 So we do have a cheat before we get started. I just wanted to announce we'll be the close session will be held at the end of the meeting. I know it's listed. Close session is listed as being at 6 o'clock, but it really will take that up at the end of the meeting due to logistical problems. Mainly, the meeting was next. There's a meeting next. President Christensen, we were able to correct the agenda. So it is at the end. Well, I know it's an end, but it still says. OK, all right. So I just wanted to make sure that was clear. Is everybody else here? Dr. Jaffe has not joined yet, but we do have a quorum. I'll call it up. Dr. Balboni, here. Vice President Jaffe just joined us. I see Dr. Jaffe. Can you hear us? We're doing roll call. I can hear you. Great. Thank you. We see you're here and we can hear you. Director Lehu. I am here. Director Lather is absent. And President Christensen. Here. Thank you. OK, so then, giving over to, we have no public hearing today. So this is, we're on item three, which is the board members' opportunity to remove items from the consent agenda. They wish. Any? Do we have any? I don't have any. I don't have any either. Me neither. So at this point, anyone? I'll move approval of the consent agenda. Oh, wait, public comment. Oh, wait, no, just wait a second. Anybody who'd like to make a comment on the consent agenda is welcome to you right now. Thank you. My name is Becky Steinbruner. I noted in the consent agenda, I think it's item 4.5, the district rejecting the claim from the Palm Terrace mobile home people that your very high water pressure caused them a lot of damage to their internal water systems. I think that you should not summarily dismiss this. It is a problem throughout your district. Some people in the seascape area have had problems. And clearly, it shows on the meter that it's nearly 100 PSI. So I would like you to reconsider what staff is recommending as complete dismissal of this. If you investigate this and do a fair evaluation, it could save legal costs. $35,000 worth of damage is a lot of damage for a mobile home place. And these people are on fixed incomes. So don't expect them to absorb this damage that likely was caused by the district's pressure problems. Thank you. Would you like to comment, Leslie, on that? It's done our policy. That item, the policy, is to remand it over to our insurance company for review and final resolution. Yeah. Yeah, that's when it gets to a certain price. But it's over $2,500. It has to go to the insurance company, so automatically go deny it. So it's not assigning any responsibility at the moment. It's going straight to the JPIA to be educated. That's what always happens when it exceeds $2,500. So we're not denying it. We're just rerouting it to our insurance company, correct, which is our policy. Yeah, correct. And then weigh in on it, then we act on it. That's just to clarify that. It's just a clarification for your health. Any other comments from the consent agenda? OK, we'll move on. Is there a motion to approve the consent agenda at this point? So moved. Second. Second. Thank you. Can we do it by a claim? Or do we have to do it by roll call? So I had a motion by Dr. LeHue and a second by Director Balboni. Is that correct? Correct, sure that works. Roll call, Director Balboni. Yes. Vice President Jaffe. Yes. Director LeHue. Yes. And President Christensen. Yes. OK, moving on to oral and written communications. The public is invited to address any item that is not on the agenda this time. And it's three minutes, three minutes to speak, and I'd like to keep it to that. Thank you. My name is Becky Steinbrenner. I submit a comment to the state regional water quality control board for the two permits that SoCal Creek Water District is seeking related to the Pure Water SoCal Project. It really concerns me that this project will inject water that the state water board admits will degrade the high quality waters of the aquifer. I have been trying for a long time to get a final anti-degradation analysis, as is required by law, that the district provide. And I was finally able to get it from the state water board. And it really, I do not understand why the district would want to degrade the high quality waters of the aquifer. In the name of trying to restore over pumping, what I want to ask is because the nitrate level, according to the documentation in the permit, the draft permit to do this injection, states that the project will inject water. The finished product water that we've all been told is pure. It will contain 3.5 milligrams per liter of nitrate. And it would be injected into the high quality waters of the Perisma aquifer that have an ambient nitrate level of 0.06 milligrams per liter. How can you do this? It should not be allowed. And what I'm asking is that you pull back on injecting this treated water that you cannot get clean. If you can't get the nitrates down to closer to the ambient level, what else is getting through? What else will be in there? And I don't think it's fair for Soap Creek Water District to be injecting this into the aquifer that other people depend on as well. You've stated that the water would meet all drinking water standards. Well, that's true. There are many unregulated pollutants that are not being named. And what I would like to ask you to consider is that rather than injecting the treated sewage water, which is what it is, into the injection wells, please work out a transfer water deal with city and inject potable water. It would be much better. Thank you. Any other? Hi, I'm Chris Kirby. And I'm really concerned about you guys raising our rates again. It is unfortunate. Pardon? It is unfortunate, but necessary. Yeah, I think, well, I don't know about necessary. But I think you've already raised it about 53% in the last five years. Do you talk to people about what this is doing to them? There's older people that are taking showers every other day or every third day because they can't afford their water bills. Our bill used, well, we moved here in the mid-90s. For six people, it was like $65 every two months. That was when it was billed every two months. Now it's at $300 for four of us a month. Luckily, we still work, and we can somewhat absorb it. But I'm really concerned about the seniors and people on fixed incomes that cannot afford it. It's just, I mean, water's a right that we should be able to use. And when I see what wages are in this district, when I see you remodeling your office, for God's sakes, come on, it was fine. Unless there was structural problems. It just seems like you guys are not aware of what this is doing to people. I feel like, privately, you laugh at the rest of us. Like, oh, I mean, you're given raises and bonuses where this is these people's jobs. Why are we required to do this? This is a municipality. It's not a privately owned company. We can't, it's really too much for a lot, a lot of people. I feel like you guys have no regard for these people. Like, oh, we're just going to raise the rates another 10%. Where does this stop? PG is so high. Food is, I mean, I could go through the list. It's too much for a lot, a lot of people. The wages and the bonuses have got, it's got to stop. We can't afford it. This is a municipality. And we have no other choice but to use SoCal Greekwater. And I think it's really, really unfair. I mean, I'm speaking for a lot of people. I talk to a lot of people. We were out at the farmer's market talking to people. I have a radio show. We talk to people. And it's really impacting a lot of people. And it's like, you guys just don't even care. I saw Leslie send a letter to one of the ratepayers saying that wages is the salary. No, it's the benefits. It's everything that people are all making. I mean, Ron's almost at 400 grand a year. We, as ratepayers, can't afford this. With your benefits and your pension and your health benefits, it's out of control. And I think it's really unfair of you people to continually keep giving yourself raises and bonuses for doing your job that on our backs. There's a lot of seniors that this is really hurting. So that's just what I have to say. Thank you. Any other comments from the public? And then we will move on to reports. And then President Kirshensen, I don't have a report this evening. Thank you. 7.1, there are no conditional or unconditional will-serves. And 7.2 is a rate discussion presentation by Raftalus. So good evening. This evening, we do have a rate presentation by Raftalus Financial Consultants. They are the consulting firm that is developing our rates. And so they have been working with both our ad hoc water rates advisory committee that is made up of district customers as well as staff and directors and working with district staff to develop a finance plan, which they're going to kind of discuss with you this evening. And after the finance plan has been settled, then we'll move into a discussion in November of rate structuring. So I do want to caution everyone that the information being presented tonight is about the finance plan. And it does talk about our revenue need. But that doesn't necessarily extrapolate one to one for rates. So we do have an increase in revenue need. What that increase would be to the rate pair remains to be seen. And I'll go ahead and pass it off to Kevin. Thank you, Kevin. Thank you for the introduction, Leslie. I'm going to share my screen here. Good evening, President Kirshensen, board members, staff, members of the public in attendance tonight. As mentioned, we're going to talk about the district's financial plan tonight. So tonight, we'll be talking about utility financial planning broadly at first and then getting into some details, some presentation of results or examples, and then a bit of discussion on those examples. And then we'll briefly touch on our rate study schedule, which also includes public outreach. So when we go through our rate study process, this is the normal course of a rate study. So the first is a rate setting framework. So we talked about financial goals, pricing objectives, alternative rate structures that we want to evaluate. That's something we've discussed with staff over the course of the last several months. It's something that the board has done on its own over the course of the last year. We have a slide in here talking about those key objectives. The second step is the financial plan. So that's the presentation tonight. We'll be looking at how we fund our operating costs or capital costs. What does a cash flow look like relative to our cash needs or operating capital for reserves, for future debt service, et cetera. The third step is rate design. So that's where we take the cost that we need to recover, all in costs, and allocate those to our different user classes based on different types of commuters sizes, our customer classes, and our user groups. We look at alternative rate structures that we might propose or modifications to the existing rate structure and then calculate rates and conduct a customer impact analysis. So tonight we're talking about step two in the background, we're well into step three, and then step four and five is really the procedural and substantive requirements behind legal rate setting in California. So step four is rate adoption where we document the study in a study report that's reviewed by legal counsel. We then have to notice all district customers. They have the right to protest the rates and at the conclusion of a protest period, we hold a public hearing that we have tentatively scheduled for February as a completion date for this year's study. And that public hearing is a conclusion of the rate study process. So when we talked about financial planning, we have a water utility, the properties of a utility system is that it's highly capital intensive. We have highly fluctuating capital costs and capital needs over time. A lot of our asset base is underground. It's in inaccessible areas, it's of varying ages, and we have increasing regulatory demand. So very capital intensive, but we need to recover those costs in a way that provides rate stability for both customers and the district. We always want our rates to be affordable. We want to be equitable in how we recover our costs through our rates and we care about environmental stewardship. So oftentimes there's a tension between the properties and the acceptance of rates and that's a bit of a balancing act in the financial plan as well as rate setting. So we look at key pricing and policy objectives. There's a board policy statement on the key priorities from last winter. These key priorities are financial sustainability, social equitability and legal responsibility. So we have the three here and then the sub bullets kind of translate that into the context of a rate study but the financial plan and the rate structure. So for financial sustainability, what we want to do is reduce risk through our reserves and our reserve policies and use conservative cost and water use estimates where we can. We also want to recover costs through a high degree of fixed revenue. So we have two components to our water rates. We have fixed charges that vary by meter size and we have water use rates that vary by the volume of water that a customer connection consumes. So we want a relatively high degree of fixed revenue to ensure cost recovery. Social equitability, we really translate that into fairness. So fairness in how we reinvest in our system and its capital needs and the fairness in our rates between different user groups. And then defensibility, that's a key in California. We want to have well documented financial policies which their district does. And we also want to have a straightforward cost allocation and rate rationale. So when we think about financial plan drivers, what are the cost drivers for a water system? We have inflationary pressures even in the best of times. Inflationary pressures have obviously been higher over the last couple of years. And that's been true on both the operating front and the capital front. Source of supply and associated costs continue to increase year over year and are constrained, it's a limited resource. Cash reserves, so we need cash reserves on hand to mitigate risk for the extensive capital infrastructure that we have for emergency situations, for fluctuations in demand both over the years and even seasonally. We consider future borrowing terms and assumptions. So none of the examples here that you'll see tonight assume any borrowing for future capital other than the pure water project. And those terms are known. And are factored into this 10 year look as long range financial plan. The next key driver is baseline water sales estimates. And you'll see in a couple of slides here are estimates going forward and then capital reinvestment. So pure water is the big project right now for your district, but even outside of that there's significant capital needs in the long-term CIP program. So when we build out our financial plan model this is the flow chart. So we input all of our customer connections, all of our build water use that translates into rate revenues. We bring in our operating costs and our projections based on future escalation assumptions. We bring in the capital plan and we know our beginning cash position. That all feeds in to building out a long-term cash flow. We then bring in the capital project funding mix. So is it cash? Is it debt? Are there grant funds available? What are our debt covenants on any future borrowing? And then we consider our financial policies and our targets and those two key metrics are cash reserves and debt service coverage. So that exercise, what it yields is a jargony term called revenue requirements. And that's really just to say, what are our total costs that we need to recover through our rate revenues across our entire customer base? So on that prior slide, I talked just for a moment I'm cash reserves and debt coverage ratio. These are really our two key indicators and in upcoming slides, you'll see in the charts what I mean by cash reserves and debt coverage. So again, cash reserves, they're there to meet operating cash flow or paying bills that the district has, capital reserves, rate stabilization funds to kind of smooth things in periods of shortage. What an emergency for asset failure or a natural disaster. So cash reserves are really a risk medication tool. And then debt coverage or debt coverage ratios, whenever we borrow, we generally have covenants that we have to meet that say, what kind of revenue we have to generate so that the bond holders can be sure that their debt service will be paid, that they'll be repaid for the borrowings that the districts incurred. So let's talk about some of the big underlying assumptions in the model. So there's lots of assumptions to go in, but there's a handful of key assumptions that really move the needle. So the first is that we're not anticipating account growth, new connection growth or changes in water demand when we look out over this 10 year period. So agencies can get into trouble if they're too rosy on those estimates on future development, new connections paying in or buying into the system or increases in water demand. And when that doesn't come to pass, we can have a revenue shortfall. So our demand is projected at approximately 2,600 acre feet per year right now. That's a lower baseline than what was used in the prior study, which was 2,900 acre feet. Our cost escalation assumption, so we think about increases, inflationary increases across all of our costs on equipment and power and chemicals and personnel, et cetera, are higher in the coming year, the coming two years to account for still a heightened level of inflation before kind of going towards long-term trends. Pure water, so-called capital repayment, that doesn't begin until 2030, but we do have O&M costs that come online next year. And you see in this fifth bullet, it says pre-funding this year. And so what we're doing is we're ensuring that we can bring some of those costs into the current year to prepare for the upcoming pure water, so-called O&M costs. And then the CIP program itself, so excluding pure water, we still have about six and a half million dollars per year on average in capital needs over the next five years. And then our reserve policies, no changes are recommended. We've reviewed this with staff. And the current policies on reserves appear to be sufficient. That's 40% of your annual operating costs, a $2 million rate stabilization reserve and one year of debt service. And then on the debt service coverage front, a minimum debt service coverage ratio on past borrowings of 120%. So that means when we look at the net rate revenues each year, those must be 1.2 times the actual debt service. That's a minimum, but the district has a target policy of 170% or 1.7 times the annual debt service. So now we'll get into the actual examples. So underlying all those assumptions and the cash flow, these are basically a handful of solutions, if you will. So we've got three examples. And then the fourth is really a what if to demonstrate the changes in water demand. A lot of this I know is in the board memo, so I'm not gonna go through each individual bullet, but the keys here that the first three examples all assume this 2,600 acre feet going forward. The fourth example is a what if we still were at 2,900 acre feet of water demand. So example one, this is an example or an option to minimize increases over time by minimizing our reserve balance. So first I'll step through these charts to orient everyone. So the table at the top is simply showing our revenue adjustments. So you can think of that as the gross rate revenue increases that would be required. In this example, it's 10% per year for the next 10 years. No new debt proceeds or bonds and our water sales just shy of 2,600 acre feet per year. The charts, I'll start on the right. So the financial plan is showing our operating environment. So the staff bars are all of our costs. Those are operating costs, cash-funded capital costs, pure water and any reserve funding or use of reserves. And then the lines are our revenues. Current revenues being the lower line and then projected revenues that are the line that's increasing at a rate of 10% per year. The capital projects funding, this is showing our long-term site plan. So in 24 and 25, that's heavily weighted towards pure water soquel. And then in future years, you see our standard capital reinvestment. And again, on the order of $6.5 million per year in the next five years. And then that ramps up a bit beyond 2030 towards the end of the planning horizon. And then on the top left, revenue adjustments and debt coverage. So the blue bars are simply showing you that they're at a rate of 10% per year. But what we wanna focus on are the lines. So the red line is our debt coverage minimum of 120%. The gold or the yellow is our debt coverage target policy. And then the blue is what we actually calculate in the model. And so what we can say here is that we have sufficient debt coverage with these increases to achieve both the minimum and the target policy. And actually stay north of it. As you see that once we get out to 2030, this is the WIFI alone coming online for pure water. So we see debt coverage come down. But even at that point in time, we have a decent buffer between the target policy and the calculated coverage. So the last chart is the funds balance. So these are projected ending cash reserves in a given year. And the stack bars show those projected balances, the little red dot and the value above showing the value at the end of the year. And then the line is the policy itself. Again, that's a function of future O&M, $2 million rate stabilization and future debt service. And so what we see here is that at 10% per year we're sufficient on the debt coverage front, but in all years we're under our reserve policy target. And in some years substantially so. So in 2026, our goal is on the order of 16 to 17 million, but I re-project we'd only be at 6.1 million. So about operating only. So that excludes the rate stabilization and the debt service reserve. So we'd be operating with some minimum reserves. So example two is one where we front load those revenue adjustments. And by front loading, I mean, we would have a 25% revenue increase in the current fiscal year in March and then 7.5% per year thereafter. So compared to example one, which was this uniform 10%, this is 25% the first, 7.5% projected thereafter. And what you can see is again, we're good on debt service coverage in the near term and in the long term. And then on the reserve front, what that allows us to do is stay pretty close to our target policy over the next several years. We actually exceed it towards the end of the decade and then comes back towards target as you get into the 2030s. The third example is what we're calling a middle ground. And what this does is kind of it provides kind of a two step approach. And so again, up here, we're showing our gross rate revenue increases, which would be projected in the next example at 12% per year for five years. And then 5.5% per year thereafter. And so if we go back to our key indicators, debt service coverage, again, we're good. We're exceeding policy in all years. And then on the fund balance, we are below target in the first four years in the rate study period. But in 2026 now our low point rather than being 6.1 million is about 8.7 million. So about 2.5 million dollars greater than that first example that we should. And then in the out years, again, we're achieving or achieving our reserve targets. And then we wanted to provide this hypothetical. Can I interrupt you for just a moment? Oh, I'll pause there. Sorry, I just wanted to, on the scenarios that you just showed us on example two, I believe. Yeah, that was the front loading. I just wanted to point out to the board that we did come into this rate study with about an 11 million dollar revenue shortfall. Or money that we didn't collect on our last rates because of the decrease in demand. Go ahead, Kevin. Thank you. So the last example, again, is it's just a hypothetical to say what's the magnitude of change being at 2,900 acre feet of sales versus 2,600 acre feet. And so we had an idea of where we thought we were gonna be at the end of this last cycle versus where we are. And so with 2,900 acre feet of demand, what you see is we're pretty close to our targets in all years. We're under in the first three, but much closer to that policy. And then a bit under again. And this is at 8.5% increases, which are much closer to what was projected in the last rate study, which I think was on the order of 6.5 to 8.5% percent. And so what that tells us is that this change in demand has had a significant impact on the future needs. So if we look at the revenue adjustment comparison, so again, revenue adjustment saying, what would we need to increase rates across the board? Example one, 10% per year. Example two, front-loaded again, that 25% in the first year, followed by 7.5%. Example three is at 12% per year. And then the what if again, just for context, 8.5% per year. And we've bolded and italicized those first four years because we are looking at a four-year plan. The remaining percentages in years are simply for planning purposes. And then if we compare those, we take the percentages that you see in this comparison slide and translate that into a customer bill. Now what this assumes is you simply have the increase. And as Leslie mentioned at the start of the presentation, this is the financial plan and not the rates. And so when we go through a cost of service analysis, cost allocation to get updated, if we modify rate structures, cost recovery gets modified. So this is not a one-to-one with what a bill would be when we get to the end of this cycle, but this is just to provide some additional context. Simply to say, if all we did was take those percentage increases you see on the prior slide and apply them to the current rates, what are the corresponding inventors? So we have our four examples. We have our current 2023 bill. This is showing a single family user, 5.8-inch meter using roughly six units of water per month. That bill stands at $106.85. And then you can see in the first year proposal, what that bill would be year two, year three, year four. And so obviously in the first year, the most impactful is example two because it has the highest increase. It has a 25% in the first year. But as we go through time, all the other examples kind of balance out, right? Because when you front load, you reduce the out years. When we have a more uniform approach, you start lower, but you play catch up. So when we get to the end of the rate, this rate cycle in year four, what you see is we get much closer at the end. So example two that's front loaded, we end up at $165.92. But example three is actually the highest. We get to 168.13. Example one, again, this one is the riskiest approach, sees a bill of $156.44. So again, just for context, when we come back in November, we'll have preliminary rates and we'll have some actual bill examples of current and proposed based again off of the financial plan, the cost of service allocations and any changes to the rate structure. So just our, this is our wrap slide to kind of put a bow on it. Example one is gonna present the greatest degree of financial risk. And we know one of the key priorities of the board is financial sustainability. So example one, we can reduce rate impacts if we're willing to take on additional financial risk. The what if example again, is just a comparison to the previous assumptions with higher annual water sales. And then examples two and three, they mostly mitigate our risk relative to our policies. They fully recover our costs. The difference there is that example two is gonna do so with one significant increase in the first year followed by more modest increases in years two, three and four. Example three does this in kind of a two-rate cycle step where we have a uniform set in the first cycle and a uniform set in the second rate cycle. And then the last thing we'll leave you with for the financial plans is that we can model any additional examples kind of between that example two and example three. So these aren't the only three discreet options that we have. There's, we can tinker as much as we want between these different alternatives and land somewhere in the middle. So I think we just have two slides left. This one color coded a bit to denote kind of what's the technical piece versus public outreach versus all the procedural requirements of Proposition 218. So we had a meeting with the Water Aids Advisory Committee on the 12th of October and we talked rate concepts and rate alternatives with the committee. Now they had seen this presentation. We presented this presentation to them prior to that meeting. So they've gone through the financial planning material that you're seeing tonight. And then last Thursday we met with them and we talked rate concepts and the rate alternatives that we're evaluating with staff. So we're here tonight, October 17th. And then actually tomorrow we're meeting with staff to look at preliminary rate results. We have a meeting with the advisory committee next week to look at those preliminary rate alternatives. And then we're gonna be back. We have a tentative meeting with the advisory committee on November 13th should we need it. And then we'll be back to you on November 21st with rate proposals. So those are the rate alternatives after the advisory committee has seen them and after we hold a community webinar. So we've programmed a community webinar kind of a so-called pre-specific rates 101 with the community on November 16th that'll happen online at 6 p.m. And there's more information that will follow. So we'll have that. And we'll have that before we come to you on November 21st so we'll have some feedback and input from the community meeting. And then we have a backup date. We're coming back to the board on November 5th and then we're entertaining the idea of a community open house in December. We're working away in the background to work on that. And then really the bulk of December is once we get a rate proposal, we're drafting our report having that reviewed by both staff and legal and then coming back on the 19th for an authorization to notice customers. And then again, that kind of sets that sets the timeline for the public hearing. So once notices hit mailboxes, we have a minimum of 45 days to the public hearing which is scheduled tentatively for February 20th. Should rates be adopted on that date, new rates would be implemented in March of 2024. So that's the detailed schedule to the end of the rate study kind of in the near term. I mentioned this in the previous slide. We have a review with staff tomorrow of cost of service results and rate design alternatives. And then financial plan options, if we were coming back with revised options to either you, the committee or both, we'd be modeling that in the background. And then as I mentioned, we're going back to the advisory committee next week to look at preliminary rates. And with that, I would be happy to answer questions on tonight's presentation. Thank you. Thank you. I think it's ready to open it up to you for any questions from the public. Thank you. Becky Steinbruner, I request that this slide presentation be put posted on the website, the district website for public to review. It's quite shocking, especially to hear Strom's statement that the district has gone into all of this with an $11 million shortfall. I think that's what I heard. And it's because people are using less water. That's a good thing. But that wasn't what Raftalus thought last time. You did the five year rate increase and that was purely to finance the Pure Water SoCal project, which at that time in 2017, 2018, was projected to cost $60 million. Much more than that, isn't it? Almost $200 million. Even though you've gotten grants and that's wonderful, the cost, the debt is coming due. And what I read in the staff report is that it's coming due quite soon, as early as some of it in 2026. So, legally defensible, has Raftalus ever been hauled into court? I want to just thank and recognize John Cole, one of your ratepayers who took you to court and won over some illegal tears. He's my hero. What about the quail run tank that your district had borrowed money for a long time ago and has still not been built? That's not part of the capital improvement borrowing that I don't see mentioned here. They all assume that there will be no more debt for other capital projects other than Pure Water SoCal. What's happening with the rest of the district, especially the quail run? 2.5 million operating costs are being increased projected for Pure Water SoCal. Operating costs will go up. Thank you. Thank you. Well, a lot of those projects are in the budget and if there isn't enough money in the budget, they don't get done. It's part of the problem. It's the problem that they are all prioritized, so I am afraid not, unfortunately. Any other comments from the public? Okay, board members, anyone have any questions? I was just going to mention one thing. If you can hear me okay. And that was just that whenever we set rates to meet a budget, if for some reason, I mean, we don't always stick to those rates. We can't go above those that we set, but we can go lower if, for instance, there was more production than we anticipated. And so we obviously have to meet all of our obligations, but I just wanted to point out that we could end up with lower rates than what we end up choosing, but we can't go any higher. Yeah, I just, I forgot to mention this in the rural communications, but the states, the state modelers and planners for water future in the state are basing their models and plans on an extended drought. And that is, we're seeing now the effect of an extended drought or water use is, our water use and water use across the state are following similar patterns. And so we are, we did accrue this deficit based on lower demand. And so that was good, but it was lower even than anyone could have foreseen. So it wasn't ref tell us, and I don't think they've been to court. I think it's just, it was a different rate, rate consultant at that time. Anyway, so it really is unfortunate, but somehow we have to pay those, we have to pay for all of this. They were trying to do the correct projection now, how to most effectively and fairly and conservatively pay for these things. And so this is the financial plan, it is not the actual rate setting at this. Is it appropriate to make comments right now as well or just questions? Okay, thank you. I wanted to just point out that all of us who serve on the board are all rate payers in this district and the majority of us work full time. So I just wanted to state that. And I have studied the plan and ref tell us, it has done a really thorough job. It's, I've read it twice and it's pretty amazing. I think that for me and talking to a lot of my neighbors, the scenarios number one and four are kind of, with kind of more of the steady rate have seemed a little bit more appealing to people. Of course, nobody wants water rates to go up. Nobody wants any rates to go up, but there's reality as well. I think that the what if scenario is really interesting and it at first it struck me as sort of magical thinking, but then I noticed that in this study, ref tell us points out that Santa Cruz County is adding 4,500 additional housing units over the next eight years and Capitola city is adding 1,500 additional housing units and the governor just passed two days ago the new ADU law, which now allows people to sell their ADUs like condos. And so it's like, there's a lot of new users coming online. So I'm not so sure that the number four really is magical thinking. I think that that's might be really more possible. So anyway, I wanted to say that that's kind of where I'm thinking right now. Okay, just to keep in mind though, that stated in Reptiles's report that those housing, that housing demand is not gonna come into play for this rate, but other than that, yes, that's really true. There's a lot of things that are going on that changes and that leads me to feel like we need to be a little more conservative because we don't know how the immediate future is going. We do know that there will be an extended drought even if this winter is not a drought winter, it's a rainy winter, but as far as building, a lot of our policies, we need to be very conservative in planning. Otherwise we'll never get out of this deficit hole that we have. Being good consumers in our district, saving water and whatever the trigger was for that, it was really important because it kept us in compliance with the state to work toward preventing seawater intrusion. So everything the district has done has been focused making sure that we have sustainability in the long, long run. Anyway, I don't know, I can't remember what direction. I guess I had one other possible thought is that I feel unlikely any of us are gonna wanna go for option number one with a 25% increase. So perhaps instead of using that as an example to work on, maybe something a little, it could still be a little higher the first year and then go down, but not at that degree. Yeah, agree. But example one was 10% and that was lower and it was considered the risk. I meant example two. Okay, alright. I agree with that 25%. That's a bitter pill to swallow. Yeah, I think we're probably all in agreement about that. I think the intent was to show bookends, so to speak and two A through two Z, three A through three Z, there's many permutations as you get into it. Well, in the way you design the financial revenue needs, but then also you gotta translate that into the rates, which can have a whole another complexion if you change tiers and fixed costs and that sort of thing. And another thing to keep in mind is the cumulative impact over the course of the four year rate study. The example two with the front loading actually wound up with a lower rate four years out than the example three with the consistent rate structure. So that's something to be considered as well. Yeah, you know, that's the conservative part of being likes that because I'm very nervous about that amount of money having the deficit. But it could also just trigger even more water savings and really we're moving into a point with the Pure Water Soak Help if it goes online as injected, be able to relax a little bit on water demand so that you don't want people to use, not be uncomfortable, be able to use water. So I don't know if I do have a question. Pardon me, would you like to speak? I have a question, can you hear me okay? Yeah. So this financial plan takes into account inflation in terms of projected needs. What's the inflation rate assumed? The inflationary rate in the first two years is higher than subsequent years, simply because of the inflationary environment we're seeing right now. Kevin, do you have those assumptions on hand? Yeah, let me look, I think we have them in the back. Yeah, it varies by commodity. So I know that for power and is it chemicals? Power and chemicals, we have a higher inflationary standard because we're seeing PG&E rise so rapidly and then some of the other costs are a lower inflation rate because we're not seeing those costs increases rapidly. Well, if you can't find it now, maybe next meeting. So yeah, I'm happy to describe we have about a half dozen different inflationary assumptions to try and be more precise. So we differentiate general inflation from salaries, from benefits, from chemicals, energy, capital and then some assumptions on our non-rate revenues as well. So what would be the increases on other sources of revenues and then interest earnings as well. So that's all very, I'd be happy to provide that slide. Okay, another question. This is a 10 year plan and 10 years is tough to predict. Very tough to predict. And have you ever gone back to other 10 year plans and see if how close they were to reality and how do you account for the nature of the problem predicting 10 years out is difficult? Yeah, so I'll take the second question first. So the second one is there are more and more agencies we work with that are evaluating that they might adopt rates for five years but they're updating or they're looking at their financial plan every year. So we're starting to have some findings on what was projected versus how the world came to be or came to path. But I'd say the reason we look at 10 years is because we wanna make sure that there's nothing out in years six to 10 that we should be accounting for today. And so this is a good example for your 10 year plan where you have this, you have a Wiffy loan coming online in 2030. And so we wanna see that coming so that we know that we can have sufficient rate revenues to service the debt when it comes. So even though that's in 2030 where what is it six years, seven years out we wanna make sure we're looking out that far because there might be a freight train on the horizon for no other agencies that might be there replacing a water treatment plan or wastewater reclamation plan. For you, you have this Wiffy loan that's coming on in 2030 you have sure water O&M that starts next year and ramps up. So we always wanna be mindful of what's in year six to 10 even if we're only adopting say a three or four or five year rate cycle or rate plan. And director Jaffee, I would take that one step further every year we reevaluate our finance plan as part of our budget cycle and we actually use our finance plan as our guidebook and we look at our actuals against the finance plan and we modify our budget behavior accordingly so that we're sticking very close to the finance plan because that's what the rates will fund. So we monitor that annually. Okay, thank you Leslie. So one last question, when we talk about what the rates are gonna be five or 10 years from now do we take into account that because of inflation the value of the dollar changes over time? Yes, yes, we're projecting our costs in future dollars so that our revenues in future dollars are sufficient. Right, but you can't really compare today's dollars to future dollars. No, so the closest approximation we get is by projecting our costs based on a combination of inflationary assumptions and then changes and kind of absolute things like cost buckets or metered connections or water demand and then projecting rates forward at a rate of, as you said, as you saw tonight, eight and a half percent or 10% or 12% so that once you get to your years six, years eight, year 10, those future dollar costs are accounted for in future dollar rate revenues. And I will point out that Raftalus performed our last rate study and finance plan and they had factored out 10 years on that one as well and in years six through 10 they had anticipated rates being about 8%, 8%, 7, 7, 7, I believe in years six through 10. So here we are five years later and they're showing us in example four what we would have been had demand stayed the same, we would have been at about eight and a half percent. So that's only about a half a percentage point off of where Raftalus had forecasted we would be when they did the rate study five years ago. So that's pretty darn close. All right, thank you. Provide staff with any direction regarding the finance plan examples. Does anyone have any to suggest? As we've heard this, I'm curious. Well, as I had said, I thought just, you know they can get rid of the 25% and choose something more reasonable. It could be still the idea that it's a little higher the first year and then dropping down, but I think just, I'm not sure what number to choose but I think that one's too high for sure. Did you hear that, Kevin? Yes. Yeah, we can move forward with that plan and we'll bring back some alternatives at the next meeting. We'll go on to item 7.3. The review of the policy on requiring separate metering for new individual residential and commercial units. I triggered this, asked for this to be agendized just because it had been a while since we had reviewed our ADU policy and we've been in conformance with state law, sure, but some questions were raised the last meeting. It seemed like a good time to review this. Manager, evening board and members of the public. So just a little background on this item, separate metering for all new multifamily residential units, accessory dwelling units and commercial units was first required by the district in 2002 as new development adds to water demand. The driver behind this requirement was to help protect our overdrafted basin from further seawater intrusion by aiding in conservation. There's a lot of studies that show separate metering coupled with separate billing and thus a price signal really saves water and it also helps in aids and leak detection. Prior to 2002, single family homes required a meter and multifamily and commercial units regardless of their size or number of units typically only required one meter. In recent years, there's been several laws that have passed focused on increasing housing and those laws have prohibited water agencies like the district from requiring separate metering for ADUs of some types and multifamily's projects if they're classified as low income. For ADUs, SB 229 made the distinction between conversion accessory dwelling units and new construction ADUs and mandated that water agencies could no longer require separate metering and charge water capacity and metering fees for conversions. Attachment three to the memo is a FAQ or fact sheet that we have on our website that shows the differences between a conversion ADU and a new construction ADU. As the basin still overdrafted and classified as critically overdrafted by the state and experienced in seawater intrusion, those conditions that prompted the requirement still exist. So at this time, staff doesn't recommend making any changes to the policy. We do suggest waiting until after the Pure Water SoCal facility is operational to conduct a more thorough review of the policy later down the road. There's also considerations associated with changing the policy at this time when the current rate and water capacity fee studies are well underway as you just heard. Eliminating the separate metering policy for new construction ADUs at this time would likely impact the schedule on the rates and the water capacity fee setting. So again, the motion tonight is to, if desired, to direct staff to come back with a more detailed analysis of the pros and cons associated with changes to the policy or take no action this time. Any comments from the public please? Thank you and thank you so much for taking this on from my suggestion from last meeting and nice meeting you Shelly. Nice meeting you. I'm Jim Lattori and since the time that I came last time, I did some research that I think is it would be important for you guys to do and that is to take a look at other districts and what they're doing. Every one of the ones that I talked to had the same response and that is that they all allow ADUs to share the meter. But if it's new construction or if there's not a meter, then they'd have to pay for that. You guys are right on target in terms of how much you charge for water capacity. So that's not the issue. The other thing that I found in some of my research was the fact that most districts with the exception of Scots Valley who was pretty small they have their own people doing the meters. So you're not being charged that additional contractor price which in mine amounts to $18,000. So $18,000 plus $13,000, $30,000 represents for me about a fourth of my budget for building my ADU. And I think that's rather absorbent. So I would encourage you please to take the board action that asked for a more detailed analysis of the pros and cons. And I also have a difficulty understanding that what the impact of separate metering to continue to benefit the protecting groundwater. But if I pay the fee, then it's okay. I don't understand that logic. So it's hard for me to understand that. I'm paying them bill. I already have water there. I'm already metered. So if it's the same amount of water that I'm already using how is that making any difference? So thank you for your time. Becky Steinbrenner, thank you, Mr. Lattori for doing that research. I appreciate it. And I'm sure a lot of the ratepayers do as well. I would like to see staff come back with a more detailed report about this. And especially making sure that your policy is legally defensible given the new legislation that Director Balboni referred to that earlier a new piece of legislation just signed into law that ADUs can be sold separately from the main property residence. So it does merit more close evaluation for a lot of reasons. And these costs are exorbitant for someone trying to help solve the housing problem. Over $30,000 for a water connection is too much. It is too much. And I would like your staff to evaluate alternatives and present those in cost benefit analysis to your board for further review. Thank you. Any comments from the board? I mean, I just had a question. I mean, it makes sense to me that if there's new laws that said they can be sold separate from the house that's all the more reason to have a separate meter. Exactly. But I'm fine to review the policy if there are any other alternatives to do what other districts do and put the meters in ourself or, I'm fine to have it brought back with more detail, but I just, I think it's only, that law only strengthens the reasoning for having separate meters. If we put the meters in ourselves, we would still have to charge for that work. Otherwise, that would be a gift of public funds. So at one time the district did install new services and we did collect a deposit on that. And it might be that it's less expensive maybe than going out to a private contractor. But we do have to recoup our cost of service. So it's never gonna be free. It's not gonna be something that the district absorbs as part of the water capacity fee. No, I was not saying that it would be pre-adjusted that it might be less expensive. I think we charged $6,000 back in. When was that at least eight years ago? Yeah, we would have to charge whatever is appropriate not to subsidize that entity on the backs of the other ratepayers. So we do a detailed analysis of what it actually cost. We probably are, we're often more efficient than the private sector that's been proven. So it might come in less, but we'd have to do that analysis. I think if I may take the moment to respond to the question, I thought it was a thoughtful question. If you have a meter, how come, why do you need a second meter? And this is based on some studies we looked at a while back that showed about a 15% savings through individual metering of households and not even sub-metering, but separate metering. So that was the rational behind it why we're in a critically overdrafted basin. So I just wanted to, you asked, so I wanted to make that clear. It's assuming that the units are rented out and getting a bill really does result in conservation for the tenant of that unit. They're more accountable to their water usage and being efficient. So that's the purpose for that. It also aids, and just as an aside, leak detection, it's a lot easier to find, identify where the leak is and it has its own meter. But all that I agree with, but with the changing landscape with ADUs, it seems prudent to look at this in more detail. So I'd support that. Yeah, I was going to suggest, when Raft-Hells has finished with this to do it actually a financial analysis of costs and benefits of metering, sub-metering, just one meter. We don't even know right now what's going on. Please get this. So I'll make a motion. They can't hear you, but I think that's the board's discretion whether you come up or not. You can say that. You're talking about the city council. Sorry, this is Jim Latoury again. Thank you. I had an extensive conversation with Katie in planning and they have had several inquiries in terms of people wanting to build ADUs and when they find out the cost of water, people have withdrawn their plans. It happens all the time and in this current state where Capitola is being urged to provide more housing, it's really hurting the planning and the building department. So it might be something to look into as well when you're, and when you do some research about what's going on. So thank you again for your time. I know I've taken up too much of your time. Thank you. Thank you, we'll check. I think those would all be considered in the future. We couldn't, obviously couldn't do it two week and analysis of this in the two week period. Yeah, so. Okay, and quick comment from Director Balboni. Very happy to have this ordinance and to really have it for review. Thank you. I would also request that we, if we do ask for more information, I would like to know if we could add the conversion ADUs as well or why we would not have separate metering on the conversion ADUs. And so that would be my question and input. Thank you. We used to charge all ADUs for water capacity and new meters and require new services, but the laws have changed over the last five years. And that was a specific carve out for conversion ADUs. And if I'm correct, Shelley, the law does require all single family units to be meters, is that correct? I believe so. I mean, we've required separate meters or meters for single family homes, I think going back to the district's formation. Yeah, currently our policy does conform with state law. It's just whether we want to find out what we can do for our customers. There are some that are though. I think the crux of our situation, I don't want to get into a discussion, but is only 21 out of over 500 basins in the state of California are critically overdrafted. We're fighting that battle. And so the metering does help reduce usage. Yet we know we have a need for housing too. To me, the question is more about timing until we solve the, make sure we solve the water crisis because without the sustainability of the basin, everything's in jeopardy. Board President, just let's stop. When that's not part of this issue. You're not, you've had your time to speak, please be responsible. Thank you very much. This is about ADUs. I thought I heard Dr. Jaffee making a motion. Yeah, I was about to make the motion. Okay, so who wants to do it then? Jaffee, okay. Number one, right? Okay, second. Okay, I'll second it. Second, the motion to direct staff to come back with more detailed analysis of the pros and cons associated with changes in the separate metering policy if desired. And we won't to come back soon or what's the timing? I'm not sure we need, I think we need to consult with, if the policy needs the timing. Okay, we'll come back with- I don't know, so we don't, I don't think we can suggest the timeline right now. I would leave it up to staff. Yeah. In terms of the timeline that makes sense to them. It could even be, you know, if it's a matter of the workload, it could even be something that comes back that's partial earlier and more complete later if that's the issue. Thank you. That's the issue, yeah. Director Baboni. Yes. Vice President Jaffee. Yes. Director Lehu. Yes. And President Christensen. Yes, thank you very much. That was actually, it's good to have a review of it anyway. And I think we are adjourned now. Oh no, we're adjourned from the public portion of the meeting. We're closed session, right? Yeah, we're going into closed session and anyone who would like to comment in closed session may do so at this time. Thank you, Becky Steinbruner. I am the litigant in the challenges to the Peerwater SoCal project and I've learned a lot. And I again want to say that I have not wanted to do this action and I'm sorry, but I have discovered some things that have concerned me so much, concerned so many people in the community so much that the legal action was necessary and continues to be. So making reference to the anti-degradation analysis, the final analysis of that was not done until March of this year. It was not made public. It's not on your website. Why not? There has never been any collaboration with the California Department of Fish and Wildlife. There was never any analysis of the change to attach the conveyance pipelines, those large pressurized pipelines to the bridges, the Laurel Street Bridge, the Porter Street Bridge, that was never analyzed. And it needs to be, it's being built. It's ridiculous to have pushed this through so quickly because it was a grant timeline. Mr. Duncan testified in court under penalty of perjury that if the project were not done by, what was it, February 29th of 2021 or something and you'd have to give the money back, that was not true. But it sure affected the timeline of the judge shoving the things through the court. So I just wanna say that I hope you will reconsider injecting treated sewage water into the aquifer and instead inject, if you must, potable water. Thank you. Thank you.