEAKS TO LOWER THE COST FOR NEXT YEAR IF WE'RE AHEAD OF THE GAME? CAN YOU TOUCH ON THAT AND EXPAND ON OUR CONVERSATION?
>> I THINK WHAT I WOULD TOUCH ON IS, AGAIN, IS THE OPERATIONAL STRATEGY OR PROBABLY THE EXPECTATION OF HOW YOU MANAGE AN ENTERPRISE FUND.
WITH OUR CURRENT FINANCIAL MODEL BUILT, WHICH IS ONE OF THE INITIATIVES OF THE RATE STUDY THAT STAN TECH OPENS DO GIVES US, AS THE CITY THE TOOLS TO DO THIS ANALYSIS.
THAT EVERY YEAR WHEN WE'RE DOING BUDGET DEVELOPMENT, WHEN WE'RE MAKING FINANCIAL DECISIONS WHEN WE'RE PRESENTING TO COUNSEL, THAT WE HAVE TO THIS MODEL THAT'S RUNNING TO TALK ABOUT THOSE IMPACTS AND WHAT THEY LOOK LIKE.
THAT IS THAT ANNUAL OCCURRENCE THAT YOU WOULD LOOK AT THAT FINANCIAL PLAN TO SAY,
[01:05:05]
HOW ARE THOSE THINGS ALIGNING? ONE OF THE OTHER INITIATIVES FOR THE RATE STUDY WAS THE COST OF SERVICE, ALSO A VERY HUGE LIFT TO DO A COST OF SERVICE STUDY.ADMINISTRATIVE INITIATIVE WOULD BE IS THAT YOU WOULD DO A COST OF SERVICE STUDY EVERY THREE YEARS, WHERE THAT'S NOT LOOKING AT THE REVENUE, IT'S LOOKING AT HOW YOU COLLECTED IT BECAUSE YOU'RE LOOKING AT THE REVENUE VERSUS EXPENDITURES EVERY YEAR.
THAT COST OF SERVICE, MY INTENT IS THAT WOULD OCCUR EVERY THREE YEARS, AND BECAUSE I WOULD FRAME THAT THERE'S THREE ENTERPRISE FUNDS BECAUSE THE FOURTH ONE IS ATTACHED, RECLAIM CURRENTLY IS ATTACHED TO WATER.
THAT COULD PUT THAT IN MY MIND IS THREE ENTERPRISE FUNDS THAT IF I COULD DO ONE COST OF SERVICE EVERY YEAR, EVERY COST OF SERVICE WOULD BE DONE EVERY THREE YEARS, AND I'M NOT HAVING TO DO THREE ENTERPRISE FUNDS ALL IN ONE YEAR AND DRAG YOU THROUGH THREE CONVERSATIONS ON.
ARE WE TALKING ABOUT WATER? WE'RE TALKING ABOUT WASTEWATER.
THAT BEING SAID, IT IS MY INTENT AS WE MOVE FORWARD BECAUSE THESE THREE WERE DONE TOGETHER.
MY INTENT WOULD BE EVERY YEAR WE'RE LOOKING AT THAT FINANCIAL PLAN, THE THREE YEAR CYCLE FOR THE COST OF SERVICE, THE NEXT COST OF SERVICE WILL BE FOR STORMWATER.
THAT WILL BE EXECUTED, THEN I WILL DO WATER THE FOLLOWING YEAR, AND THEN I WILL DO WASTEWATER THE FOLLOWING YEAR AND CREATE THAT CYCLE THAT EVERY YEAR YOU'RE DOING A COST OF SERVICE STUDY ON ONE OF THE ENTERPRISE FUNDS, BUT EVERY THREE YEARS, YOU'RE MAKING SURE THAT THAT YOUR RATE STRUCTURE, ALL OF THAT IS PROPORTIONAL LOOKS.
BUT THAT FINANCIAL LOOK OF YOUR BALANCE SHEET REVENUES OVER EXPENDITURES, BUT THAT IS OCCURRING EVERY YEAR, AND THAT'S INTEGRATED INTO WHAT WE DO.
HOPEFULLY THAT PAINTS A LITTLE BIT OF A PICTURE OF WHAT THE PLAN GOING FORWARD WOULD BE.
>> THAT DOES, AND THAT ALLOWS US TO BE A LITTLE BIT NIMBLE FOR THE PLANNING YEAR TO YEAR. CORRECT?
>> THEN MY ONE CONCERN THAT I'LL JUST SAY OUT LOUD IS THAT, YOU KNOW, WE ARE A COUNCIL THAT HAS BEEN THROUGH THIS AND UNDERSTAND IT, BUT THE FUTURE COUNSEL MAY NOT BE AS, THIS MAY NOT BE AS TOP OF MIND, AND SO I'M GOING TO COUNT ON YOU TO MAKE SURE THAT THIS DOES COME BACK TO THE NEW COUNCIL AND THAT THEY UNDERSTAND WHAT THEY'RE LOOKING AT AND HOW TO ADJUST.
>> THANK YOU. I APPRECIATE THAT.
>> THANK YOU, MAYOR. COUPLE OF COMMENTS.
WE'VE HEARD COMMENTS ABOUT HOW HIGH INFLATION IS NOW AND THAT'S NOT THE NORM.
WELL, I'M A LITTLE BIT OLDER THAN SOME OF THE PEOPLE IN THIS ROOM, MAYBE NOT ALL OF THEM.
BUT I REMEMBER WHEN THE INFLATION RATE WAS WAY HIGHER THAN IT IS NOW.
I PAID 11% ON A HOME MORTGAGE.
THIS IDEA THAT WELL, INFLATION IS REALLY HIGH NOW AND IT'S GOING TO GO DOWN.
I DON'T NECESSARILY THINK IT'S GOING TO GO DOWN.
HOPEFULLY IT DOES, BUT NOT NECESSARILY.
LORI MATHEWS SUGGESTED THAT MAYBE WE SHOULD THINK OF OTHER IDEAS, AND I'M GOING TO PRESENT AN IDEA WHICH I PROBABLY DON'T EVEN SUPPORT, BUT IT IS AN IDEA THAT COULD BE CONSIDERED.
WE'VE DECIDED TO KEEP OUR PROPERTY TAX LEVY THE SAME AS IT HAS BEEN.
IN EFFECT, ADJUSTED FOR INFLATION, OUR PROPERTY TAXES ARE GOING DOWN.
IF WE WANTED TO KEEP THEM LEVEL ADJUSTED FOR INFLATION, WE COULD FUND SOME OF THE WATER EXPENSES WITH OUR PROPERTY TAX.
I DON'T REALLY SUPPORT THAT BECAUSE I LIKE THE IDEA OF WATER SHOULD PAY FOR WATER AND THE GENERAL TAX SHOULD PAY FOR POLICE AND FIRE AND WHATEVER.
THERE ARE THINGS WE CAN DO, BUT THAT DOESN'T MEAN THEY'RE REALLY A GOOD IDEA. THANK YOU.
>> ANY ADDITIONAL QUESTIONS, COUNSEL, BEFORE WE MOVE ON TO THE NEXT PART OF THE PRESENTATION? THANK YOU SO MUCH.
>> YES, WE'LL STILL BE AVAILABLE FOR QUESTIONS, BUT WE WILL LET STEN TECH TAKE US THROUGH SOME OF THE SCENARIOS AND FURTHER OUR DISCUSSION.
>> WHILE WE PULL UP THOSE SLIDES, JUST THINKING ABOUT TIME, CAROL HAS FOUR POINTS THAT SHE'S PRESENTING THE FOUR SCENARIOS.
WE'RE TRYING TO GIVE 10 MINUTES TO EACH ONE.
SHE'LL PRESENT IT, ASK QUESTIONS, SHE'LL MOVE TO THE NEXT AND THEN WE'LL SEE WHERE WE'RE AT AT THE END.
IF YOU'RE READY TO MAKE RECOMMENDATIONS OR WHAT THAT LOOKS LIKE.
>> I HAVE A CONCERN ABOUT WHAT YOU JUST SAID.
IT SOUNDED LIKE WE WERE TALKING ABOUT 40 MINUTES.
IS THAT WHAT I HEARD YOU SAY 40 MINUTES?
[01:10:01]
IF WE DO THAT, WE WON'T HAVE PUBLIC PARTICIPATION IF WE HAVE A HARD STOP AT 5:00 O'CLOCK, SO I'M NOT SURE HOW WE WANT TO HANDLE THAT.>> HOW DO WE WANT TO HANDLE THAT? WELL, ACTUALLY, I COULD EXCUSE MYSELF TO GET TO MY NEXT COMMITMENT, AND THE MEETING CAN CONTINUE ON AND VICE MAYOR COULD TAKE OVER.
>> WE HAVE A WATER COMMISSION MEETING IN HERE THAT STARTS AT 5:30, SO THERE'S A LITTLE FLEXIBILITY THERE.
I DON'T KNOW IF IT'S WORKING OR NOT, BUT YOU COULD TAKE THE PUBLIC COMMENT NOW AND TO BE QUITE CANDID, I KNOW COUNCIL PROBABLY WANTS TO HAVE A LOT OF DISCUSSION TOO.
JUST TALKING TO [NOISE] DEPUTY CITY MANAGER SHANNON ANDERSON, I KNOW THAT THERE IS SUFFICIENT TIME TO HOLD EVEN ANOTHER WORK SESSION IF YOU WANTED TO DO THAT.
I HATE TO BRING THAT UP, BUT I'M JUST LOOKING AT THE REALITY.
>> THE REQUEST FROM STANTEC WOULD BE TO HAVE THAT DISCUSSION NEXT TUESDAY, SO THEY CAN HAVE DIRECTION AND HAVE TIME TO WRAP UP THE STUDY BEFORE JUNE 18TH.
WE'RE NO LONGER ON THAT AGENDA.
WE'D HAVE TO ASK THE CLERK IF THERE'S ROOM.
>> SO LET'S HAVE THE CLERKS WORK ON WHETHER THAT WILL FIT FOR NEXT WEEK.
COUNCIL MEMBER, DID YOU HAVE A SUGGESTION?
>> MY SUGGESTION WAS CONTINUING THIS ON TUESDAY.
>> WHAT I'M GOING TO DO IS GO AHEAD AND TAKE PUBLIC COMMENT, AND THEN WE WILL CONTINUE AND WE WILL STILL HAVE A QUORUM IF COUNCILMEMBER HARRIS AND I LEAVE.
WE'LL SEE AT 5:00, WHAT WE'RE GOING TO DO ABOUT OUR DISCUSSION.
WE MAY JUST PICK UP OUR DISCUSSION ON TUESDAY ONCE WE GET CLARIFICATION THAT WE CAN FIT THIS ON THE AGENDA.
>> HELLO, MAYOR AND COUNCIL. MY NAME IS JOHN NAUMAN.
I'M A RESIDENT OF FLAGSTAFF FOR QUITE A WHILE.
FIRST OF ALL, I THOUGHT YOUR QUESTIONS WERE GREAT, AND I WISH THE WATER COMMISSION WOULD HAVE GOT THEM TOO. THAT WOULD HAVE BEEN GREAT.
I'M SPEAKING ON BEHALF OF MY VIEWS, NOT THE WATER COMMISSION.
I ALSO WANT TO THANK AARON HILL AND SHANNON JONES FOR ALL THEIR WORK [NOISE] ON THIS STUFF.
THEY HAVE REALLY [NOISE] BEEN AT IT, THE WHOLE WATER DEPARTMENT.
ALSO CAROL AND STANTEC HAS DONE A GOOD WORK TOO.
I JUST WANT TO TALK ABOUT THE BIG PICTURE.
THERE ARE RAPID CHANGES GOING IN WATER AND NOT ONLY THE UNITED STATES, BUT GLOBALLY.
DPR IN THE SOUTHWEST IS A KEY RESOURCE NOW.
THE CITY NEEDS TO LOOK ON HOW IT'S GOING TO ADDRESS THAT.
IT'S IN PART OF THE RATE STUDY CAPITAL PROJECTS.
THE WATER DEPARTMENT IS ESSENTIAL DEPARTMENT.
YOU NEED TO HAVE TECHNICAL EXPERTISE IN THIS DEPARTMENT.
IT SETS IT APART FROM THE REST OF THE CITY IN A WAY.
WITHOUT THAT TECHNICAL EXPERTISE, YOU HAVE PROBLEMS. THE OTHER CHALLENGE IS, AND IT'S HIT THE NEWS, IS PFAS.
ANOTHER CHALLENGE TO OUR WASTEWATER TREATMENT, POSSIBLY IN THE LONG-TERM FUTURE, POTABLE WATER.
THOSE THINGS NEED TO BE LOOKED AT.
WASTEWATER TREATMENT, IS CHANGING.
IF YOU LOOK AT WHAT'S BEING DONE IN EUROPE RIGHT NOW, THEY HAVE MODULAR SYSTEMS, NOT THE BIG HUGE CONCRETE FACILITIES THAT WE HERE HAVE IN THE UNITED STATES, THEY'RE SHIFTING TO [NOISE] AN ENTIRELY DIFFERENT TYPES OF TECHNOLOGY THAT'S CHEAPER AND MORE EFFICIENT.
I'M JUST SAYING THAT TO SET UP SOME OTHER STUFF LATER.
[01:15:04]
I'LL TRY TO BE FAST. BIG PROJECTS.WE HAVE RED GAP BRANCH ON THE HORIZON. HOW ARE WE GOING TO FUND THAT? WE ALSO HAVE THE NEW WILDCAT WASTEWATER TREATMENT PLANT. HOW ARE WE GOING TO FUND THAT? WELL, THE CITY CANNOT REALLY ADDRESS THESE ISSUES UNLESS IT HAS TECHNICAL EXPERTISE IN THE CITY ITSELF, I THINK, WHICH BRINGS ME TO MY TWO SUGGESTIONS.
ONE, WE NEED TO REALLY FOCUS ON STAFF RETENTION AND EXPERTISE IN THE WATER DEPARTMENT.
IF WE DON'T HAVE THAT, MAKING PROGRESS IS GOING TO BE TOUGH.
I KNOW I'VE TALKED TO SHANNON, HE LOSES PEOPLE BECAUSE WE CAN'T COMPETE WITH OTHER ENTITIES IN THE CITY AND BEYOND THE CITY.
I KNOW THIS IS A PROBLEM EVERYWHERE.
IT'S A PROBLEM AT THE UNIVERSITY, BUT KEEP THAT IN MIND WHEN FUNDING THIS.
IF WE CAN'T FUND GOOD PEOPLE, WE'RE IN TROUBLE AND I KNOW THIS IS A CITY PROBLEM TOO.
>> LAST THING JUST REAL QUICK.
>> LOOK [OVERLAPPING] AT THE NEW TECH.
>> WE ARE ON SUCH A TIGHT TIMELINE.
YOU CAN EMAIL US OR COME BACK ON TUESDAY WITH ADDITIONAL QUESTIONS OR COMMENTS.
>> HONORABLE MAYOR AND COUNCILMEMBERS. I'M JOSH MAHER.
I'M THE ASSOCIATE VICE PRESIDENT FOR COMMUNITY RELATIONS AT NAU.
WE'D LIKE TO THANK CITY STAFF AND STANTEC FOR THEIR TIME SPENT IN THE PRODUCTIVE DISCUSSIONS WITH US OVER THE LAST SEVERAL WEEKS.
THANK YOU TO EACH OF YOU WHO'VE INDULGED US IN THIS IMPORTANT CONVERSATION.
WE APPRECIATE THE OPPORTUNITY TO ADDRESS THE PROPOSED WATER RATE INCREASES WITH YOU TODAY.
NOW, WE ACKNOWLEDGE THE CITY'S DESIRE TO SIMPLIFY THE RATE STRUCTURE TO EASE ADMINISTRATIVE BURDEN.
MORE IMPORTANTLY, WE ALSO UNDERSTAND THE IMPORTANCE OF MAINTAINING A RELIABLE WATER SUPPLY FOR ALL FLAGSTAFF RESIDENTS, AND THE NEED TO INVEST IN CRITICAL WATER INFRASTRUCTURE.
NAU, IS COMMITTED TO BEING A RESPONSIBLE COMMUNITY PARTNER IN THIS EFFORT.
HOWEVER, WE RESPECTFULLY DISAGREE WITH THE CURRENT PROPOSED RATE STRUCTURE AS IT PERTAINS TO NAU.
THE CURRENT PROPOSAL WILL RESULT IN A 38% INCREASE COSTING NAU AN ADDITIONAL $274,000 IN ONE YEAR ALONE.
BY YEAR 5, WE SEE A ONE MILLION DOLLAR INCREASE, WHICH REPRESENTS A 142% INCREASE.
IT SOUNDS A LITTLE RIDICULOUS WHEN YOU SAY IT.
IT'S ESSENTIAL TO NOTE THAT NAU IS NOT A TRADITIONAL COMMERCIAL USER, AND THE CURRENT RATE STRUCTURE WAS A CLEAR RECOGNITION OF THAT.
MAYOR AND COUNCIL, YOUR CONSULTANTS WILL TELL YOU THAT NAU DOESN'T FIT NEATLY IN ANY OF THE PREDEFINED WATER USER CATEGORIES, AND WE AGREE.
NAU IS UNIQUE IN MANY WAYS, BOTH AS A WATER USER IN THE CITY OF FLAGSTAFF, AND ACROSS THE COUNTRY.
YOU'RE UNLIKELY TO FIND A UNIVERSITY THAT HAS INVESTED SO SIGNIFICANTLY TO MINIMIZE THE HOUSING BURDEN IN ITS COMMUNITY.
WE HOUSE 50% OF OUR FLAGSTAFF STUDENT POPULATION ON CAMPUS, AND WE HAVE PLANS TO INCREASE ON CAMPUS HOUSING OPTIONS FOR OUR STUDENTS, AND FOR THAT, WE ARE EXTREMELY PROUD.
OUR ON CAMPUS HOUSING ISN'T JUST ABOUT DORMITORIES.
IT'S A CRITICAL PART OF FLAGSTAFF HOUSING SOLUTION, BUT IT ALSO ACCOUNTS FOR THE MAJORITY OF NAU'S WATER USAGE.
BY PROVIDING HOMES FOR 10,000 STUDENTS AND FLAGSTAFF RESIDENTS.
WE ALLEVIATE PRESSURE ON THE RENTAL MARKET AND CONTRIBUTE [NOISE] TO A MORE AFFORDABLE AND LIVABLE COMMUNITY FOR EVERYONE.
[NOISE] GIVEN OUR UNIQUE CIRCUMSTANCES, WE BELIEVE A RATE INCREASE THAT MORE ACCURATELY REFLECTS THE RESIDENTIAL NATURE OF OUR WATER USAGE, WOULD BE A MORE EQUITABLE SOLUTION.
WE URGE THE CITY COUNCIL TO WORK WITH US TO DEVELOP A REVISED RATE STRUCTURE THAT FAIRLY REFLECTS OUR UNIQUE CIRCUMSTANCES AND CONTRIBUTIONS IN THE COMMUNITY.
NAU, IS EAGER TO COLLABORATE WITH THE CITY TO FIND A SUSTAINABLE SOLUTION THAT BOTH FUNDS NECESSARY INFRASTRUCTURE AND SUPPORTS THE DIVERSE NEEDS OF ALL WATER USERS.
WE BELIEVE A RATE STRUCTURE THAT RECOGNIZES OUR EFFORTS IN HOUSING CAN BENEFIT BOTH THE UNIVERSITY AND THE RESIDENTS OF FLAGSTAFF. THANK YOU FOR YOUR TIME.
>> THANK YOU. WARD DAVIS AND THEN STEPHEN POOR.
I'M A LONG TIME FLAGSTAFF RESIDENT, AND I WAS ON THE WATER COMMISSION FOR A LONG TIME, ALSO WITH THE FLAGSTAFF WATER GROUP.
THE FIRST THING I'D LIKE TO DO IS SUPPORT THE IDEA OF DOING ONE STUDY A YEAR BECAUSE, THERE'S NOT ONE PERSON HERE IN EITHER THE COUNCIL OR THE WATER COMMISSION THAT WENT THROUGH THE LAST ONE.
[01:20:01]
THAT WOULD AT LEAST GIVE US SOME ROLLING KNOWLEDGE.I WANT TO ALSO SUPPORT THE RUNNING THE FINANCIAL MODEL EVERY YEAR.
THERE'S A WHOLE LOT OF CHANGES THAT WE'LL HEAR ABOUT OF THINGS WE DON'T KNOW.
IN PARTICULAR, I'VE BEEN WORKING WITH WASTE WATER AND THERE'S SOME NEW TECHNOLOGIES THAT ARE GOING TO MAKE SOME OF THE PROJECTS THAT WE SHOW IS PRETTY EXPENSIVE, A LOT CHEAPER.
NOW, WHEN YOU ROLL THAT TOGETHER WITH THE TOTAL OF 100 MILLION THAT YOU NEED, IT MAY NOT BE SIGNIFICANT, BUT IT MAY.
WE'RE TALKING MAYBE 10 MILLION ON A PROJECT, AND THAT MAY MATTER.
THAT'S BASICALLY WHAT I WANT TO SAY.
THE NEW TECHNOLOGIES ARE A LITTLE UNCERTAIN.
THE INDUSTRY DOESN'T LIKE TO CHANGE, AND HOPEFULLY WE'LL BE ABLE TO SAVE SOME MONEY. THANK YOU.
>> THANK YOU. STEPHEN PAUL, AND THEN REGINA SALES.
>> GOOD AFTERNOON, MAYOR, VICE MAYOR, AND CITY COUNCIL.
I'D LIKE TO FIRST THANK THE CITY STAFF.
I SPENT A WONDERFUL HOUR WITH THEM YESTERDAY.
I DIDN'T GET ALL THE QUESTIONS ANSWERED. IT WASN'T ENOUGH TIME.
JUST WE DON'T HAVE ENOUGH TIME TODAY TO GO OVER EVERYTHING, BUT WE'LL GIVE IT A SHOT.
WITH REGARDS TO COST ESCALATION FACTORS, WHICH HAS BEEN A SITUATION I'VE BEEN LOOKING AT, AND THE MODELS THAT THEY HAVE PUT UP.
I TOOK A LOOK AT THOSE MODELS.
I BROKE THEM DOWN BY THE LAST YEAR IN EITHER TWO OR THREE MONTHS, AND A ROLLING PERIOD GOING BACK.
I THINK IT'S IMPORTANT TO TAKE A LOOK AT THAT BECAUSE, YOU CAN'T USE THESE NUMBERS AND I KNOW THERE IS SOME OF THESE NUMBERS THAT WERE USED, FOR EXAMPLE, YOU GET A 7% AVERAGE FOR THE FIRST ONE THEY HAVE ON THEIR COST ESCALATION PAGE, AND SAY, WELL, IT'S 350.5 THAT'S WHAT WE'RE USING FOR BUDGET.
LET'S JUST USE THAT. THEN THEY GO TO THE SECOND ONE, AND IT'S AROUND 5.8. LET'S USE 6.
THERE'S NO CONSISTENCY, AND ON WHAT ARE WE DOING? USING 3.5 YEARS OF 100 YEAR EVENT AND THAT 100 YEAR EVENT IS JUST NOT WHAT HAPPENED WITH REGARDS TO THE PANDEMIC.
IT'S WHAT HAPPENED WITH REGARDS TO THE FEDERAL RESERVE, INCREASE THE MONEY SUPPLY 40%.
IT'S WHY HOMES WENT UP 40% AND WHY YOU SAW THESE BIG INCREASES.
BRIEFLY, IF YOU TAKE A LOOK AT ONE OF THE THINGS THEY GAVE YOU WAS THE PLASTICS WATER PIPE FROM THE FED.
IF YOU GO FROM JANUARY OF 2013 TO 2020, THE PRICES WERE DOWN. SEVEN YEARS.
THE NEXT TWO YEAR POPPED UP 100%, 20%.
WHY DID IT GO UP THERE THOSE TWO YEARS? FOR THE REASONS I JUST MENTIONED.
NEXT, CONSTRUCTION, SIMILAR EVENT.
YOU GO BACK TO 2010 TO -2020, UP 20%.
THAT'S NOT BAD, 2% OR LESS A YEAR.
BUT WHAT HAPPENS IN THE NEXT TWO PERIODS, UP 10 AND 20%.
THAT'S RIGHT AFTER THE FEDERAL RESERVE INCREASE THE MONEY SUPPLY, 40%.
WHAT HAPPENED THE FOLLOWING YEAR? DOWN A 1/2%.
GO ON TO THE NEXT ONE THEY SHOWED YOU CHEMICALS, WATER TREATMENT.
IT'S DOWN ALL THE WAY TO 2020.
IT'S NEGATIVE. THEN WHAT HAPPENS TO THE FOLLOWING YEAR? POPS 30%.
THAT'S NOT CONSISTENT. THAT'S NOT WHAT'S GOING ON.
THAT'S THE MONEY SUPPLY AGAIN.
WHAT HAPPENED LAST YEAR DOWN 3.62.
I'M NOT SUGGESTING THEY'RE GOING DOWN.
I'M SUGGESTING YOU LOOK AT WHAT THE MARKET'S SAYING AT 2.4, AND ONCE YOU DO THAT, I DON'T CHANGE WHAT THEY HAVE ON SCHEDULE 8 OF THEIR FINANCIALS, AND I'M NOT CHANGING THEIR NET OPERATING INCOME, BUT WE'RE REDUCING THE INFLATION EXPECTATIONS THAT ARE EXCESSIVE.
THEY CAN STILL GO AHEAD AND DO EVERYTHING THEY WANT TO DO.
I'M NOT TAKING ANYTHING.THANK YOU.
>> THANK YOU. REGINA SALES AND THEN JOE GALLEY.
>> HELLO, MAYOR, COUNCIL, AND CITY STAFF.
I APPEAR TODAY ON BEHALF OF THE NORTHERN ARIZONA LODGING, TOURISM AND RESTAURANT ASSOCIATION, AND IS AN ADVOCATE FOR OUR CITY'S ECONOMIC PROSPERITY AND THE WELL BEING OF OUR RESIDENTS.
OUR TOURISM INDUSTRY IS A VIBRANT ECOSYSTEM THAT SUSTAINS OVER 8,000
[01:25:03]
JOBS AND BRINGS $565 MILLION INTO OUR LOCAL ECONOMY.EVERY RESTAURANT, HOTEL, BAR, AND CAFE CONTRIBUTE TO THE TOP HISTORY OF OUR CITY, CREATING OPPORTUNITIES FOR COUNTLESS FAMILIES TO THRIVE.
IN 2023, OUR TOURISM DOLLARS BROUGHT IN $12.1 MILLION IN BED BOARD AND BEVERAGE SALES TAX TO FUND THE CITY'S PROGRAMS, PROS, BEAUTIFICATIONS, ART AND SCIENCE, ECONOMIC DEVELOPMENT, AND DISCOVERS FLAGSTAFF.
TOURISM IS THE FASTEST GROWING SECTOR IN COCONINO COUNTY, WITH 9,000 NEW JOBS BY 2030.
NOW, IMAGINE THE RIPPLE EFFECT OF IMPOSING HIGHER WATER RATES ON OUR BUSINESSES.
OUR RESTAURANTS, HOTELS, BARS ALREADY OPERATE ON RAZOR-THIN MARGINS, AND ANY INCREASE IN OPERATIONAL COSTS DIRECTLY THREATENS OUR VIABILITY.
IT'S NOT JUST ABOUT PROFITS, IT'S ABOUT THE LIVELIHOODS OF OUR FELLOW RESIDENTS WHO RELY ON THESE JOBS TO PUT FOOD ON THEIR TABLES, AND ROOFS OVER THEIR HEADS.
LET'S NOT FORGET THE IMPACT ON THE BROADER COMMUNITY.
WHEN BUSINESSES ARE FORCED TO ABSORB HIGHER COSTS, WE'RE LEFT WITH NO CHOICE BUT TO PASS THEM ON TO CONSUMERS.
THAT MEANS HIGHER PRICES FOR MEALS, ACCOMMODATION, AND ENTERTAINMENT, A BURDEN THAT OVERLY AFFECTS WORKING FAMILIES AND PERSONS IN FIXED INCOMES.
IS IT FAIR TO BURDEN OUR RESIDENTS WITH ADDITIONAL FINANCIAL STRAIN, ESPECIALLY DURING THE ECONOMIC UNCERTAINTIES? THERE'S A FUNDAMENTAL QUESTION OF FISCAL RESPONSIBILITY FROM OUR ELECTED OFFICIALS.
WHILE WE RECOGNIZE THE NEED FOR FUNDING WATER INFRASTRUCTURE, WE BELIEVE THAT BURNING BUSINESSES AND RESIDENTS WITH HIGHER FEES IS NOT THE SOLUTION.
OUR CITY'S ECONOMY RELIES ON LOCAL BUSINESSES.
MANY OF US ARE ALREADY SCRAPPLING WITH NUMEROUS CHALLENGES, IMPLEMENTING HIGHER WATER FEES WOULD ONLY EXACERBATE THESE DIFFICULTIES, LEADING TO JOB LOSSES AND INCREASED FINANCIAL STRAIN ON OUR RESIDENTS.
I URGE COUNCIL TO VOTE NAY ON THE PROPOSED WATER RATE INCREASES AND EXPLORE ALTERNATIVE METHODS OF FUNDING WATER INFRASTRUCTURE.
IT'S IMPERATIVE THAT WE PRIORITIZE FISCAL RESPONSIBILITY, AND SEEK SOLUTIONS THAT DO NOT IMMENSELY IMPACT BUSINESSES AND RESIDENTS.
I ASK COUNCIL TO GO BACK TO THE DRAWING BOARD AND WORK ON SUSTAINABLE FUTURE FOR OUR CITY BY FINDING INNOVATIVE, CREATIVE WAYS TO FUND WATER INFRASTRUCTURE THAT DOES NOT PASS THE BURDEN OF COST TO OUR BUSINESS AND RESIDENTS.
THANK YOU FOR YOUR TIME AND CONSIDERATION.
>> THANK YOU. JOE GALLEY AND THEN NICOLE ELMAN.
>> GOOD AFTERNOON, YOUR HONOR, JOE GALLI, 101, WEST ROUTE 66, SENIOR ADVISOR OF PUBLIC POLICY AT THE GREATER FLAGSTAFF CHAMBER OF COMMERCE.
I'M EXCITED TO BE WITH YOU TODAY AND SHARE SOME THOUGHTS.
IT'S BEEN AN ONGOING DISCUSSION, GOING BACK TO WHEN RATE PROPOSALS WERE INTRODUCED BY THE CONSULTANT TO YOU AND THE WATER COMMISSION IN JOINT MEETING IN OCTOBER, I BELIEVE, OF LAST YEAR.
AND SO I WANTED TO STRESS WE HAVE BEEN IN CONTACT WITH YOUR STAFF ON A VERY FREQUENT BASIS SINCE THAT TIME.
MR. SHANNON JONES, THE WATER SERVICES DIRECTOR, I THINK I JUST COUNTED HAS BEEN IN OUR BOARD ROOM.
SPEAKING TO EITHER OUR BUSINESS ADVOCACY DIVISION OR OUR BOARD OF DIRECTORS AT THE CHAMBER, NO LESS THAN THREE TIMES IN THE LAST FIVE MONTHS, INCLUDING THIS MORNING.
THANK YOU, MR. JONES, FOR BEING A WILLING PARTNER IN COMMUNICATION WITH THE BUSINESS COMMUNITY.
LOOK, WE ARE CONCERNED WITH THE CURRENT SITUATION.
NO ONE UNDERSTANDS MORE ACUTELY THE NEEDS OF WATER INFRASTRUCTURE IN OUR COMMUNITY.
WE CURRENTLY HAVE A LINE DOWN ON THE EAST SIDE OF TOWN.
NOT SURE YOU'RE AWARE, BUT THE CORTLAND PLAZA HAS SUFFERED NO WATER FOR THE LAST WEEK, INCLUDING ONE OF OUR KEY RESTAURANTS WHO LOST ABOUT $20,000 FOR MOTHER'S DAY WEEKEND AND GRADUATION WEEKEND IS STILL NOT OPEN, BUT I DID SPEAK TO ONE OF THE RESIDENTS IN THAT COMMERCIAL CENTER TODAY, AND THEY SAID THEY'RE GETTING REGULAR UPDATES FROM THE WATER DEPARTMENT.
SO TO MR. JONES' POINT, WATER SERVICES IS ON IT, AND I KNOW THAT THEY'RE WORKING ON IT.
WHEN BUSINESSES LOSE REVENUE, THE CITY LOSES TAX REVENUE TOO.
WE DON'T WANT THAT TO BE AN ONGOING SITUATION.
WE'RE INTERESTED IN MAKING SURE INFRASTRUCTURE IS SUSTAINED, RESILIENT, LONG TERM.
HOWEVER, HAVING SAID THAT, AS PREVIOUS SPEAKERS FROM THIS PODIUM HAVE SHARED, WE'RE IN A CHALLENGING TIME.
INFLATION WHILE IT MIGHT NOT BE WHAT IT WAS IN THE MID '80S, AS COUNCILMAN MCCARTHY STATED, IT CERTAINLY IS HIGHER THAN IT'S BEEN THE LAST 10 OR 15 YEARS, AND WE ARE FEELING THE PRESSURE OF THAT IN OUR COMMUNITY.
[01:30:03]
OUR BUSINESS MEMBERS ARE CONCERNED.SEVERAL OF OUR BUSINESS MEMBERS HAVE VOICED CONCERNS AFTER HAVING GONE TO US DIRECTLY AFTER HAVING GONE TO THE CITY'S CALCULATOR AND SEEN THAT THEIR WATER BILLS ARE GOING TO GO UP EXPONENTIALLY.
I APPRECIATE THE OPPORTUNITY TO CONTINUE THE ONGOING CONVERSATION ON BEHALF OF OUR BUSINESS COMMUNITY AS YOU SORT THROUGH HOW YOU GET TO AN END POINT HERE, BUT I WOULD TELL YOU THAT WHILE WE MIGHT NOT BE OPPOSED TO A RATE HIKE, WE CERTAINLY ARE NOT IN SUPPORT OF WHAT'S BEEN IN FRONT OF YOU RECENTLY, 15% PER YEAR ON WATER AND SEWER AND RECLAIMED FOR THE NEXT FIVE YEARS.
SO URGE YOU TO CONSIDER ANOTHER PATH, MAYBE GO BACK TO WHAT YOU CONSIDERED IN OCTOBER AND GAVE A HEAD NOD TO THE SMOOTH CATCH UP AT 8.5%.
MAYBE SOMETHING IN BETWEEN AND WE CERTAINLY APPRECIATE THE TIME TODAY.
THANK YOU, YOUR HONOR. I'M HAPPY TO TAKE ANY QUESTIONS.
I HAVE AN EMBARRASSING CONFESSION TO MAKE.
I MAY HAVE CHECKED THE WRONG BOX ON MY COMMENT CARD.
IT'S NOT OFTEN I COME UP AND SPEAK AGAINST SOMETHING, BUT THAT'S WHAT I'M SPEAKING AGAINST, AND PERHAPS I CHECKED FOR, SO I APOLOGIZE.
HOWEVER, BACK TO MORE SERIOUS MATTERS.
BY IMPOSING THIS STEEP RATE INCREASE, YOU ARE MAKING IT EVEN MORE COSTLY FOR OUR RESIDENTS TO STAY HERE, AS MANY OF US HAVE SAID ALREADY THIS EVENING.
THIS INCREASE DOESN'T ONLY AFFECT RESIDENTS, IT ALSO AFFECTS BUSINESSES.
THE JUMPING COSTS CURRENTLY REALIZED BY THE CITY ARE ALSO FELT IN THE COMMUNITY.
I HAD THE PRIVILEGE OF SERVING NEXT TO COUNCILMEMBER HOUSE ON THE CITY HOUSING COMMISSION AND WORKED VERY HARD TO COMPILE A COMPREHENSIVE TENURE HOUSING PLAN IN AN EFFORT TO HELP OUR RESIDENTS NOT TO BE HOUSE COST BURDENED, VERY NERVOUS.
WE ARE STILL EXPERIENCING A HOUSING CRISIS.
PLEASE DON'T MAKE LIVING HERE MORE EXPENSIVE THAN IT ALREADY IS.
I FULLY SUPPORT EACH CITY DEPARTMENT'S REQUIREMENTS TO BE SELF SUFFICIENT AND DRAW IN ENOUGH REVENUE AND FEES TO FUNCTION INDEPENDENTLY.
HOWEVER, I ENCOURAGE COUNCIL TO CHALLENGE CITY STAFF WHO DO AN INCREDIBLE JOB ALREADY TO PROVIDE YOU WITH THE TRUE COST TO OPERATE THESE DEPARTMENTS, WHICH DO NOT INCLUDE OVERHEAD COSTS THAT EXISTS, EVEN IF THAT DEPARTMENT DIDN'T.
AN EXAMPLE OF THESE COSTS WOULD BE THE FULL BURDEN OF THE CITY MANAGER, HIS WAGES, HIS BENEFITS, HIS ASRS CONTRIBUTION, YOUR WAGES.
TO GET A TRUE UNDERSTANDING OF THE COST OF RUNNING THE CITY WATER SERVICES, YOU MUST EXAMINE THOSE TRUE COSTS.
OUR GOAL IS TO KEEP PEOPLE HERE, NOT DRIVE THEM AWAY.
THE ADOPTION OF THIS PROPOSED RATE INCREASE WILL SURELY DRIVE PEOPLE AWAY OUT OF OUR CITY.
I WOULD ENCOURAGE COUNCIL TO BE CREATIVE WITH THEIR ANALYSIS OF THE DATA PROVIDED AND CONSIDER ADOPTING A MORE GRADUAL RATE INCREASE THAT TAKES PLACE OVER A LONGER PERIOD OF TIME.
THERE IS NO DOUBT THE ITEMS IN YOUR STUDY NEED TO BE ADDRESSED, BUT THEY DON'T ALL NEED TO HAPPEN IN THE NEXT FOUR YEARS.
>> THANK YOU. WE'RE GOING TO MOVE ON WITH OUR PRESENTATION AND I JUST WANT TO SAY TO THE COUNCIL, TO THE PUBLIC, TO STAFF THAT WE FEEL A LITTLE RUSHED THIS EVENING BECAUSE OF OUR TIME CONSTRAINTS, BUT THIS COUNCILS NOT GOING TO BE RUSHED INTO A DECISION.
SO WE'RE GOING TO ASK THE QUESTIONS THAT WE NEED TO ASK.
WE'RE GOING TO CONTINUE TALKING TO YOU ALL, AND SO DON'T LET OUR SENSE OF HURRIEDNESS TONIGHT MAKE YOU FEEL LIKE THE DECISION IS GOING TO BE HURRIED.
>> GOOD AFTERNOON, MAYOR AND MEMBERS OF COUNCIL.
THIS WAS INFORMATIVE, AND I KNOW PROBABLY A LONG LOTS OF INFORMATION ALREADY.
BEFORE I START, I HAVE TO ACKNOWLEDGE MY TEAM MEMBERS.
I HAVE ZACH COOK HERE BEHIND ME.
HE WAS HERE READY TO HAVE SOME NUMBERS BEHIND WHAT WE'RE TALKING ABOUT.
HE'S A CONSULTANT THAT'S BEEN WORKING ON THE TEAM.
AND VIRTUALLY WE HAVE OUR DIRECTOR AT STANTEC MANAGEMENT AND TECHNOLOGY CONSULTING, ANDY BURNHAM.
HE'S ON VIRTUALLY FOR THE HARD QUESTIONS.
BUT TONIGHT, WE'LL JUST FOCUS ON THE BASICS.
YOU'VE HEARD A LOT OF THE INFORMATION ALREADY.
I'M GOING TO START WITH AGAIN, THESE ARE NOT ONLY SENSITIVITY ANALYSES, BUT SCENARIOS THAT WE'LL BE TALKING ABOUT, THE GROWTH SENSITIVITY ANALYSIS, ESCALATION, AND THEN WE'LL TALK ABOUT PERCENTAGE OF DEBT AND CAPITAL EXECUTION.
YOU'VE SEEN THIS SLIDE ALREADY, AND I WANTED TO MENTION JUST A FEW THINGS.
THESE WERE THE KEY ASSUMPTIONS AND THE LEVERS THAT WE HAVE WHEN WE'RE DOING MODELING, AND WHEN STANTEC DOES MODELING FOR EACH OF OUR UTILITIES THAT WE WORK FOR, WE START WITH SOME NATIONAL GENERAL ASSUMPTIONS.
[01:35:01]
THAT'S A GOOD GENERAL APPROACH, BUT WE ALWAYS HONE INTO THE LOCAL CIRCUMSTANCES.WE ALWAYS GO BACK TO THE LOCAL GROWTH, THE LOCAL COST ESCALATION, THE LOCAL FACTORS.
IT MIGHT SEEM ODD TO START WITH BORROWING OR START TO TALK ABOUT DEBT, BUT I WANTED TO MAKE A FEW COMMENTS ABOUT DEBT WHILE WE'RE HERE.
MANY OF THE SCENARIOS WE RUN HAVE MULTIPLE FACTORS.
ACTUALLY, ALL OF THE SCENARIOS WE RUN HAVE MULTIPLE FACTORS THAT WORK TOGETHER FOR THE ULTIMATE RATE PLANS THAT YOU HAVE SEEN LATELY.
SO THESE FACTORS INCLUDE BORROWING AND INCLUDE DEBT, AND WE HAVE TO BE ABLE TO BE MINDFUL OF THOSE LEVELS OF DEBT NOT ONLY FOR POLICY PURPOSES, BUT ALSO FOR SCENARIO COMPARISONS.
SO THE DEBT SCENARIOS THAT YOU SEE HERE AND WHAT WE'VE TALKED ABOUT ALREADY HAVE A POLICY LIMIT, AND THAT POLICY LIMIT WAS ADOPTED BY THE CITY ACROSS THE FOUR ENTERPRISE FUNDS.
SO WE'RE NOT JUST LOOKING AT WATER ALONE.
WE'RE NOT JUST LOOKING AT THE WASTEWATER FUND ALONE.
WE'RE LOOKING AT COMBINED AMOUNT OF DEBT SERVICE AS A PERCENTAGE OF THE TOTAL OPERATING REVENUES.
THAT'S AN IMPORTANT FACTOR TO KEEP IN MIND.
THERE ARE MANY QUESTIONS ABOUT WHAT IS OPTIMAL DEBT.
AND WHEN WE'RE TALKING ABOUT THESE DEBT QUESTIONS, I'D ALSO LIKE TO REMIND YOU THAT WE'RE TALKING ABOUT REVENUE FUNDED DEBT PAYMENTS.
THIS DOES NOT INCLUDE THE BONDS UNDER THE PROPOSITION 441.
WE'RE ONLY LOOKING AT THE BONDS OR THE LOANS THAT ARE FUNDED WITH RATE REVENUES, NOT PROPERTY TAX REVENUES.
WHEN WE'RE LOOKING AT AN OPTIMAL LEVEL OF DEBT, WE'RE TALKING ABOUT WHAT CITY POLICY IS, AND WE'VE ALREADY DISCUSSED THAT.
WE'RE LOOKING AT BOND RATING AGENCIES BECAUSE BOND RATINGS ARE IMPORTANT.
THAT LEADS TO LOWER RATE PAYER IMPACTS WHEN YOU HAVE BETTER BOND RATINGS, THEREFORE, LOWER INTEREST RATES.
SO THAT'S IMPORTANT TO WHAT WE'RE LOOKING AT.
WE LOOK TO DIFFERENT RATING AGENCIES FOR GUIDANCE ON WHAT THAT OPTIMAL LEVEL IS, HIGHLY RATED UTILITIES, AAA, AA, A, DEPENDING ON THE AGENCY.
THOSE TYPES OF AGENCIES LOOK AT THESE FACTORS.
IF YOU ARE CONSIDERING ADDITIONAL INCREASE IN YOUR DEBT, YOU HAVE TO BE MINDFUL OF THESE FACTORS.
I'VE LISTED THREE FACTORS ON THIS SLIDE.
THE FIRST ONE, THE PERCENT OF CIP FUNDED WITH DEBT FOR HIGHLY RATED UTILITIES, THIS IS 2019 DATA, IT COVERS AROUND 36% OF THE TOTAL CIP THAT WOULD BE FUNDED WITH DEBT.
SO THAT'S ONE FACTOR WE'RE LOOKING AT.
ANOTHER ONE IS THE DEBT SERVICE COVERAGE RATIO.
HIGHLY RATED UTILITIES HAVE AN AVERAGE DEBT SERVICE COVERAGE RATIO OF 2.4 TIMES ANNUAL DEBT SERVICE.
>> SO THEY HAVE THE 2.4 DEBT SERVICE RATIO REQUIREMENTS FOR THE CITY.
>> ARE YOU TALKING ABOUT THE REQUIREMENT FOR THE CITY?
>> REQUIREMENT FOR [INAUDIBLE].
>> I SEE. THERE'S TWO DIFFERENT CONCEPTS.
THE ANNUAL DEBT SERVICE THRESHOLD OF 20% OF ANNUAL OPERATING REVENUES, THAT'S ONE CITY POLICY.
ANOTHER POLICY, WHICH IS A BOND COVENANT AND A LOAN COVENANT IS THAT ANNUAL REVENUES FROM RATES NEED TO BE AT LEAST 1.2 TIMES ANNUAL DEBT SERVICE, SO TWO DIFFERENT THINGS.
>> CAN YOU TURN YOUR MICROPHONE ON, COUNCIL MEMBER?
>> SORRY, SO HOW DO YOU GET THE 2.4?
>> THIS COMES FROM HIGHLY RATED AGENCIES FROM A COMPANY CALLED FITCH RATINGS.
THIS IS NOT THE CITY'S RATINGS, THESE ARE TYPICAL THRESHOLDS.
>> WE'RE DOING OUR MODELING ON WHAT'S TYPICAL BUT NOT WHAT'S NECESSARILY REQUIRED.
>> ACTUALLY, WE'RE DOING OUR MODELING ON WHAT'S REQUIRED.
I PROBABLY STARTED THIS OFF INCORRECTLY.
WE ARE USING THE CITY'S POLICIES FOR THAT AMOUNT OF DEBT THAT IS ISSUED, THE AMOUNT OF DEBT SERVICE COVERAGE RATIOS THAT ARE REQUIRED.
THAT'S HOW WE MODEL AND LOOK AT THE FINANCIAL CONSTRAINTS IN THE SYSTEM.
BUT WHEN WE'RE LOOKING AT WHAT IS OPTIMAL OR WHAT ARE OTHER UTILITIES SEEING OR OTHER UTILITIES ACHIEVING, THESE ARE THE MEDIANS OR THE FACTORS THAT OTHER HIGHLY RATED UTILITIES ARE EXHIBITING.
IT'S ANOTHER METRIC TO FOLLOW.
NOT THAT YOU HAVE TO ACHIEVE THAT, IT'S JUST ANOTHER METRIC TO FOLLOW FOR HIGHLY RATED UTILITIES.
>> THANK YOU. I GUESS THAT WAS MY POINT.
[01:40:02]
WE DON'T HAVE TO MEET THE 2.4.>> THAT'S CORRECT. THAT THIRD METRIC IS THE ALL END DEBT SERVICE PAYMENTS THAT WOULD BE AT LEAST 18 OR AT MAXIMUM OF 18% OF YOUR ANNUAL OPERATING OR GROSS REVENUES.
THIS METRIC IS SIMILAR TO THE 20% THAT THE CITY HAS AS POLICY, SO 20% OF ANNUAL OPERATING REVENUES AS A THRESHOLD FOR BORROWING.
I'M LINKING WHAT YOUR CITY POLICIES ARE TO WHAT THE RATING AGENCIES LOOK AT AS A GUIDE.
WE'LL BE TALKING ABOUT INCREASED DEBT AS WE GO FORWARD.
IN SOME OF THESE SCENARIOS, THOSE ARE THE METRICS THAT WE ARE KEEPING IN MIND.
WE'VE ALREADY TALKED A LOT ABOUT GROWTH AND GROWTH ASSUMPTIONS, AND I JUST WANTED TO MENTION THAT GROWTH INFLUENCES DIFFERENT AREAS OF THE RATE MODELS.
ONE WE KNOW IS RATE REVENUES, ONE IS THE CAPACITY FEE REVENUES.
AS YOU CAN IMAGINE, LOWER GROWTH MEANS LESS REVENUES.
THEREFORE, RATES EITHER NEED TO GO UP OR BORROWING NEEDS TO GO UP TO ACHIEVE THE SAME FINANCIAL PLAN.
IF YOUR GROWTH IS HIGHER, THEN YOUR REVENUES ARE HIGHER, AND YOU HAVE MORE REVENUES SO YOU CAN LOOK AT LOWER DEBT.
I'M NOT GOING TO GO OVER THOSE ASSUMPTIONS AND GROWTH SINCE WE'VE COVERED THAT A LOT.
WE PRINTED OUT SOME OF OUR MODEL OUTPUTS THAT MAYBE TUESDAY WE CAN GO BACK OVER SINCE WE HAVE LIMITED TIME BECAUSE I WANTED TO TALK ABOUT THE RESULTS OF CHANGES IN GROWTH.
THIS IS THE SENSITIVITY ANALYSIS PART WHERE WE APPLIED A LOWER GROWTH RATE OF 0.5% PER YEAR, AND WE APPLIED A HIGHER GROWTH RATE OF 1.25% PER YEAR.
WE LOOKED AT THOSE TWO BOUNDARIES AND LOOKED AT THE EFFECT ON BORROWING IN THIS FIRST SCENARIO.
I'D LIKE TO DRAW YOUR ATTENTION TO THE CIRCLE AREA HERE.
TRYING TO USE MY CURSOR. WHERE DID IT GO? RIGHT HERE, THE YELLOW SQUARE AROUND THOSE PERCENTAGES SHOW US WHAT THE PERCENTAGE OF CIP THAT IS FUNDED WITH DEBT IN EACH ONE OF THESE SCENARIOS.
FOR EXAMPLE, OUR CURRENT SCENARIO UNDERWATER, THE BLUE AREA IS WATER, THE GREEN AREA IS WASTEWATER.
UNDER OUR CURRENT SCENARIO OF A 1% ANNUAL GROWTH RATE, WE HAVE A TOTAL CAPITAL IMPROVEMENT PROGRAM 2025-20, FISCAL YEAR 2023.
THAT TOTAL PLAN IS 185.6 MILLION.
IF WE ASSUME A 1% GROWTH RATE, WE SEE THAT AT THE SAME RATE PLAN, WE SEE THAT THE AMOUNT OF BORROWING OR AMOUNT OF DEBT THAT IS NEEDED TO KEEP THE RATES THE SAME FOR THAT SAME CIP PLAN IS 54.9 MILLION, WHICH EQUATES TO 30% OF THE TOTAL CIP.
THIS IS WHERE I'M TALKING ABOUT THAT THRESHOLD OF CIP FUNDED WITH DEBT.
FOR WATER, IF WE REDUCE THE GROWTH RATE 2.5%, I'M SORRY, TOUCHY.
WE GET AT THE SAME CIP LEVEL, WE'RE HOLDING THAT CONSTANT.
SAME BORROWING, DID I FLIP SCREENS? I THINK I DID. MY APOLOGIES.
WE'RE STILL ON IMPACT OF GROWTH ON BORROWING.
WE'RE HOLDING THE RATE PLAN CONSTANT, A LOWER GROWTH RATE RESULTS IN A HIGHER AMOUNT NEEDED TO BE BORROWED, WHICH EQUATES TO 43% OF THE TOTAL CIP THAT WOULD BE FUNDED WITH DEBT.
THIS IS THAT RISKY AREA OF BORROWING WHERE YOU GET TO THE RISK OF COMPROMISING YOUR BOND RATINGS AND ALSO COMPROMISING THE ABILITY TO FUND ANY FUTURE PLANS.
ANY FUTURE PROJECTS THAT MAY BE NEEDED EARLIER THAT MAY BECOME A HIGHER PRIORITY.
IF YOU HAVE MORE DEBT NOW, YOU WOULD BE COMPROMISING THAT ABILITY TO FUND SOMETHING ELSE.
LASTLY, WE HAVE A HIGHER GROWTH RATE BECAUSE THERE ARE SOME THOUGHTS THAT GROWTH COULD BE HIGHER.
WHAT IF GROWTH IS HIGHER, THEN WE HAVE LESS AMOUNT OF DEBT NEEDED THAT DROPS TO 25% OF THE TOTAL CIP FOR THAT SAME RATE ADJUSTMENT.
WE COMPLETED A SIMILAR ANALYSIS FOR WASTEWATER, BUT IN THE INTEREST OF TIME, I'M GOING TO GO TO THE IMPACT OF GROWTH ON RATES.
BUT THIS TIME, WE HELD BORROWING CONSTANT.
[01:45:02]
WE SAID, YOU'RE AT A COMFORTABLE LEVEL OF BORROWING FOR THE CIP PLAN.BUT WHAT HAPPENS WHEN WE ADJUST GROWTH TO RATES.
WE STILL NEED THAT SAME AMOUNT OF REVENUE, BUT WE HAVE LESS GROWTH.
OUR CURRENT SCENARIO, OF COURSE, IS THAT 1% GROWTH. OH, MY GOODNESS.
WE HAVE THE CURRENT RATE PLAN AT 15% PER YEAR FOR WATER.
WHEN WE HAVE A HALF A PERCENT GROWTH ESTIMATE EACH YEAR, SO LOWER GROWTH EXPECTATIONS, HOLDING THE CIP CONSTANT, HOLDING THE AMOUNT OF BORROWING CONSTANT, OUR RATES WOULD HAVE TO INCREASE TO 17.5% PER YEAR TO FUND THAT SAME PLAN, SO 2.5% RATE INCREASE EACH YEAR WOULD BE NOT THE DIRECTION THAT WOULD BE NEEDED HERE.
ON THE OTHER HAND, A ONE AND A QUARTER PERCENT INCREASE OR 1.25% GROWTH RATE EACH YEAR WOULD ALLOW YOU TO LOWER YOUR RATE INCREASES TO FUND ROUGHLY THE SAME AMOUNT OF THE CAPITAL IMPROVEMENT PROGRAM WITH DEBT.
IT JUST SHOWS YOU THE SENSITIVITY OF YOUR RATE PLAN TO GROWTH.
I THINK THIS FRAMES THE INFORMATION WE'RE GIVING YOU FOR THE OTHER SCENARIOS.
YOU'LL SEE WHAT WE CAN VARY AND WHAT WE HAVE TO HOLD CONSTANT SO THAT WHEN YOU'RE LOOKING AT ALL THESE OPTIONS, YOU COULD SEE WHAT AFFECTS DEBT, WHAT AFFECTS THE RATES.
OUR PLAN HERE AND TALK ABOUT THIS ANALYSIS.
WOULD YOU LIKE TO TALK ABOUT THIS FOR ABOUT FIVE MINUTES OR UNTIL OR KEEP GOING?
>> THANK YOU. OUR NEXT ANALYSIS ARE THE COST ESCALATION FACTORS.
WE'VE HEARD A LOT ALREADY ABOUT COST ESCALATION FACTORS AND ASSUMPTIONS THAT ARE USED.
AS I MENTIONED, WE BEGIN OUR ANALYSIS WITH NATIONALLY PUBLISHED FACTORS.
I WANT YOU TO PERHAPS, IF YOU WOULD, I WOULD LIKE TO ASK YOU TO JOT THIS DOWN.
INFLATION DATA.COM IS AN ORGANIZATION THAT JUST SUBMITTED A REPORT ON CURRENT INFLATION AS OF THE END OF APRIL OF THIS YEAR.
THE LAST 12 MONTHS OF DATA INDICATE THAT THE INFLATION WAS AT 3.36%.
WHILE WE'VE BEEN TALKING ABOUT THE LARGE INCREASES IN COSTS, AND YOU'VE SEEN THOSE SLIDES.
WE KNOW THAT THESE PAST FEW YEARS HAVE EXHIBITED EXTREMELY HIGH ESCALATION FACTORS IN ALL OF OUR COMMODITIES AND ALL OF OUR SERVICES, BUT INFLATION IS STILL AT 3.36%.
I MIGHT WANT TO CHECK OUT THAT REPORT.
IT'S GOT SOME OTHER INTERESTING OBSERVATIONS. I'M GOING TO SKIP THESE SLIDES, YOU'VE SEEN THEM ALREADY.
I'M GOING TO GO TO THE COST ESCALATION IMPACTS ON OUR RATE PROJECTIONS.
I DON'T MEAN TO BE SKIPPING OVER WASTEWATER.
I THINK WE HAVE SOME TIME TO GO OVER WASTEWATER THIS TIME.
IN THIS SCENARIO, WE'RE HOLDING THE CAPITAL IMPROVEMENT PROGRAM CONSTANT.
AGAIN, THIS IS THE APPROVED CIP, THE INFORMED CIP PLUS THE UNFUNDED CIP.
THIS IS THE FULL CIP ON THE WATER SIDE, 185.6 MILLION.
IN THIS CASE, WE'RE HOLDING THE AMOUNT OF BORROWING CONSTANT.
WE'RE HOLDING DEBT CONSTANT AT 54.9 MILLION FOR THIS NINE-YEAR PLAN.
ON THE WATER, YOU'LL SEE THAT TOP LINE, AGAIN, IS THE 15% RATE PLAN, ASSUMING THAT 3.5% ESTIMATE FOR ANNUAL DEFAULT INFLATION.
THE 3.5% JUST REFERS TO TYPICAL FIXED OPERATING AND MAINTENANCE EXPENSES, SALARIES AND WAGES, AND OTHER COSTS.
IT DOES NOT INCLUDE CHEMICALS, ELECTRICITY, AND MAINTENANCE.
WE ARE STILL ASSUMING THAT THOSE COSTS INCREASE AT A HIGHER RATE BASED ON THE CITY'S LATEST CONTRACTS AND SUPPLIES OF THESE ITEMS. WE'RE PROJECTING THAT FORWARD.
ASSUMING A 2.4% ESCALATION FACTOR FOR THE DEFAULT ESCALATION FACTOR, KEEPING CHEMICALS AND ELECTRICITY AND MAINTENANCE COST THE SAME.
WE SEE THAT HOLDING CIP AND CIP FUNDING WITH DEBT CONSTANT THAT WE GET A 0.75% REDUCTION IN THE RATE EACH YEAR.
[01:50:03]
ON THE WATER SIDE, THAT'S THE EFFECT OF INFLATION REDUCTION ON RATES.WHAT IF WE ARE WRONG, AND INFLATION IS HIGHER OVER THE NEXT 10 YEARS? WE EVALUATED AN OPTION WHERE THAT DEFAULT ESCALATION FACTOR WAS 4.5%, AND YOU COULD SEE HOW IT GOES THE OTHER WAY.
WITH A 4.5% ESCALATION FACTOR, THE ANNUAL RATE ADJUSTMENT IN AT LEAST THE FIRST THREE YEARS WOULD HAVE TO BE 0.75% HIGHER THAN THAT CURRENT RATE PLAN, AND IT GOES DOWN OVER THE NEXT TWO YEARS BECAUSE OF THE TIMING OF COSTS.
THIS SENSITIVITY SHOWS THE IMPACT ON RATES WITH LOWER DEFAULT ESCALATION AND HIGHER DEFAULT ESCALATION.
ANY QUESTIONS ON THIS ONE? I SAID I WAS GOING TO GO OVER WASTEWATER.
ON THE WASTEWATER SIDE, WASTEWATER IS A LITTLE TOUCHIER BECAUSE OF ITS CAPITAL IMPROVEMENT PROGRAM SCHEDULE SO THAT EVEN THOUGH ON THIS SIDE, WE ARE ONLY INFLUENCING OPERATING AND MAINTENANCE COSTS, WE SEE THAT IF WE REDUCE OUR DEFAULT ESCALATION FACTOR TO 2.4% FOR THOSE ITEMS I MENTIONED, WE SEE THAT JUST FOR THE FIRST TWO YEARS, A 1% REDUCTION IN RATES COULD BE ACHIEVED TO MAINTAIN THAT SAME CIP AND SAME BORROWING.
FISCAL YEAR 2027 AND FISCAL YEAR 2028 ARE MORE SENSITIVE YEARS.
SO WE COULD NOT LOWER THOSE RATES.
BUT IN FISCAL YEAR 2029 AND THEREAFTER, THE EFFECT OF THAT COMPOUNDING REDUCTION IN INFLATION KICKS IN, AND WE COULD REDUCE RATES TO 2.5% UNDER THIS OPTION.
>> THANK YOU, MAYOR. BEYOND FISCAL YEAR IN 2029, WHAT'S THE ANNUAL INCREASE?
>> FOR OUR CURRENT PROPOSED SCENARIO, IT'S 5% PER YEAR.
AND THEN WITH THE 2.4% SCENARIO, IT'S 2.5% PER YEAR.
>> I GUESS I WAS UNDER THE IMPRESSION THAT YOU WERE GOING TO BRING THE MODELING SO WE COULD JUST PLUG NUMBERS IN.
AND I THINK COUNCILMEMBER SWEET ASKED IT, THE ESCALATION IS THE HIGHEST IN THE FIRST FIVE YEARS.
I UNDERSTAND THAT THE CIP PROPOSED PROJECTS TO BE COMPLETED AS OVER TEN YEARS.
BUT WHAT HAPPENS IF WE SMOOTH IT OUT AND THE ESCALATION WASN'T SO SIGNIFICANT OVER THE FIVE YEARS, BUT AMORTIZED IT OUT, IF YOU WILL, OVER 10 YEARS?
>> MAYOR AND COUNCILMEMBER MATTHEWS, THE ESCALATION FACTOR IS CONSTANT THROUGH WE'LL CALL IT 10 YEARS OF THE PLAN.
IT IS THE CAPITAL IMPROVEMENT PROGRAM THAT IS DIFFERENT OVER THOSE YEARS.
THAT CAPITAL IMPROVEMENT PROGRAM, SMOOTHING THAT OVER 10 YEARS IS OUR LAST SCENARIO.
THIS SCENARIO JUST CONCERNS THE ESCALATION FACTOR OR INFLATION, AND IT IS CONSTANT.
IT'S HELD CONSTANT OVER THE FULL ANALYSIS PERIOD.
I THINK THAT IS ABOUT ALL THE TIME THAT WE HAVE FOR THESE SCENARIOS.
WE'VE GOT THROUGH HALF OF THEM.
BUT ANY REMAINING QUESTIONS ON THESE BEFORE WE TALK ABOUT THIS NEXT WEEK?
>> COUNCIL, I THINK IT MIGHT BE HELPFUL IF YOU HAVE ANY QUESTIONS THAT YOU WANT TO HAVE ADDRESSED NEXT WEEK, WE CAN TAKE A COUPLE OF MINUTES AND TAKE SOME OF THOSE QUESTIONS.
OTHERWISE, WE CAN DO AS WE DID FOR THIS WEEK'S AND EMAIL THOSE QUESTIONS TO STAFF AND THEN HAVE THOSE QUESTIONS ANSWERED PUBLICLY AT TUESDAY'S MEETING.
I DO HAVE CONFIRMATION THAT WE WILL GET THIS ITEM BACK ON TUESDAY'S AGENDA, SO WE WILL BE DISCUSSING IT NEXT TUESDAY.
DO YOU HAVE QUESTIONS THAT YOU KNOW NOW, YOU'D LIKE TO ASK FOR NEXT WEEK.
COUNCILMEMBER HOUSE HAS INDICATED FOR THE SAKE OF TIME SHE WILL EMAIL ANY QUESTIONS.
[01:55:01]
BUT DO YOU HAVE ANY QUESTIONS THAT YOU KNOW NOW THAT YOU WOULD LIKE TO HAVE ANSWERED NEXT WEEK, COUNCILMEMBER MATTHEWS AND THE VICE MAYOR?>> I WON'T BE HERE NEXT WEEK, BUT I CAN REVISIT THE MEETING.
I THINK WHEN WE WENT THROUGH THE INITIAL SCENARIOS, KNOWING JUST THE CIP PROJECTS, WE ALL WANTED TO DO AN ALL IN BECAUSE WE SAW THE VALUE OF IT.
NOW THAT WE'RE FACING THE STICKER SHOCK, I'D LIKE TO REVISIT WHAT THE SMOOTH TRANSITION WAS, AGAIN, JUST TRYING TO SEARCH FOR AN ALTERNATIVE TO THIS.
I CAN'T SEE IT. WELL, IF IT GOES THROUGH, IT'S GOING TO BE DEVASTATING.
I'D LIKE TO NOW SAY, WELL, I DID MY SANTA CLAUS LIST AND I WANT ALL THESE THINGS ON THE LIST.
WELL, NOW THAT I SEE HOW MUCH IT'S GOING TO COST, I DON'T HAVE ENOUGH CREDIT CARD CAPACITY FOR THIS, SO MAYBE I'LL GO BACK TO THE PLAN A OR B. I'D LIKE TO JUST REVISIT THAT.
>> I WOULD LIKE TO SUBPOENA RICK TATER ON TUESDAY TO COME TO THE STAND.
WE'VE HEARD SEVERAL CALLS TONIGHT FOR US TO SCRATCH ALL OF THIS AND START OVER.
I WOULD LIKE AN ANALYSIS FOR MR. TATER.
WHAT IS THE FEASIBILITY 1-100 THAT WE COULD FIND AN ALTERNATIVE THAT'S SIGNIFICANTLY DIFFERENT THAN WHAT WE'RE ALREADY DEALING WITH HERE? [LAUGHTER] IT MIGHT BE PART OF A LARGER CONVERSATION, SO I'LL WAIT TILL TUESDAY.
>> I WOULD LIKE TO ASK THE GENTLEMAN FROM NAU TO HANG AROUND AFTER THE MEETING.
I HAVE SOME QUESTIONS FOR YOU. THANK YOU.
>> ANYONE ELSE, COUNCIL? PLEASE DO EMAIL ANY QUESTIONS THAT YOU RECEIVE SO THAT STAFF CAN BE PREPARED TO ANSWER THE QUESTIONS NEXT WEEK, ANY QUESTIONS THAT YOU HAVEN'T ASKED THIS EVENING.
STAFF OR STAN TECH, DO YOU HAVE ANY ADDITIONAL INFORMATION YOU WOULD LIKE TO SAY BEFORE WE ADJOURN THE MEETING?
>> THANK YOU, MAYOR AND MEMBERS OF COUNCIL, I DO.
IT HAS TO DO WITH THE EXPECTATIONS FOR NEXT TUESDAY.
WHEN WE IMPLEMENT ANOTHER SCENARIO, SUCH AS THE LEVEL SCENARIO OR THE SMOOTH CATCH UP, WE SPENT ALL THESE MONTHS RUNNING THE BACKUP, THE COST OF SERVICE, AND THE RATE DESIGN.
WE WON'T HAVE ENOUGH TIME TO DO THAT FOR THOSE OTHER SCENARIOS BY TUESDAY.
I JUST WANTED TO MANAGE THOSE EXPECTATIONS THERE.
BUT WE CAN CERTAINLY BE READY TO SHOW WHAT THE IMPACT WOULD BE ON THE CIP, BECAUSE IF YOU RECALL FROM LAST FALL, WHAT ALLOWED US TO SHOW DIFFERENT RATE PLANS WERE DIFFERENT LEVELS OF THE CAPITAL IMPROVEMENT PROGRAM.
WE HELD ALL THESE OTHER ASSUMPTIONS CONSTANT.
WE JUST CHANGED THE AMOUNT OF CAPITAL THAT COULD BE ACCOMPLISHED WITH THOSE RATES. THANK YOU.
>> OKAY, COUNCIL, WE ARE AT 5:02, AND THIS MEETING IS ADJOURNED.
* This transcript was compiled from uncorrected Closed Captioning.