 Good morning everybody. Good morning. Happy Monday. Yeah. A director Burke. Do we have all of the staff? Call now. Yes, all staff is present. We can start whenever you're ready. Great. Thank you so much. Well, we will get started. We'll call this meeting to order at eight a.m. Secretary, if you could do a roll call. Yes, chair wants here. Thank you. Board member Walsh. I think you muted board member Walsh. Here. What number right here. Great. Thank you. And just as a reminder to all the committee members to mute our phones, microphones, when we're not speaking. So we will now take public comments on item number two public comment. If you wish to make a comment via zoom, please raise your hand. If you wish to make a comment via zoom, please raise your hand. If you wish to make a comment via zoom, please raise your hand. If you wish to make a comment via zoom, please raise your hand. Secretary A. Do we have any live or email or voicemail public comments? We have no public comments. Great. So we will move to item 3.1 director Burke. If you could introduce the item. Sure. Thank you, chair Watts and members of the subcommittee. Our item 3.1 is our water and wastewater demand fee study study. We will now move to item 3.1. We will now move to item 4. And water administration. Kimberly Zanina will be leading off the presentation. Good morning. Chair Watson members of the committee. Today we are going to be going through the water and wastewater demand fee study. You did receive a copy of that. It was posted with the agenda. For your review. Pretty early last week, actually. I'm going to hand it over to him now. Good morning, chair Watts, members of the committee. Pleasure to be here with you this morning. Are we going to do a screen share on your end, Kimberly? There it is. All right. I think it was. Mid December was the last time we were with you to talk about demand fees as well as with the water and wastewater rates. So we wanted to summarize where we are today. We have made some refinements as we've gone through staff review and made some tweaks along the way. So this will probably look pretty familiar to you, but the specific numbers are a little bit different. If we could move to the next slide, please. As part of this presentation, we'll talk about the demand fee framework and the methodology for calculating the fees. One of the significant things that we did with this update was to update the water use factors for both water and wastewater. Because of the drought and the subsequent. Continued curtailment in water demands. We have seen a pretty significant reductions in water use with the rest of the. I think that the city is also seeing that on the commercial side as well. So we'll talk about that a bit. And then we'll present the fees and the fee calculations. And then also compare those fees. For you before summarizing next steps. So next slide, please. So as you know, the, the water and wastewater demand fee. Often called capacity charges in the industry are one time fees paid by new development at the time of connecting to the water or wastewater systems. Occasionally there is an incremental fee. Imposed if somebody is enlarging the size of their business or something they need a larger water meter. Sometimes it could be an additional fee paid at that time, but for the most part, it's not an additional fee. It's not an additional fee. It's not an additional fee. It's not an additional fee. It's not an additional fee. It's not an additional fee. It's not an additional fee. It's not an additional water meter. Sometimes it could be an additional fee paid at that time, but for the most part, it's it's new development and new connections to the, to the systems. These fees were last calculated in, in 2014. Through a study similar to what we're doing right now. However, the fees are adjusted annually. Core inflation basis based on changes in the construction cost index. And the other thing that we're going to talk about is the cost of the fees is that they not exceed the estimated reasonable, reasonable cost of providing the services for which they're imposed, which basically means the cost of capacity in, in the systems. So it's a pretty broad in general standard that exists for demand fees. Next slide, please. The basic formula. For calculating demand fees with the bio methodology. We're looking at some of the others as well, but basically with the demand fee methodology that we're using here, we're looking at the present value of existing facilities and dividing by the units of development or the amount of demand, the existing demand within, within the utility systems. So it's, it's really looking at the investment that's been made in the infrastructure that is being used to serve existing facilities and chain charging new customers alike amount. The attributes and benefits of this methodology is that it's, it's really best applied in situations where most of the development has occurred most of the infrastructures in place. And so it's more in fill type development where new development is using capacity that's available in the existing infrastructure system rather than expanding into an entirely new area. And so it's more in fill type development. And so it's more in fill type development. Occasionally there may be expansions into new areas where new subdivision is going on. And in those cases, that development might also be charged to extend a pipeline or add a storage tank or something like that. If that's specifically required for that development. But in the, in the situation within the city of Santa Rosa, this is really the best methodology. It's a very common and well accepted methodology within. Development associations understand this methodology. It's generally pretty well accepted. It does not rely on capital improvement plans or master plans. It's not forward looking, looking at the cost of new facilities, but really relying on fixed asset records of historical cost of facilities, the way they've been financed as well as demands in the system rather than anticipating the amount of growth and so on. And so it's really, it's really, it's really, it's really, it's really simple from that aspect to calculate. And because this is really a reimbursement fee is development pays the demand fees. They're really reimbursing the utilities for investments that they've already made. There aren't the same accounting requirements. You don't need to show that the money is going to be spent on specific projects. It just goes back into a capital fund and being used to make sure that the system has needed, but it's much easier that way from an accounting and reporting standpoint. Next slide, please. So this table summarizes the demand fee calculations for both water and wastewater systems. The water is shown in blue. The wastewater, we were looking both at the local collection system within San Rosa as well as the regional reuse system that provides treatment and disposal for not only the city, but some of the neighboring communities as well as, as you know, the top part of this table summarizes the fixed asset valuation. What we do is we look at the fixed asset records from the city's accounting system item by item basis. We look at the book value and the, excuse me, the original cost as well as book value. But what we do is we take that original costs. We escalate it up to a current dollar value based on inflation and the age of that facility. And then we depreciate that back down. So it reflects what we call this a replacement cost less depreciation. So it's not the historical value, but a replacement cost value, but it is depreciated. So one of those brings the value up. The other one brings it down, but there's still a little bit of a net change between that. So we can see this as being summarized by major asset categories. Although in doing this, we are looking at an asset by asset basis and there's, I recall, right something like 2000 different assets in the system. So it's pretty detailed. We then make some adjustments to that valuation. We recognize that much of the systems, particularly the, the regional reuse system has been financed through debt obligations. So we add in the present value of pass that issuance costs as well as interest costs. Those are part of the cost of acquiring the assets. So we add those in. And then to the extent that there is outstanding principle on that debt, we subtract that out. It reflects the fact that you haven't yet paid for the entire asset yet. You're still paying off the debt. And great payers are paying that debt as well. And then to the extent that money has been earmarked for several projects in your different funds and reserves, we add that in that dollar in the bank is worth, you know, what it would be as a, as a pipe in the ground. If it's been earmarked and dedicated for capital purposes, so we wouldn't, we don't add in the operating reserve, for example. So we add all of these up to come up with the total value of the system on this by evaluation methodology. We then divide by the current system demands. And those are shown here on the basis of those are shown here in terms of a million gallons a day. And then we express that in terms of 1000 gallons per day, as well as 1000 gallons per month. And it's really the 1000 gallon per month number that is used for calculating the demand fees. So you can see at the bottom of this table increases in the fee amounts for both water and wastewater. So this is the amount of water. However, these are offset by the reductions in the demand for different types of development that we're seeing. So this isn't the amount of the fee that's being changed here. But really reflects that component on the valuation alone. Go to the next slide, please. So focusing on water for a moment here. This slide summarizes the water use factors. So what we did was we looked at annual water usage. For the peak month of each year for the last four years that were available to us. So that was 2016 through 2019 looking at the peak month of water use, which is generally July or August. And then for the different types of residential customers, the amount of water that's used on an average basis for each of those. So for single family homes, there are a lot of different types of water. So we're looking at very large lots, medium to large lots of, and then small lots. Those very large lots are an acre or larger. The medium or large lots are 6,000 feet up to an acre. And the small lots are under 6,000 square feet. We also broke out as a separate category this time, and for larger department or condominium complexes, those with four dwelling units or more, we looked both with and without irrigation. Because typically they have a separate irrigation, but, but not always there are some exceptions. So we, these are slightly different categories, but it's more refined and a better estimator of water use for the different types. We also looked at the larger accessory dwelling units, ADUs, senior resident occupancy type housing, senior housing. And the city is also looking at having some sort of a small, high density apartment units that might be very small. And so we looked at that as a category. And we lumped all of those kind of into a single group because we believe they have similar use characteristics. For the non-residential accounts, these fees are charged on a per 1,000 gallon per month basis. So for each proposed project, there is an estimate of what their water use or wastewater flow will be. And then it's charged based on how many 1,000 gallons per month that demand would be. So this is just representing that 1,000 gallon per month and either gallon per day or in that gallon per day term. As I said, these, for the residential customers, which is based on the residential types of dwelling, we saw use reductions generally vary for the different types of residential, but generally in the range of 20 to 40% reduction in the people our use relative to the last rate study. So, or fee study. So pretty significant reduction. Go to the next slide, please. This summarizes the current proposed water demand fees for the different types of residential development, as well as the non-residential at the bottom. And you can see the reductions for most of the residential categories. There are a couple of exceptions where they go up and somewhat, but many of these are going down. Actually, there are going, many of them going up a bit, a few of them going down. So, different when we look at the combined fee. And I think that is a better summary. We'll see that in a couple of slides. But again, for the residential, it's based on the type of residential, the size and type of residential development. And then the individual calculation for the non-residential. Looking at the wastewater now on the next slide. Again, these are the, we look at the average dry weather flow or the, basically the wastewater that's being generated by each home or dwelling unit for the residential customers. Again, we looked at the time period from 2016 through 2019. Here we looked at the sewer cap as representing that, that sewer flow that's being generated from the households. And you can see the flow rates here in both in gallons per day as well as 1000 gallons per month. And again here, we saw significant reductions across the residential customers generally in the 25 to 40% use reduction range as we updated this. And then in the next slide, you can see the fee amounts. And this is the one I was thinking of. This is one where all of, on the wastewater side, all of the residential customers will see some sort of a reduction in the demand fee amounts. And even though you can see the commercial fee is increasing on this slide, it is offset by, as we're looking at estimated flows being generated from commercial development. Those are probably also going down there looking at adjustments to the usage factors for calculating those based on recent history. So many of those customers will likely see reductions in demand. The next slide summarizes the combined water and wastewater fees that are both current and proposed. So it just adds the water and wastewater together. And here it shows that the dollar change as well as the percentage change in the fee amounts. And you can see across the board, we have have reductions in the residential fees. Again, it'll depend on the specific characteristics for the, for the non-residential. That would be determined on a case by case basis. And if we move to the next slide, once we calculated the fees, we also looked at, and this is new information. We didn't have this last time. I think it was requested. We looked at some of the neighboring communities and what they charge for similar fees for water and wastewater service. So Petaluma, Windsor, Healdsburg, and Kintadi are all listed here as well as the current combined fee for Santa Rosa and then the proposed. And you will be at the low end of the spectrum under the proposed fees. And this is for a typical standard single family lot over 6,000 square feet, three quarter inch meter. So we did that comparison. The conspicuously absent neighboring city as well as neighboring city is runner park. And we tried to look at theirs. Their fee structure is very complicated. They have different parts of town are, are charged different fee amounts and they have all sorts of different factors going into it. As well as other facilities sort of all lumped together. So we couldn't really extract that out to, to provide a comparison for that, but you can see the other cities up and down the valley. That you can compare with Santa Rosa. So on the next slide, I think I'm going to turn it back over to Kimberly to talk about some of the outreach activities that have been going on and looking at next steps as we move forward with these fees. So we just wanted to give you an update on the, on the outreach that we've been doing to the development community. We have lists of contractors and developers that we reach out to every year when we do that annual inflation. And also that planning and economic development use for all of their outreach as well. So we've combined all those lists. We have created an FAQ for those, these fees so that we're answering those questions about why pieces are going up, but overall why pieces are going down as well. We have the current website updated with all of that information after this. Now that we have posted the report, we'll also post the draft report to that. We have given the FAQs to the internal departments. And then we have also sent a letter to each one of those contractors and developers. That do business in the city with a copy of those FAQs, as well as emailing directly. The several associations around the city that work with the contractors, developers and engineers. We have offered to come to any of their meetings if they would like us to and do presentations for their groups. And so I'm just waiting to hear back to see if any of them are interested in that offer. Next is just the timeline for the. Request to adopt the new demand fee schedule and the report. We will be, we, well, we would have been with you already. Sorry. On December 15th of 2020, we brought this to you. We were also in front of you on January 19th. As we worked through the reports and doing the finalizing of all of the numbers. Today we are asking you to consider recommendation to the full board of public utilities. We will be in study session on May 6th. And then we will be asking for BPU to make a recommendation to the city council on May 20th. And then we are still confirming. Unfortunately right now we're also in budget process for the city. So dates are kind of moving and shifting based on that. And so we are still working on what dates exactly we will be in front of the city council. But then the next plan will be a study session at city council. And then the considerations for them to adopt the new fee schedule. And with that it is recommended by Santa Rosa water staff and consultants that the board of public utilities budget subcommittee recommend the proposed water and wastewater demand fee update and proposed demand fee schedule to the board of public utilities. Thank you so much for the presentation. We will open it up for any board member questions or comments at this time. Or member Walsh. Yes. Thank you, chair. I do have some comments on the, on the calculations. And I appreciate it. First is whether and to what extent. It looks like we're taking the next steps. And then we're depreciating that to, to the current. I understand that calculation. Methodology was wondering if some things are included or excluded, such as. Contributed capital from other governments. And also. Does that come out of the calculation because that was not paid for. And by the ratepayers historically. And then also whether and to what extent the PG. Reimbursement is included or excluded from those calculations or at least the share that theoretically could have or should have gone. To the utilities. And then another question is. We're demand fees charged for the rebuilds. Of the properties impacted by the fires. Okay. I'm going to start with that last one first. I don't believe that if somebody was just rebuilding their home after being destroyed in the fire, they already paid for a connection. And so there would not be a new demand fee. Charge. Unless they were building something different, you know, that might, might cause an upcharge. But typically that would not occur. In terms of the fixed asset valuation. We were looking at all the major asset categories. We generally exclude some categories like. A category. For meters because everybody is paying for their own meter. Basically. And, and, you know, things like that. I'm not familiar with the, the contributed capital. If sometimes the utility acquires. Facilities. Not through charging a fee and building it themselves, but sometimes it develops. Or might come in and say, I'm going to build a storage tank for you. And then they might get, you know, a fee credit for actually installing facilities for the city. Historically that may have happened. But that's still the utility has acquired those assets. That's part of the system. So the value of that would be in the fixed asset records. It should be. And we would, we would include that. If it's a governmental, you know, if you got a grant that paid for some facilities, again. The utility did acquire that. It's part of the fixed asset records. And that value would also be reflected as the total. It would be, I would imagine it would be very difficult to try and. Tease that individual piece out if there was a grant funded asset in there. But it is part of the overall system valuation. Gotcha. And that, and that makes sense again. I'm just checking. So, and it would have to be a very large contribution, like a huge grant. Normally that would apply to a smaller water system. It's exactly. Yeah. Great. And then I'm, I'm familiar with them. This is my first question. Through any of this. So. Hope you will be patient there. There's average dry water flow. For wastewater feed calculation. Can you. Can you help me out with how, how that's different between dry and wet. Sure. That's, that's a good question. Because we're looking at winter water use to determine an average dry weather flow. It sounds very contradictory. And I'm not familiar with the, this is my first time through, through any of this. So it sounds very contradictory. And so I understand the question. So it's a good one. So if you think about in the, in the summertime in dry conditions in July and August, we don't have rain. So there is no. Inflown infiltration from, from a saturated ground. That comes into the sewer system. So the systems generally get a lot of seepage coming in during the, the winter months. And so when we're looking at what is the, the flow. On an aggregate basis generated by the customers, by the homes and businesses. We look at a dry weather flow because that's actually the sewage, the wastewater coming out of those and not affected by that infiltration. But when we're looking at the customer level and trying to determine how much. Waste water is generated. We look at winter water use. When those customers tend not to be irrigating. So whatever the water use going into the home is, we can assume is the sewer flow coming out of the home. And, and so it represents this, the sewer flow being generated by that home or business, which when you add all that together ought to be approximately equal to dry weather flow. So that, that, that, that, that clicked. So it's the flip side of what we do with water. Where we say during the wet months, you're not watering outside. And then in waste water. During the, during the dry months. It's not outside water. It's not, it's not outside water coming into the plant. Right. Okay. Great. And then just the last question. So it, and I appreciate the model. I think we picked the right one, you know, the right methodology. And then. So there could be a capacity model. Then there could be a, you know, net present value of, of, of a rate per contributions to date for capital assets. And I think we picked the right one. But, but it may be dependent. And do we have to change capacity in the real near term? So how much extra capacity do we have to accommodate development? Cause it looks like if that was going to be squeezed, we may have to go the extra step and use a capacity model. Does that make sense? Yeah. And, and I didn't, I, I didn't describe the other primary method. And let me do that very, very briefly for you. The, the other methodologies, often called an incremental cost methodology. And it's looking at the cost of adding future facilities, building new facilities to accommodate the expansion of the system to accommodate new development. And that really applies. It makes more sense when you have a, a rapidly growing community where the infrastructure is also needing to expand, to accommodate that new growth that's, that's on the horizon. And that takes a different look. It, it is reliant more on the, the master plans that identify the facilities that are needed, service level standards that say we need so many gallons of storage to accommodate a home, or we need so much treatment capacity per home and you get into all of those sizing standards. You also need to look at, well, how much of this is, is really for expansion versus correcting a deficiency that exists. So it becomes a much more complicated analysis. When we look at your master plans now and where you are in terms of the development of the city, most of the, um, uh, a couple of expenditures at this point are rehabilitating the system because of a aging infrastructure or upgrading to a new treat. You know, for example, a treatment standard, you're moving to UV treatment and wastewater, which is a change in the standard and not so much expansion requirement. And so, you know, from, from that perspective, this buying methodology is, is a much more appropriate, um, approach for the city at this, at this time. Gotcha. And then so capacity squeeze in the, in the short term or within the term that we would normally apply a rate study. It's not going to be an issue. Is that, is that okay? No, no. And the, the, the main reason for that, well, I think there's two reasons. One is, is where you are in terms of growth and development of the city. Um, you're, you're getting some, uh, but not, you know, huge amounts, but, but also the, the demand per connection has come down because people are using less water. Now that's freeing up existing capacity. And so you're able to accommodate additional homes because of that freed up capacity. That's fantastic. Thank you very much. I appreciate your explanation of this and walking us through it. I think you picked the right method and your description makes sense. So thank you very much. Thank you. And I'll add a couple things which are that, um, we did not do any sort of, um, consideration for the PG&E funds for this study. Um, at, especially when we started, we didn't even know how much the PG&E settlement would be. It's still very unclear if water will receive any of that funding. What is included, however, is the, um, investment we made in the infrastructure for the recovery, um, from the fires. So those, those projects were fully funded by water. We will be receiving funding back, um, from FEMA, you know, as we're slowly getting, you heard, we've gotten about half of it so far. Um, but all of that and the improvements to those assets do get included into, um, the, the demand fee that we're doing now. And then in addition in the rebuild area, really the only, um, demand fees that we collected would have been for ADUs that were larger than 750 square feet. Um, unless any of them were built before that rule came into play. So there were, um, several, um, properties that chose to add ADUs, uh, accessory dwelling units to their properties. Uh, and those were really the only demand fees that were paid because they were an expansion of the existing use on site, but the rest of them, once you make a connection to the system and you've paid for that connection to the system, you do not pay an additional demand fee to rebuild or, um, restructure as long as you're not going to bring more capacity needs to the system. Gotcha. Well, and I really appreciate that. And thanks, thanks too for going out to that FEMA money. I think the first step is to get the outside resources to come in and help make as whole as a community. And we've done that through multiple players as we could. So thanks very much. Thanks very much. It is a significantly large process. We're getting there slowly. I could imagine and I appreciate your, your walking, walking me through this as a, as a newer member. Um, thanks, thanks very much. That's all the questions that I have, uh, chair Watts. Thank you. Board member Walsh. Board member, right? Uh, yeah. Yeah. I'm, I'm, uh, Mark, I just wanted to point out, you know, 15 years ago when I was on the staff, we were looking at charts that showed, uh, that our dry weather wastewater flow was going to be 24 million gallons a day by now. And our water usage was going to be much more. And I do do, you know, conservation, water use efficiency and tightening up our system. We pretty much are, uh, at least from the plant standpoint, our dry weather flow flow is the same as it was 15 years ago, 20 years ago. So we have all sorts of capacity in our system. And just for example, our digesters at the plant, I think we have five of them out there. And I think we only use two or three of them. And that allowed us to do, uh, add on all the grease and oil stuff, come into the digester to make an additional, uh, power just because they were sitting there unused. So, um, and at least in my view, uh, capacity isn't going to be an issue for Senator Lisburg quite some time. And I really appreciate that comment because it points to, you know, some of the, some of the work that we do that others may not understand. We have to do the conservation work. And I think the answer is yes. And it really, really helps out. Um, years ago, I was auditing, uh, sanitation, sanitation functions and a plant operator that you might be familiar with. I wanted to know where the fine bubble diffuser was. And he told me to put on scuba gear, but, uh, I think that I had to look at it to check it off my list. Um, it evidently, I, I, I, uh, I saw the bubbles and said that was good enough for me, but, um, some of these assets go on a long time. And it's the life, the lifespan of the assets. Um, and, and sometimes those estimates change too. Um, based on capacity, but, uh, I think doing conservation and maintenance work on our assets. Um, in the long run, even though the annual maintenance is expensive, I think it'd serve us well. And these kinds of studies, um, these kinds of studies prove it. Thank you. Uh, board member right. Was that all your comments and questions? Okay. Thank you. Uh, thank you for all of your questions and clarifications. Um, my only question was, I know you said the last time this was updated was 2014. Do we have any sort of legal requirements of when the demand fees have to be updated and how often? Um, I don't think there is a legal requirement. Our recommendation is that they, um, be reviewed and updated every three to five years, depending on the changes that are, that are going on. And I think the city is pretty much followed that, that recommendation to do the annual adjustments for inflation. Uh, just kind of keeps it from, from drifting too far. It keeps it in line with, with changes in costs. Um, but over a longer period of time, uh, it can be more, more problematic. Um, I've got one client right now that let theirs go for about 15 years and, and the divergence over time, because so many different things changing is, has been pretty dramatic. So I think the city's current practice. I know we're about a year behind schedule, but you know, lots going on in recent years for y'all. Um, uh, is, is right online or with where you, you should be with it. Great. Thank you. And I'm glad to see that our, you know, we're able to lower these rates and hopefully that'll encourage more much needed housing and development in our, in our community, although we, as we've stated, it's been a little slower than I think, um, we would like, but really appreciate all the work on this. Um, and if that is the end of that, I will open this up for public comment. If you wish to make a comment via zoom, please raise your hand. If you're dialing in via telephone, please dial star nine to raise your hand. Secretary, do we have any live or pre-recorded email or voicemail public comments? We have no public comments. Great. With that, I will entertain a motion to move this recommendation. I move that we, um, take the, um, demand fee update to the BPU at the next possible session. I will second that motion. Thank you. I'm motioned by a board member rights. Seconded by board member Walsh. Um, secretary, that could we have a roll call or. I'm sure what a roll call. Yeah. On this. Yes. Two months. I. I'm motioned by a board member Walsh. I. Number right. Hi. With that, it is unanimous for this recommendation. And I believe that concludes our meeting today. So we will bring this to the next, um, BPU session. Um, and follow the schedule. Thank you so much for your, um, all of your time and work on this. And we will adjourn the meeting. Thank you, chair Watts. Thank you everyone. Bye folks.