Okay. Five thirty one and call the city health and work section leading to order is Tuesday. It's over seven twenty twenty five and as our clerk chair Allison called the roll. Council member aden here on the member Jackson here on the little years. Your member is here. You're here. You're here. We've got a singular topic this evening is utility rate study update. We're going to go through and because at the end of the day we think we'll think of how many capital improvement projects we want to undertake at one time. Over time. Yeah. So here we go. You roll it out. We've got manager Neil. I'm very director Chad Norman. Todd Tower, finance director and Nick Ant and our senior municipal advisor from Ehlers here with us. Just for the record. So okay. Our presentation to tonight at work session is all about utilities utility. Utility projects in our water sewer and waste in storm sewer utilities and also the underlying rate structure that we are looking at in terms of providing funding to do those projects. So in terms of the presentation tonight we want to start with the actual projects themselves the proposed capital investments and then we'll go from there to the money part. So if we could we've got a lot of content to get to you tonight and we've tried to put this together to reserve a sufficient amount we hope a sufficient amount of time for you to have dialogue as well. Chad. Okay. So just wanted to get into some of the bigger projects that we've been considering for many years that are now in in somewhere in the past. Rate study now this is an update to those rates studies. So the first one if you recall the trunk York Avenue trunk sewer improvements. We've been working on this. We've completed three phases. They're completing one third phase right now. That project will be complete in about a month. Areas four, five, six and seven or aisleton road in West 69 are still in the capital improvement plan as part of this rate study. So just a reminder we continue to upsize the sanitary sewer. To support development within this area. This project's unique is that there's been developments basically paying for these upgrades as it happens because of the sack and whack fees that happens. So this one is kind of funding as we go with the development that's happened within this area the last 10 years or so. And these costs were again historical costs but just showing you the different stages and where we're at. So these other four stages are programmed in the CIP. The other big one that we put in during the last CIP was the South trunk. We've also called it the K Hill. San Jose who improvements this goes between an under France Avenue on the east and high 100 on the west. This opens up potential development in the K Hill industrial park area. We've had a few developers come through and asked to densify some properties and we've had to say no we don't have capacity. So this was a priority of the council a few years ago we did initial study probably five years ago put it in the capital plan. Now we're actually in the design and consideration of how we actually do it because the pipe is very deep going right through a neighborhood. That report will be completed soon. We did promise the neighbors on 72nd Street that we're going to do that first phase next year. That's where a lot of the traffic coming and some of that stuff you get a lot of emails on that. We're working through that design. That'll come in front of you during that December special council meeting for assessments because there is a small portion of this project assessed on 72nd Street. So that's the opportunity for residents to speak on those traffic. So we're going to have a couple of other questions. I'm going to ask you a couple of questions. 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I'm going to ask you a couple of questions. I'm going to ask you a couple of questions. I'm going to ask you a couple of questions. I'm going to ask you a couple of questions. And in 2022, we amended that management water resources management plan with incorporating in the flood risk reduction strategy. And this is just what that strategy states, right? Reducing risk throughout the community. And you can do that in a variety of methods of whether it's infrastructure, regulation, outreach and engagement or the emergency services. And our first project, which is complete, was the morning site. That was our first flood risk reduction project. It was a great outcome on that. And then we threw in five, six other big projects we knew of. And we kind of stacked it on the end of the CIP that was developed a couple of years ago. So we really put a lot of placeholders in 2030, 2031. I think there might be some discussions tonight if that's the right schedule based on the rates you're seeing. Because if we push some of those projects, then the rates would change accordingly there. But these are the areas we identified. Adaptive level control, some of that is on your agenda tonight to start design for that one. And Concord Flood, we've been working with the school district to do a cooperative project right down here at Concord. So they actually did tennis courts already without a watershed permit with the understanding that they might cooperate with us on this cooperative project. Because we want to put some underground facilities underneath their ball fields and make it better for both parties. So I think those two are kind of moving forward and then the last three are ones that we could discuss on what is the appropriate timing with those. So I think now we hand it over to Nick. Thank you. All right, so I'll dive into the financial side of things. So we've conducted routine utility rate studies for the city over the course of sometimes every other year, sometimes based out a little bit further. But really it's usually driven by updates to the CIP. So capital tends to be the largest ticket item that we're solving for in these studies. And this slide is really just trying to provide a reminder that these are enterprise funds. So they're different from governmental funds and that the expectation is that they're paying for themselves. So the fees and charges that the council imposes through its ordinance and the way it structures those are intended to cover all of the operating as well as capital costs, any debt or any other expense of maintaining and updating these systems. And we analyzed individually the water, the sewer and the storm water systems. Each are a little bit different, but they are built together quarterly. So the payers tend to be the same types of folks. Some might vary depending on how much they are using. But ultimately we evaluated each one of these kind of separately as their own standalone item with the intent that the charges imposed for each one. So water fees would pay for water and the capital expenditures of those sewer would pay for sewer storm for storm. Your audit combines these all into one category called your utilities, but they are accounted for in three different separate accounts. I'm going to run both at the same time. How the city charges this has has changed in morphed over time, but some items are fairly consistent. So the city ordinance for water imposes a base fee. So this is a fixed fee. It does not change during the course of the year. It is updated within your fee schedule from time to time if those fees need to be adjusted, but it is a fixed fee that is applied to each meter, essentially. So an account has one meter. They pay one fixed charge associated with that. Fixed fee is intended to cover fixed costs, right? So these would be costs that are going to happen more or less regardless of how much an individual consumer is actually using. So things like buildings, the software, personnel costs, some supplies, some parts of the system themselves are not necessarily going to change or need to grow over time. Based on how much consumption is actually taking place, it's more based on how many accounts are being administered and how many different users there are. Different from a base fee, there's what is turned volumetric charges. So this would be basically usage, right? So how many gallons are actually being used by the individual consumer? It is charged per thousand gallons in your ordinance. And the charges are tiered in such a way so that some minimal amount of use, the first tier is charged at one rate. And then the charge jumps up once that is eclipsed and any usage beyond that first threshold, it's charged at a higher rate. And there is even another tier on top of that for a higher rate. And this is called a conservation pricing method. Essentially, you are tiering the charges to incentivize consumers to potentially reduce their use, or at least if they're price sensitive, they will potentially reduce some of their use and reduce the stress that that puts on the system and the potential for consumption beyond the capacity of the system. Sanitary sewer is a use charge entirely, but it's got kind of a hybrid to deliver some fixed amount of revenue. It is charged based on for residential users based on the lesser of the winter quarter use. So winter quarter, following between December and April of each year through March. And this would be typically when the lowest amount of water is used. And typically when all of that water might be going down the drain, as opposed to in other times of the year, when there might be outdoor or other types of use, where that water is not actually going down the drain through the sewer system, it's actually either being absorbed within the property itself, or might find its way into the storm drain. In that system, again, we're charging storm water fees to cover that expense. So this minimum fee is basically designed so that the user is charging the lesser of either their winter quarter use for each quarter throughout the year, or their actual, in the case that maybe they used a lot during the winter and then didn't use as much in the summertime being out of town or whatever the case may be. This is charged at a minimum of 8,000 gallons for each user. So their use up to 8,000 gallons they're going to pay for, no matter what. Any use beyond that in their winter quarter, they would pay for that on a 1,000 gallon basis per the rate. But essentially it's a hybrid to ensure that we do have some amount of fixed costs associated in fixed revenues to cover those fixed costs. But it does fluctuate if there is usage beyond that category. And that was a change that was imposed in 2023. The minimum used to be 12,000 gallons, and it used to be only the winter quarter solely. We did not allow for the lesser of mechanism in that council decided to make that change to in reaction to some complaints from some users that maybe we weren't using as much in other quarters during the year. And the majority of other users, non-residential users, a lot of their sewer is actually metered and tracked. So they'll actually be charged based on what's actually going down the drain. Residential users don't typically have a separate meter that's measuring the flow that's going down the drain as opposed to what's coming in through the water system. So this is a way of dealing with the reality of the fact that we don't have necessarily perfect information. But we do have some indication that winter use should be generally essential use, and that's the mechanism that is used. Stormwater is a single rate that is adjusted based on the property use. So a single family use would pay a set fee or a charge per quarter. And then other types of uses would adjust from that based on what's called a residential equivalency factor. And this has to do with how intense the usage of the property is in terms of potential impervious surface and what would actually go out into the storm system. So a typical residential use is going to have grass and other things that are going to absorb some of the rainwater as well as some of the irrigation that's not going to go down the storm drain in all cases. But maybe a pure concrete parking lot is going to have everything 100% go down the drain. So that residential equivalency factor allows for some kind of mechanism to differentiate the property that might be putting more strain on the system versus others. So that's how the city's ordinance charges for those. There are some other fees and revenues associated with it. There's billing and other types of things, but those are the main categories. There's also connection fees for the water and sewer system. These are based on development new development. So if we are going to intensify the use of a property, turn a single family home into a duplex or a quad or even maybe even a larger multifamily building. That's going to now induce more use or consumption and take on a greater responsibility and put more strain on the system potentially. And so there are some connection fees that are paid once the permit essentially is pulled to build those developments or redevelopment. So if you have a redevelopment that is a renovation of an existing home and you're still going to be using it as a single family home, you're not charged a sack or wack fee. But if you are adding new units, then those new units are charged on the basis of adding a new user or capacity to the system. So these are all the different various mechanisms and revenue sources within your existing structure. When we look at a utility rate study, we're primarily focused. We're financial folks. We're really looking at the month, right? And whether or not we're going to be able to continue to maintain these funds so that they are self-sufficient and they're not drawing on other resources of the community. They're not drawing on resources from one another and they're not drawing on the need to maybe even use property taxes or other types of revenues to pay for again the operation and capital costs of the system. So that's our primary objective. But when we do this analysis, we're also able to look at usage patterns, determine whether or not the fee structure looks like it's equitable. We're able to inform if there's a particular goal or a policy objective, a change in policy that the council wants to promote. We can use some of that usage information to help provide a backbone or a backing of that goal or analysis and maybe changing the way these charges are. Ultimately, the charges are essentially allocating the cost of the system to different users based on their habits or how much strain they're putting on the system. But it is also a forward-looking analysis. So we are looking ahead into the future and we're trying to solve for really the CIP and the costs that are going to be coming down the road to either add capacity of the system to facilitate new development, redevelopment. And repairing and replacing the existing infrastructure that's in place so that is functioning well for the community. So this is just a recap of the last time that we did this analysis. So there was a study that was performed in 2021 and 2022. It kind of straddled both of those years. And again, the impetus for that was primarily the CIP. There was an update to the capital plan. Looking, you know, your capital plan that you adopt as a policy is usually five years. We tend to look a little bit longer term in these analyses to make sure that we're kind of getting ahead of the curve. So we use a 10 year time horizon, but this just gives you a snapshot of, well, I guess I'm not even there. I want to head. Sorry. This gives you a snapshot of some of the costs that we were trying to solve for in that analysis. And ultimately the recommendations were to inform incremental rate increases within the water fund of 5% per year. Incremental increases within the sewer fund of 6% per year. And then the storm fund, again, anticipating some of these items that you have already started within the CIP and will continue was higher than 8% clip. That analysis also informed imposing a conservation tier structure that I described. And that was adopted and put in place to set a tier structure for residential commercial users to try to incentivize and provide a pricing mechanism to incentivize conservation within those different categories. Again, the impetus for that was to try to curtail future growth to some degree, but also to make sure that the folks that are using the system are paying for it. So the city already had tears put in place, but the tier bands or the amount of gallons within those tiers were much wider and then was recommended and didn't necessarily reflect the kind of the indoor essential use versus the kind of more discretionary type of use. And so a lot of the users within the system, particularly in the residential, where all of their use was falling within that lower category and they weren't getting any of the pricing influence of beyond that first tier. But you did have a three tier system in place at that point in time. I should also mention that there are also irrigation specific accounts for certain users. So this is not every user. But these are separate meter that measures just the outdoor irrigation use. And this is fairly typical for businesses, homeowners associations, multifamily buildings, larger properties with a lot of external area and a way for them to be able to control and have a little their finger on the dial for exactly how much they're potentially using and consuming. So you do have an irrigation charge as well on top of the residential commercial and multifamily. But those users might straddle any one of those different categories, but they have a separate irrigation meter that's measuring that it's not typical for a single family home to have a separate meter that's measuring just what they're using for their lawn. This would be big sprinkler systems and things like that. Okay, so however the data is being collected during winter. Correct. So we measure the entire year. But every year the winter use is measured and then uses a kind of a baseline for the sewer charges. Why do we do that? Why don't we do the summer when the usage is higher? I think the idea is to try to make sure that we're really only because we're setting a minimum. Right. The minimum is intended to deliver enough revenue to support all the fixed and variable cost of the system that's necessary. And when we set a minimum, we want to make sure that we're not being extra punitive to users that might be using much less than that minimum threshold and they might be doing so just for their everyday important drinking water, bathing, things like that, those things going down the drain. Whereas if we were measuring based off of, you know, summer usage for a property, a lot of their use might not be going down the drain and we don't have a way to measure what's actually going down the drain. So if we measured a property in the summer when they have their sprinklers on that water might be shooting out into the yard getting absorbed within the grass, none of it's going down the drain. And so we don't want to set a minimum that everyone's paying for based on potentially use that's not actually feeding into our system and these, you know, water that doesn't need to be cleaned up. Okay, but the value of the water coming out of the system and the aquifer and all of that. There's no minimum charge for the water that's coming to the house. That's the tears that I mentioned. The minimum is only charged on the sewer. Only on the sewer. That's the minimum. Okay. That's measured in the budget. Okay. On that 2022 study, where you've got that. First bullet point, 2022 to 2021 CIP projects. Any of the projects you described at the beginning of the presentation encompassed within that. Need or are they all in there? Part of the, part of these numbers match up with what you showed us at the beginning of this presentation. So some of those might have had some overlap, but very few, most of them would have been storm. Or more that we had the York project, the first one I kicked out that was in there. And the South sanitary, we had an estimate at the time, but we know much more that number went up considerably since that initial study. The flood projects were something new that I think was right after that last rate study. So, you know, there's been essentially three or four years that have lapsed, right? You've accomplished a lot of those projects already. And now everything that Chad mentioned, the majority of those, other than the, I think the first slide. We're forward looking, looking ahead into the future, future needs. Yeah, like the water treatment, water treatment plant was in here, but it was a much different number. So we updated numbers on some projects, some were included and some were not. So if I look back at the first part of the presentation looks like. Including the flood risk reduction projects. Yeah, I think Nick will probably get into those details. Yeah, if we want to get through this slide. Okay. And so the, I take it that in 22, go back to the prior slide, please. I take it that second bullet point, that says, informed future general rate increases, those are rate increases that we did adopt based on that 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20, 20 and that'll feed into some of your future budget discussions, whether or not you want to continue to do that or change it up and the like. And ultimately, we want to make sure that what revenues are coming in from the users of each one of these systems is delivering some minimum target amount of capital or cash essentially at the end of the year. It's going to be able to support at least four months of operating expenses. So why four months? Well, we want it to last at least a quarter because we only bill quarterly. So we don't get revenue necessarily thinking. Things like that quarterly analysis consistently throughout the year. We want to make sure that we've got at least four months to cover some of those and it's good just to have a reserve anyway. Because some expenses will fluctuate during the course of the year. We also want to make sure that we're able to cover our debt payments and so that we don't have to draw on any other funds to, you know, even if it's on a short term basis, we don't want to have to loan from another fund to be able to cover a debt payment. Even if you can pay it back quickly, you want these to do self sufficient funds. So we built the target such that at the end of every year, each fund would have 100% of their next years. And payments set aside in cash to be able to make those payments. And then we also want to set some kind of minimum reserves in the unlikely event that there's something that we're not planned for in the CIP, a line-brank or something of substance that requires a significant capital investment. So we want to make sure we have reserves to be able to cover for that kind of a calamity, if you will. Again, with the intent, you know, we could think about issuing debt or things like that to that's paid back from the utilities to cover some of those. But, you know, in the case that, you know, we might not be able to get to it on time. There's always a chance you need to draw on some other fund. And so we want to make sure we're protecting those other funds with the minimum target that we're setting. So the things we were trying to cover, is there anything different about the things that you've listed here than what we've done in the past? These targets are actually fairly consistent. We have, from time to time, adjusted the potential cost of an unforeseen repair because capital, you know, things are more expensive now than they were 10 years ago. So we might adjust that, but this fundamental premise has been consistent in these analyses. One thing, because I do keep thinking about seasons and impervious surfaces. And I know there are single family houses where there's a lot of impervious surface. And I'm thinking about one where it looks like they've built all the way out to the lot line and are violating the, you know, that they would have 25% pervious surface because they're under 900s, over 9000 square feet. And so there's that, there's also the phenomenon of during the summer and even now the sprinklers that are watering the street. And, you know, things like that are, you know, I don't know if there's some kind of way of looking at that water usage and trying to figure out. Some way to capture. So I just, as a comment, wanted to get that out. I don't think we can assume. That everyone is very, you know, carefully watering the tomato plant or whatever. And things also happen on property. You might have a breakage or something like that. Things and other things happen. So. So as I mentioned, some of the assumptions we're using. So, you know, we started, we wanted to build a budget, an operating budget for each fund. So, you know, we started from what was actually incurred in 24, use that as kind of a historical benchmark. We also used the budget that was adopted for 25 already since that was already in place. And then what's forecasted within your, you know, your budget documents for these, these utilities. And then we added some assumptions for inflationary expenses. So we wanted to make sure that we're not, you know, assuming that Hey, everything that we budget for right now is going to stay exactly the same over the course of the next 10 years. We know that's not going to be the case. So just to be careful, we included some percentage growth of those operating in capital costs. So 3% just in general operating expense growth, 5% for specifically for personnel costs. One item that I could mention right now, I had it in the previous lab, but I didn't touch on it. The Met Council Environmental Service Charge. So everyone in the in the metropolitan area is part of the Metropolitan Council, sewer treatment, various facilities, very large facilities handle all of the treatment for the entire metro area. And they charge for that treatment. Now we, the city of the Dina needs to get that sewage out to that facility and do that through its own infrastructure. But the Met Council does impose a charge that is paid for from the sewer fund. Typically those charges, we're going to get them about a, what, six months in advance of the next year and they're based on actual flow patterns. So they're charging for basically how much the total sewage from the city that goes into their treatment and their apportioning it amongst all the different communities that they serve. And they come up with that amount. And that's a dollar amount that we find out. Sometimes it stays relatively the same. Sometimes it grows. I think this last one went up about 5.8%. Our prior analysis had assumed, you know, anywhere between four and five percent growth in the Met Council's, charges. We're going to recommend assuming a seven percent growth. We're getting some indications in some of the internal Met Council discussions. And that those, you know, again, they're facing the same reality that we all are in terms of inflation and capital needs. But you want to make sure that we're careful. Since that's the largest single expense out of the sewer fund. So our study is assuming a seven percent growth, which is a higher percent growth than we've assumed in the past. So that is informed in quite a bit in the financial model for the sewer fund in particular. We also assume some revenue growth is going to take place from investments and other types of, you know, non usage fees and things like that. We also assume some connection growth. So, you know, you're redeveloping all the time approving projects that are coming forward. But we only assumed the connection fee revenue. From that growth, we did not want to model out and try to predict how that a new apartment building was going to specifically add new gallons of consumption. So we did not incorporate that in the forward looking part of the analysis. We incorporated in what we analyze right now. We're current usage because we know what that actually is. But we didn't want to assume, oh, we're going to get some extra revenue coming from things that haven't actually happened yet and development that might not occur. Certainly there's some immediate projects that might come forward, but we don't want to assume there's a 200 unit apartment building that comes online five years from now that nobody even has their eye on. So we did not assume we conservatively did not include additional revenue growth tied to that specific usage in these miles. So the various say, what we budgeted for 25, 27. And then we increase that. From there, we inflated that means that it's percentage. And then the only revenue is the 1%. We forecasted our budgeted revenue based on analysis of usage, actual usage. But we did not forecast that revenue would grow from new development that hasn't happened. So I think it's just in general, I get it. It's a challenge because we don't build in any assumption of efficiencies gained. This is essentially saying every period we're going to budget to spend more for this service. And we're not going to look at it. And I get why your example of why you don't include revenue because the project will exist. But we also don't include, you can't use population because those structures already exist unless you're building new homes. And you don't want to rely on that to figure out an allocation model either. But this ends up always being cost plus. I think you're right. Generally speaking. I would also just want to say that when we're doing a forecast like this, we conservatively want to do that. Rather than catch ourselves in the other direction, we don't want to be revenue plus. And put ourselves in a hole. But then we're going to underset. I'm going to use this to allocate to residents. That's right. So that's one of the reasons our recommendations is to not try to solve it all once in your fee schedule in one year. Right. Because if we wanted to try to tie all this together and say, you know what, let's just bite the bullet one time. What's the amount of increase in rates that we need to solve for all of this? We're going to see something like 50 percent. Right. And I'm just making that up. But we want to do it incrementally over time as these actual projects are coming forward and as that new development happens. Anticipating that we're going to be doing some analysis as we go to make sure these assumptions continue to be valid. And some of these annual inflators, they might move the needle. The big things that are going to move the needle are actually the CIP projects. You know, those are the high dollar value things that if they change, that will cause the model to give you a different conclusion. So when we do, and I want to skip ahead, but we usually try to do step by step. We take this off one year at a time, allow a period of analysis. And then, okay, it looks like everything's following suit. Let's continue down that glide path. And then, you know, if something else happens, maybe we update the analysis and put a new model together in three or four years. And that's a consistent approach that the city has typically taken in the past. So that's why we're here tonight after having done this in 2022, right? Exactly. Right. And it's kind of the CIP understanding that it's evolving. There's some new needs. And there was also just a desire to actually get in and look at some of those changes that were put in place. And that actually is a good segue to the last bullet. We also want to just see how users are using the system. I mentioned kind of the fee equity and measuring the user impacts and things like that. Those are those are things we can do with this analysis as well. It's not the primary objective, but it's a good way to inform whether or not you want to shift policy in the future. And so as part of this analysis, we didn't just look at the CIP and think about, all right, how much more do we need? We also looked at, let's take a sample set of a year and figure out, okay, we're going to look at the CIP analysis. And figure out, okay, were the assumptions that were used to set those conservation tiers? Was it, you know, are we consistently seeing the same type of patterns in the community? And, you know, does it look like we should keep that going forward or maybe throw it away or think about a different approach? So we did want to make sure that we analyzed a year 2023. That was particularly chosen because it was a drier year, not as much summer rainfall. So we could then see whether or not there was actual use from outdoor watering. So the 2020-2024 was one of the wettest years that we've had in the last 20. And consumption was actually down about 17% in comparison in that year. Last my notes. So it, we can look at multiple years as we go forward. If we redo this analysis again, I mean, there's a way to do that. It's kind of data intensive to, you know, keep looking at multiple years. But we did want to pick a year where there was some, you know, decent amount of watering that was taking place and look at whether or not these tiers were set appropriately. From the recommendations in 2022. This slide just shows essentially the what each fund is trying to tackle in terms of the costs and how it's apportioned between operating and capital. You can see the sanitary sewer in the middle. That's the size of the Met Council charges that that it's the largest expense of that fund. 40% of the expenditures of that fund is to pay that Met Council charge. And then you can see the difference between operating versus capital debt would be considered capital expense. And so in every indication, you know, water has the most in terms of operations about 50% of budgeted water costs are going to be for operations. But the other 50% is all capital, all the CIP items that we talked about. It's, it's, I don't want to say worse. It's not worse. It's just there's a higher degree in the other funds. They're even more capital intensive. Sorry. One other thing I wanted to note on this is just to give you some perspective. I know we talked about the last analysis. You know, there was 60 million assumption. For the water, the CIP that we're looking at right now is about 114 million for the water. So again, updated costs for the treatment plant. All in these costs include not just what Chad mentioned. Those were kind of the big ticket items in the in the preamble. But your CIP covers all, you know, equipment. It covers street reconstruction projects, all the neighborhood reconstruction that's going on and utility costs that are associated with that. A number of other types of expenses that are paid for under these funds. For the sewer fund. What we were trying to tackle from the CIP is about 91 million. And then for the storm sewer fund, the CIP is forecasted about 98 million over that again. That's out over 10 years. That's the total amount that we're trying to solve for. In this analysis. I want to include a slide connection piece. So I mentioned those. That's when things redevelop. There's a charge for the developer. They pay it when they pull the permit for adding essentially new use to the system. Last analysis suggested 3% increases per year on those connection fees. Charge for water and sewer. Looking at the CIP numbers that are going forward and the projects that are specifically for expansion of capacity and not just reconstruction and some of those other things. You know, it looks like that's actually the right. That'll fund that portion of the CIP if we if we continue those 3% increases. So our analysis suggests that we stay on that glide path and recommend that you consider that in your fee schedule. Again, per year. Adjusting those fees potentially 3% per year. Sewer on the other hand. There's more capacity projects that are forecasted within the CIP. And so we think that we should keep pace and be able to provide so that redevelopment is funding more of the CIP costs total and not just the existing user base. And so we're going to recommend a 9% per year increase in the interim to be able to fund a greater amount of capital needs within that fund. Just for some perspective, you know, the water connection fees. This is going to be very volatile because it's very dependent on what actually is being built in some years you're going to have many projects come forward. Other years you might have very few right or different types that aren't going to add new users. So on average water fees are adding about 1 million in revenue per year and then the sewer fund about $800,000 per year. So yeah. I'm very worried about an upcoming recession. So if we see a halt to reconstruction redevelopment, what does this do to our CIP? If that just doesn't happen for 10 years. For an extended period of time. And what question of it is connection fees and analysis, right? You could pull that out. Yeah, we're trying to fund again 16.7 million of the numbers that I just quoted from before the 90 plus. And I guess the question that I would then we would talk to, you know, do we need those projects anymore? If the growth is not occurring. Yeah, we see. We have a chance every year to look at it. Every year we can. So if this worst case scenario that I've heard about in the last week, my life happens. We can adjust. We can adjust. So we're not stuck. We're not dependent upon this to continue to have. Repairs and things like that that we can continue to have a good water system. If redevelopment stops for extended period of time. Yeah, we can adjust based on markets. Some projects. Some of this is just has to happen repair operations. And street recon, you know, those things we need to keep up. Otherwise, if we get behind. Then the number just gets so big in your 10 or 20. Well, I want the servicing existing customers versus new customers kind of thing. So this is small enough that if the new customers drop off, we can continue to service existing customers. And we're specifically targeting those projects. Okay, that are linked to our linked to expansion service. This would be. This would be development. Right. And higher density. To your point about the revenue plus or cost plus. You know, we're not assuming that those. So we're. We're forecasting what those fees would need to be to cover their share of the CIP. We're not forecasting what their usage. And those things which which would then make something like a reset an extended recession very problematic. To this analysis. So we're not assuming any of that user growth. Is paying for future operations. And the reconstruction projects. So. You're like that. You're you're making these recommendations based upon potential future development. We are assuming there's going to be assumed about a 775 units coming online. You know, it's which is consistent with growth that has occurred over the last decade. It's not. It's not. We worked with Carrie and Bill and came up with a number that we thought was reasonable over 10 years for units. And we're not. Assuming again, those 175 units are going to be turning on the water and paying and helping offset our future revenue needs. This is only assuming that the developers. Once they pull up permit are paying this fee. And then that fee revenue will be available to cover 12 million. Of capital costs over the next 10 years. If that's. Yeah. That's not a function based on past. Three. Correct. But in your career for your presentation, you said you didn't want to go to the future. You don't want to go by and what was here. No one now. Correct. Only for the development fees. Are we making we're not making any assumption that these developed. Properties these theoretical developed properties are going to be turning on their spigots. And paying quarterly bills. For their revenue use. So we did not assume any of that in the analysis. But we have assumed that development is going to continue forward. And then what the fees need to be in order to cover the cost of growth. And then I might remember Jackson's question of none of that happens. Right. Then we don't get those millions for construction. Because this is essentially. I'm calling it new construction. That is not in that. It's more requesting that doesn't impact the current users of the system. Right. I'll look and get. I think why you take 2023 because of dryer or more consumption. That's the computer approach. But a lot of the things we're doing are built around the fact that we're getting wetter. And it was a tear to our residents to be thinking about picking a dryer. As opposed to what we're seeing in the trends. But we're trying to plan for. In terms of managing more water than we've ever had the management report. Right. We don't. We are being as mentioned. Cost plus. I think I like that. Description. We're assuming. That. You know, we don't want to hitch everything. To a usage wagon that we don't know that's going to fluctuate dramatically depending on a lot of different factors. And new development to tends to be more efficient. In terms of its water use and utility use. So we want to make assumptions about what that might be as well. A lot of our existing users might be using water in a way that they wouldn't be using if it was a brand new. With different pictures, different property use. So we want to be very careful that we're not. Putting ourselves again in a whole revenue wise. Assuming growth that might not materialize. So looking at that test year 23. I want to give you some indication about kind of who pays. Based on consumption. So these are the volumetric charges that I mentioned. So it charges per thousand gallons. For the commercial multifamily. And residential classes. And it came in pretty close. Not exactly for each one. They're not they're not tied to the hill. Together. They do differ. And they will differ depending on how you measure it. This is looking at the full year 23. Residential users used 59.5% of the water. And they paid for 59.5% of the water through their volumetric charges. It wasn't exact for multifamily or commercial. They were off just a little bit. It was actually very close within this. This is just one year. It's going to be different. Every year depending on seasonality changes. You know, is it a wet or a dry year? You know, a dry year. You're going to be watering your lawn quite a bit more. So then you might be paying into that higher higher tier consumption. Whereas a wet year, you might be watering quite a bit less. And not. Paying into that as much. So, you know, it does it does fluctuate, but we wanted to give some indication of whether or not. The users were paying for what they were using. And I'll go ahead. Well, we were able to get this data because we have a new billing system. Correct. That this was a billing system that was implemented like in 21. 23. 23. But we can get it before that too. Because it's based off of volume. Okay. Okay. Very cool. Oh, I'm just trying to remember when the because it seemed to me that we had to hold off on doing the new rates based on usage on getting the new rate system. I think we didn't want to screw up the billing process. Okay. I think so. It was, it was, yeah, wanting to get that system in place and up and functional before we started changing and messing with the structures and getting them programmed in there. So it's just a. Yeah. Yeah, making sure it worked properly. So, yeah, so this is, this is just a snapshot in time, but it does look like, you know, it is, it is fairly consistent. And it's something that, you know, the council will want to look at again in the future every time you do an analysis like this, you know, dust it off and kind of reevaluate and make sure that it's at least in the ballpark and consistent. And again, you might want to go a different policy direction and think that one class should pay more than another. You know, that's the direction that the council is going to have to give based on, you know, the whole host of factors that you all deal with. But the way that this was designed was to try to kind of minimize the deviation. We also look at like individual quarters and we want to look at the tier structure specifically to make sure that the tiers were consistent with what was adopted. So if you recall what I mentioned that the city had a tier structure in place already, but they were wider bands. So this, this chart right here is just looking at the winter courses quarter usage during that test year in 2023. Winter quarter use. So that's going to be generally speaking December through March, some customers. The city uses cyclical billing. Not every customer is paying in April in July. You know, you stagger them to some degree. But we're looking at the basically the cold months, right? And the bills that are associated with the cold months of the year when there's not going to be expected to be that kind of outdoor irrigation use on a residential property or whatever else. You know, there's there's quite a bit of other activity that also takes place in the summertime that you wouldn't have necessarily in the winter that might skew it. And so this is kind of just looking at one specific example of a test to ensure that when we're setting these tiers up that we're not being punitive to essential use. Right. So what people are going to consistently be using throughout the year to prepare your food to pay to flush the toilets to do your indoor cleaning and all those other types of things. Things that you might not really be able to control. Even if you had perfect information and you knew exactly how many gallons you're using every minute of the day, you might not be able to change that behavior necessarily. You know, for those types of things. We can, you know, obviously some some degree, but. So that's why we want to look at the winter quarter and make sure that the tiers that are imposed. Are applicable to the majority of that winter use. Right. So the tiers that were put in place were up to 12,000 gallons of use was charged at the lowest consumption rate. And when we look at this particular test year, this is consistent with the prior analysis. 57% of the city's residential accounts, all of their usage fell. Within that first year category. So everything they were using during that three month period was at or below. 12,000 gallons. We expanded out to the next year. 93% of all the accounts and usage was was falling below. So only 7% of the accounts were even getting to that second tier threshold in this winter. So what this does is it shows that yes, we are the tiers look like they are set in a way that kind of use were captures that essential use. Right. And so when we measure them in different months, when there's other maybe more non essential use that's taking place. Now our tiers are going to be able to give a price mechanism for consumers to decide. Maybe I don't want to use as much for those non essential type of purposes. Maybe I can curve my my usage patterns. If I'm price sensitive to how much I'm paying in my bills. This type of structures is pretty typical. There's not really a one size fits all scientific. Hey, this is the best practice, but generally speaking, you know, you can look at reports from that council. You can look at various engineering studies that are done. You're typically going to want to make sure that whatever your highest tier is. It is something that is applicable to maybe your top 10 to 20 percentile use. And then you're going to want to make sure that the other tiers multiple tiers fall somewhere halfway between that kind of threshold somewhere between the 40 to 60%. And then you're going to want to make sure again, you're protecting, I guess that essential kind of, you know, that use that you can't necessarily curve as easily. And then encouraging folks to conserve when they can through a price mechanism. Frustrating when you look at the range here because we have people going from 2000 gallons all the way up to 60,000. And you can say only 7% of the users are above the second tier. But in terms of the volume of water that is being used, this graph really doesn't capture. Just how much those households are tapping into our water sources and our resources. I feel like there needs to be another tier or, you know, something to really curb that excess use. And when I look at this winter quarter usage, I would really like to see what this summer quarter usage is because I'm guessing the disparity is even more extreme. And then we've got a lot more households or at least a lot more gallons of water coming out above that second tier. Absolutely. So I don't feel like that's encouraging conservation because they're able to purchase it at a price. I mean, that's, that's a lot of water. And, you know, like 60,000 gallons, what's going on there? What's the profile for this day decision? Is it all single family? This is residential users. Yes, a single family. I think a duplex. The transport. You can get the current unit that we're seeing these numbers per account. Great. Great question. I mean, if you got a household of five or household stuff. Right. I also wanted to provide some, maybe some general information as well. So, you know, this, the median use in this, in this data set for residential was 11,000 gallons. So the median was at 11,000. There are, you know, the DNR puts out some recommendations or analysis about what a typical water consumption is in the state. It's 52 gallons per person per day. If you put that in terms of the diner, right, I think. The data I use showed that average household is about 2.3 people. If you extend that same 52 gallon per day per person out, that actually would be. I have it right here. 10,914 gallons. So very close to the median use again, winter. Now that DNR number is not winter. But that DNR number is your, your calculating it is your round. So I will throw that at you. Dina historically has been very. Tending to be a community where we use a lot of water. And I don't know if that is still true, but. You know, this would suggest that. Yes, it is. It is. And. I think I think that's where we perform. It is. And. We're conservation efforts have to be made around. Water. We're just profit. But I think if we could do something and create, you know, you get up over. 36,000 gallons. I mean, there needs to be or even 32 or 30. You know, what is going on? There needs to be another. I feel like there needs to be another tier. I think the last thing you said is that doesn't make sense. Why? That's the question. I don't know that we should have another tier or not. Because I don't know the profile. Like who's using 48,000 gallons of water and water. There might be a variety of different reasons. There could be a million or a million pools. Ice rings outside. Yeah, there's a. I think we need to know. It could be a little bit more. We do need. Yeah. A big house. And we get that data so we can figure. We've seen that summer day before. Yeah, I do have the summer day. So I actually, I don't have a chart for you. I'm showing you this slide because we want to make sure that we're setting these tiers in a way that will cause a price indication. When you then turn on your outdoor use and exceed. This is winter. So I'm going to see. Some of the. Some of the. Gallons in the winter. When summer gets here, whatever's in that data set. Could go good double or whatever. But yes. They're going to build the hockey rink in the winter and they don't. It might be less. But no, most people are using more in the summer. Right. You're trying to make sure it's. We just want to set that if we're going to set a price mechanism, we want to make sure that we set it using data that doesn't necessarily overly punitive to essentially use. Right. So that's why that's the only reason I'm showing you this chart in particular is just a validate. It looks like that 12,000. And 24,000. BAM. Is appropriate. Okay. This is the pair this to these types of pricing structures that are used elsewhere. This looks consistent. Okay. I have, we will provide you the charts for the highest, you know, the summer month. It does all these blue lines. Yeah, platinum and cascade way out to the right. So they are paying. For it in the higher tier structure. This winter usage, it says 93% of accounts are falling below that threshold. It's actually pretty consistent as well with the gallons. It's like 8% of the gallons during the winter quarter are charged at the third tier rate. So it's very close. Just a, again, just the winter quarter though. If we go out into the summer, it's going to be more like 50%. See that it would be great to have a chart that included that information because I think we'd need to get that out to the community. And then as I look at, you know, way, way out at 60. I mean, could that be someone had a. A bus to pipe or something and all this. You know, I mean, I don't know how much that little bar represents. They're not going to be individual accounts, but they're going to be close to, you know, two or three years or something to that regard. Okay. Any other questions on this in particular? So the structure does do the same thing for commercial users. Commercial use is not going to fluctuate as much season. It will to some degree. In some cases, it might even go the opposite direction. It really depends on the individual business and what they're using the water for. You know, our folks, you know, inside using the bathrooms or are they, you know, outside or able to use the exterior of the building, things like that. But we do, you know, still have this kind of price sensitive. We want a price mechanism that we're going to have a consumption tier. We want to apply it to the commercial in as well. So to your policy, the decision on the on the commercial was to use a wider band. Again, the decision for the recommendation for the wider bands was because we just wanted to map. The existing usage and provide a benchmark to impose this this tier structure. Now there's going to be a charge for receiving these thresholds beyond what you're using already to conduct your business. We don't want to play necessarily winners and losers for individual businesses. Some businesses need that water use. Other businesses don't necessarily rely on it. They have a much easier time curbing it. We do still want though there to be a threshold and we want that threshold to provide at least some kind of indication. And so, you know, this one doesn't look as nice like histogram for from a typical distribution. But as you can see, you know, quite a bit of the commercial consumers are in the lower categories and there's really just kind of individual outliers that go well beyond that. So things like the hospital, other types of things, I mean, they use quite a bit of water that they also, you know, might only have one meter, but they're, you know, thousand people are being serviced there. Anyway, it does still look fairly consistent, you know, 57. So above the median is being captured within that first tier band. The second tier band, not as great in terms of performing as the residential, but still making sure we're getting close to that kind of that outlier 10 to 15% is paying a higher rate. For their usage. When would the inappropriate time to think about something that tier two, one more thing to the right? So to give the 225,000 gallons that might get us closer to 90%. You couldn't do that? We could do that at any time. We're looking for feedback now, but. I think we want to go. I don't know. Well, that's. We drop off at 93%. I think just to just prepare. I don't know what the policy slide is. Showed of who's paying for the water. Yeah. Yeah, and that fit pretty nicely. We got about. I better get to the end. Okay. Another thing we analyze, we just want to make sure that the meter charges, the fixed cost, the base fee are at least covering a substantial portion of fixed costs. And it looks like it is about 66% of fixed costs in the system. We're going to recommend that you continue. And go slightly above on the water fund to 5.25%. Again, most of that driven by the fact that the CIP is much larger. In the future, but that should stay at a consistent funding level to make sure that the fund is setting aside enough cash to pay for everything you need over the course of the next 10 years. And that 5.25% would be applied universally across the structure. So we're not recommending any change to the structure. Moving the tears thinking of that, but really just thinking about a incremental increase across the board. Both to the base fee as well as the volumetric charges. This is kind of what that this is that target compared to actual cash. There's an outlier here there because we've got on proceeds for the treatment plant. That in that treatment plan is being constructed over multiple years. So it's not being spent all right away. But again, fairly consistent. So water fund is maintaining adequate reserves right now. And we don't expect too much more growth. Why do we want to raise the rates? Change in the water treatment plant costs. It's up at 31 million in five years. So it's the water treatment plant costs is only relevant to the southeast part of the data. Right. Yeah. It's multiple hearts in the system. If a plant goes down here, that's going to supply water to a big portion of the city. So it's all inner working. So we can take one system, one heart offline and maintain it while the others provide water to the whole city. We see water from this treatment plant all the way down in Saltdale and it could be vice versa. So I would it's a mixing of waters and it's a system. Is that regardless of where the water plant improvement takes place in the whole city. It's a benefit to the system. The system wide. Would we have the mechanisms to charge differently for different areas of the city? If you want to get extremely messy. I wouldn't. I wouldn't think so. Well, I think it's a fair question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. I think it's a good question. 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At the end of the day, I think some of these layers are going to be how much additional do we want to put into the capital improvement? At the end of the day, if we're trying to raise X, there's not much flexibility in what the X is, it's more about how do we want to collect that money? I think that's where it's going to come down to the policy decision is how do we want to appropriate that across the different populations, including the different tiers? I think that should be the discussion. I have a whole bunch of questions for that. I have a whole bunch of questions for that. Yeah. We're hoping to make some changes to the fee structure this year, if we would find another time, I guess. We may need to do a special, I think, given the volume of what's left to cover. Much of the rest of the analysis, I mean, it's in the sky. It's fairly consistent. We're trying to get a target, but we might want to talk about stormwater to some degree. We'll make sure that we all get this sent out of this PowerPoint in our email so we can download it and copy it. I think we can all pack it. I think there was confusion because there was an earlier PowerPoint where the Ellers slides were identified as Ellers slides and there was more information. And so it would be really great if we could have that first presentation that got posted, get back up there, and then have this one as well because this is just a little confusing in terms of the content. And then to have one presentation that some people were looking at on Friday and then the presentation that is up right now, which is very, I think it's different. And I understand that it was pared down, but at the same time, I think we need both of those presentations online so people can see the content. And I do appreciate, I mean, I get this format. However, for me, I really want to know what content is coming from Ellers, but I do appreciate that earlier presentation where there was more information. So. Might I also add that we'll find a date to come back, but we need to get something on the council for review for 2627 by the first meeting of December and the second meeting in December for adoption per past practice. Okay, thank you. I think water rates are going to go ahead. Alright, we're good.