 So I'd like to convene this meeting of the Board of Directors for the San Lorenzo Valley Water District for September 14, 2023. Holly, would you take the roll? President Smalley? Here. Vice President Hill? Here. Director Ackman? Here. Director Falls? Here. Director Mayhood? Here. Okay. So, are there any changes to the agenda this evening? Rick? I'm sorry. Are there any changes? There are no changes. Okay. All right. Oral communications. Is any member of the public have anything that they wish to comment on for items? Other than what's on the agenda that are within the district's purview? Seeing none here. I see none online. And I understand that there were no actions taken in process. That's correct. Thank you. Given that, we can then proceed to unfinished business. The one item that we have on the agenda this evening, the cost of service analysis and the rate study. So, Rick? Kendra? I think that you believe we're going to turn it over to the Chair of the Pleasure of Finance Committee for the introduction and move forward with the presentation. Okay. All right. Thank you. Okay. Well then, Gail? I'll go ahead and do that. I've prepared four slides that will be at the beginning of this presentation, and I'll be followed by, is it Sudhir or Lindsey from Raftellis who will present some models? And basically the goals that we have for tonight's meeting as a special meeting on the board is to receive input from the public and to discuss the revenue model that Raftellis has developed in order to move the board towards some kind of consensus view of how we feel about the revenue model. Because we have to make those decisions so that Raftellis can take the next step, which is actually developing alternative rate structures, which we're not really talking about tonight. Tonight the focus is coming to some sense about what we think about the revenue model. I don't anticipate we're going to vote on anything tonight. I think the idea is to get a discussion, and if there's anything that needs to be voted on, we can do that at the next meeting on the 21st, okay? So after the meeting on the 7th, I think for some of us, especially Jeff and I, there were a lot of questions that we had that we felt that we hadn't really, that sort of arose about the revenue model. And we also recognized that we kind of got off on tangents and didn't discuss some aspects of the revenue model. So the scenarios that you'll see tonight are actually slightly changed when they show the models from what you saw on the 7th. And they, oh, thank you, they will reflect the consensus view of the Budget and Finance Committee and staff that developed at the Budget and Finance meeting that we had on Tuesday. And we have one member of the committee here in the audience, Jim Mosher. And I do want to recognize that Bruce Holloway was there as a member of the public, and he actually made some very useful comments that kind of got incorporated into our thinking as well, okay? So really there's kind of two categories of questions, big questions that kind of come up when we think about the revenue model. One is how do we rebuild the cross-country raw water pipelines? Do we do it above ground? More or less as they were before the CCU fire, or do we bury them? And the reason this has this decision as a first-order decision is because the difference in cost has a large impact on the revenue needs that we might have and also our ability to acquire or accumulate reserves. And then the second category of questions have to do with the assumptions that Raftalus has to make in terms of developing the revenue model. So let's go ahead and go to the next slide, which is essentially talking about how do we rebuild the cross-country raw water pipelines. You're going to see scenarios tonight that actually show different scenarios for those two. So one is assuming that we build it above ground at an estimated cost of about 25 million, and the other is that we do it buried at an estimated cost of 52 million. I will say that at the Budget and Finance Committee, it was a view of the committee, the consensus view that we should go with the above ground option. The main reasoning here being that although the buried option could be achieved with only a slightly higher need in terms of annual revenue and maybe a little bit more in debt, it has a large impact on our ability to accumulate reserves. And we've been under-reserving for years. And so if we went in that direction, it would be very hard for us to accumulate reserves at the level that we think is appropriate. And then there are other factors that come into play in this decision as well, having to do, I think, largely some of the members expressed concerns about the environmental impact that would come with burying it and that this might get a large response from members of the public. But that's one of the reasons we have public meetings is so that they can express that. There's also the concern that we could get snarled up in a lot of delays having to do with, well, basically, Santa Cruz objecting to what might happen if we start cutting a bench and releasing sediment into the creeks that feed into the San Lorenzo River. But as I said tonight, we're going to see the scenarios of both models. Next, now let's go to the second category of questions about the assumptions. And one of the questions we had are, were we comfortable with the rates of inflation that were adopted for the various categories of expenses? And I think most of us felt a little worried about the fact that Raftalus was using long-term 10-year averages. And the reason being that our belief is that we're still coming off of the edge or the end of the COVID-related inflation. And that the inflation rate for a lot of the things that the district has to buy and purchase to do the work that it does and the specialized skills at some of the labor that we have is actually more expensive than, say, the sort of market basket that your average consumer would have. So what we asked Raftalus to do is to calculate it with using the three-year averages for the first two years, and then assuming that we would go back to some kind of long-term 10-year average for years three to five. The revenue model assumes that expenses will grow at this rate of inflation. And a question that immediately comes to mind is, should we, in the model, account for new incremental one-time costs or new ongoing expenses? And these could, in many cases, these ongoing expenses would be things that are sort of unfunded mandates that come down to us. I mean, an example is our, for example, Santa Margarita was a good example of an unfunded mandate that we're now having to pay for. Or another one would be, you know, if there are new rules about PFAS that's basically going to put all water districts in violation and we'll all have to buy expensive equipment to fix that. We didn't make any modifications to the model for this, which makes me a little nervous personally, but I think, Sudhir convinced us that if we're acquiring or accumulating our reserves properly, we should be able, within those reserves, to accommodate one-time hits to the budget. And one big one that's in mind is it may cost us something like $250,000 in terms of legal fees and environmental fees to get the conjunctive use plan through, right? That's an example one. And then the other question of, well, what about some of these ongoing things? And I think the sense was we don't know how to set that number. And so because we don't know how to choose that number rather than just pluck something out of the air, we didn't change the model. Another question was, is it realistic to assume the district could complete $27 million of capital projects in fiscal year 2024 and more than $50 million in fiscal year 2024 to 2026? And I think there was a consensus in the room that, given the history and all of the things that happened in terms of environmental impact and everything and supply chain issues was no. And so what we asked Rick and Kendra to do was to spread out the capital expenditures over a longer period of time so that they would go all the way out to the end of this rate study, which would be 2028. And that has the effect of meaning that we don't necessarily need such a big injection of cash to get us through the next year or two. So it sort of smooths the capital expenditures. Next, continuing on on these assumptions, we have, are the reserve targets set appropriately? And the answer is yes. They're based on the district's reserve policy that was adopted in 2021, which the two major categories, there's a few more smaller ones, but the two major ones are that we have 4.5% of the annual operating budget as a reserve and that we have 2.5% of our total capital assets in reserve. And you have to, for that, you have to make an estimate of what is the value of our total capital assets and the one that is used in the model is 375. I think that's 4.5 months. 4.5 months. I'm sorry, you're right. Thank you for correcting that. Yeah, so on the operating budget, it's 4.5 months, not percent. Okay. Then the question is, is how fast do we want to reach the target reserve levels? The model that we saw from Raftalus the last time basically tried to get us there in the second year or at most the third year. And I think we felt that given that we have not adequately reserved in the past and given, but more importantly, the fact that we have this huge amount of expenses that are related to the recovery from the CZU fire and the storms of 2022-23, that it may not be realistic to think that we can accumulate all the reserves and go right up to the target in the second year. And so what we instead said is that we should increase reserves every year and then reach the target levels in year four rather than year two. So we're just spreading out that requirement. Another was, do we want constant annual increases in revenues or should we front load those increases? And I think the, as we heard from Sudhir, I asked this question at the last meeting and Sudhir said, well, normally what districts do is they just set an amount like 9% every year for five years. And we basically thought that given the extraordinary expenses that we've had and the fact that we didn't basically didn't have an increase last year, that it would make sense to front load the revenues to be a little bit higher in year one and two and then have the revenue requirements drop. Yeah, yeah, right. And then the final question is do we want to take out debt? And if so, in what forms? In other words, could those be loans or bonds? And I think basically we pretty much have to do something to get us through the next couple of years in terms of cash flow and the expenditures that we have. In the revenue model at year C tonight, we showed debt in form of a market loan 20 years at 4.3% interest. We had some discussion of the possibility of trying to get a bond, but I think the basically our decision was as a board, we should take the most conservative approach, which is there's no guarantee that if we tried to float a bond issue that it would pass, meaning typically less than half of them pass. And it's our job to make sure that the district says solvent. And so in this assumption, we are assuming what I've put up there. And this doesn't mean that and basically I think what we will do is by the time we get to making the decision for how much there will discuss how much debt, what type, and we'll discuss this more fully. Because all of this is this market is very fluid. And so, you know, to try to set it now would be not very prudent. But what we're trying to do is put something into the model that is conservative and protects the district. If I could comment on that. The market for debt changes quite a bit and can change very rapidly. This is based on current conditions. We don't know when we would have to go out for the debt. And we don't know what the conditions will be at that point. And so we had to make a choice. And we chose to base it on current conditions and a standard market loan. But when the time comes that we do go out for the debt, we should shop and we will shop for the best deal, whether it's bond issue, participation notes, market loan, we'll evaluate all the options and go for the best deal. But when you're building a model, it's a little complicated to add all of those different options in there. And the whole idea here was to, as Gail said, be conservative and use current numbers that if we went out to the market today for a loan, what we'd be looking at and address what the actual form of the loan would be and what the interest rates will be at the time when we need to actually go for it. Okay. So now I'd like to turn it over to Sidir. Yeah. I think it'd be better if we let Sidir go and give this part. And then because all I've really talked about is the assumptions. Hang on a second. There's some clarifying questions I have about the assumptions. And the fact that this was not part of the agenda up front that we got, this is completely brand new. And I'd like to ask a few questions about what you did. I'd like to go through these questions again. But I'd like to have Ref tell us, do their presentation first, and then come back to these. I want the understanding of what they're going to do. But my understanding of what's going to happen if we do that, is my understanding of what they're going to be saying is going to remain open. Right. And I won't be able to get to the core of what it is they're presenting. So I want to make sure that there's a few things. I mean, first of all, I don't know that there's ever been a presentation that a board member has done like this. This is really great news to know. But I wish we'd had this in the agenda packet. So we could have had questions coming up front. So if we could at least get through a couple of clarifying questions before doing that, that would be really great. Two questions. And then let's move on. Okay. Two questions. So on the first one, I'd like to make these quick because I do want to get to Ref tell us. Yeah, you know, I understand that. But because this got thrown out here at the last minute, I think it's important that we at least have a little flexibility here on the reserve target levels. When you're talking about reaching them, were you talking about that being a combination of debt and cash or cash only? Because in the last presentation, we use reserves fairly promiscuously. And debt reserves versus cash reserves are very, very different. You made that point last time, Bob, and we did not change anything. Okay. So it's still the way it's not it's unchanged. Okay. And so the impact of that is that if we have a debt that says you have to do things in three years, that debt goes away. It's no longer available for reserves. You don't have to take out more debt at that point. It's not cash. It's fake. Okay. If you go back to the previous slide, please. Relative to the expenses, was it your guys assumption that the five year budget that's being presented here is only for the purposes of the rate study? Or is it a committed budget that will be passed by the board to cover this five year period? That is, are these expenses like the last rate increase where it was showing an increase in operating expenses of about 3.5% a year? And our actual is closer to six budgeting? Or is it a this is a commitment we're making to the community? This is a model, Bob. And so the questions that you're asking, which you asked last time about how we might decide to restrict or assign some of the money that we get, those are, I think, discussions that we should have as a board at the time that we start discussing. That's what I'm asking. Sorry, what I'm asking is about the operating expenses. Are the operating expenses that you're that that they're presenting here? Is it your guy's view that that's a model for the rate study? Yes, or that it's a budgetary thing we're committing to the community? I don't think we can basically say that this is a commitment in part because when we do budgeting we do it on a two year basis. We could do it whatever basis we want. Two years is only something we decided to do that was better than one. But we could certainly do five. I understand that the issue we have here is if it's not a commitment that we're making to the community, then the model itself is not a commitment to the community either. And that needs to factor into their decision about whether they approve it or not. That's what you're right. Okay. I'd like to move to Ralph Telles' presentation now. Who will be giving that? I will start that presentation. Let me share my screen. Good evening, President Smolley, members of the board. This is Sudhir Pardewala with Ralph Telles. We have our project director, Melissa Elliott, on the line as well, as well as Lindsay Roth, who was a financial consultant. I'm filling in for Teresa, who's still on vacation, should be back at the end of this week or early from the beginning of next week. And hopefully, she'll be able to take it on from here. I don't think so. Seeing your screen. Yes. We don't see your screen yet. Oh, you don't see my screen? I thought I should show your screen. So last time, we covered a lot of the slides, and I tried to go a little faster this time. But if you have any questions, please feel free to interrupt me, but I'll try to go a little faster. So we don't repeat a lot of the information that we would covered last time as well. So we are going to focus on the financial plans, obviously, as Director Mehood indicated, we will identify the inflation factors that we are going to be using, get into that a little bit, and then discuss the various plans that we have for water and wastewater, the financial plans. So we looked at, again, this chart that shows the CPI for the San Francisco, Oakland, Hayward area, and we took the average of three years, which was slightly under 4%, but we assumed 4% going forward for our operating expenses, including salaries, most of the operating expenses. We had certain expenses like benefits and utilities and so forth that were inflated at a higher rate. But our operating, most of the other operating expenses, we are increasing them by 4% based on a three-year average. The utilities, as we discussed last time, they are increasing at a higher rate, so we have taken that into consideration as well into both for power as well as for other utilities at a higher rate. The construction cost index, which is used to inflate the capital cost, we took the three-year average again, and we are assuming here or we estimated that the average would be 5.5% in the first two years, and then we come down to 4% in subsequent years. So compared to last time, we have increased operating expenses for the first two years to 4% instead of 3% that we had, and then it was 3% after that, and for the capital cost, we are assuming that those will increase for the first two years at 5.5% and then drop down to 4%. Those are the changes that we have on the inflation costs. So let's start with the financial plan for water. Again, going to the current revenue sources, we have 85% of our revenue coming from current rates, 9% from taxes and assessments, and the remainder from interest income grants and other non-operating revenues. The important assumption in the financial plan always is what kind of growth do we have, both in terms of accounts as well as in terms of water usage. As you can see here, we are assuming essentially eight accounts per year except in FY24, where we have this consolidation from Blackenbury and Forest Springs, which is about 150 units, and then we are estimating that the poor account consumption will not change, and therefore it's a very minimal increase in demand going forward based on current demand. This particular slide shows us the water sales over the last several years, and this is an important assumption in the financial plan as well because the more water sales you have, the more revenue you pick up, and therefore you can spread your costs over a bigger usage base, so to speak. But as you can see in FY22, we actually had a reduction of about 10% from the previous year, and we are assuming conservatively that going forward, we will be using that same level of consumption to project our revenues going forward. To give you an idea as to how your expenses are distributed amongst different functions, essentially, you're looking at supply and treatment and distribution that are about the same goes to 57% of the total expenses, and then the remaining are spread amongst finance, administrative, engineering, and watershed. Just one second. This does not mean that your variable expenses are only 29%, but because your salaries and benefits fall within each of these categories, actually, they make up about 70% of your total expenses. So as Director Maywood mentioned, we have taken the CIP and projected them, spreading them a little bit more than what we had previously. So originally, in the last presentation, the first year in FY24, we were at about $27 million total. Now that has dropped down to about 24, 24.5 maybe, and so forth. So we have dropped the CIP in the first two years and then built it up in the later three years compared to what we did last time. The total CIP that you see here is about $72 million, which averages about $14 million per year. The length of the bar represents the total expense, and the colors represent the different elements of the financing that we see. So starting from the top, we have this brown bar represents the fire surcharge revenue. These are the bond proceeds that we would be based on the debt that you will be issuing. These are funds left over from the previous debt issues that we have. And then this is the grant funding that you see here. The FEMA proceeds don't kick in until FY25 and beyond because there's always a lag getting FEMA proceeds. And then you can see here that we don't have any rate funding at all in the first five years here. We are going to be using basically that FEMA funds, fire surcharges, and grants to fund our expenses. An interesting element of our revenue structure is to identify how our fixed costs and fixed revenues are collected from or we spend and collect from our rate base. So when we look at our expenses, this is just the operating expenses. It's an average of the next five years. We have about 94% of our costs are fixed and only a small percentage which is basically related to power and utilities is the variable expense. However, on the rate side, we have about 37% of our revenues coming in from the meter charges which are fixed and the rest from which is 63% would be coming from the rate revenue. In general, I think when we look at utilities having a fixed component of about 30%, it's not unusual. In our case, since we are getting surface water and well water for the most part, we have very little in terms of variable costs and therefore the fixed revenue that we collect here could be considered under collection of the fixed revenue. But the issue is that the moment you increase that fixed revenue, you're impacting your low volume customers and so there has to be a balance in terms of what we charge on the fixed portion versus what we collect from the variable portion and also recognize that the increase in the variable rates helps to incentivize conservation. The California Urban Water Conservation Council in its past few years actually had recommended that the fixed charges not be more than 30%. When we hit the drought in 15, 16, more and more agencies started increasing their fixed charges and so the 37% that they're collecting here is reasonable. It's not unusual and I think when we look at setting rates, we would probably be considering that as well, retaining this same level of fixed expenditures or with slight modifications. The water reserve targets we discussed last time in some detail, four and a half months of operating budget, which is about 3.7 million dollars, two and a half percent of, I said four and a half months, two and a half percent of replacement costs which is $375 million that target is established at about $9 million and then we have compensated absences of one third of the balance on the audited financials which are about $600 so we have a target of $200,000 on those and these are pretty reasonable in terms of generally for operations, we typically have three months so you are a little bit more conservative which is good. Capital replacement, 2% of the replacement cost is pretty reasonable, two and a half percent basically gives you like a 40-year life on your assets so that's a good number as well. The fire surcharge is one of the elements in the revenue structure that we have currently. It's based on the meter size. It's a restricted funding, a restricted fund where the money can only be used to fund the CZU projects. Currently, we are limiting the total revenue to be collected from fire surcharges at about $5 million and at the rate that we are collecting it, we should be done by FY 2026 so any CZU costs that are incurred beyond this timeframe will have to come from rates and would not be a separate charge on your bill. For example, the CZU projects continue to 2028 so the remaining projects, there would not be any funding available from the CZU, from the fire surcharges to fund those projects. So as we discussed last time, we have two scenarios on the water financial plan. The first scenario is above ground for the divine and clear creek supply lines which is approximately $25 million uninflated costs going from FY 23 to FY 28 and we have already applied for FEMA grants on this so we should be guaranteeing the 90% reimbursement that typically would be expected from this project. So under this scenario, basically what we are looking at is doing 10% per year for the first two years in FY 24 and 25 that is 10% in revenue adjustments does not necessarily translate into rate increases of 10% for everyone. The subsequent years from FY 26 to 28, we are looking at 7% per year as shown here and this particular scenario requires us to issue $19 million in debt to finance the capital expenditures that we have on our books. There would be no change in the fire surcharge which is limited to $5 million in revenue. What you see here are the total reserves that the district would have over the five-year period and this is the target that we just discussed the four and a half months of operating expenses and the two and a half percent of the asset base replacement asset base. We fall a little bit under in 25 but we are showing reserves about target in subsequent years here. Now the reason we have this about target is when we take a look at a longer-term scenario when you look at a 10-year scenario, we see that if we were to reduce the revenue adjustments that we are proposing here, the 7% revenue adjustment that we are proposing here, then you would probably wind up with much higher revenue adjustments in the next five-year period to fund all the capital costs and therefore we are proposing that we have the 10% in the first two years and 7% for the next two years. So sorry just so I'm clear on this or the slides we're looking at in the agenda the same as what's up here. I'm not sure but what be no I think that this has been this has been updated since this has been updated from that so in other words these slides now are based so they're used this the assumptions that we discussed in can I clarify one of the presentations I think we have slides on our website not as part of the agenda that we from last week's presentation this week the slides have been updated based on the admin I'm sorry the budget and finance committee's feedback and so the this presentation will be posted to the website following this meeting. I'm sorry in the agenda that I'm looking at here for the 14th there's a series of slides are those slides those slides no the one on the okay I mean up to a certain point they look the same but there are slight modifications because we changed some of the assumptions yeah and I mean it looks like some of the numbers change fairly substantially actually okay okay we just want to make sure I was clear in that because there's no reason for anybody to follow this at this point so but as Jamie said this will immediately go up on the district website but this has been a work in progress and Rick and Kendra's studio has been working really hard on this for the last few days so this is a slide that I've added from what you know that we didn't have in the previous slide which represents a financial plan on the scenario one what it shows you are the expenses the green bar here represents the operating expense the yellow bar represents the debt service and then the gray bar here represents the reserve funding the the dashed line here represents the revenue at the current rates if it did not make any revenue adjustments and the black line solid line here represents the revenue with the proposed revenue adjustment 10 percent in the first two years and seven percent in the subsequent years so when we look at this what we what we see is obviously that you know we are setting aside funds in reserves in each of these years here and this results primarily from the fact that we are have that debt issue that helps us to offset the capital cost and therefore we are able to put aside funds in these in the in the reserves in these years here okay so going to scenario two which is the buried pipeline for p wine and clear creek the uninflated project cost here is estimated to be 52 million dollars and under this scenario we are not confirmed with the 90 percent reimburse from from FEMA so there is some question whether we would get the full 90 percent funding from FEMA for this particular project and as I think as director who discussed there might be some environmental concerns as well associated with this with this scenario too so under this scenario we are looking at a 12 per cent per year revenue adjustment in f5 24 and 25 and then 10 percent in subsequent years 26 to 28 we are proposing a 23 million debt issue in f5 24 again no change in the fire search are they remain at the current levels and collect a five million dollars so in this particular scenario because we are in have increased the amount of debt that we are planning be and and pushing the capital projects out we fall below target in the fourth year but then we make it up by the fifth year and again the reason why we have this going in this manner is because as we have future capital projects that need to be funded in the subsequent years and that requires us to maintain a higher level of reserves than what the target shows here so similarly the financial plan for this particular is consistent with what I just showed you except that in f5 27 we had a higher capital cost and they will now need to be funded through rates as opposed to from entirely from reserves and in fact we draw down our reserves can see the revenue line here shows us so we have some costs here which need to be covered through reserves which is shown by the gray bar over here so while we add reserves in the first three years we actually draw down reserves in 27 which was represented you can see the the reserves were down in 27 and then we begin to add them back again in 28 I think that completes the water scenarios financial planning scenarios that we had now move over to wastewater so I think we discussed this basically we have 56 customers on the wastewater side you have there are several elements of the collection system that are described here we have a treatment system consisting of three-state trickling filter system and clarifier tanks the last upgrades capital upgrades were completed in the 20 2013 time frame and then we are still operating under a discharge permit from 20 violation of a wastewater discharge permit from April 2016 the expenses here can see we have three different expenses here the contract and professional services salaries and benefits and operating expenses that are about the same here which represent almost 80% of the total cost more than 80% of the total cost and then you have general administrative maintenance and facilities these percentages appear to be you know kind of out of context because the total expenses we are looking at here are very small it's only $120,000 in expenses that we're looking at over here which is the average of the next five years of expenses we are not planning any CIP in any year except in 2031 where we have a big project of about two million dollars which when inflated comes to about 2.7 million dollars there is a potential to get some grant funding on this but we don't know that for sure so we may want to use that to offset great impacts or even new impacts and so we have proposed three different scenarios on for this particular wastewater utility the reserve targets remain essentially the same four and a half months on the operating budget you can see it's a very small number 45,000 dollars 46,000 dollars and two and a half percent of the replacement cost of 3.4 million which works out to 90,000 dollars so the sum of those two is about 136,000 dollars in total targets that we have so under the first scenario for way project capital project will be funded by grants and we would incur an additional 900,000 in debt in f531 and we have assumed three and a half percent for 20 years over here under the first couple of years because we inflated the O&M expenses from the previous presentation the next year instead of three percent we have under three percent after that in subsequent years the first scenario the second scenario we are looking only at the grant without any additional debt and that causes us to increase our revenue adjustments to 15 percent in the first seven years and then dropping down to 10 percent in 2031 and then flat lined after that in the third scenario which is all cash funded we are essentially looking at 25 percent for the next eight years and we can see how the reserves change we need to build up these reserves under each of the scenarios so that we can fund these capital costs that are that we are incurring in 2031 and that concludes the wastewater financial plans the next thing that we need to look at is you know what are the next steps that we need to is to identify which projects sees you project scenario we want above ground or underground and finalize the financial plan which financial plan we want to go with on water I think once we make a decision on which project we go I think we have identified what is the financial plan that we need to go with but on wastewater we do have three options that we can select on from any of those three once we have decided that then we we can start the cost of service analysis and develop rates look at potential changes to the rate structure under the current rate structure or alternative rate structures for water I have a question about the wastewater would that be at the end yes we're going to let him finish and then we'll go to the board that come out to the public with questions so the schedule that we have right now is you know hopefully we are able to get to the rates by October 23 if you have a decision on the financial plans we can do public outreach in the October November timeframe we can have another board meeting in November at which point they would make a decision on the 2018 notice which would need to be issued by the end of November so we could have a public hearing in January of 24 and then the rates would be implemented February 1st 2024 or financial plans to assume that you will follow this particular schedule so that we can implement rates in February if this is delayed further then obviously we lose revenues you know for the month that delay that we have and that causes an impact on the reserve level that we have shown in this presentation and with that we can open it up to questions now okay thank you the beginning of the presentation director may who posed a number of questions to us one of the more significant ones was how we reconstruct ccu piping I'm not clear on how the budget and finance committee got up to those conclusions but we'll get there but it was more than that question there were a number of others that were being posed in those slides has the budget and finance committee concluded on those that's what we did at the meeting on Tuesday okay so there was a discussion of all of these things and basically what you saw there was a consensus of the committee plus the staff and that's where it comes from okay all right well what questions were being asked to delve into tonight besides the last one that I see coming up in Sudhir's presentation here is what I'm trying to get to at this point the first is how to how to reinstall that piping the rest of the questions that you were bringing up and why don't we look at those first can you pull out the gale slides yes those slides from from gale and who has those I want to start with this first one the engineering and environmental committee discussed this aspect I was at a meeting this morning and to have a cost of 25 million for the above ground piping I wasn't aware that we had any costs for that yet it's just an estimate we're just we're making an episode okay so for the financial model that's what I believe we're doing here we're putting in a number for the financial model I don't believe we're deciding at least it's not my impression that we're deciding we're going to go above ground at this point that's what I think the decision is all about let me let me finish Bob I don't think we're deciding above ground at this point versus below ground we're trying to put money into that the board hasn't had the full discussion of those options yet with weighing that we did have a discussion at the committee level this morning as to whether we could agree based on staff's recommendation that above ground was appropriate and we said no we couldn't come to a decision at that point what we did request was come back to us with the developed cost estimate that supports how you would propose to do the above ground so can I ask a clarifying question for a tell us though um let me let me finish here to kind of set the scenario for for the the board and the rest of it so the committee um didn't say that so just to convey the full board hasn't bought into that this is being brought to us at this point to see so what do we think on this so with that uh like you need to add something to a good I want to ask a clarifying question over I've tell us which is I thought I heard that if we don't decide tonight next week on above ground or below ground they can't proceed that's correct okay so you know we have a situation tonight but some we we have a situation here where there's a lot of delay in getting to any numbers around above ground or below ground and all of a sudden now we're being stampeded into having to make a decision like in the next few days and that that is not a good feeling on my part because we also haven't explored the option of an unconventional approach to at least p-line so um um so I the decision sounds like it's already been made we're about to disagree that it's been made well the budget and finance committee is bringing this to us uh based on discussions that they've had with staff it would have been nice to have gotten this information this morning I I don't know why we weren't presented this this morning I don't have an answer for that so yeah there is no answer let's let's proceed with with that Jamie since Jeff and Gail have had input into this I'd like to hear what your thoughts are on it so as the only non-scientists non-engineer non-finance person on the board I uh you know want to make sure that my understandings of why we are taking the steps that we are taking are clear and what I understand because I hear you know this conflation of two different conversations happening um and some of it goes a little over my head sometimes so what I hear is that uh we have to figure out a model for how we are going to understand what our costs are our inputs into the budget how what our strategies are for addressing those before we can then get to the next phase of okay let's start putting inputs in and see what reality looks like based on this model now I I understand that there are things about this model that are imperfect because there are there's imperfect amounts of information available to us so at some point in order to ensure that we can make our budget in 2024 we have to make some assumptions here right and go forward am I understanding where we're at as a board correctly I mean I believe you're correct yeah we need to make some decisions okay yeah so so to this question which while I know that we don't have all of the information it's not the first time as a board we have looked at the issue of above ground versus underground we are all aware that it will be vastly more expensive and vastly more invasive if we go underground but that it will also have you know tremendous other benefits in terms of reliability and stability those are trade-offs that we're going to have to make as a board and and we will not necessarily have the full and complete picture of what those costs are when we make those trade-off decisions we don't know if we say above ground that it won't be double that number when we get you know I mean we I'm just hopefully not but we don't know that we but we know it will be significantly less if we select above ground than if we go underground so I'm comfortable being asked to make a a values-based decision on that question tonight and and where I was when we first heard about this was that while I I always wish for the best possible most stable and reliable project I understand that we have to balance those concerns for me more importantly with the invasiveness of the impact and the length of time it would take us to construct an underground water main versus the the length of time that it would take us to go above ground so that for me is a really important consideration and that's why I would be I would be comfortable making the assumption that we are proceeding within above ground okay I like the way you characterize that we're making the values judgment here on which of these two for uh putting together the budget model we want to to use yes um and we've heard from Bob well I have I have more to say about this that okay um and and let's and more and more to say on that particular item is that again as we talked about this morning splitting p-vine from the rest because one of the things that we could have as a value is protecting as much of our supply line as possible right now we've protected about 40 percent if we did p-vine underground using unconventional methods not building 14 foot roadways we could protect 60 60 is better than 40 and if we couldn't get the other 40 percent well at least we have 60 percent and our future generations will thank us for that and that the other part of this is we also don't have to be constrained by this prop 218 process the supply line um projects could be handled separately through a separate prop 218 process just like we did the CZU fire surcharge for five million where we restricted it specifically to that rather than conflating these things and the reason I get concerned about that is if you look at history you can sometimes learn from it the rate study that was done the last time in 2017 forecasted budgets of operating expenses increasing 3.5 percent the actual budgets that were put forward were six percent the difference between those two would have allowed us to borrow anywhere from 15 to 30 million dollars of debt now without having to do any additional rate increases making ourselves even better positioned and if what we're saying is that these rate studies that people are using to base whether or not they vote is nothing more than a valentine letter that can be ripped up at any point in the future and do whatever we want why should they trust us now if we didn't didn't use the last rate increase study as the basis for our budgets because we clearly didn't and and and the difference between operating and capital I know is sometimes hard to understand but think of it this way I think we're talking about I believe you're getting away from the question I'm not getting away from the question because the question here is do we do this now and what is the underlying assumptions on the operating expenses that's going to drive what kind of capital we need to do these are these are not completely separate questions these are completely interrelated keep in mind that 650,000 to 850,000 of operating margin that is cash left over after expenses is about 15 million in debt that we can take out and had we followed the 3.5 percent increase from the last rate study through these last five years we would have been able to take out 25 million or so in additional debt with no change in the rates and we would be much better off right now because of the power of compounding these are things that we are not even talking about other than to say oh well that model we're putting together is just a model and no we're not making a commitment how can we do that to our community so Bob I want to I want to offer my opinion of these numbers and I agree with what Jamie said we're being asked to make a valued decision at this point for the purposes of putting together our financial model I feel that we should be putting in the number for the above ground cost that's being presented to us here so this is only the first of several questions Jeff you wanted to okay so I think we need to do a couple of things here first of all I would like to make a distinction between a projection based on what current knowledge we have versus a commitment which is a firmer type of decision and what we're doing here is a projection with the best knowledge we have it's imperfect we make commitments to our constituents when we pass a budget every two years we pass a budget and that is a firm commitment this is a projection it's a forecast it's we'll do our best to get there but five years out we don't know what the inflation rate will be three years out we don't know so this is it's the best projection we can make but we don't know no we do have the farther out we go the less the less knowledge we have right different that's why you make your commitments based on your biannual budget okay but the biannual budget is a choice we make Rick you wanted to offer something on this at some point just to move this forward I think from my perspective I would move that we agree that we're moving ahead to rebuild replace the raw water supply lines and put a budget of 25 million in which gives us time to vent out above below different construction techniques if we go with a below most likely your EIR process will be three to five years before you even start construction right so we won't even be looking at the big dollar numbers in this rate study period and we're going to then need to consider how to raise additional money yes to cover the rest of that put the 25 use the number of 25 million move ahead on p-vine and let's try to get through this lengthy process with the board so they all have your ready is a good feeling that we've been to the different construction techniques and select we've got the time but we should at least put the 25 million in because we need to do p-vine we've got three work we've got a lot of work to do and we've got the time to figure out how we're going to move ahead going to right now the environmental process if we can even get through it without being sued on barrier right is a three to five year before you break ground I agree how much did we how much did we do with environmental because it was during the fire the ground was still smoking we were exempt right um but I just expand one more thing of what I was talking about on the difference between projections and I commitments I understood what you're saying I know that what I want to say is that the 2017 uh study rate study which I'm not sure if any of the board members current board members were here when that took place maybe bob was I don't know I wasn't on the board but I was involved so that like this was a projection based on imperfect knowledge but the best knowledge they had at the time and over a period of five years assumptions have to change things disasters happen inflation happens all kinds of things and so the commitments that the board made were the biannual budgets and they were held pretty good they weren't biannual well an annual budget at that point but the commitments that were made were the budgets and the budgets were helped were as far as I know I wasn't present at that time but as far as I know the budgets were pretty well uh under control can I help can I help you with that because that's actually not true in the first two years after the rate increase was passed I'm talking about the operating expenses went up 14 and 7 I want to get off of that also but the past is prologue I want to get off of that also we've discussed this question and I've heard input from all of the board on this question I'd like to move on to the other questions that were that were posed that are part of the financial model um so could you pull up the second slide um the assumptions that are in the revenue model uh three-year averages uh for or sorry rates of inflation for three years uh using that and three through five using the tenure any comments from the board on that jamie bob jamie go to you first I don't I don't feel like I have enough particular expertise here to offer much except to say that I you know I think I'm kind of going to the next issue but I like the adjustments that we made in terms of front loading um but you know I'm comfortable with these assumptions okay okay so this this last month we saw inflation the last few months we saw inflation go down for a while this last month it's gone back up um not to where it was but it has gone back up right um so we I don't think we can predict that we're not so we have something in the model here um the budget finance committee is recommended bob do you care to comment on well the three-year average does that take it at about 4.2 percent something like that is that the number that they're using so I'm not sure the percent it depends on what category of expense so general expense and salary was a little bit over 4 percent the construction costs um so dear are you if you're still there you can type in it correct me but yeah I mean again historically if you look at our actual numbers the the salaries were going up three percent our budgets were going up six percent so there was like an additive factor on on top of that um I don't know that the overall I mean at least again looking at historical budgets I don't know that you can just say well it's it's inflation because that hasn't been what they've been going up I have used uh four percent for general expenses including salaries and then for utilities as I said we had higher percentages I think six and a half percent for utilities I mean I'm just I'm just looking at historical numbers here and they don't match any of those so can we explain more about why did Raf tell us take into account historical numbers in terms of what the district has done over the last few years so dear no we basically took the budget that we were given and then used the inflation factor so we didn't go back and try to identify the changes previous historical change than your budgets okay I mean again what I'm really looking for here guys is what is what the truth is going to be and if you look at our history relative to the last rate study and what the actual budgets were there's a big disconnect right and and we need to resolve that disconnect I hear you about projections versus actuals but the problem is you look at history they knew within a two-year period they increased operating expenses by 22% they front loaded the money in terms of the rate increase and the expenses were front loaded as well and that put you up at a higher level that you then compound growth on we're repeating I mean the thing that the thing that gets me so concerned because I've been around longer is that I'm I'm seeing this sort of it's history repeating itself exactly the same words exactly the same structure exactly the same assumptions the fact that we're not willing to commit to something beyond two years which was an arbitrary policy that we made we can commit anything we want makes me concerned we're going to repeat 2017 all over again there's nothing saying it won't and at the end of the day the people are going to pay the rates for whether or not we do what we say we're going to do with the question the question that we have in front of us that's why I'm asking look at the historical stuff okay because and I and I think that um Rev tell us did answer your question they didn't go back yeah I mean but here's the thing there's no there's no shame in saying hey four percent isn't what it is based in historical it should be six or seven percent as long as that's the truth that we're going to present to the community that they can use for making their decision but to go in with something that is that isn't a repeat of 2017 that didn't come to pass that doesn't make any sense um moving on then to the next two items that are on here I think these are both reasonable steps that you've taken in particular spreading out the capital projects over a longer period of time based on the districts uh spending on capital projects that we've been able to do over the last several years so yeah I think part of this decision that we were with this recommendation we were making on that was that um the district has finite resources in terms of project engineers and and people to go out and supervise and inspect and and review bids and all of that and we just didn't feel in the committee that we had the staff bandwidth to do that much capital okay all right um I mean I think I think something more like uh 10 or 12 in a peaking situation might be possible um you know we should be spending about six to seven a year in general anyway just based on the infrastructure we have and then we have deferred to catch up so that's where I come up with the 10 to 12 somewhere okay um why don't you pull up the next slide for us kinder and um reserve targets um I think that uh Sudhir clearly spelled out in there what the reserve target numbers are going to be I don't see that there's anything significant and just to be clear it does include the debt yes so one of the things I couldn't tell from I mean unfortunately I'm looking at bad numbers here in the agenda I couldn't tell if the 15 million or 19 million that we're talking about taking out if that has to be spent within three years like the other loans that we've taken out have have had covens for that we've been able to get around that because of the disasters but the covenant is you have to spend it on project identified projects in three years what happens to the reserve situation from a cash flow point of view and that might be helped if I had the model I thought the model was going to be distributed I haven't seen the model yet but if we had the model I could probably do some sensitivity analysis to figure that out when we are distributed we are planning to use up the first debt issue in the first two years and then the next debt issue will be uh actually yeah in the first two years we plan to use up the debt funding and then the next and then that would take your reserves down um so you're saying you would take out another debt in the two years after that if you needed to that's right this is where I need to see the the cash flow because right now I can't I don't have anything here in front of me to be able to make any kind of determination when is the model going to be delivered? All the tweaks have been made and to the rest of the board yes also okay all right um increasing the uh reserve levels every year uh the slide that Sudir showed us on that actually it didn't show that though it really didn't okay yeah I did did it yes yeah well again it depends on if you're using debt and cash right so right um but I didn't see anything that's significant with that aspect of what was there front loading the reserves uh to be higher in years one and two revenues I'm sorry revenues then in years three to five I think that given everything that we've gone through in particular uh this year with emergencies and the rest of that uh being able to build up revenues and front loading that is is appropriate Bob I'm it would be appropriate under a similar kind possibly appropriate again I got to see the model possibly appropriate under a similar kind of restriction excuse me that we had on the CZU's debt surcharge and that is that this part of your bill is going for this purpose as opposed to just goes into the general fund to be spent anyway we want okay we hear what you're saying on that um and last do we want to take out debt um we have the uh this built on did did we look at a 30-year I don't believe we did no we yeah we've done 20 years because we have two right now one's 30 one's 20 too big it's 130 120 okay uh but if we did bond we would do that make that decision at a later date if we had a significant additional cost such as on CZU pipeline where we knew we needed to have 52 million maybe that's the point that we go up for a bond on that which would then require a vote so and just to be clear the the difference on the debt is that a debt taken out under the model here is something that is equally distributed across everybody's bill effectively right whereas a bond is an ad valorem tax that means it's based on the value of your property so people with higher values of property pay more than those with lower values so that's what the school board did with their 75 million bond it doesn't have to be done that way that is a typical way I understand that might be typical I don't want to say that that's the way that it would have to be done parcel tax is very different than a bond but I don't I don't want to debate how we would do a bond this is not the place to do that I agree we agree at this point it's the model is based on revenue if we did bond that's something we would discuss anything anything that is on this slide is fair game for discussion I disagree well then why is it on the slide they've this staff is the budget right there needs further discussion on giving some background to the community and what that might involve it would require further discussion years from now whenever we would go out for a bond yeah I think the question is do we want to take out debt in some form right if the answer is yes then at the point where we're faced with the question of what is the amount of money we need we would determine is does it make sense to go out with for regular and for the for the purposes for the purposes of building the revenue model we're not assuming that it includes any bond debt so um wait what I'm sorry what for the purposes of building the revenue model I think it does show debt yes it shows debt but not a bond sorry we've taken the conservative approach of assuming that it is in the form of a loan right yeah a loan 20 years current rates but when we do go out it'll be current rates then right and we'll explore all the options and see which one is legally we can't make that decision tonight all we can say is yeah we'll go seek some debt at some point yeah right so you know that's not a we can't make that decision so um I'm not sure if this is the the last of the I do have a couple of questions okay okay um I wonder if we should go out to the public they've been sitting there and also I want to see that and then we can come back to the board based on uh any public input that we have at this point so uh given what you've heard uh and seen as far as these questions uh what questions does the public have if any or comments uh and could you please come up to the mic and I do want to say that uh public presentations are uh limited to three minutes so I just appreciate all the information we have shared and it's being transparent as possible I'm Tess Weisbar 40 board 40 board I think staff should address the chair and not be asking the speaker I mean if the chair wants to ask the speaker her name okay I don't think the staff should be interjecting at this point and also I think that the chair should be clear that in this stage you cannot be required to say your name to participate in one of these meetings correct thank you again um I'd just also like to make clear that we should not have members of the public leaping up and making points of order so there's a three minute period to speak and you'll be called at your at your opportunity thank you can we restart her o'clock yes of course you're you're right it's only board members so my question is what is the hurry with the model that we were presented why do we have to make a decision in weeks time with the with the model that was presented we need to make a decision on the revenue model in order for RAF tell us to take the next step which is to start to calculate various alternatives for what the rate structure will be and so they can't do that until they know how much revenue is needed okay so to stay on track on the as as Sidir put up the next steps of what all the things we have to do um we need to make a decision on the revenue model by the end of this month end of october is that is that right he was saying october yeah so in other words that's why we're not voting on anything tonight and we will have further discussions at the board meeting on the 21st um and so but so there's more than just a week's time yes yes thank you yeah could could we um put the schedule back up on it i want to make sure i understood what you just said Sidir yes um let me see is the schedule next next should i go should i wait um go ahead let's let i i'd like to see what the schedule is so we could conclude on that uh first these uh have the shares can you see my screen yes okay yes so what what is what what isn't clear with on me though is is what that rates discussion with board means october 2023 that says to me that the rates that they're making a rate proposal and in order for them to do it by october they have to have this you're right budget done you're right now because we're being rushed the end i i misspoke we need to do it by the end of september okay so just wanted to clarify that i'm i'm sorry i made a mistake okay okay my name is bo silver i'm part of the bear creek walkways water mistakes we're 50 houses that our water rates are obscene was 277 four years ago and we increased it by 70 up to 400 dollars a month right now so that's what i pay for wastewater and so i guess you can you're saying no i don't know we can talk about it after uh so i guess they're asking for more money or something it doesn't make any sense to me it's totally i know all 50 people and that in the community we're not giving any more money for any of that our rates were insanely increased and then also there's a slide that's like oh we're going to do something in 2031 i don't know what that thing is but i guess all i'm saying is that the amount of money that we pay for wastewater right now is completely obscene it's not fixed right now i'm willing to do any reasonable plan so no reasonable person should have to pay when we pay for wastewater and it's fine to create a cube bottle where like money goes up for whatever reason it goes up but um we were just asked at least 50 increase i don't know if my numbers aren't perfect but it's really not acceptable to ask us to pay more money and you know we were told that this would get fixed and a number of something the study was done but i guess all i'm saying is that i'm willing to work with you guys but there's just absolutely no way we're paying more money to the very few wastewater i say it's 50 people i want to create reasonable solutions i don't i haven't heard one yet ever and we're a reasonable community we wanted to do reasonable things but as bob has kind of been saying crazy stuff happens years ago and i'm not forgetting that so we're definitely voting down eight great increases for barricade wastewater estates i'd like to know more information rather than a slide that says we'll do something in 2031 uh and asking for more money because like let's just say the money was going up just a little bit over these years and then your that's not what happened it was here and it went up like this and then there's more increases so i have no idea why there's more maybe that that uh spike in 2031 was to allow the district to connect into a system uh that the county is putting in place uh the it's also to to uh to to to to to tie into csa seven we have to have a new collection system new collection systems coming in in csa seven is is the county system okay but i could believe that um spike is the collection system that we have uh uh notice violation not because of the i and i and i don't want to pick something in 2031 that makes sense i was just curious why the credits were increased so largely four years ago and then there's more much chance for us that's what i don't understand came i made sure his i think his bill is a combination of wastewater and water okay well it makes a big difference well how much do you know how much we pay in wastewater does anyone know that okay i don't go ahead come on to 257 sorry only 257 per month in wastewater sorry about that it's pretty good i'm not i don't know 56 houses 257 per month i know that's a lot i am on septic so unfortunately i hear you i understand that's a challenge but but what i'm saying is 257 times 56 houses is $170,000 annual operating budget to run your septic it doesn't matter i'm gonna vote now i understand but i'm kind of you're asking the question about why my question was we increased it by 50 four years ago i don't understand why you're asking do you want to debate though or do you want to hear the answer to i want to know why it was increased so much and then there's more of another it's the basic question of what do we get for the money that we're being charged we never answer that question on anything um rick do you want to answer that is going to take a little research to be i don't want to give any information okay i have no problem getting some of the information but i said here give it up top my head all right i want to be accurate okay just for perspective the first vote that was taken the last time rate increase was proposed they defeated it we understand it okay we'll do that again thank you thank you guys real answers for why you're asking that's why they've been out of compliance for the last time that's your problem and i'll vote now i want to get off of that i just told my house to get pranked do you know someone told me my house is gonna get pranked and it didn't so that's not my problem i will vote now my problem is i vote yes or no thank you thank you for your input rick has agreed to to follow up to get some additional information but he always has a great job i don't know if i have your contact though i would love to give it to him so i'll give you mine i'm not confidential i promise i'm a sweet happy normal i'm just trying to get some answers you guys always agree thank you uh thank you uh your next commenter hello jill gary from ymc ak demo and i just apologize for my ignorance and where all this information is and are your budgets online yes okay and i understand the basics of budgeting and reserves and all of that small reserve i'll look at them then hopefully be able to propose some thoughts and questions about that i was just wondering we could put whatever we're going to put in reserves but if you don't financially make it for the year my guess is that you will then use the reserves for operating is that incorrect or correct i don't i don't have an answer on that uh rick that'd be correct yeah that would be correct hopefully because that doesn't reach that you know it's has that been the history i do believe it probably has been the history um from time to time you know with different disasters that we've had i mean we don't have a crystal ball if there's no disasters and no covid and supply chain issues and all the problems we've had over the last five or plus years we probably would meet all these normal inflation rates and so forth i understand that too because i have to manage my job so i get it and i know how we use reserves it's very difficult but yes that would be very good okay uh reserves right so then we're creating reserves that might have to be for operating so based on history that might happen and we have no idea what's going to happen with this wonder it's going to be here next summer or whatever so i get a hundred percent of that um when it's talking about the revenue and if we have to come up with a model to be i would i would have hoped to have a model that's based on reality of how we know it right now if it's just a guess i get all of that but it could be 52 for the above grounds and then then where we're at and then if it comes down to the rate increases something like the property that i manage whatever the value is or whatever the what it comes down to will just negatively impact the people that we serve so i know that you know that's that's in that equation but i think uh as far as budgeting being able to see it and be able to comment on it and be able to understand what changes you make along the way would be helpful for me as a property manager i don't know the one i'm saying silicon valley owns it but i think understanding that you're you're trying to make make a model based on unknowns that i don't see why you wouldn't look at history because even when i'm making my budget i look at 2019 and then is it real or is it not but we're now having to make a decision on something we don't know about or you guys do i don't have any part of this but it seems like an odd process is all i'm going to say but i would think that based on however you use reserves um you know i think we're we're you're going to use reserves for operating that makes sense but if we don't increase them each year then there will be in the same situation that we're at okay thank you thank you for your comments um anybody else it's all the way i i went to both committee meetings this week the the budget and finance committee did not have the above ground below ground issue on the agenda at all but it was substantially discussed um and uh and i told them that it was on the agenda for the engineering committee this week but they've already made their decision even though it was an unagentized item so i'm kind of disturbed by the process and then the lots of local government meetings um you need to stick to the Brown Act you need to stick to an agenda they got off topic as far as i'm concerned and it almost sounds like it's being brought to the board tonight to make this above ground below ground decision i mean it was right on the slide with question mark answer the question and yet it's not on the agenda tonight at this meeting um and uh you know i guess everybody could could walk out of this meeting and say well we decided we decided to go above ground and other people in the community who who might have even looked at the agenda tonight would be very surprised that that was the outcome of this meeting um another thing that was on the agenda for the budget and finance committee was reserve policy there was an item on the agenda for reserve policy i attended the whole meeting um it was repeatedly said that the meeting had to end at five and started at four had to end at five had to end at five finally went on to five fifteen i guess but there never was a point in the discussion when uh the chairs said oh now we're moving on to reserve policy we're going to discuss reserve policy so my impression was reserve policy didn't get discussed at all at the budget and finance committee so one of the points that i would have made if it actually if they had actually followed their agenda um i don't know this two and a half percent number i don't understand uh it in some cases it could be too much and in other cases it could be too little um if if uh the asset that you're talking about is something like a roof uh that only gets replaced every 30 years then two and a half percent just just to say oh we should keep two and a half percent every year um it doesn't really solve the problem you could have two and a half percent every year for 29 years then in 30th year you're gonna have to borrow it to be able to do that project other times i think it's too much uh for this district uh probably most of the assets are either pipes or tanks and because you have so many diverse assets uh you you actually need to spend two and a half percent every year you need to spend two and a half percent every year of your tanks and of your pipelines so the two and a half percent through those assets is more like an annual uh an annual budget item yeah it's pretty much pay as you go and i see i'm out of time but i think you should be careful with the brown asset you're not speaking with your agendas you're getting off topic and getting on the side of the project um i have folks want to comment jamie can i just correct it um let me have jamie speak to it and then you can't go i just wanted to say that for my part i don't believe that we're making a decision a bit about above ground or below ground tonight um maybe it was not phrased in the perfect way but i think what we're making a decision about is how much money do we want to project in future budgets for project costs associated with p-line and we are saying based on our best knowledge right now we are willing to well at least what i'm saying is based on our best knowledge right now i'm willing to project 25 million now as we continue to develop our understanding of that project and receive more information about it if we have to revise our assumptions we will then have to seek additional funding this is a an unfortunate but very common process that happens in public government budgeting it is unfortunately why you you know you see inflationary cost and projects over time because it takes time to understand and get to those members we have to go through a long environmental process before we can truly understand what the cost is because then we'll know what are the you know factors that we need to consider for that project and we just can't have all of that information at the point that we have to set a budget okay okay yeah all right um i do have a comment in that to follow up on that which is very quickly which is we could have had that information because we asked for a lot of this a year ago okay so we we that we're doing it to ourselves not having it i disagree with bob's comment we've been working with outside consultants to try to get to that point we don't have it yet but for the purposes of what we want to put into the budget i agree with jamie's statement that putting that 25 million in now is appropriate so i'd like to go back to public comments to see if we can conclude on that yes i'm jim mosher i'm from felton and i'm on the budget finance committee as a citizen member and uh just to clarify um what was on the agenda was to go through these very slides and make comments and and uh give advice to staff and to wrap tell us about what the budget finance committee uh felt about it the major decision a major issue in that slide presents presentation was two scenarios one was above ground and one was below ground so when i prepared for the meeting that was a major issue that i thought we were going to be discussing and i think it was part of the agenda because it was part of the slide because that was one of the key decisions that this board has to make so i i'm just a little baffled by saying we violated the ground act by talking about that very decision that is so central to the to the um uh material that was presented to our committee uh two quick things just my comments about what uh the questions that you're addressing tonight one is that i do believe the above ground is the best approach for a variety of reasons that have already been uh spoken about i won't repeat them but i think the idea that we i think some of the environmental issues the issue around whether we get the kinds of problems we have uh with uh FEMA uh it's just makes the the varying option really problematic even aside from there what we expect to be much higher cost i wish we had an act you know some sort of estimate other than sort of feels like it's being pulled out of the half 25 million um but you have to have a number to stick in there so i agree with change uh that's probably a good conservative number to use at this point for above ground i still think that the projections for how much capital work you're going to do each year even though you lowered your one from 27 to 24 is unrealistic i just don't see this district spending 24 million dollars you could have the money in the bank but it's just that's not been our history um so i think that's still unrealistic and i think it would help uh in terms of um in terms of being real more realistic about what we can get done to look look at the history of how much we can get done with all of the permitting the supply chain problems um the the construct you know getting constructed look at the fish lab uh as an example so i just wonder if you want to we uh continue to relook at that one okay thank you um i'd now like to turn to members that are attending virtually uh the public um Cynthia Denzel uh yes can you hear me we can uh i just wanted to congratulate you on discussing so many issues that are contentious and important to the public and to your process there i'm aware that other government agencies in our area are having trouble attracting and keeping personnel and that really complicates the process of getting any work done if you don't have project managers if you don't have people to do the environmental reviews and take into consideration all the factors um and do public outreach your handicapped and i think that we are in that position with the loss of personnel and our future change of director i'm you know i'm in favor of increasing the inflation number for staff and that part of operating expenses because i think that's a realistic assumption so thank you very much for your work i really appreciate your the input of all of the board members thank you okay um alina land hi alina laying a boulder creek um i do apologize i'd conflicting meetings i had a bce meeting so i missed the first half but i was very surprised to log in and see that you guys were discussing uh above grade versus below grade and i was even more confused because i am a committee member on the environmental and engineering committee and we had a meeting this morning at 9 a.m where we were i was on the agenda to talk about above or below grade and we the physical impact for above grade was listed as tbd and below grade was uh 61.64 million and then your slide here was saying like 52 and 25 and you guys had a number suddenly between between 9 a.m and now of 25 so um that that's pretty confusing and i feel like that uh we asked for that information in the e and e committee like forever ago um and they came back again to the committee without those numbers and i don't know how the budget and finance sort of how they got those numbers and then are all on board to go with above ground and i i just i just feel left out of this conversation when it was agendized on our meeting today um that's all but thank you for your hard work on this i i know it's a lot okay thank you alina um uh chris show meyer hello can you hear me yes hi uh i'm the slb superintendent uh and i just um been listening to everything i don't really get involved in other district budgets um cars is big enough to handle oh i don't think he wants to make a comment and he's just listening oh okay uh that's it that's it chris sorry no but i'm not sure if i'm coming through yes we can hear you i i'm just asking when you move forward for the rates structure if you taking consideration to the school district which is the largest employer and one of the largest users of water we can't charge people more um when our rates go up so it's a direct impact to our operation budget and a lot of cities and water districts taking consideration their school districts and things like that when they're doing the rate tricks or the last one really substantially increased our water rate when the tears changed and we are treated like a residential and so whenever you're considering that can you keep in mind our school district the largest employer and one the largest users and how that rate will impact us as a school district that's all i'm asking okay we will that's part of the next the next step yes okay um that's all the folks from the public that i see online who wanted to comment um with that uh like we could uh go back to the board president smally may i uh may i interject sure so we have quite a few unknowns i think director fools is talking about the operating cost going up potentially and then we have questions about you know which particular option we should be having in terms of underground and above ground the uh if we just if we make a decision to go one way or another supposing we go with the scenario one which is the above ground scenario we are looking at 10 percent for two years and then seven percent for subsequent years and if it turns out that your operating costs are higher uh you know and you're not going to be able to meet them with the rates that we have implemented obviously you're going to have to do another 218 notice go through another rate study if you decide to go with scenario two which is the higher revenue adjustments which are 12 percent for the first two years and then i think it is eight percent for the subsequent three years you have some options there in you know if you decide to go with above ground you don't need to increase your rates as much as we are saying you first of all the opt the decision as to the debt issue can be made will be made sometime next year in the middle of spring or even maybe you know say in spring you know so you have time for that decision you may have better numbers by that time as to you know which option is going to cost you how much so the question is you know do you want to bite the bullet and go with the more conservative rates which is the higher rates right now and if it turns out that you don't need to have those kinds of expenses both in terms of operations and our capital you can always go with lower revenue adjustments and what you put in your 218 notice question is are you willing to bite the bullet with those higher rates that that we are proposing on the scenario two for the water enterprise i think if that helps you make a better decision kind of you know helps to decide at this point there are several still unknowns and so you decide whether you want to go with that option you don't need to do another 218 notice hopefully if you decide to go above ground because you would have adequate revenues in that case to cover any increases in operating cost as well okay we understand your your question the feel that i have from most of the rest of the board is utilizing the 25 million dollar number for the purposes of putting together the budget the revenue model that we're preparing so we haven't voted on that yeah i i think he makes an important point that we haven't really thought about it that way which is another way of thinking about it rather than talking about above ground or below ground it's basically just what what kind of revenues we need and i i think that's worth all of us thinking about and discussing on the 21st and so just like everything else i don't think we're trying to come to conclusions tonight i think we're trying to lay things out and get public feedback and part of the reason we did what we did i know bob is objecting but we were trying to to focus the discussion so that these things would be surfaced so the public has something to respond to and the board has something to respond to um and so that's that's that's what we did okay and i appreciate the questions being put out this way i left the last meeting with what were they asking us to talk so okay uh bob well it would have been most helpful for the public to be able to comment if the presentation had been in the agenda it's kind of hard when you don't have all of that i have a number of things i want to say and they relate to everything that's talked about tonight the first one is when it comes to the brown act we all really need to listen to bruce all the way the i'm looking at the agenda for the budget and finance committee i don't see the presentation in there i don't see anything about above ground below ground in the agenda there might be something else attached but i don't i don't see it i do see the capital um the reserve policy discussion so you know bruce was absolutely right about that i had one clarification on the number i wanted to make sure that um i understood properly um and unfortunately i don't think it's one of your slides but it is one of the slides in the agenda um maybe it is the top line water revenue number does that include the ccu surcharge or is that exclusive of the cc surcharge uh i'm not sure which revenue number you're looking at uh well again i wish i could give you the number but it's since things seem to be different from what's in the board packet let me go to the one that i have in the board packet and i'll give you an example hang on a second kind of scroll down backup slide it's not for distribution okay um in the financial plan scenario one option one that's in the agenda there's a source of funds water rate revenue in 2024 it's $1219208 does that include the ccu surcharge or is that exclusive of the ccu surcharge actually i don't see that number in my model here so i know it's because of the the fact that we're looking at different yeah slides this this would have been if if you go to the agenda um it's in the agenda on page oh god this is why everything needs to line up when you're having a meeting dincey do you recall whether uh the surcharge revenue is included in the top line water rate revenue in our model uh i believe it is i'm looking at the model surcharge hold on 34 so if it is i mean one of the things that the board established as policy when we did the surcharge was that would be accounted for separately and would not be included in general budget numbers like that because it's misleading you can't use that million dollars for anything that you want it's specific for the ccu and that distorts um the revenue number relative to the expenses well the thing is basically all of your revenues wind up in a pot and then it doesn't matter whether the pot has you know one revenue or another revenue it is going to be used we are saying it is going to be used to fund your capital expenses as shown on that chart so it doesn't really matter once it comes in it gets mingled with everything else i understand i understand money's fungible but from a presentation point of view it's misleading for the public we actually need then why did we set the policy then of course it's two different things so you are informing the public because you are conflating two entirely different things i'm not conflating i'm trying to forming the public i am trying to conflating two different things i'm trying to separate two things so that we aren't misinforming the public you are attempting to misinform the public because you are conflating two different things as you often do okay really we'll have a discussion about finance later the next question i have about this hang on a second if i can interrupt you just one second the water capital slide that we showed shows the brown bars which are representing the fire search are being used to finance the capital projects what i'm trying to do is make sure when i'm looking at the model that we're going to get tomorrow that i'm understanding what that number is if that number is excluding the ccu surcharge that will lead me to a different conclusion but thank you for for clarifying that it does i was actually i was mistaken i'm sorry i'm looking at the model and how it does not include the fire search oh even better so that's good okay so that number is pure fixed and variable revenue that's correct okay i'm not well enough to stay much longer so i'm gonna have to leave okay all right thank you gil one other comment and that is doing the vote over the holiday so this prop 218 process is already rigged enough because it's a negative vote if you don't vote it's the same as voting yes so you're not really actually voting for something you're voting against something so by doing it over the holiday when people are not tuned in to anything but family and the holiday season and the spirit and all that that doesn't seem to me to be a very transparent thing to do what does that have to do with the revenue model bob and also because we're talking about the schedule because the schedule here is related to when we're supposed to do things that's why it's all interrelated comment on this the previous meeting bob put the last one so you've commented on it again okay well we had the same presentation again so we get to make a lot of the same comments again actually we got this presentation again so that we could hear from the public again right we've heard from okay and i want to share with the public my same comments okay and i'm sorry you guys find them tedious we i see new faces here okay so okay and we understand your concern with doing that vote so could we could we have that as a discussion item and an action item at the same time we're talking about finalizing the budget because if we aren't doing the vote over the holidays we might have a couple extra weeks a meeting perhaps to be able to allow us to get better numbers on the above ground or a hybrid above below ground or below ground i'm i'm not willing to do anything further with that above ground below ground to put any contingencies on trying to come to a conclusion on that so from your point of view we've already so from your point of view we decided tonight without a vote 25 million no well no okay we haven't taken a vote on anything we've had discussions about our opinions but you're saying that you're not willing to do anything more about this um so what so next week what is it that we're going to do we're we're going to have further discussions on this next week using the 25 million dollar number that's going to be put up in front of us yes the burying it is going to be put in front of us also keep keep in mind that the peer review process that was done on the original fryer and loretta was delivered to us on november 22nd i know we asked for numbers after that was delivered we are now 10 months later yes and we still don't have a number and now all of a sudden we got to make a decision so mark isn't this what we always do uh could i make a comment sure um the fact that we've ended up with one presentation on the screen one on the agenda the fact that the budget and finance committee ended up discussing things that were not on the agenda and i part of that was because gail has been ill and didn't have time to really work on the agenda but um we're moving a little too fast here because we're out running ourselves and finding ourselves in board meetings here where we aren't quite ready to make decisions we don't have all the information i think one of the next steps has to be to take a good hard look at that calendar and say do we need to throw a couple extra weeks in here to catch up with all this stuff what does catching up with all this stuff look like though that's well for example we may be able to get some better numbers on the above ground below ground we may be able to answer some of the other questions that have come up tonight on the model um adjust the complications of having to publish agendas uh we're we're moving faster than we can get agendas published is what i'm getting gaffer okay and so i think we we just need to take a deep breath can i see something first of all i want to acknowledge a couple of things staffs working under difficult conditions this will be next week will be the fourth board meeting in uh four weeks right so that's turning an agenda every couple of days to try and get it out that's hard we're doing it under hold on hold on let me finish we're doing it under the the conditions of having uh some brand new staff members in place who are still getting their feet on the ground and understanding you know what's happening and losing some staff critical staff members that we're going to have to replace and so you know i i think that a little bit of grace and you know the imperfection in the process is understandable but i also want to respond to this idea that the prop 218 process is inherently rigged that is bob's opinion of a legal process that has been governed and passed by the state of california and dictates to us the way we are allowed to set our rates now i understand bob doesn't like the process and bob disagrees that that's the way the process is set but unfortunately that is the process as it is given to us by the state of california and so i really find using language to talk about a legal process we're required to follow as rigged is inflammatory and misleading to the public and unfair to the board because we are following a process that we are required to follow by law that's all i wanted to say as i said it is my opinion as all things are the rest of us have to ask you to speak but he just answers well because that was a fairly direct looking at bob that's a that's a fairly direct comment to me and i think my article basically explained where i'm at in this i recognize that it's something that was passed by the public i don't know that they understood it but i think but i recognize it was passed however there's no there's there's no requirement that we have to follow the minimum standard that is allowed under the law we can do what we want as long as we are following the law following the law does not make it rigged i am taking issue with the way that you choose characterize the process it's a rid i listen to you i i i disagree that i disagree that it's a rigged vote it is the way that the law it governs the process you don't like it take it up with your legislator sure yes it's rigged in the sense that people aren't voting for a letter to our i disagree with that bob okay fine i understand we can we can continue to battle with this and we're not going to change each other's minds at this point um for the purposes of what we were asked to do here this evening which was comment on ref tell us a presentation of the race study i think we've concluded that part of the process so um with that i'd like to adjourn thank you