 I have 630. So I will convene this special meeting of the board of directors of the San Lorenzo Valley Water District. And Holly, would you please call the roll? The may hood. Present. Vice president Henry. Here. Director Falls. Here. Director Smalley. Here. Director too. Here. Are there any additions or deletions to the agenda tonight, Rick? The staff has none. Okay. This is the part of the meeting where we have oral communications, but I, let's see, don't see any attendees on my list. Are there any people that phoned in? Doesn't look like it. Somebody is Christina Wise just joined in Mosher. Here they come. Okay. Yes. They're starting now. Participants. All right. Well, this is the portion of the agenda that's reserved for oral communications from the public on items which lie within the jurisdiction of the district, but are not on tonight's agenda. Are there any, anybody that would like to give an oral communication? Raise your hand. Yeah, I do. And I don't see any questions of this or interest in doing that at this time. So we'll go on to new business. Rick, you wanna present the first item, fire recovery surcharge. Yes. I'm forays the fire recovery surcharge and I will ask the finance manager to present this report to the board. Attached. You see the memo regarding the fire recovery surcharge. The district manager's recommendation is to go with a $5 million surcharge recovered over a five year period, which it's going to be about $10.55 per month per customer account. So this would be uniform across all of the customer base. This would require a proposition 218 process. This is used to help build back up the reserves from the CZU complex lightning fires that caused all the damage to the district. And I think that about summarizes it up. So I'll give it back to the district manager or board. Rick, did you have anything you wanted to add? No, this will generate approximately $5 million over five years to rebuild the district's reserve fund and to cover associated costs with the fire from the CZU fire. We're asking the board to approve starting authorize the 218 process. With that, I'll turn it back to the board. Okay. So let's start our questions from the board with director Henry. Director Henry, are you, you're muted, Lois, there you go. I'm, there I am. So do we need this in order to get a loan? Need to have this surcharge. I don't believe so, but I'll refer to the finance manager on that. No, we do not. All right. Well, I know a surcharge isn't popular, but I don't see any way around not having one. I think that we're going to have to go that route. And that's all I've got to say. Director Smalley. Yes. We've talked about potential other funding sources that the district might be seeking other than the FEMA grant. Rick or Stephanie, could you speak to what we're seeking outside of that, if any? You know, there was some talk early on about possible funding sources from state or Fed to the additional 25% of the district share. I've been unsuccessful locating, you know, I've talked with FEMA to find out any additional funding available. We have talked to our local representatives. No one sees that avenue. We are looking for any type of grant funding to move through. There may be some grants available, but I wouldn't want to say that they are a sure thing. Carly's been working with other agencies, the foundation, which does grants and for different types of low income and projects. We're working with them on possibly some grant funding for the five mile pipeline, but nothing firm or approved as of yet. Okay, okay. If you don't initiate the surcharge, what projects do you anticipate or what types of projects do you anticipate don't get constructed, don't get built? One of the biggest concerns is our reserve fund. You know, when going into the fire repairs, you know, we exhausted the $3 million that district had in reserves. Our reserves are very low. If we were to have an earthquake or additional debris flows or another type of disaster, we would not, do not have funds to recover like we have this time. I think it's very important that we start to build back up our emergency reserves or our reserve fund. Okay. Director too. I'll be brief and forgive my dog. But my concerns are similar to Director Smalley in that I'm hoping that we can either direct staff or find a way to connect with our other federal representatives. And maybe it doesn't have to be FEMA. It could be other offices to try and see if we can get some grant funds to sort of cover some of this. That would be my hope going forward. And that even if we don't get the funds to for the reserve fund specifically, maybe we could get some grants to cover some other projects we've been looking at, such as the Lyra program to help out the people that maybe wouldn't be able to afford the extra fee. So that's my thought there that maybe there is another way to get some extra funds that we hadn't considered yet. That would be my concern or request is to keep looking for money, right? Like that that's always a concern for something like a small district is such as ours. So that I don't really have like a question other than to ask Rick if that's a possibility that we could keep looking for some funds to supplement what we're doing. You know, we definitely are and I, you know, and we have put out an RFP for, I'll ask Carly to quickly report on that. We're adding that process for a grant writer. And we've also are trying to work with the county on securing some grant funds from the federal government or folks that are having issues with paying water bills during COVID. We're working with the county on that. They're the lead agency, but Carly, can you give a quick update on grant writer? Sure, yeah. So we did release an RFP earlier this month for a grant writer researcher consultant position. So hopefully we'll be getting some proposals back. You know, we've been sending me around to a couple of different contacts that I've received from other local agencies that work with grant writers. So I'm hopeful that we'll be receiving some proposals. And we did apply for a $300,000 grant to offset the cost of installation of the generators on the PSPS. So we are looking, it's a slow process and I don't want to say there's anyone in the bank at this time. Before I go to you, Director Fultz, I just want to add one little piece of information that responds to both Mark and Tina's questions. And I, before the election, Anna Eshoo met with a group of people in the Valley and she, I asked about this question and she at that time said that she had a bill that was cosponsored to raise the FEMA contribution to 90%. And it had not gone anywhere because of the situation of Congress. But I sent her an email reminding her about that conversation and asking whether there's any hope that that might change, especially for our small districts that are hit by this and by COVID and other things. Now that both houses are under democratic control and we have a democratic president. So I haven't heard back from her yet and I don't know whether that would happen on a timeframe that could help us, but we could hope that that'll go. Director Fultz, Director Fultz, you're muted. I understand, it just takes a while to go click on it, right? I wasn't sure how long you'd be going. On a previous version of the agenda, I noticed that there was a comment on here that said that this surcharge was being proposed for all of the San Lorenz Valley Water District customers. Are all of the customers, how are all the customers impacted or benefiting from this? Well, I would say that all of our customers have the potential to benefit through this as we are thoroughly interconnected between Felton, Felton, Scots Valley and our North system and we have the abilities to move surface water throughout our complete district and that does impact 100% of our district. Under what conditions are we able to move water around between the three areas in our district? Under emergency conditions? We are able to move water? No, but as a normal course of operations, we don't move water from our surface water sources in Boulder Creek to Scots Valley or to Felton. Not at this time. Okay. So in essence, what the people, there's a group of people, because we haven't yet been able to unify the operation of our district, there's a group of people that benefit directly and there's another group that benefits indirectly. I think is maybe what you're trying to say. You could say that. I don't look at it that way. I look at we have the potential to serve 100% of our water system and especially during an emergency time when they need it most with surface water or through these treatment plants. Do we, I know there's a process to remove the emergency designation. How long do we think that'll take? Carly, do you have any update on that environmental impacts? Is there a process that we're working on with the county? For the conjunctive use study. So right now the CEQA is looking like it will end in June. So we'll be bringing that to the board for approval then. And at that point then, we would be able to move water back and forth among all the areas in our district. Felton to Boulder Creek, Boulder Creek to Felton, Boulder Creek to Scots Valley, Felton to Scots Valley, everywhere. There's other, it's not quite that simple. There's other restrictions with water rights from the town of Felton, but we would be able to move water from our north system to our south system. And that would take place in June. And basically once the CEQA process is done and we approve it, then that can happen. As well as the water right petitions, we have to get those approved and work through as well. And when do we think that would take place? We're aiming for everything to be completed for the actual grant in June. So ideally we'll have everything at least submitted by that timeframe. Okay, great. Thanks, Carly. I did have some additional comments about the numbers. So I hope you guys will bear with me, but there's a number of numbers here that I think are important, particularly given that this last year has been pretty devastating for large portions of our community. And the notion of another $120 on top of what they're already paying is going to be quite daunting, I think for a lot of people. And the Lyra programs basically, unless this is done at a state level, we simply don't have the scale to be able to deal with the scope of what's necessary in our community. And unfortunately, the state hasn't really got off the dime in that. So in the last six years, since the rate increased before the one that we're currently in till now, the average water bill has gone up between 90 and 105%. Excuse me, I should say median water bill, not average. Inflation has run roughly a percent and a half during that time, 2% some years. Our operating expenses have grown about 80% in that time period. And the revenue growth has gone up about, well, at the 89% in terms of the average bill. We're facing a situation here where every time we have a rate increase, like in 2014, between the year that it went into effect in the next year, we were looking at 20% increase in our operating expenses. And the most recent one between 2017 and 2018, we're looking at 37, actually 38% increase in operating expenses. The first year increase in 2014 was 13%. And the first year increase in 2017 was 35%. Basically every time we have a rate increase, everything goes immediately into operating expenses. And we can never get ahead of ourself because of that. And in the meantime, what's happening here is that our community is paying double what they were just a few years ago. We're selling less water and it's not really clear what it is the community is getting for the doubling in the rates that they're paying in terms of measurable, quantifiable improvements day to day, both at an operating level and a capital level in the system. We're facing a serious capital shortfall already based on the work that we need to do in order to quantify what our true financial position is. We're talking just in tank maintenance alone, $10 million right there. And we're also coming up at the end of our current rate increase. This November will be the last increase. And I'm sure there's another one planned after that because the operating expenses this year consume the entire amount of the rate increase yet again. So I am not in favor of continuing to raise people's bills as we continue to stay on this hamster wheel because we can't demonstrate what value it is we're giving our customers slash owners. And I'm very concerned about that. I want to take everybody back a little bit to 2014. There were a thousand protests approximately in the 2013-2014 rate increase. There were 2,700, a minute just short of 2,700 in 2017. This is a serious issue that we have to address. And I think it's very, I think it's very premature for us to say, hey, let's kick off a prop 218 process when we have not worked through yet what a long-term financial and capital plan is going to be over the next five to seven years as to where exactly the money is going or what we're gonna be charging our customers. Cause right now, if we continue on the current glide path that we're on, we're looking at $150 a month bills for water, for median usage in just a few years. That is a huge amount of money. In some cases could be up to two to 2.5% of somebody's income. I think we need to take a step back from this. It's not necessary to get it for the loan. I understand the issue about the reserves. I've been on the reserves and was an advocate for increasing them the first year I was on the board. But I think over the course of the next month or two, we need to put together the plan first and then take that plan to the community and say, this is why we believe the 218 process is necessary. I will now go out to members of the public and I'll just kind of alternate back and forth. And I'll start with Karen Hall. Karen, are you there? Okay, if not, how about Pat McCormick? I think somebody needs to be letting them in. Is there somebody on the? There's actually two people with their hands raised. Okay, all right, let's start with Lawrence Ford. Here we go, thank you. Great, Larry, are you there? All right, I tried to unmute myself, there we go. Can you hear me now? Okay, yes, we can. Thank you. I think this is a very important issue. I appreciate all the points that have been raised. I know it's very unpopular to raise rates, but I have to say that I'm not concerned about that. I think this is necessary. I think we've been expecting for years that the rates were gonna continue to increase. We were warned by the governor years ago that water supplies were down and they were undervalued and that the rates were gonna go up. And so I've been planning for that. I can say that for my family in particular, our income is down about 50% since the coronavirus pandemic began. But this is a really important expense that we have to pay. It seems really minor compared to the other kinds of extra expenses that we have. I agree with Director Toh and District Manager Rodgers about how to resolve this problem, which is to identify the specific people who are gonna have a really hard time making this payment and try to provide some kind of external assistance like through the LERA program. And certainly the more important question to ask is what would happen if we don't have this surcharge or what would happen if we had to cut back? And I think those, the answer to that question would be, it would be basically unacceptable to not be able to do infrastructure, to not have the staff that's necessary that's finally been added to the district. And so I'm in favor of the surcharge and I don't see any problem. Thank you. Thank you, Larry. Rick Moran. Can we hear me? Yes, we can. All right. My issue I'm concerned with is the fairness by which this money is gonna be raised. And to me the fairest way to get the $5 million would be through a surcharge based on income. Those with the highest income paying more than people with a lower income. This is the way our federal taxes are collected, which is where the FEMA money will come from. California state income taxes are also based on income brackets. Our own rate assistance program, piggybacks off of the PG&E care program, which also uses income levels to determine eligibility. To ask the people in the water district to take on more taxes, it must be done fairly. A graduated income based system is the most fair way to raise money necessary to rebuild from the fire. Thank you very much. Cynthia Denzal. Can you hear me? Yes. Thank you. I would like to hear what the staff believes are the causes of the increases in operating expenses. Are there any expenses that we could afford not to pay? Is there any staff that we could afford not to employ? Are there any operations we could afford not to have? Is the increase in operating expenses due to an increase in our client base or due to disasters or due to increases in regulations that require staff time? I'm just curious. I'm in favor of, you know, our water district is central to our survival here as we've seen in the last fire. We can't afford not to have it function well. I don't know that we have any choice here if we need this money to keep the operations going. So I'd like to hear more of the justification for our increase in operating expenses. And personally, I can afford the increase. I do worry about our low income neighbors and I hope that our Lyra program will be able to address that or as you have suggested, we can get state funding for more help for our neighbors. I would also like to hear from Stephanie the evidence about the rates of payment or delinquency during the last year and where we stand with that and the use of the Lyra program. Thank you. Rick, would you like to start? Sure, you know, operating costs, you know, director folks is correct having increasing but also has the operating of the water system. The PSPS is for one, have a incredible amount of staff increase over time. The fire has increased over time. You know, that's the obvious one. The windstorm where we were out of power for five days, we had all hands out from sun up to sundown and half the night operating the water system. When power goes out county wide or valley wide like that, so does internet, so does a lot of our SCADA control. We do have increased operating costs. We have been looking at ways to reduce just lately the operations department restructured and reviewed our telephone lease lines and reduced our monthly bill almost a little over $3,000 a month. We are looking at ways to reduce costs but costs have gone up, you know, above the control of the district and the operating our water system, it is a, it can be a challenge with the weather and the conditions we have in the Santa Rosa Valley, especially with, you know, PSPS, PG&E power outages are out of the control of the district. Oh, you know, we have to be there 24 seven to ensure water delivery. And it's just one issue after another. You know, we were in an evacuation where we had all of our operational facilities and treatment facilities in Boulder Creek. We were evacuating. Again, we had to go out and monitor the systems, change the way the water moves from well water to surface water right now because of the fire. We have a considerable increased operational duties due to the fact that we're moving water around differently than we normally do because of the lack of surface water. Sampling is increased costs of water quality sampling. You know, our increases are pretty fixed and our costs and operations are pretty fixed. And we don't have a big travel training budget. There's almost nonexistent. We don't spend a lot of money in areas that we don't have to. Most of them are directly reflected on operational costs, you know, and out of the control of the district. Could you just clarify for me, the period of time that Director Fultz was talking about was a fairly long time. Was that, within that time, did we add Lompeco and the costs that were associated with doing servicing that area? Or was, when did that? I'm not sure your question and what Director Fultz is referring to. And can I speak to this for a minute? Sorry, I'll take myself. Oh, sorry. Can I speak to this for a minute? So, yes, this was during the consolidation with Lompeco. We have added staff with Lompeco. We had added staff with the takeover of Felton. And those are all increases. We also functioned for a long time without GIS person and an engineering department. So with that, that was increases also. As we keep building our staff back up, the operation costs goes up. And now we're looking pretty good. We're almost full staffed and that's where we're at. That's during that time period. Stephanie, did you want to respond to delinquencies? And also could you tell us to what extent the Lyra program is utilized or do we still have room in that? Lyra program, yes, there's still plenty of room. We've had roughly around 40 applicants. So I think we have somewhere in the 30s of people that have been approved. And it has a total of, I believe, 208 that we have capability for. So there's still plenty of space in the Lyra. Has to do, have been remaining relatively steady the last three months at just shy of half a million dollars. With usually the shorter term piece does get paid and people tend to have kind of that floating. I didn't pay this bill. My next bill, I pay both of them. My next bill, I didn't pay. I pay both of them at the next one. And then the longer term items that are more in the couple $100,000 range are the ones that we really consider to be more potential delinquent accounts. They do, the majority of them have leans based against the properties. And as we've discussed before, we're talking about doing the property tax roll for owner properties to be able to secure that money a little bit more upfront for the district. So those steps are gonna help reduce it. We will continue to monitor. We did start up the late fees again. The holidays, we tend to have a little bit of an increase. And I think a lot of it's just people out of town. So compared to the prior month, it did go up about 20 grand. But I'm anticipating that'll come down, come the next round. That's Thomas, would you like to comment? Hi, thank you. Yeah, I'm interested in a couple of things. I think that Larry and Cynthia's questions about really having a better picture of what the operating expenses. I mean, off the top of your head, Rick, I know it's hard to come up with actual costs for things. I think that in making a decision, it would be important to know over the last five years what those costs have been attributed to. And I think also, I would disagree about the community's ability to pay for this as a general statement. I think it would be important to spend a little more time trying to get that information. Stephanie's just describing how the past dues have gone up and significantly, as I recall, from a budget and finance committee meeting a few months ago. And I think that indicates that not everybody, like Larry Ford would be able to increase his payment on his water easily. And Lira, I don't consider to be a real answer to the problem because Lira provides $10 a month for people who know about it and want to take advantage of it. And also, if you increase, Lira, you're taking that money from property taxes or some other place in the budget. I think it's always an important thing to know because as Bob pointed out, this process would require the scrutiny of the public and it has increased over the past two attempts of raising the rates, the opposition to it has increased and I don't think there's a reason to think that now given the certain financial situations, people find themselves in due to the pandemic and all of the fires and all of the things that we've suffered in the last year, I don't think there's a reason to think that that number wouldn't grow. And in fact, it's possible that the district might not be able to pass a rate increase. And I think it's important to understand both for that possibility and in making this decision, what would you do? Because the water district would have to continue to function absent a surcharge or increase in rates. And I think it would be prudent to have that information in making a decision about whether it's absolutely necessary to go forward in that case as well. Thanks. Jim Mosher, can we get Jim Mosher's mic turned on? Thank you. Can you hear me now? Yes. Yes, thank you. Well, I appreciate that this is a really hard decision and it concerns me that we have to raise costs to rate there once again. The thing that I'm concerned about, I'm not sure Rick said it as dramatically as he might have, which is that if we were to have another disaster and we don't have a reserve fund, the district could be in serious, serious problem being able to do its basic function. And we're facing another fire season in just five months. So I'm very concerned that we have adequate reserve. I think it's important. I'm glad to hear that the board is exploring every possibility for raising other money, but it seems to me that we have to be quite deliberate and make sure that we can maintain basic operations and that we have an adequate reserve. So I guess I support this with the caveat that I think we need to be very aggressive in trying to find other sources of funding that we can that we don't simply add those cents of those added funds, but that we then relieve the rate payers of this surcharge if we can raise other money. I'm also confused by the discussion about the lira program, why we don't think that this could not help low income folks. We could as part of doing this, double the lira program to $20 a month, take that out of the property tax, factor that into how much the surcharge should be. And it's $10 a month that we're saying we're gonna raise the lira program and provide that for people who can't afford it. We need to do better in terms of letting people know about this and getting their eligibility, but it is one function that we have to help. I like Rick Moran's idea a lot. The problem is we can't do it. It's not legal. We can't have our rates based on it. It has to be based on how much water you get. You can even base it on heavier users paying more than later. This is something that's been very, it's a legal case that came up. It's frustrating. It's one reason why the Center of the Valley Water is advocating for lira programs because it's one way to deal with helping low income folks get what is fundamental human rights. And so it is a frustrating situation we're in. And it's not a happy set of decisions we have to make or you have to make, but in general, I support getting that, getting the Contingency Fund reserve funding so that we don't get some major crisis in the next six months, which I think different what's happened in the last year and a half. We can't say it isn't likely. We need to be prepared for this. And unfortunately we're not paid for it. And we're paying for what came up with the fire. We have all these additional costs we didn't expect. People should understand that in the Valley. We need to help low income people deal with this, but we need to move forward. Thank you. Elaine Fresco. Hi. Yeah, I share a lot of the sentiments that people have already expressed. I'm very concerned about the reserve funds. I remember, God, I think it was a year ago, maybe more, there was a discussion among the board about the last rate increase. And at that time, Director Fultz said, we had enough reserves and we didn't need to do the rate increase. And Director Henry said, no, reserves are really important. And since then we've had COVID and we've had the fires and we had the windstorm and we really did need those reserves. And I just feel like our water supply or infrastructure or water quality is incredibly important. These have not been normal times. And they are, that certainly accounts for a lot of the operating expenses. I also agree with Rick Moran, that we're stuck in that situation because of Prop 218. I think that we could do a lot to make our leader program better. And I don't understand if you're concerned about the people not being able to pay that we don't just make this leader program work. So, and give it more publicity, maybe at the same time we advertise or inform the public of the rate increase. And one more thing, I think that the staff did an incredible job through everything that's happened and worked really, really hard. And the public knows that and the public, I think will come together and still feels that there's a community support that we can easily tap into to understand that we need help with these fees. I think anyone with common sense would know that why the water districts we need to raise rates. That's it. Okay. I guess I would like to, since I didn't get a chance the first round, I'd like to just state my views and then we'll go around for another round with the rest of the directors. And I think it's important to realize that this is not a rate increase. This is a surcharge that is a fixed time. And I think some of the comments by Director Fultz are confounding two separate issues. We had something really, really bad happen to us during the fire with sort of the equivalent of a car crash. And when something is destroyed and you've got an insurance policy, which for our case is FEMA, you're still stuck with that 20% that you have to pay. And we're stuck with that. Whether there's been increases in operational costs over time, and if you think they're too much, this is not the venue to really talk about that. That should be dealt with in a longer term effort. And Bob's been talking about this for a while, but we just haven't made any progress on it. So I think what we have to realize is that something bad happened. We have a fixed way of trying to address it. If we don't address it now, we're going to be in a very precarious position because we'd have essentially, basically spent down all our reserves. And as everybody notes, we could have other disasters. We could have a bad set of debris flows that come down still this winter because it goes into February and March. So I am in favor of this. I'm sad that we have to do it, but this is just something that happened. It's exogenous to our system. It's not endogenous. It's not something that we've created due to not being thrifty enough. It's something that came in from the outside and we're just stuck dealing with it. So I'll just leave it there. Mark, did you have anything else you wanted to ask or comment on? I appreciate Bob's comment on why have expenses been rising as much as they have. And does the staff, including Rick, need to do something more to provide, not only the board, better understanding of that, but then the public also, that the public can reasonably understand. But at the same time, I think we need to build back this reserve. I don't see that we can't do both what Bob was suggesting and do this surcharge at the same time. That's it. Director Chiu? Yeah, I was just looking at some numbers and according to Circle of Blue, which keeps track of water rates across the country, the average family of four in California pays $113 a month for water. And I wanted to address Director Fultz's comment that we've doubled the rates in the last, I think he said last 10 years. The thing is in California, the rates have actually tripled. So we're actually doing, as far on the statewide standard, we're doing better than the state. And I wanted to point out that a similar water district, St. Helena, the average family of four pays $112 a month there. So they're in line with the current state. And we have, I think, sort of a different problem here. Anyway, my point is that what we're doing is in line with other California districts. And I think that it's a, we need to address it. It's absolutely something we have to do. Like there's no other way at this instant to fund our problem. We can look for other, I would hope other grants and so forth going forward. And we've talked about that. So I wanted to just say that as far as statewide, the cause of water has been just going up in general. And I feel like our district is actually doing an okay job of managing the just the increased cost of providing water. So yeah, I just wanted to put that out there that on the whole, we're doing okay. And I think that this surcharge could also be offset slightly with the layer program, if we could adjust that a little bit and we could talk about that more later. Thank you. Director Fultz. Yes, I had a question for Rick and Stephanie and then I have some additional comments. Rick, how is this money going to be managed? So is it the intention that this would be money sequestered into an account that would not be touched for any kind of operating expenses? I'll refer to our finance manager on that question. I mean, the board could choose to have it be dedicated restricted fund balance. That's not precluded from any of this. It doesn't necessarily have to be the five million. There's a lot of different options that could still be looked at and evaluated, but there's nothing precluding it from going into a more restricted fund. I mean, it could go to five million. I believe that would fulfill operating end capital reserves. Their target levels that the board has designated. It could go into a purely capital fund to where it can only go towards funding future capital projects. I mean, there's a lot of options around something like that. Well, I guess the question is what specifically, I mean, you're recommending a dollar value. What specifically were you planning and doing? I mean, it sounds pretty general at this point. It just goes into a big pot and we get to take it out whenever we want. I believe the original intention of the five million was to recoup the five million burden that the district was gonna be paying from the CZU fire damage. We know that five million is the amount that the district's gonna be relatively on the hook for. I mean, there's a lot of options. I mean, this. All right, what happens to our reserve account then? It would go back into filling the reserve. It would go back into fulfilling reserve. And then there would be excess because I don't believe there's five million that was lacking. Well, I'm kind of confused because maybe this is because the proposal hasn't been fully fleshed out yet, but it's not clear to me that this is in fact a either in whole or in parts sequestered in any way, shape or form, as opposed to just being dumped into potentially operating budget. But we'll cover that later. A number of points were raised during the conversation. I wanted to respond to some of them. I believe a person mentioned that in the last rate increase discussion, I was saying that our reserves were high enough that we didn't need anymore. Actually during the discussion in the last budget, we reduced our reserves by a half million dollars. I objected to that. That half million dollars was effectively going to tank maintenance. And as one of the reasons I voted against the budget because I felt that was not a responsible thing to do given the potential for disasters. So had we been further into our budget year, we actually would have only had two and a half million available, not three million. Let's, I wanna make sure on state water costs and that sort of thing, we have a pretty wide range. There are some districts that pay a fraction of what we pay. So it's not a uniform thing that everybody's paying significantly more. And St. Helena, for example, has very different demographics than what we have both income and other ones. With respect to being prepared for the next disaster, I wanna make sure everybody's really clear on this. If the disaster happens within the next three, six, nine or even 12 months, even if this proposal goes through, we're not gonna have any of the money unless we A, go out and borrow against it or B, use the money that we're talking about borrowing on the next item, I believe. Because not enough time will have gone by to recoup any of that. So I think that's another discussion here is do we really think that passing this is gonna solve a problem three to six months from now? That's just not the case. I do wanna point out that both Scots Valley and Santa Cruz have tiered rates of the sort. Tiered rates are not necessarily prohibited. There are certain requirements that have to be met, but there are districts that use tier rates and seem to have no problem with them. I wanna address a couple other points around number of customers. We've been pretty much flat with customers for quite a while. The only significant increase was 500 customers came in from the Lompico process, pushed this up to just under 8,000. Before that, we were pretty flat for all the time going back to Felton acquisition, which I believe was a long time ago and certainly well before any of the numbers that I'm talking about. I wanna point out that before PSPS, before our disasters, before windstorms and all the rest of it, fully 50% increase in operating costs occurred before any of those things happened. Now, if what I'm hearing, and maybe this is something that everybody else understands and I didn't, is that we're staffing to handle disasters ourselves internally rather than having a disaster plan, mutual aid or other peak staffing strategies that a lot of agencies and other companies use, then that's one thing. And that definitely means you're going to have a much, much higher operating cost to do that because typically agencies and companies don't staff fully for every disaster that might come along because it's very expensive to do so. If we were in fact doing that, then it would seem to me that we would be able to very easily quantify exactly the benefits that our customers, our owners are getting for having that increased staff during at least half a year where there aren't disasters that are occurring and certainly there weren't that many disasters, 17 was bad, but before that, not so much. So I think that is definitely a conversation that we need to have and be very transparent about with our community. I'm certainly willing to look at the evidence, look at the numbers, look at the quantitative data that says this is what people are getting for the money that they're spending. I just haven't seen it yet. And as part of putting this together, I think that's something we need to do in order to, if you wanna sell this to the community, do that. It's certainly, from my point of view, whether you wanna call it a rate increase or a surcharge or what have you, I mean, I get there certain semantics and there might be a legal situation, but I'm just thinking about it from the point of view of our average community member. When they write the check, they don't write it to, oh, this is for rates and $10 for surcharge. You know, it's just one check that they write. And I think from their point of view, it's gonna be a distinction without a difference. I mean, it might be legal for us, but to them it's going to be not so much of a distinction. I think we need to, because of the fact that this surcharge that's proposed is not going to have a fundamental impact in our ability to withstand another disaster. Again, that's what this loan we're talking about is gonna help with as well. We need to step back and do what I think we should have done for the last few years and put together a very comprehensive financial plan that basically says to people over the course of the next five to seven years, this is what our operating costs are gonna be. Here's where we're gonna save money. You know, if we could save 350,000 a year, we could reduce this surcharge by 33% right off the top. This is what we're going to use for capital. This is what we're going to borrow. And this is why we need this surcharge in order to replenish our reserves to be able to make sure we're resilient for the next one. So far, I haven't heard any of that kind of discussion. It's just, oh, we need it, and therefore we gotta go out. And I mean, I hate to say this, but we're gonna break our customers piggy bank again because every time, particularly like in 2014, and in fact, in 2016, we raised our operating costs almost 28% in one year before we even had the rate increase. This is managing this on a year-to-year basis, on an event-to-event basis. Does our customers, does our community, does our voters know good? And it's not a great way to run an organization when you're talking about capital infrastructure and the long-term planning that goes into this. We can do better than this. We can present information to our community that will gather the support that we need without having a third or more of our customers be willing to vote against what we're talking about. That's not a good thing. That means that there's a loss of confidence in our district's ability to gather support within the community. I don't wanna see that kind of number. We can do better. Lois? Hey, well, I, reserves are very important to me. A number of years ago, a federal examiner came to me at the credit union and said, you have too many reserves. You should give some of those back to your members. And I said, well, we already give them lower loan rights, higher payments on their savings. And I think we need those reserves for a rainy day. And a rainy day came in 2008. And my husband was very ill and I retired from the credit union at the end of 2008. It was a bad time for many banks for credit unions, but that credit union is still there today because we had reserves. Now, in the past 12 years, I've spent 10 of those years being on a water board and prices go up, expenses happen, things break. And you've got to fix them, you just can't really let them go. And I, one of our employees, I mean, we were broke in Long Pico. We couldn't afford a manager. And one employee came to me and he said, I'm not driving the truck one more day because you're trying to kill me. So we went out and found a used truck. It wasn't- Director Henry, can I get you to stick on the topic that we're on here and- I'm trying to, okay, never mind, forget it. Is there anybody that would like, oh, Rick, do you have your hand up? I just, you know, every month and a half or two months, we talk about it. At board level, the reduction of staff, and this has been going on for some time. It needs to come to an end. It shows your staff lack of support. It causes insecurity in our staffing. We need to put together a higher consultant, put together a staffing study and put this issue to bed one way or another. It's horrible what this does to our staff moving out, working seven days a week, for months. And, you know, two of our staff members lost their homes out keeping other people in water. And then they hear every month and a half, two months at board level discussing reductions in staff. This needs to come to an end. This board needs to step up, take the responsibility and put this to an end one way or another. Not just keep going through every month and a half and two months and talking about it at the board level. It's just not fair. And it has a huge effect on staff. James. Wait a second. Yeah. So I just want to speak to Gail, your comment about female funding and 20% that's not coming. Up front, we have to pay for the 100% of the projects. And that's what this loans about. Is to get in. We already did a bunch of emergency repairs, a bunch of debris repairs, a bunch of equipment, a bunch of equipment, a bunch of equipment, a bunch of equipment, a bunch of equipment from the state. We have a lot of work to do here. We have a lot of construction, emergency repairs, a bunch of debris removal, and we've got to get into design and construction of these projects. And that's what this is looking forward to. And yeah, there's been some CIP added to this. Cost amount or the amount of the loan. And it's needed. It's what the district needs. And then. I want to move on to the. Reason. It had a lot to do with past board, not approving extra staff for taking over other water districts, water companies and everything else. We got one staff member with Felton and we went all that time and we lost staff members. Our GIS guy, he passed away on the job, never got hired for years. Our engineer left, never got hired back for years. Then all of a sudden we started finally coming back to staff because the board started approving these kind of things to be able to get us back to staffed up and be able to get us back to operating the system. Another one is the maintenance issues. Finally, we were able to spend some money on maintenance issues. This was not approved before and it was shot down every time we brought it to the board. So these are the increases in operating investments and we have a budget every year. And the budget at the end of the year comes out compared to what we budgeted. And there's increases in everything. Every one of them is available to the public. They're all there to be looked at. So, I mean, if you want us to do the comparison as to what's gone up year by year, fine. But it's all there for everybody to see. And that's all I have to say. I think we're getting a little bit off track here but I guess what I heard from Rick actually made a lot of sense to me in that we've been hearing about staffing issues from Bob for a long time now. I'm sorry, I have to object to the characterization of this. Let me clarify. Okay, let me clarify. I, as a board member, I also have a chance to speak. You do, as long as I have one too. If you would like to put on the agenda a discussion of hiring, whether to hire a consultant to come in and do a study of the staff, I think we would all welcome that. But this is not the time to get into the details of this. And we're just, we need to get back on track of what we're discussing. And so I will now go ahead and break my issue. Thank you. So my focus here is on operating expenses. I don't do day-to-day operations as a board member. It's not appropriate for me to do that. That's not our role. I'm talking about operating expenses. How those operating expenses get managed is entirely up to staff. And how the board sets policy on what we're going to do is entirely up to staff or excuse me, entirely up to the board with respect to the kind of information we're looking for in order to, if you really want to, make a case to the community, this is what's happening with the money that they're having to pay. I'm thinking there are, I get that there are a lot of people that have been impacted by this. There have been a lot of our community members that have been impacted by this as well. And we need to speak for them. That's who we work for. And the notion that we would put another, whatever you want to call it, surcharge, rate increase, what have you, in front of them, without going through this kind of diligence and without figuring out what we're really going to do with our operating expenses in order to make sure that we have the capital required and the reserves required to manage in the environment that we're in is astounding to me. I mean, this is just basic stuff. Sure, with Prop 218, you can ram something down the community's throat because it's a negative vote. It's not a positive vote. People actually have to be motivated to come out and vote against it, right? So it makes it a lot easier. You don't actually have to get 50 plus one. You just have to get under 50. So I get that. It's a very tough thing, but that's what we're here for is to speak for our community as well as to make sure that this district has the resources it needs to perform all of the functions that it needs to do. And I think we all recognize that this district over the last 20, 30 years has not done nearly the kind of work that it needs to have done on tank maintenance, for example. Okay, great. When we had a 50% increase in operating expenses between 2014 and June 2017, how many tanks got maintained in that period of time? None. We still have the same tanks that have to be done. So what I'm asking for are questions that I think any community member who's looking at this, that's looking at this from the point of view of, I'm spending money as a business. What am I spending it on? These are the kinds of questions they're gonna have. They're not all gonna sit there and go, oh, gee, yeah, no, we had this, we just have to do this. Well, okay. But with two one in, right now I see no end in sight as to what we're doing. You're repeating yourself for the third time. So please bring your comments. I wanna make sure it's clear to Rick and to James. This is not about staff. This is about operating expenses. How you guys manage that, it's up to you. Madam President, could I finish what I was saying? Yes, if it's not a story about Lompico, I mean, I would like your comments about what you think about the item. Well, I was getting them and I was getting there based on my experience. But I would like to make a motion to direct staff to initiate a Proposition 218 process, including hiring a rate consultant to prepare a rate study and present a fire recovery surcharge for board review and approval. Is there a second? You have to say it out loud. I can. Okay. Thank you. Is there any further discussion of the motion? Polly, would you please take a roll call vote? Can you repeat the motion really fast before we vote? Yes, I will. The motion is to direct staff. This is basically from the packet here. To direct staff. I just wanna make sure we're clear. Yeah. To direct staff to initiate a 218 process, including hiring a rate consultant to prepare a rate study and present a fire recovery surcharge for board review and approval. So in other words, this will come back again with a finalized version of it. That's, so what we're voting on is to move forward with this process and that we will review and we'll potentially approve later. So did I have a second on Lois's motion? Yeah, I second it. Thank you. Polly. President Mayhood. Aye. Vice President Henry. Yes. Director Falls. No. Director Smalley. Yes. Director Too. Yes. Motion passes. Thank you. We now go to item five, unfinished business, which is loan analysis. Rick, did you wanna do this or start with Stephanie? You are muted, Rick. Yes, I'll ask the director of finance to produce this report, present this report to the board. From the last meeting where we were discussing the loan options, there were a lot of different ideas put around and what the district manager and staff came up with is a $15 million long-term financing where there is approximately $8 million that's gonna be coming from going towards spending projects for the CZU fire damage. And then the district manager came up with a listing of additional approximately $7 million in other capital improvement plans, mainly making up multiple mainline extensions and replacement as a blue ridge tank. The district is going for a 15 million long-term loan. The municipal advisor is on the line and he went back and discussed with the different lenders that we had the original proposals for to see what their capabilities were if they could facilitate something like this. Through that, we were able to get two of them that were able to do a structure like this. Cobank actually was able to offer more competitive rates under a structure like this, which it is the recommendation that we move forward with them since this made them the front runner. Additionally, with this item, due to the increase in the loan amount, it will result in increased fees for the bond council to be able to get us the tax exempt status. A lot of that is around the amount, it usually is tied to the amount of the loan for what type of risk bond council takes on when giving illegal opinions. So those are kind of the two items that are associated with this agenda item. We do have Chris Perlitt, our municipal advisor on the line to answer any of the loan questions. Okay, did you want him to say anything or just to answer questions? He's here just to answer questions. Yes, and you know at our last board of directors, meaning the board indicated that if possible, they would like to see additional capital improvement projects included in this loan impossible due to the historic low interest rate. The director of operations and myself went through our capital improvement list and selected five projects that we believe that could be completed in a timeframe of three years. We reviewed our current workload from the the CZU fire and our other capital improvement projects that are in construction at this time or in design. And we believe that we can facilitate the construction of these additional projects as well. So we added those additional projects which were our good projects. The district will replace either undersized mains where we have periodically water outages and low pressure during summertime and extreme leaking mains. And it'll also upgrade a sex and distribution system that is part of improving fire flow into the Lomkeco Canyon that the district has planned. That'll turn it back to the board. Okay, director Smalley. I have no questions at this point. Okay, director. No questions. So we've discussed this to some extent already. Close. Yeah, I have a few questions. So just so I'm clear on this, we're proposing to take down the entire 15 million at one and one crunch. So this is Chris and Bob. Yeah, the initial thoughts were that we were talking to these potential lenders for the five million in order to offset some of the costs for FEMA as we require. And some, I think there was some operation costs there, but the concept was that there was additional projects that the district knew they had to do at some point here in near term. I get that, but sorry, I want to get to what I was trying to get at. If we're taking the 15 million down all at one time, then I'm assuming we're going to be able to make some interest to offset the interest costs we're paying. We have two options available to us. And that's if you do a draw, where it'll accrue interest as you draw the loan. And I believe with Cobank, there was an availability period of years. So that would be an option. I mean, we're not funding it up front, right? We're going to be funded gradually as the project requires it. So we're not going to take the whole 15 million in one shot? Correct. We'll be next three years, right? And then the rate structure is that having discussions with Cobank today, they will define that actually right now, it's a floating rate, but when they get the credit approval, which we're hoping will be on Friday, they'll lock in that rate that they've proposed. That's a really nice component. Yeah, for sure. Yeah. I think you and Rick and Stephanie have done a good job in this one. In terms of the call provision, I noticed they added a call provision on this. Are we contemplating taking the call provision either the seven year or 10 year? So that I think what we're contemplating from my understanding is that we're going to have the lower rate, which is at 2.35%, had a call provision where it allowed the borrower to call back those notes anytime between now and 20 years if the rate index is higher than where it is today. So first, since the other offer, like first foundation, they had a declining call provision was a 3% for the first three years, 2%, 1% in callable car after the 10 year. This structure allows them to call and you can call it anytime as long as the rates higher than their current rate. And so that's a, if the rates go up, presumably over the next few years or even in a few months, you could take out that note if you wanted to. Okay, did we determine that we could not go to the capital markets because we didn't have plans for these projects yet? I think the notion was that the capital markets was a timing issue that you needed to have, you were getting low on funds related to the capital project for the FEMA project that you needed capital for that. And so going to the capital markets was gonna delay the process and beyond. It's usually about 60 days is a time when, you know, from start to finish. And this is how long? 30 days? This is about a week. So three days of credit approval and then they'll make and fund as soon as you need it within, they said about a week. So yeah, I think that's some kind of constraints you guys have on the short term basis. Okay, and then this doesn't prohibit us from doing additional borrowing if we decide to do that. Yeah, exactly. You're gonna be on priority with your COPs you issued a couple of years ago. So as long as your coverage ratios are there, you know, we'll do the calculation at that time with your expense costs, you know, and I think there's, we're using some flat operating expense costs. So obviously that, you know, following inflation and following, you know, your expenses and following your revenues, you know, that'll be a dictation of what kind of debt you can incur in the future. Okay, good. Well, you know, one of the reasons that I wanted to look at increasing this is because, you know, in today's world, trying to estimate what costs are actually gonna come in at combined with what decisions we may make about how to replace the infrastructure, primarily the raw water supply lines. That 5 million that we had estimated for the 25% that we would be responsible for could be off by, you know, anywhere from 30 to 60%. And it's nobody's fault, it's just the way the market works nowadays. And so by having a larger loan, this really gives us the flexibility if necessary. And if the costs come in way higher than we were hoping to have that without having to go back out to the markets to get that money. And then the money that's left over, we can use for critical infrastructure. And Rick, at a future meeting, we should probably put in place something similar, not exactly what we did with the $15 million loan we took down last year, in terms of the order of priority on those projects that you identified in the event that all the money to do them is not available. And to put that in a resolution form so that we're communicating that to the world what we're doing. So thank you guys for working on this so hard. It's a really critical piece and it also provides a little bit of buffer in case we do run into another disaster here in the next few months to a couple of years. Yep. Dr. Henry? I do have a question. So we have three years to take this $15 million. So let's say we take $5 million. If a year from now we take $5 more million, is that going to increase the interest rate? No. Well, we're gonna lock in the interest rate when they approve credit and they've already begun it. And that's gonna be... Yeah. They're for three years. It's gonna be locked. It's there for 20 years. For 20 years? Why aren't we borrowing more than 15? Because you don't need it quite yet. Okay, thank you. To answer, and I'll just see gone on to what Lois said. The reason we didn't borrow more is given the low rates you might want to, but as we've discussed with Rick before, there's a limited bandwidth that he and the crew can do. And so, between repairing the fire damage stuff and what he's done, and I congratulate them taking Bob's, largely Bob's suggestion and me sort of popping in agreeing with them and taking advantage of the low rates and have come up with essentially sort of shovel ready projects that will not take a lot of time to figure out no sequel reports or anything else that we can do within the constraints of our current staff. And so I thought that was a really good outcome and a good kind of compromise. And it does leave us the possibility of down the road, getting more money if we want to. My guess is the interest rates are gonna stay low for a while because the Fed didn't raise the rate the last time with all these variants and COVID coming out. I think we're gonna be seeing these low rates for a long time. So I don't feel like we're losing too much on that. So with that, I'd like to go out to the, if there's any comments by attendees, Cynthia. I would just like to say that from the discussion I heard tonight, I am very grateful to the staff for the job they're doing. And I hope there will be no discussion of reducing staff and that if increasing staff leads to more of the work being done in the next five years, then so be it. Let's look at dealing with what we need to deal with to make this district operate optimally. And I don't understand what else can be cut as part of operations. So maybe that's a discussion for another meeting. Thank you. Okay. Any other comments from the public? Seeing none, I will come back to the board. And does anyone want to make a motion? Oh, Rick, did you want to say? One thing real quick. You know, it was a group effort and including our district council who negotiated a lower rate with bond council, which was greatly appreciated, lawyer to lawyer. And it worked out well for us. Thanks, Gina. So if we, Bob, did you, did you have another comment? Well, I was going to make the motion. Oh, okay. Go ahead. If it was time to do so. Yeah, no, please. I think Stephanie had her hand up. Stephanie, did you want to make a comment? The only other thing I was going to mention is that the board prior did the refunding resolution as well or the reimbursement resolution. So once this does go through, we will be drawing down a chunk of this money to refund the reserve balances for what we did have to show out in the beginning. So I know everyone was talking a lot about if there is another emergency stuff like that. So part of that previous resolution is to help put some of that money back into there. So that kind of is where the time is of the essence with all of this. Everything is going according to plan. Director Pulse, did you want to state the motion? I do. And, you know, kudos to Gina for giving the attorneys the secret attorney grip. So I'd like to make a motion to authorize and direct staff to proceed with securing financing for infrastructure projects consisting of repairs and improvements to the district's water system resulting from the CZU wildfires plus additional projects identified by staff consisting of approximately 15 million in new borrowing based on the most favorable terms offered to the district for tax exempt, long-term fixed rate borrowing. Currently the co-bank term sheet reflects the most favorable terms offered to the district. However, if a loan cannot be finalized based on the co-bank term sheet and staff is authorized and directed to proceed with securing a loan based on the next most favorable term sheet which parenthetically I guess would be the first foundation. It is further, excuse me, at further I would like to move to authorize and direct district manager to execute the amended and restated fee letter with best, best and Krieger. Any second? Second. And thank you for including the motion language in the agenda items, great innovation. Yes. You can thank our chair for that. Been asking for a while. Okay. Pauli. President Mayhood. Aye. As president Henry. Yes. Director Fultz. Yes. Director Smalley. Yes. Director Too. Oh, sorry point of order. Did we, we did go to the public? Oh, I'm sorry. Yes, we did. We did go to the public. That's right. Okay, great. Thank you. Yeah. Yeah. Director Too. Yes, ma'am. And I also like the motion being stated in the memo. Thank you. It makes your job easier too. Yeah. So much easier. Yeah. Okay. So the motion passed, any parts of it? Next on our agenda is number six district reports. Are there any board comments on the district report of supplemental business and finance report? Director Fultz. Yes. Thanks. Stephanie, I'm, you know, as I was going through the bill list, it occurred to me that maybe it might be helpful to break some of these things out into different format, particularly for the fire recovery topics. I know it's listed in here, but having them all together and summarize would sort of be a really helpful thing for me at least. I don't know about the rest of the board members to really get a picture of where we're at with spending and as the FEMA reimbursements come back in and that sort of thing. These are also, even though they're quote, operating expenses at some level, they're extraordinary operating expenses. And typically we're not going to run into this sort of thing every year. At least we certainly hope not. So I'm not sure what would be involved in doing that, but it would certainly, I think, help also communicate to our public and the community members what's happening with the numbers as well. Any other comments from the board? Well, then I think we have reached the end of our meeting and we will go ahead and without objection, adjourn. Thank you. Good night.