 So, um, good afternoon chair Watts from the city staff perspective I believe we have all staff and consultants here. I think you're still waiting for one fellow board member so but I just want to get all staff here at this time. Thank you yes it looks like we're missing board member gravel so we'll wait a couple minutes and then get started. And Secretary, if you're on and would have the ability to try and text board member Grable to see if he might be available that would be great. I will try to do that. Oh, he just joined. Great, so it looks like we have everyone on. Thank you everyone for being here. I'd like to call the meeting to order at 102. And if we could get a roll call. Yes. Chair person wants here. Board member Grable here. Board member right here. Thank you everyone is present so we will move to item number two any announcements. Seeing none. Let's move to public comment. And this. We are now taking public comments on item three. If you wish to make a comment via zoom, please raise your hand. If you are dialing in via telephone, please dial dial star nine to raise your hand. Secretary, do we have any public comment at this time. There are no hands raised your pub comment at this time. Great, thank you. Thank you. We will move to item four new business 4.1 director Burke if you would like to introduce this item. Thank you chair Watts and board members. We are here today after quite a number and many months of a lot of hard work with staff to bring forward our preliminary water and wastewater rate study for the board's review input. Thank you. Thank you. And deputy director Zanino as well as our consultant Bob Reed with the regroup will be making the presentation. Good afternoon. I'm all just start by introducing Bob and Mark to the group as well as just give a little overview of what we've been working on. And then actually Bob Reed will be doing the presentation and running that from his screen so he'll share his screen when it comes time for that. I know that as a first step we have been working on updating the, the long range financial model that has been going on for more than over a year but most recently we have added current expenditures for the fiscal year 1920. We have also been able to add bond funding that we are currently in the process of working on, as well as letting you know that there is a refunding that became available to us through the process of acquiring new bonds. All of that will be coming to you this week actually at the board meeting at the, at the full board meeting. And those have all been able to be added in as well in order to calculate what possible rates and where they may stand. We are also working on a communications plan. So this is going to be a robust communications plan that talks to the public and to the board members and council members about what our infrastructure is letting our customers especially know what service is being provided and what our rates are paying for. We are looking to have that come out very soon, the beginning stages of that communication plan and hopefully we'll be able to share some of that with you at the next meeting. And with that I'm going to hand it over to our rate consultants, Bob Reed and Mark Hildebrand believe Bob is going to be handling most of the presentation today. Yes. Good afternoon everyone. Pleasure to be here with you this afternoon. I'm going to share my screen if I can do that looks like I can. With the PowerPoint presentation that I'd like to share with everyone with me today is Mark Hildebrand Mark and I have been working on this project together. We've gone through this process and he and I are working on a number of projects together as, as I'm kind of easing my way into retirement he's picking things up for me and doing a great job so this is a introduction of Mark to the city as well. I'd like to encourage anyone who has a question as I go through the presentation to ask them. And I think that'll make the discussion a little bit more beneficial as I'm sharing my screen I can't see everybody else so I'm a little bit handicapped that way but hopefully you can see my screen now. Yes. Yes, yes, we can see it. I see it. Okay, thank you. So we've been working on updating the water and wastewater financial plan models for the city over the last many months here, incorporating new financial information as it's become available with the purpose of developing new rate recommendations for the next four year period The city in the past has adopted five year rate plans and we're looking at a four year rate plan this this time around. But what I'm going to do is we go through this presentation is summarize the project and the analyses that we're going through have gone through and are continuing to work on. We'll pay particular attention to the financial plan development. We've got a 10 year cash flow model for water for the local wastewater system as well as for the sub regional system. We'll talk about some of the key financial issues and inputs that go into developing the annual revenue requirements and that's sort of a term of art. The revenue requirement is the amount of money that we need to raise through the rate structure to cover costs of each of the utilities. And then we'll talk a little bit about rate structure issues, although our next meeting with the subcommittee is forward towards the end of October. We'll talk more about the cost of service and rate structure issues in that meeting. So today we'll focus primarily on the financial plan. So those are basically the overall steps in conducting this study one to determine the revenue requirements we do that through the financial planning models. And then we go through a cost of service analysis where we're proportionately assigning costs of operations and debt service and couple improvements proportionally allocating those out to different customer classes and ultimately to customers based on demand and usage characteristics and requirements of being provided service and then we design the rate schedules, the rate structure and the rate schedules is sort of a third step. But the first step there is really the most important in terms of determining the revenue needs for the utility. The other steps in this study we're not looking at significant changes to the rate structures either water wastewater really updating the cost of service analysis but really maintaining the basic rate structure so most of the effort with this study has been in the determining the revenue requirements through the financial plan analysis. So as I mentioned it is a 10 year cash flow model so we're looking at revenues coming into the utilities expenses going out. Non rate revenues come into play so interest earnings and miscellaneous revenues and demand fees and that sort of thing gets incorporated within the analysis as well. We also look at reserves and reserve policies and part of this project. We're also looking at at your current reserve policies and developing some recommendations particularly with respect to the catastrophic reserves and increasing the money set aside for catastrophic events. We'll talk a bit more about that today as well as in our next meeting towards the end of October. Part of the complexity associated with this study is the sub regional system and how that interacts with the local wastewater utility and the local rates for the city. We do have the the financial plan model does include a component for the sub regional system where costs are allocated out to each of the user agencies with a majority of those costs being assigned to the city's customers and local wastewater utility so we are incorporating all the information associated with the sub regional system in this analysis as well. Can I interrupt you one second. Can I get you to put it into full presentation mode because that'll make it bigger on our screens as well. See if I can do that. At the top of the screen you should be able to. Oh, that's showing you're not helping. See if I can't go back. It's okay if you can't just it would make it a little bit larger on our screens if I see what I can do here. So I think you click on slide show at the top in the top menu. Click on slide show and then from current slide. No next one over. Yeah, hope that showing your notes though. So I think it's going on to your other screen, the full presentations on your second screen. Okay, let me see if I can switch. So I think that's going to be a good option of zoom and PowerPoint that's, I've gone through this I wish I could explain how I fixed it but it was under the under duress so I don't remember what I did. I think it's an option to share when you when you click share screen, did it give you the option to pick which screen to share. Yeah, let me let me end the share and restart it you should be able to pick which one you want to share from. Yeah. Sorry, I thought that would be a lot less complicated. That's not doing it either. Let's see. Yeah, I'm sorry I don't like you can't get it to see. I can't get it from mine if you want to just tell me when to change slides. You want to do that. Let's, I can do that. Okay. Sorry for the technical difficulty. That's okay. Robert I think you need to give me permissions to do that. I just be to a co host so you should be able to do that. I think this was the slide run. We're on the slide. So, thank you Kimberly. So, this is just a simple schematic that shows the cash, the major cash flows of the financial plan models on the left side we have the primary source of revenue as the user rate revenue. We've got other revenues that flow into the operating fund interest earnings miscellaneous revenues as well as demand fee monies from new development and then if there's debt proceeds or grant funding those would flow into capital appropriations. So, most of the activity goes on in the operating fund. So, we're going to carve out part of that fund balance for the operating reserve and that's 15% of your actual operating and maintenance costs and that's under, you know, your current policy for an operating reserve ways want to maintain at least that amount in the utilities at all time and we do that. And then we're also modeling the catastrophic reserves and you've had catastrophic reserves for a number of years I think more than I think more than a dozen years now. We recently got recommendations to increase the amount set aside for those because of the potential need that you might have during a catastrophic event and we'll talk more about about that. There's also rate stabilization reserve as part of the local wastewater system and then there's some other designated reserves for debt service and so on. They don't directly impact the rates or the, the financial analysis but they are, we are taking them into account in the analysis that we're doing. And then out of the operating fund we have operating and maintenance costs, including water purchase costs wastewater treatment sub regional system expenses, you know show up there as part of the local wastewater utility is as well as system costs and then debt service and then capital projects are funded out of your CIP appropriation so each year you set aside money for capital projects and then when those projects are completed. That's the cash flow for that. So moving to the next slide. Some of the primary inputs in this analysis is we did update the models in the last month or two using actual fund and reserve balances as of the end of last fiscal year so as of June 30, 2020. We haven't audited numbers yet. The financial statements won't be prepared for several more months but these are pretty good numbers and so we use this as the starting point for our analysis we've also incorporated the current fiscal year budget for both revenues and expenses and we go into the, we've been pulling the detailed information from the city's records to do that. And then we also have anticipated capital spending for each of the utilities, starting with last year and then going all the way out to fiscal 31. Both in terms of your current CIP and then some estimates developed in discussions with staff beyond that but we've got numbers there for the entire 10 year planning period. We also are looking at your existing debt service schedules most of the debt is within the sub regional system for the wastewater treatment facilities but there's a little bit in water and and some in local wastewater as well so we are reflecting all of those costs for all of the existing issues as well as folding in now estimates for what the 2020 bond issue the sub regional issue for the UV project, as well as refunding one of the issues there. We'll talk a little bit about that but you'll get more details on that. And then also we've obtained utility billing data for all your, your customers out of the billing system and this is really used for the cost of service and rate design analysis not so much in the financial plans but we have that detailed billing data water usage histories for last fiscal years as well. And that was a big part of the data analysis was obtaining that information. So next slide. Some of the assumptions. So we we look at the current snapshot of revenues and expenses right now and then we go out for a 10 year planning period so we are assuming general inflation as well as inflation for construction on capital spending at 3% per year. Each year going forward salary expenses are inflating at 2% per year. This was developed in conversations with staff utilities inflation at 4% a year, and then water purchases from Sonoma water. And this is a very significant part of your water system budget. We're assuming 6% increases in Sonoma waters rates, about half of the revenue that you get from water usage charges is to cover water purchase costs and so it's a it's a very significant cost item in the in the water utility. In terms of interest earnings on money that you have in the bank and your in your various reserves we're assuming a one and a half percent per year interest rate fairly conserved right now although interest rates are trending downward in the current economic climate. We looked at recent history in terms of demand fee revenues tied to new development and based on on that we've incorporated a point 86% per year growth rate in terms of new connections, paying demand fee so so that would not include reconnects from, you know, houses that have been destroyed in the tubs fire or other events that are rebuilding but but new connections that would be paying demand fees. And then we're also assuming stable water demand during this planning period and not significant cutbacks as a result of a drought or water shortage. We've got other mechanisms in place to help deal with that. And we can talk more about that as we go through this and then. So those are the primary assumptions that help us estimate the revenues and expenses over this 10 year planning period. We'll move to the next slide. Other direction. I mentioned that we're, we're starting the model using your fund and reserve balances as of the end of last fiscal year so this just summarizes those about $21.7 million for the water utility. The order of that is your operating reserve and then nearly $6 million in your catastrophic reserve. That's the current policy level for that. And then almost $11 million in undesignated reserves. So once we filled up the bucket for those designated reserves or the, you know, those other ones then then the balance goes into that. And then we have this other. In the sub regional system we have our. The under designated pot on the wastewater utility, the operating reserve is about one point, almost 1.8 million. The catastrophic reserve, 6.8. A little bit of money in the race stabilization reserve, so we're counting for that although we're not using it. operating reserve, a catastrophic, and then there, you also have a geysers reserve, which is sort of a catastrophic reserve related to the geysers system. Not shown on this slide are monies that have been set aside for CIP projects and prior appropriations. There are also some money that could be refunded to your sub-regional user member agencies if they wanted that or they can use that to defray rate increases or cost increases that they would otherwise have as well as some funds set aside for bond guarantee. So we consider all of those things in the model, but they don't actively play a role in the rate calculation process. And then our next slide, just to orient you to the utilities a little bit more, this is showing current revenues for water and local wastewater utilities about a little over 50 million for the water utility, almost 72 million for wastewater. You can see in both cases that the rate revenue, which is the two blue wedges on the water and the two green wedges on wastewater, that's your rate revenue is the primary revenue source for both utilities. And in both cases, it's the usage charges that are the most significant part of your rate revenue. So revenue tied to actual water use or in the case of wastewater, winter water use. And then we do reflect interest earnings and other operating revenues as well as demand fee revenues, but they play a smaller role. So a little over 50 million and almost 72 million in revenues here. And then on the next slide, we summarize expenses. Here for water, that lighter blue is our water purchases from Sonoma Water and then other O&M expenses of operating the water system, a little bit of debt service, that's a pretty small wedge there and then a pretty significant check, chunks set aside for capital spending. On the wastewater side, significant cost for the sub-regional system to pay for treatment disposal costs, that's the lighter green wedge there. And then the local wastewater is really the collection system for the local collection system within the city. Debt service for the local wastewater utility and then also the local share of sub-regional debt. That's the lighter shaded peach color in that wastewater graph. Pretty significant sub-regional debt service that flows to the wastewater utility and then pay-as-you-go capital spending is well there. In both of these, our expenses are a little bit less than the revenues. Water was about 50 million in revenue, 48, almost 49 million in expenses and similar situation for the local wastewater. But that's where we start looking at reserves and how much do we need in reserves and but having that little bit of a surplus is helpful as we look at the rate needs going forward. So with the next slide, wanted to just briefly touch upon our capital spending and this is, we call it plan pay-go, pay-as-you-go spending. So this isn't related to project expenses that would be covered through debt issuance. And we're not looking at new debt for either water or the local wastewater system, but as you know, there will be new debt money for the UV project for the sub-regional system. But we are showing gradual increases for both water and wastewater throughout this period and in future years for water growing at about 3%. I think that the needs out there for rehabilitating the system, the water system and infrastructure is probably greater than what's reflected here. But I think that the city is trying to spend the money that's been set aside for capital projects and to do that. So we're just kind of reflecting this pace of new capital spending here that would be growing beyond this five year period here, growing at about 3% per year, which is basically the pace of inflation. Local wastewater, we've got a little different situation there where debt service for the wastewater utility will fall off a bit in a few years and that will be an opportunity to divert money away from debt service payments and direct it towards the capital spending for the local wastewater system. So we've sort of reflected that in the financial model as well. And then with the sub-regional system, capital spending there going up about a million dollars a year, I think that continues up to about $13 million and then levels off to increase with inflation. So more significant growth in the sub-regional capital spending than in the other utilities. And again, those sub-regional dollars get allocated out to the user agencies. So then with the next slide, just summarize the existing debt service obligations for utilities, very little debt with the water utility. So only about $800,000 per year in debt service payments that does increase with your scheduled debt service right now that will climb gradually over the next 10 years up to about $3.8 million. So that's one of the things that's affecting the water rates is a growing debt service obligation. That's not new debt. It's just the existing debt service schedules that ramp up over time. And then the local wastewater utility has about 2.2 million in existing debt service and that will also grow over the next seven years or so up to almost $6 million. The sub-regional system currently has about $22.5 million per year in annual debt service and that actually declines over the next eight years or so. So that will be beneficial because a big chunk of that flows to the local wastewater utility. So that's where we're getting some room to divert more money on the local wastewater system into capital as those debt service obligations decline a bit. We are looking at that new debt issue in 2020, netting out about $60 million in new money for the UV project. So that's a big chunk of it. And then also, and that would result at least initially with annual debt service about 2.1 million. And then a second component of that 2020 issue will be to refund the 2012 bonds and take advantage of the very, very low interest rates that are available right now. So that'll be about $56 million in debt related to that refunding. And that will save the city and the utility a little more than a half million dollars a year for much of that period just from the lower interest cost. So that's helping us out quite a bit in terms of the right projections as the savings that are anticipated from that issuance. Moving on. So catastrophic reserves, this is something where you've recently gotten some recommendations to increase the level of the catastrophic reserves. So we're building that in with the water utility because there are available undesignated reserves. We can basically take the undesignated reserves and put it into the water catastrophic reserves to fill up that bucket. So there the current level is 5.75 million and the recommendation is to go up to 17 and a half million but we have money available to do that, to set it aside that way. The wastewater utility recommended increase to go from 6.8 up to 21 and a half million can't quite fund that all at once. And so we would take the undesignated money that we have and then add to it and gradually reach that target level in about five years or so. And then with the sub-regional system, right now the catastrophic reserve is about 1.7 million. We've got a placeholder, the analysis to determine what the sub-regional catastrophic reserve level ought to be is still being developed. So we've just sort of plugged in a $10 million figure and we'll update and refine that as we move forward through this process is that information becomes available. And then the geysers reserve is recommended to increase from one and a quarter million up to 3.3. And so we're gradually increasing the sub-regional costs to fund that because of the interaction between the sub-regional system and your user agencies. We don't really have undesignated reserves to just drop into that reserve. And so we really need to pick up money from the member agencies annually. So gradually funding that makes more sense. And then with respect to this catastrophic reserve, not only are we looking at increasing the levels, we'd also like to recommend that they really be available for a broader range of uses. And I think they've really been developed and estimates for them based on a major earthquake occurring that causes a lot of damage to infrastructure throughout. But the city's had a number of fires in recent years. We've got a pandemic going on. We have periodic droughts. And so we're really looking at revising the policy language that would make those monies available for some of these other significant needs when they arise. And so be able to draw down on some of those when there are some either unanticipated costs associated with a catastrophic event or loss of revenues or a combination of those. And then the other recommendation that we're like to encourage you to adopt is to inflate those target balances for inflation each year so that they don't, you know, you don't lose the time value of money over time and those balances would effectively deteriorate if you don't do that. So we're incorporating that into our analysis as well. So that's a lot of background information going into the development of the financial plans. We go to the next slide. This summarizes a lot of that analysis and there's a lot of big spreadsheets that go behind this but a couple of graphs here that really summarize the water utility financial plan. And let me spend a couple of minutes explaining what these graphs show and tell you. The top graph shows both revenues and expenses on an annual basis for the water utility. The blue bars, the stacked bars are your expenses. So the lighter blue is your O&M expenses, a little bit of debt service in that crushed hash, a piece of that stacked bar and then the darker blue at the top is your capital spending. The pay as you go, capital spending. So those are your expenses for the water utility. The green shaded, which is sort of in the background here are the revenues and the darker green at the bottom are the non-rate revenues. The middle and the major green shaded area in the middle is existing rate revenues. It grows slightly as you add new customers but it's basically the existing rate revenues. And then on top that lighter green wedge that increases over time is the additional revenue that would materialize as you adjust the rates on an annual basis. So revenues and expenses there, when the bars are higher than the background shading that means your expenses exceed your costs and your reserve balances would be drawn down a bit and when the revenues exceed your expenses then you're building up your reserves a little bit. The bottom graph here shows the fund and reserve balances for the water utility. That dashed red line is the minimum reserve associated with the operating reserve. We always want to stay above that. And then the black dashed line adds to that operating reserve the catastrophic reserve balance. And you can see that increase from fiscal year 20 to 21 it ramps up pretty steeply and that's because of this new catastrophic reserve requirement. And then the blue line, the solid blue line across here is the end of year fund balance for the utility each year of the planning period. And so you can see we get right up about to that catastrophic reserve and then stay right along that throughout this planning period. So we always have that money or virtually all of that money available throughout this planning period. So it would be available if needed in a major event. At the bottom, just some of the statistics about the rate increase, we also look at the debt coverage ratio, which is really a non-issue for the water utility. But the last two years, historically, there have been 5% rate increases in the water service charge, the fixed part of the rate structure. And then the usage rates have gone up by based on the changes in water supply costs, the water purchases from Sonoma water. And those have been in the 2.3 to 2.5% overall range impact on the usage rates recently. Going forward, the rate increases, annual rate adjustments are shown here, 2% for the upcoming year. And this is an overall rate increase to the entire water rate structure, followed by three years of 4%. Then we needed to bump it up slightly to 5% and then it comes back down to four and then tapers down towards the end. We're really focused on the next four years because we're looking at a four-year rate plan for the city to adopt and then you would update things. So while we're looking at paying attention to the latter part of this planning period, there are a lot of moving pieces here, but we try and keep the rates as uniform and consistent throughout the planning period as we develop our recommendations. The next slide summarizes the same information, but for the wastewater utility, again, the stacked bars are the expenses and the revenues are the green shading in the background on that top graph. You can see debt service is more significant here and this is reflecting both the local wastewater debt as well as the city's share of the sub-regional debt. And so you can see it's a pretty significant chunk of the overall costs. But other, we're also breaking out the local wastewater expenses, that lighter blue at the bottom and then the middle shaded blue is the sub-regional O&M and capital and then the local capital at the top. And then again, the background is the revenues as we go along. You can see here looking at the bottom graph that we are below that catastrophic reserve target here. We're certainly higher than the existing catastrophic reserve, but we don't have enough either in the undesignated fund balance or in rate revenues, surplus rate revenues in upcoming years to fully fund that catastrophic reserve. But we do make pretty steady progress throughout this planning period. And in the last five years or so, we're very close or at that catastrophic reserve balance. And we thought that this was probably a reasonable trade-off where I understand that there's a desire to keep the rate increases as low as we can this year given the current economic climate and circumstances going on. And so part of the way we did that with the local wastewater was in looking at that catastrophic reserve and we're gradually funding that. So here the last couple of years, you've had 2.5% rate increases on wastewater and what we're looking at over the next four years are 2% annual rate increases for each of the next four years. And then even tapering down to 1% a year beyond that. So at that point in time, you should be really on top of the financial needs for the utility and have pretty minimal rate increases, at least based on the information that we have right now. Are there any questions at this point on the financial plans or the information in these last two slides? Okay, then I will continue. So the next slide, yeah, this just summarizes the four year rate plans for the next two years for the water utility, 2% initially followed by three years of 4%. And those 4% are really driven by our assumption of 6% rate increases from Sonoma water. And that's a very significant part of your overall cost structure of the water utility. They're indicating, and recently they've been in the 5% to 6% range and we wanted to reflect the 6% here. And then on wastewater, 2% a year should be adequate for the next four years. I have a question. So on the water side, does that 2% include the water agency pass through the fixed and the usage? Yes, and let me talk about that briefly. And we'll talk more about that going forward. But for the last five or even 10 years, I think you've had the automatic pass through adjustment on your water usage rates tied to what the water, Sonoma water does with their rates. And they have become much more predictable in the percentage increases that they're coming forward with. They used to vary quite a bit historically, but the last few years have been really in the 5% to 6% range. And because we are looking at fairly modest rate increases here and because so much of your water rate revenue comes from the water usage charges, we thought it more prudent and really advantageous if we do away with the automatic pass through and we simply dial in an estimated 6% rate increase in those costs and develop specific rate schedules for you on that basis. It saves the time and the energy and the expense of going through that automatic adjustment process and informing customers of those changes that would be occurring through the pass through adjustment. And so it saves some administrative burden that way as well as expense. And we really felt is warranted given the much better predictability of what the Sonoma water is doing with their rates each year. So we've incorporated that. And I think generally staff is supportive of that direction. So we wanted to bring that forward for your consideration. Okay, so if we go to the next slide, I wanted to shift gears more to the rates now and we'll talk more about this in a couple of weeks towards the end of October, but this is the current water rate structure. We have a two-tier structure for both single family residential as well as duplex accounts and then also for your irrigation accounts that are it's also a two-tier structure and then a uniform water rate structure for commercial multifamily accounts as well as single family if they don't have any irrigation needs. The tier one usage for the residential is tied to the sewer cap. So that's the winter water use that's used for sewer billing. Basically is allowing the water needs for indoor water needs for customers to be at the lower tier one rate. And then the second tier, the rate is a bit higher and that's reflects more of the discretionary uses of water primarily for landscape irrigation. For those irrigation accounts, the tier structure is applied to a water budget where each individual landscape account, they look at the area, the types of plants and so on to come up with a water budget that changes monthly depending on the season and the water needs and the weather during that period of time. So that allocation is really supposed to reflect the needs for that particular landscape. And tier one applies to up to 125% of the water budget and then it steps up to tier two above that 125%. And you can see it's a pretty significant increase to that tier two for the irrigation accounts. And then also within the water rate structure when you do have slightly discounted rates for recycled water, the service charges are discounted by 10, 5% or is it 10%, 10%, 10% from the potable water service charges, those service charges do vary by meter size because of the demand that's placed on the system. And then for recycled water irrigation accounts, their tier one rate is also discounted by about 5%. Tier two is not discounted because that's really excess water above the budget and we didn't wanna discount that. So that's the current rate structure. Again, when we come forward in a couple of weeks, we'll have the updated rate schedule. It's this same basic structure updated to reflect the current cost of service analysis. And then on the wastewater rates in the next slide, we have usage rates for residential and then standard low, medium and high strength commercial accounts, non-residential accounts. Most businesses fall into that standard class, but you have different types of businesses that have different strength characteristics create different treatment requirements. And so we have those various variances. And then we also have monthly service charges tied to the meter size for multifamily commercial accounts and then a single amount for single family homes and duplexes. Any variation in meter size for single family homes is really a function either of irrigation needs or buyer sprinkler requirement or something like that. So that's the current rate structure for wastewater. And again, we are updating the calculations to reflect the revenue needs and the cost of service analysis. And the next slide summarizes what we're doing there. Right, I just said this, updating the cost of service analysis to justify the rates based on current financial analysis and revenue needs, maintain the current rate structures. And as I mentioned, we talked before, recommendation to eliminate the automatic pass-through related to cinema water rate changes for the reasons that I already mentioned. So we've covered a lot of ground here. I think the next slide is the last one. Following the discussion today, our plan is to come back in a couple of weeks on October 29th with you again. We will incorporate any revisions to the financial plan that is deemed necessary based on discussions today or additional information that comes forward. We'll talk a little bit more about the reserve policy updates, particularly around the catastrophic reserve. They have some specific language there, but would like, you know, if you have thoughts on those issues today, that would be great for us to hear that. And then we'll share with you the cost of service analysis and the rate calculations and present for your rate schedules for both water and wastewater. And with that also show what that, what those new rates would mean for your customers and comparing at least for residential customers comparing with some of the neighboring communities, neighboring cities in Sonoma County. So I've covered a lot of ground here. Appreciate your patience with this. And Mark and I would be happy to respond to questions or comments that you may have. Thank you very much for your presentation. Do we have any questions from members of the board? Sorry, looking through to everyone to make sure no one has raised their hand. It looks like we have no questions. I have just one quick question. Looking at slide 16 with the rate adjustments, the percentages, the two separate percentages with water and then wastewater. When we present it to the public, do we usually give just one percentage explanation? Do we combine the two or do we separate it out when we're explaining the adjustments year to year? And I know, and Kimberly, you might want to chime in on this. We will show typical bills. So dollar amounts, not just the percentage for both water and wastewater. And we generally then add those two bills together. And so what your combined water wastewater bill would look like. So we can do that. And I think that's probably what staff does in their outreach materials. Yeah, so we'll provide example bills, but we will also with the Proposition 218 Noticing be very detailed in every bit of it. So all of the fixed charges will be identified. The usage increases will be identified by both water and wastewater by meter size, by strength charges. So there will be very detailed information that comes out with the Prop 218 Noticing. Thank you. I know it's probably dependent on each individual meter and the different levels that you fall into as well. We will provide you though with, as we come forward to you with example bills. So you'll get an example bill of the average family of four, which is what we typically use and what you see when we come forward with other presentations. You know, I'll add to that if, you know, when there are significant rate structure changes, what can happen is, you know, some bills will go up more than other bills will associated with that rate structure change. And not just the overall level in the overall level of rate increase in the revenue requirement, but the rate structure change can cause some bigger shifts because we're not looking at significant shifts in the rate structure, but just aligning it with the cost of service analysis. There'll be a little bit of that, but it'll be substantially muted because we're not changing the structure overall. And we'll have more information on that in a couple of weeks. Great, thank you. Any other board member questions or comments? Board member Wright? Figure it out. So I'm thinking in the next presentation, you're gonna give us a little more detail on this. We have the 2% rate for the first year and then 4% thereafter. It just occurs to me that 2% is not evenly, that's barely gonna cover the pass-through for the water agency if there are six because it's usually about a third. And then I'm curious about then what happens to the fixed and the commodity rates. So I'm assuming that's more analysis is being done on that and that's gonna be presented next time. Well, and what we've done is we've tried to be sensitive to the current economic environment that we're in. And I think normally Mark and I would try and have, like we have on wastewater, we got four years at 2% and we might be able to do, four years of 3% or 3.5% to achieve the same result here. And we could do that. But I think we felt in discussions with staff that there's an interest because of the pandemic and the economic stress that a lot of people are under that if we could minimize at least the initial rate increase that that would be something that the council might be more inclined to accept. So that's why we tried to push down that initial rate increase as much as we could. And if I may, another angle for responding to that question, you're absolutely right that the rate increases by Sonoma water will be larger than these percentages. And so it may beg the question of why can these rate increases be so low when a major part of your operating costs are going up by a higher percentage. And what's going on really in the background is your debt service is dropping off. There's a series of bonds that are expiring or that are being paid off in the coming years. And that's going to give you more room in your budget. And so that's absorbing a lot of the costs is the fact that those costs are going away. You also have significant undesignated reserves in the water utility. And so we're able to fund that catastrophic reserve fully from that undesignated pot. So we're not increasing the rates for that purpose as well. Whereas there's a little bit of that going on with the wastewater. But so we look, you know, there's a bazillion moving pieces in this analysis. We're kind of looking at all of them. And this is Board Member Grable. This is Board Member Grable. Just a quick follow-up question to Board Member Wright's question. Don't we typically buffer those rate increases even when the pass-through is larger than ours? Don't we typically buffer them with our own reserves in that manner for the same reasons you listed about economic impacts? Don't we typically do that anyway? You know, I think what's happened is it's not a specific buffering or reduction to dip into reserves. But if you look at the water purchase costs as a percentage of the total revenue from your usage rates, those water purchase costs are roughly 50% of the costs that are recovered through the water usage rates. And so if we look at a 5% Sonoma County, Sonoma water rate increase and that gets spread over the larger amount of water usage costs, results in about a 2.5% increase in those rates. Now we're not recovering for cost increases in that other half of the costs that are included in that, but that's where we had the 5% increases service charge to offset that. So that worked pretty well for the last five years. And so we, you know, that served the city well, but we figured at this point in time to just dial in those estimated cost increases into the rate schedule and have a uniform across the board rate adjustment going forward was appropriate at this time. Also, if you look on slide eight, you did summarize the list of reserves that are existing and those will act as a buffer going forward, if there comes to pass a different change in costs than was anticipated, if the Sonoma water rates go up by more than what we expect, then those reserves are there to act as a buffer as you say to protect you against that. But we're not funding anything out of those reserves at this moment. Well, thank you very much. I really appreciate all the work that's gone into this, especially thinking about the current financial impact that our ratepayers are probably going through right now because of the pandemic. And I think that it's the fact that we've been able to keep it at that rate moving forward at suggested rate for next fiscal year is fantastic. And I think that that should be commended for all the work that you guys have done. So really appreciate that. If there are no more board questions, I will open it up for a public comment. Chair Watts? Yes. I'm sorry to interrupt. Can I just close really quick before you open it up for the public comment and we really appreciate the subcommittee's feedback and initial input on the information we've provided today and really when you'll see you all should have been received a request for a meeting with your council appointee. We will be meeting individually just to kind of go over the drivers and in recognition of the current economic conditions, wanting to get feedback to make sure that we're on the right track. So just wanted to also make sure that the subcommittee was aware that those either have been scheduled or are being scheduled and we really appreciate the board and council's time because we know that this is a multi-year rate increase that we're bringing forward and we wanna make sure that we're meeting all needs and feedback of the board and the council to the best of our ability. So thank you for allowing me to share that information. Thank you, that's very helpful. All right, well, we will open this for public comments on item 4.1. If you wish to make a comment via Zoom, please raise your hand. If you are dialing in via telephone, please dial star nine to raise your hand. Secretary, do we have any live raised hands or emails or voicemail public comments received at this time? We do have one in the Q and A. The anonymous attendee asked, how are CIP spending needs estimated for the coming years? Thank you, is there anyone able to comment on that? I don't comment on that. We have master plans actually for both water, wastewater and sub-regional. So we know the amounts of funding that we should be applying to those in order to cover those expenditures for those projects that are coming forward. We are not proposing funding to the levels that the master plans are requesting at this point because we are going to work towards spending appropriations we already have towards some of those projects. And then in future years, we will likely be seeing increases to appropriations to CIP to increase those to meet the master plan recommendations. Thank you very much. All right, well, if that is, there's no other public comments or any other comments from the board. We can move on to item five, which is to adjourn the meeting. So I'd like to adjourn the meeting at 2.01 PM. Thank you everyone for being here and we will see each other on Thursday. Thank you all. Thank you. Thank you.