 Hi, Roberta. Can you hear me okay? Yes, sir. Loud and clear. All right. Hope I wasn't going to get sideways for some reason. I can't get the iPhone to rotate the zoom. It's doing the other apps. To figure that one out. Hi, everyone. Can you hear me? Okay. Hi, Mary. Hi. Good afternoon. Happy. What's it Wednesday? Yeah. Well, it looks like. I'm actually not feeling great today. So I apologize if my voice goes in and out. I'm losing it today for some reason. So. Just bear with me, but sounds fine right now. So we'll, we'll, we'll get through it. But it looks like we can, we can call the meeting to order. It looks like we have everyone on the line. Perfect. Okay. So we'll start by opening up item two, which is public comment. So if you wish to make a comment via zoom, please raise your hand. If you're dialing up item two, we need to order at 102. Secretary, if I can do a roll call. Yes. Chair Watts. Here. Board member launch. Here. Board member right. Here. Great. Thank you. So just a reminder to all the committee members to mute your phones, microphones when you're not using them. So we'll start by opening up item two, please raise your hand if you're dialing in through telephone, please dial star nine to raise your hand. Secretary. Do we have any public comments at this time? We received no public comments. Great. Well, then we'll move to item 3.1 director Burke. If you could introduce the item. Thank you. Chair Watts and members of the subcommittee are only item for today's meeting is item 3.1, which is our fiscal year. It's written at item 3, item 32223 budget overview and Kimberly, Zanino, our deputy director of water administration will be making the presentation. Afternoon share Watts and members of the subcommittee. I am going to. Share my screen here. So I believe you should actually see my presentation without my notes. All right, so today we are going to start talking budget. We have a couple more meetings scheduled. I will let you know that today is just a very kind of high level overview and that's because budget screens actually have not closed for the departments yet. It's just that we start early with you and I've just closed the screens for the water department last week. And so I am now in my big review of that and we'll be going over all of the budget with the director before we bring you our final recommendations and proposals. We like to joke that this gentleman is probably 75 years old now. We've been showing him for many, many years but a good picture and a good reminder of what our mission is as Santa Rosa water. So today we will talk about expected or known increases that we are looking at this year. We'll do some staff assumptions for you. We'll talk about the purchase of water just briefly because we are not finished with our great discussions with Sonoma Water yet. I did wanna update you on FEMA projects today just so that you can have an idea of where those are currently and monies that we've received from FEMA to date. We also are going to talk about projected revenues. We'll talk about reserves, preliminary CIP funding and then the budget schedule. So for expenditure increases this year, we know we have a few that are for sure already programmed into the budget system. You may remember that last year there were no increases budgeted for staff for COLA's. So there were no salary increases in last year's budget. There was a lot of negotiation that went on with all of the different bargaining units. And finally after a pretty delayed period of time, there were new MOUs that were entered into with the majority of the bargaining units and all of the bargaining units that are actually in water. With that came a 3% increase in September of 2021. So that would have been the increase that we typically would have seen last July at the beginning of the fiscal year. But because of all the delays, the increase was implemented in September of 2021. So you're going to see that reflected in next year's budget. Also because it did take so long, the city agreed to also a 2.5% increase in the following year for the bargaining units, but they have agreed to implement that early because of the delay in implementing this actual fiscal year's increases. So there'll also be a 2.5% increase for an overall 5.5% increase in just base salaries that we will be seeing. As with most things based on COVID and supply chain issues, we are seeing the costs of chemicals increase. So we are going to see operational supplies go up. We also have quite a few operations and maintenance projects that you're gonna see increases on. Those are mostly in the sub-regional system. We have had, as you have been notified, as they've been coming up multiple emergency projects that have come up. And so we are likely going to see some increases in needs for repairing some things at the treatment plant. And then in addition, we are going to add or request three new staff members, two utility system operators, and one supervising lab analysts. And then we are going to increase a civil engineering tech that works with PED to do development for the water department. And we're gonna increase that position from half-time to full-time. The workload in that group is becoming extremely large. And the person who is half-time now is going to be leaving the city very soon. And so we want to turn that into a full-time position. Oh, actually I had a couple more things I wanted to mention, sorry. In addition, because finance has been updating things since this presentation was posted, I am aware already of some additional increases that you will see that are basically out of the control of Santa Rosa water. So like salaries, IT costs, things like that, we can't really control what those increases are. And so I just wanted to make you aware of some of them. In addition to those COLA increases, you will see in the salary line item, there will be an increase for all employees based on the annual wellness program. This was another piece of the negotiation that has been put into all of the units, MOUs. And so they will receive, each employee will receive a $500 payment each year that will be in addition to their COLAs. Some groups are gonna have larger increases on that salary line item because of that and that just has to do with the factor of employees. So some groups have a lot more employees, so a lot more numbers time or a lot more times 500. So you'll see an increase there. Benefits are appearing to increase a pretty significant amount as well. And then in addition, we know that IT is increasing their rates to most of the city. Ours will increase by 11% is what we're seeing. I do wanna point out, however, that some of that increase is due to moving to the new asset management system, CityWorks. So there's additional support that's gonna be needed for that system. It's huge advantage for the city looking forward to having that system in place, but it does create the fancier, the software, the more support you need typically. And then finally, insurance premiums are going up again for each of our funds. And then what I'm going to talk about later in the presentation is how we're going to cover having multiple increases coming towards us. I'll talk about the reserves in a couple later slides. For staff assumptions, this slide just provides you with what we're assuming for this year. We are going to project that water use will stay the same. We are doing this knowing that we already reduced it last year. So we're keeping it the same as last year, which was already reduced because of the drought. But unfortunately, we are not seeing what we need to see as far as rainfall goes and we're still stuck in this drought. And so we are going to continue to keep the volume of water that we sell down because obviously, well, unless we get the miracle march that people have talked about and maybe a miracle April two, we will have to be asking our customers to reduce their water use. So we'll see less revenue based on that. Waste water is going to remain flat as well. That's not as affected as severely by drought because of sewer caps. There's real fluctuation in water use based on irrigation, but sewer use stays pretty consistent even when people reduce water use because most of the water use reductions come from people doing better outside and not irrigating or reducing their irrigation. We expect development to stay stable. And then finally, I'm just showing you the approved rate schedule currently in place. As I mentioned, we are going to project the volume of water that we will purchase to stay flat. Typically here, we would provide you with information about the increase in the rate from Sonoma water. But as I mentioned before, we unfortunately don't have that information yet. We are still meeting with Sonoma water and the tax budget subcommittee for the final rate for this coming year. And that discussion actually continues this afternoon. We have a meeting on that. And so by the next meeting, I'll have more information for you on what the Sonoma water rate increase will be. It's also the largest expenditure in the water funds. So we always try to make sure that we're making you aware of that right from as soon as we know. On the revenue side, as for water revenue, because we're keeping that decreased volume down, we're not going to see as much revenue as a typical year, but we are keeping the revenue flat except for an increase of 3%. And that is based solely on the rate increase that is approved and in place currently. And then on the sewer side, same thing we are increasing by the approved rate increase of 2%. On the regional side, we are expecting to see increased revenues there. Good news is that our high strength waste program is booming at the moment. We are seeing an increased use of that program, which is really good for us. And so we are going to see those revenues increase slightly. So I'm going to spend a little time on this slide. I wanted to talk through the reserves because this is really where we'll talk about how we're going to cover the expenditures, what the reserves look like. And so I wanted to really get a little bit more in depth than we normally do on these. So all of these reserves are shown based on June 30th of 2021. We look at reserves from a full fiscal year. So we're always looking backwards a little bit, but we're looking at the last completed fiscal year, which would be 2020-2021. And that's why you see the reserves from June 30th of that year, which is the last day of that fiscal year. So as I mentioned earlier, we are going to have some increases that are not under the control of Santa Rosa water. And while we will see increases in the O&M budgets this year, we have a significant amount of or a sufficient amount of undesignated fund balance as you'll see on the slide. But I wanna really get into where those increases are coming from. And then also talk about how those designated funds will help us when we have a year where revenue will likely be down, but we're going to see expenditures go up. So because we are proposing or because we are proposing to use the undesignated fund balances to cover any shortfalls, I wanna give you some more information about those balances. So to start with, in the water fund, you may remember that when COVID started, we made estimates in revenue losses based on what the city was using for their loss projections as well. So at that time, the city and Santa Rosa water, we're looking at what the great recession, what the decreases were from the great recession. So the years 2007 through 2009 and we reduced our revenues based on that. And we also reduced budget based on that. And then what happened was those revenues did not decrease as we expected them to. So revenues didn't increase. We also sold quite a bit of water in that year. And then we stayed within budget, which had been decreased as well. So all of that additional funding and not spending the full budget or a regular budget allowed us to increase those undesignated fund balances. And then in addition to that, we also had some of you were here when we went through the Tubbs Fire. And after the Tubbs Fire, the year after what we did is we budgeted it in water to pay for the entire water contamination project and all of our FEMA projects. So we put the money into the budget to cover the cost of rebuilding all of those projects. Some of those have been completed now. And because of that, we've started to see some money come back in from FEMA. And specifically the water contamination project, we've already received $5 million back from FEMA on that project, which is great news. And that money went straight into the fund. And so that goes straight back into the fund which increases our undesignated fund balance because we'd already budgeted for those expenditures in a previous year. Then on the wastewater funds, there's two factors here. One is some of the money is coming from FEMA projects as well because we can actually ask for reimbursements prior to the projects even being completed and we get a certain percentage of that. And so we've asked for some of that money. They have sent us some of that money. And then when we close out the projects, which I'll also be talking about FEMA projects here in a little bit, when we close out the projects, that's when the final funding for all of those projects comes back into the city. The other thing though here in the wastewater fund is because Santa Rosa water originally had planned on paying for their portion of the project partially in cash, we were not taking our unexpended funds from the regional budget and moving them back to the wastewater budget or the wastewater fund, I guess I should say not budget. What we used to do or typically we're doing was every year at the end of the year, if there was any unexpended fund balance in the sub-regional budget, whatever portion of that was Santa Rosa's, we moved it back to the wastewater fund because that's where we pay for sub-regional from. We stopped doing that for a while because we wanted to build up that cash in order to apply cash to the UV disinfection project. However, due to the incredibly low bond rates that we received, we did not apply cash to the UV project, instead we bond funded the entire amount needed for that project. And due to that, we had $12 million sitting in the sub-regional fund that was moved back into the wastewater fund. So that's why you see a big jump in undesignated fund balance in the wastewater fund as well. And then finally, in the sub-regional fund that I just want to note that the amount of undesignated fund balance in that fund comes from all five partners. That's not just Santa Rosa Waters portion of it, that gets distributed between all five partners because all of us contribute to the expenditures in the fund. And then due to all these factors, we feel very comfortable that we have the money to cover any increased costs in our O&M budgets this year. And that we are lucky to be able to cover those and not have to worry about making any adjustments to rates to cover that. So this really helps our ratepayers, kind of like a stabilization fund so that we can use money that we have built up that they've already paid instead of going back and asking them to increase rates. So as I said, I'll talk a little bit about FEMA. This slide is just to remind you of the process that occurs for public assistance projects. It's a lengthy project that takes a significant amount of staff time. Once a project is submitted for FEMA after a disaster, FEMA then develops an estimate and then we have to go back and forth with FEMA to try to get them to increase that estimate. Typically the first estimate that comes from them are based on construction costs in another state that are much lower. And so we go back and forth and try to get them to increase that obligated amount when the project is then accepted by the city and by FEMA, then they obligate a certain amount of funds for that project to be reimbursed to the city. And then construction begins and then reimbursement is requested throughout the projects, as I said earlier. And then once we submit the closeout documentation, then there's an auditing that happens. They review it and they determine that all costs are eligible or not eligible and then they true up what they're going to reimburse us for. And then there is after the disaster is over, the disaster closes after the very last public assistance project is closed. They have three years to come back and audit the entire disaster and all projects. So it's a very long timeframe before unfortunately emergencies get closed out and everything is settled in a final way where there wouldn't be any changes to it. Here I'm showing you our actual projects in water. So you can see that water has several projects that are considered public assistance projects that have obligated dollar amounts to them. To date, we've received about $6.1 million from FEMA for reimbursements through projects. We have also, in addition to, you'll see here, the last time you saw this slide, the water contamination project was only at about, I think it was $5.4 million. We went to FEMA when we did the closeout and we requested that they increase that obligated amount. They came back with an approval to increase the obligated amount. And so they've increased the amount of their estimate for the project or the portions that they would cover to 7.9 million, which brings our possible reimbursement up to 7.4 million. So that's really good news. We didn't know if that was going to happen, but they did agree with us that the project was definitely more expensive than they had estimated it at. There's also five projects right now going through closeout. The water contamination project has already been submitted for closeout. And then we have the pumps and reservoirs are just completed and going into closeout. Also the Utilities sewer, or sewer lift station one, and then the Utilities sewer lift station. So it was a bunch of smaller projects that were in miscellaneous areas of the city. And so all of those are now getting ready to closeout and have been completed. Oops, I can't move forward, there we go. And then finally, I just wanted to mention that the water meter project, so that water department metering citywide, we don't expect that project to have anywhere near that amount of reimbursement because they, for some reason, FEMA way overestimated that project. It doesn't mean that it costs the city more because if it's not available for reimbursement, it means we didn't spend it in the first place. But I just wanted to let you know that in case you got that number stuck in your head for some reason. Some more good news for grant funding. We applied for and received a mitigation grant for backup generators. Originally it was approved for $3.4 million after the final estimates were done by the city engineers. It was determined that the project was going to be much more expensive. And so we went back to apply or appeal, I guess, the amount of the project and they approved it. And so you can see that we went from 3.4 million, which was originally approved for us. And now that grant amount has been increased to $6.5 million for us. In addition to the generators, we have a floodwall project that is going on or will be going on at the regional facility. It is currently in the process of being approved by two different grant programs. One is a mitigation grant through FEMA based on our disaster. And that one has, we've been told is pretty close to approval. It's going to be for $10 million. What it has to do though is it has to pass the environmental review, which FEMA is currently doing. That's taking quite a bit of time. So we're just waiting for that to happen. But in the meantime, there were some other grant funds that were made available through HUD. And we are requesting an additional $3.5 million for that project from the state. And that application was submitted last month. CIP funding is expected to remain as previously planned. We increase it a bit every year in the water and the wastewater fund. And then in the regional fund, we continue to increase the cash funded CIP by a million dollars a year. So last year it was eight and this year it will be nine. And then finally, this is the budget schedule. It's the time of year when you'll see me a lot. Both you and the city council. So we have a BPU on March 17th. That's when we will bring you the Sonoma Water Rate increase. We will also bring that to city council on March 29th. We are meeting with you, with our regional partners. We met with them on February 10th. We also meet with them on March 10th and April 7th. Then budget subcommittee today. And then also we will see you again on March 15th and then March 30th, if we need to. And then our study session for the entire budget will come to you on April 7th. And then we will come back to request a recommendation to city council on April 21st. We will go to city council for the preliminary approval of the sub regional budget on the 26th. And then city council study sessions for the entire citywide budget are May 10th and 11th. And then budget adoption is scheduled for June 21st. And with that, I am here to answer any questions you may have. Great, thank you so much for your presentation. Are there any board member questions or comments? Board member Walsh. Yes. First, thank you very much, Kimberly, for going through all this. I'm especially happy to hear about the grant money coming and doing a great job with that. And I want to make sure I kind of, I think it's starting to sink in how the reserves and the sub regional works with the local water. So looking at the financial reports, the annual audit report, when we talk reserves, I need to be careful to remember that that's just the cash that we can budget. Is that right? So it's not like, so we're not including the net position that's represented by capital assets. Correct, that is. So reserves that you see are the reserves from our operating funds. We have to have a 15% operating fund reserve each year, our catastrophic reserves that we have set aside, and then that undesignated fund balance. And then there's a couple other small reserves that are in both the regional system and a rate stabilization in the wastewater fund. Thank you very much for explaining that. And then on the, I've noticed like reading the rate, the rate studies that we did, when we go to spend, so when we say we're gonna budget, say 14 million in water of CIP, we move that to another fund. That's within the water fund itself, like a sub fund. Correct. It sits there and it doesn't show up on these reserves. Correct. Cool. I think I got it. I think I'm starting to get it. Thank you for your patience with that. So we do have some amount in like water CIP already. And then we're gonna add to it at the funding level of 14.2 and then whatever per year. Correct. Oh, thank you very much for, and then we do have a small contingency in that fund, but all of those funds that we continue to move over there actually get allocated to projects. So that all of that funding is sitting in a project that is planned and is in some state of either design or construction or planning, whatever state that it is in. Yeah. Like when the state or feds do their grant, until we program the X amount and then they allocate. Yes. Okay, great. And then I noticed on the wastewater, like on the regional CIP expenditure, I think it was gonna be like 9 million or something like that. That tied directly to the rate study, but on the CIP for water, should that be a little higher? So I saw the regional, the nine billion was exactly, I think what they had at the rate study, it's gonna be seven million and plus a million a year. And then the water, I think on that chart, on the rate study chart, I thought we'd be at 15.5 million now, cause we started at 14.2. He's gonna inflate it at 3% a year. So it's just a thought. So it wouldn't hurt my feelings to get to it more in there. That's good to know. Yeah. And on the regional side, you'll actually see expenditures will be much more than $9 million in this coming year, because we just put the UV project out to bid. So we have a spending schedule that will also include bond funding. And so over the next few years, you're gonna see some biggest expenditures come out of that, but this is the agreed upon increase that we've decided with the sub-regional partners that we can increase just for the cash portion, because we used to only pretty much bond fund projects out there. And we realized that we really needed to start putting some cash into a CIP for that program as well. Gotcha. That's great. So from my thinking, when we add, when we're adding to reserves, it's when we have a positive cash flow after we fund the CIP at the level we agreed to at the beginning of the year. Correct. All right, great. What they do as a financial, it's just a budgeting process for them. When we decide what we are going to budget for the CIP, finance actually takes that out of our revenue and moves it over to the CIP fund. So we don't, it stays in that CIP fund and only moves it within that CIP fund and doesn't get taken back into any other funds or moved or lost at the end of the year. Great. Alan rolls all that up for annual financial reporting, right? Correct. He said there's like one or two things he has to do still with the auditor before we get the financials online this year. They're not available yet for after. Okay. They typically are not available until more, it takes a long time at the end of the fiscal year. It's usually March or April when we start seeing the final book come out. Oh, okay. I think they had a goal of December but because we've had a disaster every year for the last few years. So there's a slip to like March or something else. So okay, great. Well, thank you. You've done a lot of delays, unfortunately. No doubt. That's what people coming to go on and everything else. So, all righty. Thank you very much. You're welcome. Other board member, right? Just curious if we get so unlucky to have high bids on the UV project is there a contingency fund? How do, will we have to transfer that from other projects in the CIP? Can we use our reserve? What, how would we do that? So the good news is when we went out for the bond we were expecting the UV project to be, I think it was 55 million. New estimates have come in much higher. And luckily when we bonded that we bonded for 70 million. So we are hoping to have all that we need in order to cover the UV project as it is today with increased cost and construction. But yes, if there were to be additional costs needed we would need to pull that from other projects in the CIP. However, remember that's gonna be over several years. So it's not like we pull all of it in one year. It's as the project gets built. So it depends on in which fiscal year it will need to be it would need to be covered. So we don't have to identify where all the money's coming during a war? We do typically we can move it in if we need to. So it'll probably sit there and we'll decide what other projects we'll take it from. That'll be part of, if we find out that it's gonna be more than the bonds that we've been given or I guess we're not really given since we have to pay them back. Since the bonds we've been issued. If it's more than the bonds we've been issued that's when all will start right from the beginning prioritizing which projects would need to be taken the money would need to be taken from in the CIP. Well, I got to say with inflation taken off the way it is those bonds are virtually free money. Anyway, okay, hopefully we'll get low bids and we'll have the other problem of what to do with all those bond funds. Thank you. That would be a good problem to have. Thank you. My only kind of question or comment I've noticed the last several years on this committee the or on BPU in general the rates for Sonoma water tend to increase and then we kind of do a bit of a back and forth with them for a few months and then hopefully end on a lower percentage than what they were intended. I'm just wondering if there's any idea of what that percentage is proposed for at this point. I know that there are a lot of infrastructure investments that have been put off several years and have those been discussed and put into consideration. Yes, so we are having discussions. We've been going back and forth with Sonoma water. They're in the same situation as us things get put off when you don't have a large enough increase. So we do expect that it will be bigger than last year. However, they are still continuing to strive to keep it lower if they can. And that's based on our requests because us as the retailer, we have a large amount of customers that we have to collect rates from. They have a small amount of customers they have to collect rates from. So that's a consideration when if you were to put a very large increase we have a lot of customers to deal with. And we've tried very hard to stabilize our rates for our customers so that with the things that have gone on, especially the disasters we've had with COVID, we've done everything we can really to try to keep our rates as low as we can for our customers. So we are expecting to see Sonoma water a little higher this year, but we'll work as hard as we can to make sure that it's the best that can be for the water department. No, I have no doubt that you will. I know it's a battle with not wanting to put off some of these needs and repairs and infrastructures. And we don't wanna have that come later and have a much larger increase for our ratepayers in one certain year. So I appreciate just wanting to know if we have any idea of what to expect in the next couple of months going back and forth. I think you'll probably see somewhere around 6%. Okay. I feel safe. I feel safe saying that. All right. Well, any other questions or comments? All right, well, we will open up for public comments on item 3.1. If you wish to make a comment via Zoom, please raise your hand. And if you're dialing in via telephone, please dial star nine to raise your hand. Secretary Aida, do we have any public comments? We do not. All right. Well, I believe that concludes the meeting for today. I know we have our schedule laid out for the next couple of months. We look forward to hearing from you again and thank you for all of your work. Thank you for your time. Have a good afternoon.