 Yeah that's right that was less than a couple minutes good afternoon I'd like to call the meeting of the Board of Public Utilities for the City of Santa Rosa to order we may have a roll call please board member right here board member Sierra here board member Grable board member Bartholome here board member Badenfort vice chair Arnone and chair Galvin here let the record reflect that all board members are present with the exception of board member Grable and vice chair Arnone thank you item 2 on our agenda statements of abstention by board members do we have any all right then we will move to our one and only study session director Burke thank you chair Galvin and members of the board our study session today is our fiscal year 24-25 water local wastewater regional reuse and stormwater and creeks funds operation maintenance and capital expenditure requests and Nick Harvey our acting deputy director of water administration as well as Lori Urbana our deputy director of engineering resources will be presenting yes good afternoon chair Galvin members of the board again my name is Nick Harvey acting deputy director of administration with Santa Rosa water and I'm here to talk to you today about our fiscal year 2024-25 water wastewater regional reuse stormwater and creeks and stormwater and creeks on MNC IP budgets so today we'll go over some background information on our funds as well as our full proposed budgets for fiscal year 2024-25 then we'll go ahead and talk about some staff assumptions used in the development of our budgets go over our plan CIP funding and finish off with the review of our remaining budget schedule so we'll start off with some background and regulatory information for all of our enterprise operating funds including stormwater and creeks for the fiscal year ending June 30th 2023 we generated water rate revenues of 43 and a half million dollars on our roughly 54,000 customer accounts we charge both usage and fixed fees using a two-tier grade structure and using sewer caps differentiate between tiers dedicated irrigation accounts are charged at a commodity rate we also generated just under eight million dollars in non-rate revenues which consists of items such as demand fees interest earnings and other miscellaneous charges that we collect our local wastewater operating fund generated just over 70 million in total rate revenues in 2022-23 across about 50,000 accounts as a reminder we always show fewer sewer accounts on the water side as the water enterprise also has dedicated irrigation and fire line accounts we charge for wastewater at a single rate tier with some degree of variability associated with the strength of discharge our non-rate revenues for the local wastewater enterprise came in at 9 million last year including demand fees south park sanitation maintenance revenues and other miscellaneous fees her regional reuse enterprise excuse me is funded by the five partner agencies including Santa Rosa ronor park sabastopol cotati in the county south park sanitation district a regional enterprise is governed by both the master sub regional agreement as well as a sub regional technical advisory committee or the sub-tech which consists of one representative free from each of our partner agencies for the master sub regional agreement our regional budget is allocated a few different ways the operation and maintenance budget is assigned based on the last full years of prorated flow into the Laguna treatment plant CIP budget is allocated per fixed percentages in the master sub regional agreement and our debt service is allocated from bond issuance based upon what the bond funding paid for and as a reminder Santa Rosa's annual regional allocation is funded and supporting supported using our local wastewater revenues and reserves the stormwater and creeks enterprise was created in 1996 by a title 16 of the city code creating a stormwater enterprise in order to facilitate compliance with mpds permitting and to reduce flooding damage and general degradation of the stormwater infrastructure throughout our city stormwater and creeks enterprise mostly funds its own operations and maintenance budget with our general fund providing a limited amount of supplemental funding in order to sufficiently funded CIP program stormwater and creeks also leverages some of our special revenue funding such as gas taxes and capital facilities fees along with its own enterprise revenues so as mentioned on the previous slide stormwater and creeks doesn't currently generate enough revenues to fully fund its operations and CIP budgets most of the revenues generated by the enterprise go towards funding regulatory compliance and operations with a mix of other resources or revenue sources rather being allocated to deliver its CIP projects our stormwater enterprise revenues are currently allocated 47% to pay for stormwater initiatives and 53% to creeks each year we work with the Sonoma County's assessor's office to have the stormwater charges added to the property tax rolls our charges are assessed per ERU or equivalent residential unit with the per ERU rate being escalated only by the consumer price index each year excuse me for the current fiscal year we're assessing stormwater charges at a rate of $41.34 cents per equivalent residential unit as a reminder our water and sewer rate payer funding is governed by Proposition 218 which has several statutory requirements including not in intermingling revenues between funds not subsidizing customers using rate payer revenues and specific requirements around how we're allowed to adopt and configure our rate structure Santa Rosa share of regional costs are governed by the subregional agreement and are funded by our sewer revenues and rates and the stormwater enterprise collects revenues via the annual property tax rolls and year over year increases are limited to CPI absentee further action here's a basic set of assumptions we used to budget our revenues for the upcoming fiscal year we're expecting water usage to increase by approximately 1% attributable to growth with wastewater use and development assumed to remain flat on July 1 2024 the final year of our currently planned rate increases takes effect for both the usage and fixed rates at 4% and 2% for water and sewer respectively so here's some of the general O&M expenditure increases we're seeing this with this proposed budget per finance department guidance we haven't included any COLA assumptions for any of our funds with the exception of the regional enterprise if new MO user adopted mid-year the citywide plan is to go to council at that time for an increase in expenditure appropriations to cover the difference out of consideration for the hardships such a mid-year change could cause a regional partner agencies we've been allowed a two and a half percent COLA assumption to help mitigate the effects such a mid-year change would bring the cost of chemicals and electricity continue to climb and we're seeing insurance premium increases of over 20% department-wide we also have four proposed position changes in the department three of those four proposed changes have vacant positions cost offsets we'll go over some of the details of our water purchase and outside services increases a little later in the presentation here's a look at the overall percentage increase in expenditure budget for each of our enterprises water and regional enterprises are set to increase 5.9% and 8.5% respectively although the regional enterprise is seeing an overall eight and a half percent increase in O&M costs Santa Rosa's portion of the regional enterprise is only increasing by 5% our sewer fund is actually seeing a 1.9% reduction in proposed O&M expenditures and our stormwater and creek expenditures are set to increase 20% with 20% of the overall budget funded with general fund dollars and 80% coming from stormwater and creeks enterprise charges our professional services and the water fund are projected to increase by 32% this is attributable to two main factors the first is that we're now paying our annual fees the ground water sustainability agency out of our operations budget the costs associated with establishing and standing up the GSA were previously paid out of our capital budget but all future costs will be operational the rest of the increases due to outside contracts we're using to reconfigure some of our office space we're also increasing our investment in vehicle replacement and maintenance to keep up with the cost of new replacement vehicles and our insurance premiums are going up almost 50% in the water enterprise for next fiscal year Sonoma water had initially proposed a 14.5% increase in the wholesale water rate working with Sonoma waters technical advisory committee and its finance subcommittee Sonoma water has amended that proposal down to a 9.88% increase after figuring in the rate increase in addition to the 1% growth assumption we're projecting the purchase of approximately 15,272 acre feet at a new rate of $1,289.02 per acre foot for a total projected water purchase budget of 19.69 million dollars or an increase of nearly 1.9 million dollars over the current year budget of 17.8 million here's a chart breaking out waters 43.7 million dollar proposed on m expenditure by category expenditure budget by category sorry turning to wastewater now the 10% increase in professional services for the local wastewater fund is also attributable to office reconfiguration as the office space will be shared by staff who benefit both water and sewer both enterprises are sharing in that cost in addition to the anticipated PG&E rate increases electricity has been slightly under budgeted historically both factors are contributing to the increase in utilities I also wanted to take a moment to address a sharp decrease in it costs which we're seeing in both of our local enterprises the cost of our water billing software were previously paid by IT and charged out to us via the IT rate model water is now paying for that software directly so rather than a true decrease these costs are actually being absorbed in other areas of our operating budget we don't see the same thing in the regional enterprise as they don't have a billing function to support we're also seeing a 25% increase in insurance premiums here here's a breakdown of our proposed 18 million dollar local wastewater operating budget by category moving on to our regional O&M budget the rise in professional services cost for the regional enterprise is associated with our biosolid section there's some uncertainty for next year regarding how much land will be available for biosolid application as such we've increased this budget to absorb the potentially increased costs of having to dispose more of our biosolids with LISTEC which is a more expensive alternative we've increased our electricity budget by just shy of 20 percent for potential increases and our IT expenditures are increasing by 24 percent due to the need to purchase additional software licenses and yet again we're seeing sharp increases in our insurance premiums here's a look at the entire proposed regional budget of 75.2 million inclusive of operations CIP debt service miscellaneous revenues and funding the increase in our operating reserve moving on to our refund reserve each year financial trues up the year and financials to determine the amounts are fundable to our partner agencies we used to write refund checks each year however about 10 years ago is this agree that the fund would hold these reserves in the form of the partner agency refund reserve each year the partner agencies have the ability to leverage some or all of their reserve for rate smoothing the results of fiscal year 2022-23 operations added 240 thousand dollars to the reserve bringing total balance up to 2.8 million dollars here's a look at our proposed regional partner allocations for fiscal year 24-25 and luckily we're able to fund our proposed expenditures for next year with all agencies seeing relatively modest increases in subaspal even seeing a small decrease in their allocation this includes a continued one million dollar per year increase in CIP investment here's a look at our reserve levels as of June 30th 2023 while we continue to see strong undesignated reserves we can see at the local the local enterprises drove significant deficits in fiscal year 2022-23 there are two main factors driving these decreases the first is that we've been intentionally budgeting slight deficits in our local enterprise funds to manage our undesignated reserves and the second is that water made significant contributions to the city's 115 pension trust last year this year we're aiming to limit the impact on reserves by passing a balanced budget to further illustrate to further illustrate our point about reserves here's a comparison of the current year's water budget versus next year's proposed budget for this current year we intentionally budgeted a 3.6 million dollar deficit whereas for next year we're proposing a nearly 1 million dollar budget surplus on the sewer side we budgeted a 3.1 million dollar deficit in the current year and are proposing a nearly 900 thousand dollar surplus for the next fiscal year so as we look at storm water and creeks operations the increase in professional services is mostly due to services related to stormwater and creeks new stormwater permit compliance program which is also responsible for the large increase in operational supplies costs like our other enterprises stormwater is also stepping up its vehicle investment to cover fuel and increasing vehicle replacement costs and here's a look at the breakdown of stormwater and creeks is proposed operating budget of just under four million dollars so unlike our other water enterprise funds stormwater and creeks are not obligated to hold aside any operating or catastrophic reserves on their trial balances as such they hold only undesignated reserves and here those balances as a GM 30th 2023 while again we are proposing balanced budgets for all of our funds we've had to make major concessions to get there in the form of reduced CIP appropriations we've paired back our planned appropriations by five point six million dollars for water and ten point six million dollars for sewer our regional and stormwater creeks our regional and stormwater and creeks enterprises however are appropriating planned amounts so here's a quick look at our planned water CIP for fiscal year two thousand twenty four twenty five by category we're coming in at just under nine and a half million dollars of planned investments with one point four going to master plan studies miscellaneous three point five six going to water mains and services a million dollars the pump stations and facilities and three point four million to our groundwater program on the sewer side we're planning to invest three point three million dollars of which a hundred thousand dollars is going to master plan studies miscellaneous nine hundred and ten thousand dollars is going towards our sewer mains and services and we're investing two point three million dollars in sewer trunk work for next year a regional CIP is a total of eleven million dollars of which ten point one million is going straight to plant infrastructure and the remaining nine hundred thousand is being invested in the geyser system our stormwater CIP for twenty four twenty five as one point six million dollars in total seven hundred fifty seven thousand of that going towards programmatic projects such as on-call contracts or other contracts that allow us to react to hazardous materials spills emergency cleanups things of that nature hundred and fifty thousand dollars going towards a McMinn Avenue storm drain replacement and the remaining seven hundred and fifty thousand going towards our lower Colgan Creek restoration phase three project okay so with that I will turn our attention to the CIP documents in front of you and I think I have a copy at all of your spots if any more needed I do have a stack up front just FYI okay so for each of our enterprises we we show three things we show pie charts showing a breakdown by category of what we're looking to invest on the one year and five-year planning horizon we have a funding sheet which breaks down all of the keys on our ledger that currently hold any CIP budget and also keys that don't currently have any budget but we're planning to provide and within the five-year planning horizon the third item that we included with our CIP materials is the GIS map showing the location of all of our projects that we're having funded for the following year so if we look at water at the water charts we always show you year one because in actuality all we're ever asking you to formally recommend or approve is the year one budget we're looking to adopt the year one budget but we always provide five years of plan CIP appropriations for planning purposes so for water year one again we're investing a little under nine and a half million dollars total five-year funding is seventy four point four million dollars if we go to the funding sheet basically everything under the gray headers on the left-hand side represents a budget that has previously been appropriated and is currently sitting in the keys so that projected available balance every dollar we see there's already been appropriated in this sitting as CIP appropriations in the fund the year one column represents the amount we're asking you to approve for year one in this case for fiscal year twenty four twenty five and years two through five are provided again for planning purposes and in addition to the funding sheets you also notice it on the last page of each funding sheet is a small chart we get a lot of questions each year regarding our carryover CIP appropriations and this this chart was created several years ago in an attempt to help present that information in a digestible and consistent manner so each of our enterprises has that chart with the exception of our stormwater enterprise so moving on to the sewer sheets again we're asking you to approve or recommend rather the year one CIP budget of three point three million dollars total plan five year CIP funding eighty one point one million dollars and I apologize for not going into detail on any of the projects but in a minute I'm going to be handing it over to our deputy director of engineering services he's going to go over some of the projects highlights for you for the regional enterprise I we're asking for year one funding of eleven million dollars with a total five-year planning horizon total five-year funding of sixty five million dollars in those documents are followed by our maps we have one map for the local water and wastewater enterprises one map for a regional enterprise and one map for the stormwater enterprise and so the last funding sheet we come to is the stormwater funding sheet asking for a total appropriation of one point six million dollars in year one and a total of two point nine five million dollars over the five year planning horizon and just a side note on our CIP budget stormwater since it's it's new to being under the purview of both a board of public utilities and the water department but also their CIP funding is funded differently we since we have a rate structure we have the the luxury of being able to plan exactly what we're going to budget for CIP every year but because as I spoke to earlier storm water does leverage some special revenue funds those revenues are not fixed or predictable so they fluctuate quite heavily each year and so you know years two through five of the funding plan look a little anemic compared to our other enterprises but really that just has to do with the uncertainty of revenues and the availability of funds in those years okay and with that I'm going to hand it over to Laurie Urbanek our deputy director of engineering services of Santa Rosa water and she's going to highlight some of our CIP projects for the next fiscal year thank you Nick as Nick mentioned I'm going to go over the various funding CIP projects such as water the sewer regional projects and stormwater projects to take in their take it at the to the end of this presentation next slide please I may need a little help when this slide is up because I'm not seeing it here deputy director Urbanek can you give me just one moment to see if we can find a way for you to see it there I can see it now thank you okay go ahead thank you Michelle as I mentioned the water main is water main projects we have up first and the first project I'd like to highlight is the Rock Creek and Matanzas sewer and water replacement this slide is going to depict the just the water side of it and it's the plan is to upsize the four inch water mains to eight inch and they were originally installed in 1953 as Nick mentioned here's the breakdown for some of these projects on this project we estimate about three million dollars for water mains the project is currently in design and we anticipate going to construction this year the next project is Calistoga road reconstruction and some of you on the board know that we try to take advantage when there's a major road reconstruction to upgrade or replace some of our select underground utilities and that's what's happening here the roadway reconstruction is going to rehab about one little over one mile of roadway and so our scope of work will include replacing aging sewer lines water lines hydrants and services we estimate the water fund cost to be about 1.7 million dollars next slide please and now on to the ground water program I know that operations have been waiting quite some time for us to get this project moving forward this is the farmers lane water treatment plant rehabilitation the estimated total project cost is about four point three million dollars we anticipate year one design and then year two construction a list of the improvements to be included are replacing the VFDs which are variable frequency drives in the shop to install new HVAC to serve the electrical and control systems a new treatment vessel catwalk for maintenance access and the filter vessel to be recoded inside and out and replace the filter meteor in in that vessel next slide please and speaking of VFDs this is a big project to replace the majority of our VFDs up in our pump stations many of these VFDs have been in service for more than 15 years and are due for immediate replacement the estimated project cost is 1.83 million dollars and design will happen in year one and construction year one and two on the stations that have been identified some of them are station four or are five six eight nine ten to name a few next slide and onto sewer mains you'll notice here that this is the sewer element of the Rock Creek and Matanzas sewer main replacement currently it has asbestos cement pipe in there installed in 1953 so we'll be replacing that with PVC design in year one as I mentioned and the sewer estimate is a little over a million dollars the next project is the Bolton Road sewer main improvements at West 3rd to Santa Rosa Creek this is an 18 inch and existing 18 inch AC pipe that was installed in 1969 under the creek just west of Bolton Road later in the late 80s we installed polyethylene liner to rehab the pipe but recent CCTV videos have revealed that the liner is is deformed and creating constructions so this project will do an open trench cut and replace the 8 inch diameter and replace the pipe with an 8 inch diameter of PVC pipe this is a substantial project as the the work will likely include a copper dam fish relocation and construction with a creek bypass and the last one on the sewer main side that we're going to highlight here is the Oakmont Treatment Plant sewer trunk relocation this project has a cost estimate of 2.3 million dollars the trunk currently is hanging from a bridge over Oakmont Creek and we want to make sure we take care of this pipe because in the event of a pipe breakage sewage could easily flow into the creek next slide please and on the trunks you've heard a little bit about this one already this is the Lano trunk phase one we are spending a lot of our sewer money on replacing some of this backbone infrastructure not replacing it necessarily but lining it and rehabbing it this is phase one the estimated cost is 17 million dollars and you may recall that this was heard about this a couple of weeks ago we're going to rehabilitate this piece with utilizing a design build framework for delivery again the project's estimated about 17 million dollars we're currently in design and anticipate construction to occur this fiscal year next slide please all right on to the treatment plant this is a very high profile and costly project it's the Laguna treatment plant electrical infrastructure improvement program project we estimate the cost to be about 35 million dollars you'll see from this slide here that there are various pieces of equipment located throughout the plant many of them are switch gears and so you can see the location and the number of the equipment that needs to be replaced the project is in design currently and this fiscal year we're proposing eight million dollars for the purchase of the long lead elliptical equipment that's required and we have heard that there the lead time for some of this equipment could be two to three years and we're also hearing recently that that time frame may be reducing as we move on next slide please and here is the reclamation pump station e building upgrades this project will provide a new building for the pump station e which is really a critical piece of reclamation for it's a critical for the operations of the reclamation system the existing building is in industry care to say the least and will require a new building the estimated cost is around five hundred thousand dollars and we anticipate the project to be completed in July of 2025 next slide please and here we go with more electrical upgrades to the geysers pump station like many of our others other systems key components have reached the end of their useful life and no longer supported by the manufacturer so this this project will replace the electrical controls and purchase new bfds and in fiscal year 2324 funding we have some current funding and then we're looking at a year one budget of five hundred thousand dollars to purchase pump soft starters to and with improved lockout tagout features next slide and then back to stormwater I see all right this is this is one of those feel good cip projects not that replacing sewer mains and bfds isn't isn't a good idea or fun but this one is this is really fun because this project is the third phase of the lower Colton Creek restoration the first two phases were constructed back in 2015 and in 2021 what makes this a great project is because it's it includes recreating the natural channel and its original dimensions and patterns installing habitat features such as for fish and wildlife and reestablishing a native or perian forest along the creek for the human elements and those of us that like to walk along the creek this project will also include a bicycle and pedestrian path and pedestrian bridge and increase the flood conveyance for the creek next slide please and this is a look at the remaining schedule and I'm happy to take any questions and turn it back over to Nick to discuss the schedule yes so as you all know we'll be back before you on April 4th requesting your formal recommendation of our budgets to City Council will be at City Council on April 16th for the preliminary approval of our regional budget may 7th and 8th will be the budget study sessions with eventual adoption scheduled for June 18th and without we're happy to take any questions you may have thank you to both of you for the presentation I'll open up for any board member questions or comments board member right thank you for the presentation it was very complete I just have a comment and two kind of technical questions so my comment is even though it saddens me very much to see the CIP diminished to support our budget I do support that as a method of funding this year's budget and my two little technical questions is for the regional million dollar a year that is I recall that increments every year are we at the top of that so several years ago we got buy-in from all the partner the subregional partner agencies that said hey we all agree to in principle to increasing the overall CIP by one million dollars per year they did not put a definitive sunset timeline on that so it's until further notice essentially okay and then on the oakmont trunk I guess it's whatever it's called now is that's more or less the last phase of upgrading the oakmont trunk from the treatment plant down to whatever channel drive or wherever it goes to I will defer to deputy director or Bannock on this one you know I am so sorry I can't answer that specifically I haven't looked at that master plan in a while but I'm certainly happy to get back to you with the answer I just know that we've been doing major projects on that trunk or actually now it's just a sewer main used to be a trunk anyway I'm just curious thank you the board member questions or comments remember about and for presentation agree with remember writes comments about the unfortunateness of getting to a balance budget on our CIP a question on the water and wastewater CIP plan reductions are you able to highlight any key project changes that we should be aware of or any prioritizing differently that might happen in years following it is a noticeable shift so we prioritize our CIP program independent from the funding so that means you know if we have half a billion dollars of projects out there which we don't but just for the purposes of demonstration but we only have a hundred thousand dollars of CIP appropriations to throw at it we're going to go first at the first on the top of the list so rather than taking a project-by-project approach we keep our CIP prioritization processes intact and we apply the dollars to them we don't let the dollars dictate the projects and as you went through I of course notice the the increases in utilities and insurance thank you for calling them out along the way were those essentially just general rate increases both on utilities and insurance particularly on insurance was I mean there's in water operations it's a 47 percent of a 24 percent wastewater and a 26 and a half percent in regional ops does that it was it just a flat increase were they were we given any opportunity to mitigate any of that increase I suspect not it's just it's just a notice no so as you know we have several uncontrollable line items in our budget that is that are assigned out by various departments like IT finance HR the insurance premiums are assigned by our risk department so absent any changes in philosophy there are some kind of change than we unfortunately just have to absorb whatever comes oh and on the PG&E piece we saw historic increases in the price of electricity so as we know since the settlement PG&E has been aggressively increasing rates last year we budgeted for 15% increase on the rates but we also found that we're we were under budgeting the quantity of electricity that we're using so we are aggressively budgeting there and just for example last year if you take year-end June 30 2022 and year-end June 30 2023 and you compare the actual expenses between the two years our actual electricity expenses were up 32 percent our chemicals used at the treatment plant were up 56 percent so it kind of colors the overall picture as we all know inflation has been practically out of control since the you know the the mid COVID year so we're doing our best to control that and adjust as we move forward that I in my if I do recall in my early years on the board I think we used to we used to project around 5% at least for a few years there so it's certainly it's certainly noticeable I if you can help me if you can help me remember was there there was a time where we transitioned to the evergreen program whether it was city-wide or whether it was just department-wide and have we already started to see cost increases built in the last couple of years or is that showing up now sorry for the question as to how long ago we transitioned but it was good five six years ago that we transitioned to evergreen it was a city-wide decision and we change you know we we figured out what that cost differential would be in that first transition over and then we've kept the evergreen pricing ever since so I think we were able to absorb that with undesignated fund balance for the initial year that that flipped over and then we were able to program that as an operational expense going forward thank you very much appreciate it other board member questions or comments very good thank you for your presentation we'll look forward to seeing the full budget and having it set on to the City Council in the next few weeks so thank you now open it up for public comment on item 3.1 wish to make a comment please move to the podium seeing no one that'll take care of item 3.1 item 4.1 is approval of the minutes for the March 7th meeting we'll take public comments on that if anybody wishes to make a comment please move to the podium see no one move the minutes will be approved and entered we have no staff briefings we'll move to the consent calendar we have one item on the consent calendar I'll move the consent calendar second have a motion by excuse me board member right seconded by board member battenfort we'll now open it up for public comment on the consent calendar item 6.1 if you wish to make a comment please move to the podium see no one may we have a roll call vote please board member right I board member Sierra I board member Bartholome I board member battenfort chair galvin I that passes unanimously with the board member Grable and vice chair and only absent thank you we'll now move to item 7.1 which is our report item director Burke thank you chair galvin and members of the board item 7.1 is the Sonoma water 2024-25 water transmission budget and rate increase and making the presentation again will be acting deputy director of administration Nick Harvey as well as Lynn Roselli with Sonoma County Water Agency and Jake Spalding with the Sonoma County Water Agency welcome everyone again good afternoon chair galvin members of the board I'm Nick Harvey the acting deputy director of administration for Santa Rosa water I'm here to introduce Jake Spalding and Lynn Roselli with Sonoma water who will present the proposed water transmission budget for fiscal year 2024-25 before they begin I wanted to quickly review the annual process for approving the proposed budget and rates and explain where we currently stand in that process after developing the budget and proposed rates they're then brought before and discussed by the finance subcommittee of the technical advisory committee of Sonoma water in conjunction with staff from Sonoma water the process of discussing the water transmission budget and proposed rate increase with tax finance subcommittee was concluded on February 28th where the subcommittee voted unanimously to recommend the proposed budget to the full tack on March 4th the full tack also voted to recommend the increase from here each contracting agency will work with their representative on the water advisory committee or the WACC to coordinate how their agency representative will vote for the purposes of the WACC recommendation to the Sonoma water board of directors which is scheduled to take place at its April 8th 2024 meeting this afternoon at the conclusion of the Sonoma water presentation we request that the board make a recommendation to city council regarding how it should direct its WACC representative Mayor Rogers to vote at that meeting as a reminder it's ultimately up to the discretion of the Sonoma water board of directors to make the decision on how they will proceed including setting the rate increases that will ultimately be implemented all votes leading up to that point in the process are simply recommendations Santa Rosa water's current rate structure was developed assuming maximum wholesale water rate increases of 6% after factoring in an after factoring in an anticipated 1% increase in water deliveries due to growth as well as Sonoma waters proposed 9.88% increase to the wholesale rate we estimate our fiscal fiscal year 2024 25 Sonoma water purchase budget to be about 19.7 million dollars this figure exceeds our fiscal year 23 24 water purchase budget by approximately 1.9 million dollars Santa Rosa water's current rate instructor rate structure includes a increase of up to 6% therefore the remaining increase of approximately 513,000 the amount by which the proposed increase supersedes are built in 6% of $513,000 will be absorbed using undesignated fund balance and with that I will hand it over to Sonoma water thank you Nick and good afternoon board members my name is Jake Spalding I'm the finance manager with Sonoma water and I'll provide you with a brief overview as Nick said of our 24 25 proposed budget and rates for the water transmission system and then Lynn and I will both be available for any questions you may have after the presentation so each year we develop a budget to that allows us to meet the transmission systems operations maintenance capital as well as regulatory demands this year similar to last year we do have a heightened need for additional infrastructure repairs and upgrades so we can continue to operate the system 24 7 reliably just as a reminder the transmission system has three main aqueducts the Santa Rosa which obviously the city is served by the Petaluma and the Sonoma aqueduct each one of these aqueducts does have its own rate structure in the the contractors that are served off that line pay that specific rate structure per the aqueduct they're served by so Sonoma water we are proud of the process which Nick went over about how we interact with our contractors and setting a budget every year in mid-January we do take a budget to the TAC ad hoc budget subcommittee and then we work in a transparent and collaborative process with them to come up with a budget to present to the TAC and finally take to our board in mid-April and I would just like to thank Jennifer Nick as well as Peter Martin for their participation and all that this year and for the tax unanimous support for the the water rate so just one more reminder so our system you know it's actually comprised of many funds these are some of the categories of funds that we have each one of these funds has its own budget and rate and then those are all combined to make a composite rate that is what the contractors pay so challenges you know we do have a relatively robust water system but we are facing several challenges that aren't unique to Sonoma water you know the first one is that the restructured agreement for water supply does stipulate that we have a fully volumetric rate and that becomes a challenge because the last three five and ten year periods we have actually seen negative growth in actual deliveries and because of that that volumetric rate structure when you have lower deliveries it puts additional pressure on the rates you know in fact fiscal year 22 23 was our lowest water sales year on record we'd never seen that before in our in our books we sold just over 36,000 acre feet when we had budgeted over 41,000 acre feet oh sorry got ahead of myself there so you know as we say last year you know some of the other challenges you know our infrastructure is aging most of its 45 to 60 years old about 40 percent of it has only 10 to 20 percent of its useful life remaining and as we all know you know as things age similar to like having a car you know maintenance needs and repair needs do increase in addition to that you know the system is vulnerable to an array of natural hazards primarily flood fire and seismic earthquakes are greatest vulnerability both in terms of you know extensive damage it costs to the system and also potential service disruptions to all the constituents we serve so I'm saying all this just so that you know to say that the budget we're presenting today does include efforts to address all these challenges so what's in the budget on the capital side on the hatching mitigation projects we currently have several several projects budgeted for 2425 that you can see on this slide this fiscal year we've made a lot of progress on several hazard mitigation projects and we continue to advance these projects both the built system reliability and also reduce all vulnerable abilities to natural hazards on this slide you know they all do provide all the projects you see here do provide benefit to the city but in particular you know the collector 3 and 5 mitigation project the pump and motor control as well as the seismic tank retrofits all benefit either the common diversion structures or tanks that are on the Santa Rosa line in addition to the hazard mitigation projects we also have several projects you can see on this slide that help increase resiliency and reliability of the system you know in particular this year we've made a lot of progress on the Santa Rosa Plain Wells project which is comprised of three separate wells we did have one of those wells up and running during this historic drought that we just got out of and we're able to provide some water to the contractors providing some reliability the budget for 2425 does include additional funds for the Occidental Road and the basketball road wells and we do anticipate that both of those will be fully online by the end of 2425 and that will provide additional resiliency in future droughts on the operations and maintenance side we've highlighted a few of the priority projects here and you know they include things like a multi-phase aqueduct cathodic protection program to prevent corrosion in the aqueducts ten year eighty eight million dollar tank maintenance recoding and rehabilitation program as well as emergency inventory procurement you know this list isn't comprehensive but these are some of the highest priority projects that we have in the budget for 2425 you know and that they're really integral to ensuring water supply and system reliability this fiscal year we have made some good progress on many of the projects that you can see it's including several design projects we've advanced we've placed orders for emergency inventory procurement to address natural hazards if we do have an event as well as performing real bill rehabilitation replacement of several collector wells for pumps and valves as well as advancing the tank maintenance and recoding program you know on that tank maintenance program we did do inspections washouts and minor repairs and six tanks this year we have three tank recodes that are under way to in to in construction one still in design but should go to award before year end and we have two additional tanks in the budget for FY 2425 including Ralph the Ralph Ian four tank which is off the Santa Rosa line on the sub fund side we continue to implement the Dry Creek Habitat enhancement project we're making good progress in this project in phases four five and six and just as a reminder we do get significant cost savings on this because the US Army Corps picks up 65% of the cost Sonoma water and the Sonoma Marin water-saving partnership continue to implement a very robust and successful water conservation and education program and they continue to attract a lot of outside dollars for this from both federal and state sources which helps offset the cost of the local contractors so what is the total proposed budget as you can see here it is 74.43 million dollars this is offset by 18.13 million in grants use of fund balance and bond proceeds the total budget here you can see is 6.14 million larger than the budget we had last year and that's really due to both the the operations and maintenance needs we discussed earlier as well as the need to advance some of these natural hazard and reliability projects on the capital side we do want to point out on the capital side that the program is fully funded this year by grants loans and bond proceeds so the capital program actually has no effect on the rate this year and as you can see the sub funds are showing a slight decrease that's not because there's less work being done that's because we had accumulated fund balance that we were able to use to offset the rate increase there this chart shows you the allocation of our costs and shows that operations and maintenance is our biggest category at 61% that's followed by capital projects at 21 the sub funds and then finally debt service coming in at about 8% of costs so real quick just to give you a primer on how our rates are calculated and this is a simplified example so these numbers aren't exact but what we basically to is take the cost of operations and maintenance of the system we divide that by the amount of water sold and for the restructured agreement and that's either the average of the last three years of annual water deliveries or the last 12 months of actual deliveries and when you put all that in it gives you a cost per acre foot you know we really show this just to show that you know the effect of the volumetric rate when that denominator is lower you're going to have a higher rate cost per acre foot what you can see here also is that the lesser of the two is the 12 month number and that's not actually the number we're using in the budget and that's because the restructured agreement does have a stipulation that because if because of drought or other water supply conditions Sonoma water doesn't believe it's a representative of how much water we were selling the next year we can with WAC approval deviate from that number and we did go to the WAC at their February board meeting proposed using the three-year annual average and they did approve that the effect of that is basically that we're budgeting off of a 2.4 percent larger number rather than a 2.3 percent lower number than the previous year and that helped alleviate some of the pressure on this year's rates had we used the lower number rate increases would have been much higher and in fact just to exemplify that point you can see here that had we used the 12 month actual Santa Rosa's rate increase would have been about 14.58 percent which is about 4.7 percent higher than what we're proposing had we used a number like 44,500 which is a number we have reached in the not too distant past the rate would have remained under 6 percent so you know once again you know what's what's driving this rate increase I mean three years of historic drought and you know state mandated conservation measures did result in historically low water sales or water deliveries last year coming in at just about 36,000 acre feet which is which was a historic low that led to low water revenues and ate away at some of our fund balances which we use on a year-to-year basis to try and stabilize the rate and keep the rate increases low you know we did make significant significant efforts to cut and defer maintenance projects everywhere we could to get the rate lower and as nick mentioned we worked with the subcommittee to help do that with the subcommittee we were able to get that rate down from 14.57 to 9.88 and we did that in a couple ways we deferred 8.9 million dollars in non-routine maintenance projects we used grants bonds and fund balance as I mentioned of 18.13 million and then we use that three-year annual average instead of the 12-month actuals and as you can see the total cost per gallon remains at less than a half a cent per gallon we did want to mention real quick that we do have programmed into the budget 2.25 million of our prudent reserve and this is to ensure that we can maintain our O&M reserve requirement of three months of operating costs if we do have to actually dip into that at year-end it's possible that the WAC may want to consider replenishing some of those funds which could have an increase in future future year rates so here are the proposed rates based off that three-year annual average number of deliveries you can see the rate increases range from 8.14 to 9.98% based on the aqueduct that serves the communities Santa Rosa's rate increase is proposed at 9.88% in addition to the O&M charges the contractors do have the discretion to set an aqueduct capital charge which acts both as a rate stabilization tool and also builds fund balance for future capital projects on the AQ the contractors that are served by the Santa Rosa aqueduct elected to keep their discretionary charge the same as it was last year so it remains at $11 per acre foot so this slide here this is lindersley cinema water this slide here is an example of the long-range financial plan rate scenarios that could be applicable to the Santa Rosa aqueduct there are a number of assumptions that are built into this long-range financial plan and it could certainly you know with different assumptions the rate increases and rates for each year would would vary the we take into account the water rates bonds and grants on the revenue side to fund a suite of projects in the long-range long-range financial plan we assume 2% demand growth based on 2024 deliveries which were 41,847 acre feet that 2% is probably not very conservative given that you know the three-year five-year and 10-year average of demand growth has been negative but we we input 2% in a way to just give an example of what it could be if we do get to you know 47,000 acre feet deliveries by 2030 for example that translates to 16,600 acre feet to 17,970 acre feet on the Santa Rosa specifically on the Santa Rosa aqueduct and again higher water deliveries would significantly change this model's output we estimated 9% growth in O&M expenses and 4% growth in capital project costs there are 55 million dollars more in common facilities projects compared to last fiscal year the rates obviously are affected by inflation the three-year historic drought and historically low water deliveries as Jake was saying 36,000 acre feet is historically low in the lowest we've seen in our records and you know I mean we're you know at least 40,000 acre feet is you know what we had expected being our bottom so 36,000 acre feet is extremely low and really pushes the rate increases up and so these rate increases that are estimated rate increases are shown on this on this slide based on those specific assumptions next slide so this is a 2024 wholesale water rate per acre foot for other wholesalers in the Bay area you can see we're on the left hand side we're the lowest of the other world water wholesalers all of them are experiencing the same pressures and drought conditions and inflation and other factors some of them are allowed to use a drought surcharge and you know they're able to increase their rates in that way by implementing a drought surcharge anecdotally we have spoken to a number of these wholesalers and they've indicated that their rate increases might be up to 15% compared to our 9.98% next slide okay now we'll talk about some of the impacts that these proposed increases would have on Santa Rosa water as I mentioned earlier our current rate structure without the pass through for wholesale rate increases was developed to absorb a maximum 6% increase for wholesale water as such the initially proposed 14 and a half percent increase would have resulted in an unplanned increase of 2.8 million dollars and the currently proposed increase of 9.88% results in an unplanned increase of about half a million dollars in order in order to absorb the cumulative effects of these increases Santa Rosa water as you saw has proposed significant cuts to the year one funding of our CIP program in order to balance the budget so as our current rate structure or as a rate structure is already set for next fiscal year with increases of 4% to both our usage and fixed charges our customers will see no additional rate impacts for next year our current rate structure is configured to generate between 520,000 and 530,000 dollars in additional revenues for each 1% increase to our water rates between the current fiscal year's budget and our proposed budget for next year our cumulative water purchase deficit or the amount by which wholesale rate increases exceed 6% the 6% provided for in the model is about 2.4 million dollars in total as such we estimate that we need to implement an additional 4.7% water rate increase next year just to catch up on the water purchase budget again not only covers increases of the water purchase budget and does not provide for cost escalation in our other on a budget categories or our CIP program we will be monitoring our budgets for saccule expense actual expenses and taking all these impacts into account when developing our new rates the first of which is set to take effect July 1 2025 so I think as Nick mentioned at the beginning you know I think the next steps are you know we're presenting to councils boards and districts at the moment you know I think we then will go to the Water Advisory Committee on April 8th and then to our board on April 16th real quick we did just want to you know we've heard from some of the contractors that they'd like us to do more outreach and explain to the public the need for some of the things that are going on with our system we have put together several videos that are all available at that YouTube web address you see up at the top there and these are good resources not only for districts and council members but also for the general public and so you know in summary I think you know cinema waters infrastructure like everyone's infrastructure it's gradually aging after decades of service you know significant portion of it is is approaching the end of its useful life we did do our best to defer and push out maintenance and capital projects in order to keep rates as low as possible this year and we understand that these rates can can have an effect on all the constituents that we serve and we were doing our best to try and really keep them as low as possible but with the you know historically low water deliveries with the drought you know there is just additional pressure on the rates and there are projects that we can't push out any farther you know we did our best to develop a budget that we think is reasonable responsible and fair and that softens the rate increase as much as we can to the 600,000 customers we serve through our partners so this you know this rate increases is necessary to invest in this critical infrastructure and remain prepared for natural hazards and keep our system operating reliably 24-7 and with that I think Lynn and I are available for any questions you may have thank you very much for the presentation I'll open it up for board member questions board member right I have just one question but also a comment thank you for the presentation and as always I think your projects and everything you're doing is what you need to do there's no question about that unfortunately it costs a lot of money of course the painful thing of course for us on the board is our rates are set and it's as you know it's taken a half a million dollars out of our basically our ability to build projects so that's that alone would almost make me want to vote against the thing but but at the same time I very much appreciate the fact that you you you're using higher water deliveries to reduce the rate that's that's good and you know at the end of the day I will support this because you know we had a hundred percent of the TAC approval and including the big gorilla in the room Santa Rosa and so I'll support it but it just it's a painful support I guess is what I'll say and lastly you know there's been some discussion here about our own budget and cost of utilities and I know that it used to be me and I assume it's still true that you're on the perpa water system could you explain that and how you're what's going on with the power with the with the agency yeah so we are we are a member of perpa which is a group of irrigation districts and water districts that pool costs we buy electricity as a group and we implement projects our costs for energy were significantly increased last year this year with with the the wet year that we're having large hydro that we are that we buy from is coming back online and so we are actually are not seeing a large increase we're not forecasting a large increase in 24-25 you know I would say it was eerily similar it was it was eerie to hear Nick say that your chemical costs have gone up 55% because I looked at ours and they've gone up the they're going up the exact same amount so you know we we are seeing increased costs in other areas but not in perpa at the moment thank you remember Bartholome thank you chair galvin and thank you for that presentation you know it it is a difficult pill to swallow as board member right just mentioned but you we need you and we need you to have a strong infrastructure and reliable delivery so it is a difficult pill and I think that you know when you first started talking I was thinking well our CIP budget is going down but then you addressed yours and you are also making changes and deferring projects and and I really appreciate that I am gonna support this because I don't even think that's our biggest problem right now when I was looking at the slide that it's going to increase over 11% over the next five years that you know that's additional bad news and that's going to be additional problem solving and and things to look at in in the future but but this is tough it's it's tough on everybody but but in the end I think you are deferring things as are we and so we're kind of sharing the pain and I really encourage you to do outreach not just have things on your website but actual talking to the public actively and engaging with them because it starts with you you know with your wholesale water prices and you know the more they're educated the better off it's going to be for everybody and it'll be interesting to see what happens in the next five years and as we look at rate increases rate increases in the next year on on our board anyway thank you for the presentation and I am gonna support it can I just clarify too that that those those are estimated rate increases and they're not set and not board approved I mean we go to our board every year so they could vary again with increased deliveries they would certainly it would certainly be a different outcome the board member questions or comments board member battenford thank you share going thank you for the presentation just a couple of comments I with similar heartburn apparently will support the recommendation today I I do appreciate that it some obviously some steps were taken and it sound and it appears that some pretty more deliberate steps were taken this year then maybe in years past to take a look at CIP changes and different operational changes the budgeting off the three-year annual what you is that something that you'll continue to do is it something that you have done in the past I mean it was mentioned as one of the tools to kind of calm the rate increase a little bit I'm just curious why maybe we didn't did we do that last year if not and will we be doing it in the future so generally speaking it as as Jake had mentioned you know it's a requirement that by the restructured agreement that we take the lower of those the two the three-year annual average of the 12 months except in the case of drought or other unusual circumstances where we think that we can predict that or believe that it's not predictive of what we think we will deliver so it's really on a year-by-year basis we have never increased the water deliveries for a rate analysis we did decrease them one year when we believed that we were actually because of the drought we were actually going to come in lower so we actually decrease the deliveries so that it would kind of tighten up the budget even more but we have never never done this step would we do it in the future if the circumstances were similar and you know we saw that you know the deliveries were not going to be predictive we would certainly take that into account and unfortunately we're seeing a downward trend in deliveries so we don't know or can't be super confident about actually having you know increases in deliveries going forward but we'll see thank you again I appreciate the efforts that were taken this year it is a little unfortunate there is some misalignment with our our rate-sending timeline and it has had some painful impacts to Santa Rosa and the work that you know our department and our team have done to try and keep rates predictable and stable for our customers and so that misalignment and that mismatch has really had some impacts I agree what you do is mission critical and we need you to be well financed and well funded and and doing great CIP projects out in the world I just hope that some better alignment around our rate structure and predictability so that we can have the opportunity to remain committed to providing those predictable and stable rates for our customers can come together in this next cycle thanks very much thank you I would just like to echo the comments of my colleagues up here I think you know it's an unfortunate situation that we're in when we have to pass along these rate increases to our our rate payers but it's a necessity because we can't continue to neglect the infrastructure that we each have an obligation to maintain so I will support the recommendation as well with that I'll entertain a motion I'll move that the Board of Public Utilities recommend that the City Council recommend to our WAC advisor a yes vote on the and Sonoma waters budget for 24-25 I second okay we have a motion by board member right seconded by board member Bartholomew at this time I'll open it up for public comment on item 7.1 if you wish to make a comment please move to the podium you know when move may we have a roll call vote please board member right I board member Sierra I board member Bartholomew I board member Baden-Fort I chair Galvin I that passes unanimously with board member Grable and vice-chair an owning absent okay thank you again for your presentation thank you appreciate it thank you very much now move to item number eight public comments on non-agenda matters if you wish to make a comment on item 8 please move to the podium see no one move that'll take care of item 8 item 9 as referrals we have none no written communications I believe we have two subcommittee reports Mr. Board member right you want to report on the budget subcommittee yes thank you chair Galvin the budget subcommittee met for the second time on Tuesday March 19th we discussed waters proposed fiscal 24-25 budget wastewater regional and storm water budgets as well and creeks budgets as well and the capital improvement and debt service budgets after review the subcommittee unanimously recommended approval of the proposed fiscal year 2024 25 budget this item was presented in study session today and we'll be back to the full board for consideration in April and that's my report thank you I'll report on the contract review sub committee we met on March 20th to review the proposed professional service agreement with Hazen and hot Sawyer for the engineering design services for the Laguna treatment plant electrical infrastructure improvements project subcommittee unanimously recommended approval of the proposed agreement and that will be coming to the full board in the near future I think that covers our subcommittee report so at this time I'll open it up for public comment on item number 11 if he was to make comment please move to the podium see none that'll take care of that any board member reports directors report director Burke thank you chair Galvin and members of the board I had a few things I wanted to update the board on first I wanted to let the board know that starting this week our local water crews will be completing several tasks needed to start up our farmers lane production wells including necessary water quality testing equipment adjustments and a large valve removal on farmers lane so once complete the treatment plant will begin the flushing process and operations will slowly start ramping up production and we are anticipating that we will be operating our wells at 1,800 gallons per minute starting April 1st and we'll continue to operate our wells through the normal season hopefully through October as high as possible and our wells as you may recall produce somewhere between five to seven percent of our annual demand and although it's a small amount it is quite a bit of a cost savings for us person as you know to your recent wholesale rate increase informational item so just wanted to let the board know that we will be starting up our wells so we're pretty excited about that also wanted to let the board know that we have a new addition to our wastewater tracking so you may recall that we have been working with a number of different different businesses to monitor disease agents in our wastewater this has included COVID RSV M pox norovirus and numerous influenza strains and now the latest addition is to monitor for drugs in our wastewater so the drugs that are being screened include nicotine fentanyl cocaine methamphetamine and something I have never heard of and I'm probably not saying correctly naloxone so this data is being analyzed by the one company we work with which is bio bot and that is the first company that we started doing the disease tracking with and if anyone is interested including any board members in receiving ongoing information on the various items and agents detected in our wastewater specific to Santa Rosa you can set up an account by emailing support at bio bot.io and that's again support at bio bot bio bot.io so pretty cool information and I'm sure we'll be giving an update to the board at some time in the future as we continue to track this information and it continues to be very helpful and being provided to our local health office. Also wanted to let the board know that the annual Salmoned Restoration Federation which has for over 30 years hosted a annual Salmoned Restoration Conference in different regions of California is coming to Santa Rosa. It's a four day annual conference and typically they highlight regional and topical issues that affect Salmonids and their diverse habitats through field tours, technical workshops, panel discussions and a plenary session on the state of Salmoned Recovery in California. So this year the conference is going to be as I mentioned in Santa Rosa March 26 through 29th which is next week and the first two days will include technical workshops and field tours and two of our staff members will be presenting and leading tours at the conference so Steve Brady our senior environmental specialist will be leading an all-day tour of the Creek Restoration sites in Santa Rosa and Sean McNeil our deputy director of environmental services will be presenting on regulations in the Laguna to Santa Rosa and on restoration activities in the Laguna watershed. So very proud of the team and very excited that they have been asked to participate in this very prestigious conference and if any of the board wants more information I'm happy to give it to you and I look forward to actually going on the day they will be there and getting a tour and hearing all about the work that we are doing so it's great. And then last I wanted to let the board know that last week the mayor the vice mayor and council member McDonald as well as the city manager housing director police chief government affairs officer and myself went to Washington DC in particular for the water department you may recall that we have received a 19.4 million water resources development act authorization for water and sewer improvements and we have been working to try and get an appropriation into the course budget this will be an environmental infrastructure project working with the Army Corps and most recently due to meetings that we had with the local office we revised our request to request 1.7 million for the design and environmental of the Lana trunk lining phase of our project which is a total total project that we've broken down into 2.3 million and so we specifically went back and met with congressman Thompson and Huffman we met with the staffs of senator Padilla and Butler and then we also met with the staffs of the Army Corps and Bureau of Recreation and so Bureau of Reclamation sorry about that and have continued to let them know that this is our top priority project and we are really trying to see if we could potentially be in this fiscal year's budget for the Army Corps to get this project going if we're unsuccessful for this fiscal year we've made a lot of inroads and are putting that forward as our top priority for fiscal year 25 and that is my report and I'm happy to answer any questions that the board may have thank you director Burke any questions for the director all right we'll open it up for public comment on item number 13 if you wish to make a comment please move to the podium nobody's moving that concludes our agenda and we are adjourned