 Well, my clock says it's one o'clock. So I will call this meeting to order. Secretary Athec, can we do a roll call? Yes, Chair Watts. Number Walsh. Here. Remember right. Here. And I got to remind the committee members to mute their phones, microphones when they are not speaking. And then for public comments, we are now taking public comments on item two. If you wish to make a comment via Zoom, please raise your hand. If you are darling via telephone dial star nine to raise your hand. Secretary Athec, do we have any comments? We do not have any public comments. Okay, Kimberly, you're here. Good. What do we do? So over to Jennifer, you announced you. Okay. Director Burke, would you announce our panelists? Yes. Thank you, Board Member Wright and members of the committee. Our first item, our only item on the agenda is our fiscal year 2022-23 proposed water, wastewater and subregional fund budgets and subregional partner allocations. And making the presentation will be Kimberly Zanino, our Deputy Director of Water Administration as well as Andy Allen, our supervising engineer with asset management team. All right. Good afternoon, subcommittee. I'm going to share my screen here. So just give me a second to get the presentation up. All right, are you seeing that okay? I don't see anything. Oh, you don't? Okay. Let me fix that. All right. There we go. I'll mute. Kimberly, it's the wrong screen. There you go. All right. So today we are here to talk about the fiscal year 2022-23, ONM, CIP and regional budgets, as well as the partner allocations for the subregional system. We're going to talk about the operations and maintenance of all three budgets, water, wastewater and regional. We will talk about the partner contribution allocations. We will look at revenues versus expenditures. We will also be doing a review of CIP, the budget schedule, and then requesting a recommendation to the full BPU. Staff assumptions, as we discussed earlier this year, pretty much everything is going to remain flat, water use, waste water use. On the water use, we made a reduction last year for the drought. So we're going to keep that reduction in place. We expect demand fees to stay flat. We do expect one increase, which is nice, which is revenues in the miscellaneous, or the miscellaneous revenues for the subregional system. We are expecting those to increase based on the high strength waste program. And then rates will increase for our customers based on the proposed rate schedule. So as we discussed at the last meeting, this year we are seeing many uncontrolled costs increasing listed here, our areas where we are seeing increases. Salaries are increasing more significantly than typical because of the delay in negotiations with the bargaining units. Because of the delays, two years of colas are reflected in the 2022-23 budget. The first of the increases was at 3% and was incorporated in September of 2021. So it was not reflected in last year's budget when you saw it, which is why you see a higher percentage increase for this coming year. And then the second increase will actually be incorporated or implemented at 2.5% in April of 2022 instead of July, which would be the normal timing. In addition, there is an employee wellness payment that was approved per employee. And that's added starting in this current fiscal year, but will be added each year going forward, at least through this MOU cycle. And it's reflected in the salary line items. Benefits, energy costs, vehicle costs, information technology and insurance are all increasing here as shown here as well. Operational supplies are going up in all funds and that's just based on the increasing cost of goods right now, which basically leaves us with the controllable costs in the professional service line items and in the O&M projects. And both of those are increasing based on regulatory requirements that we need to meet this year and also the O&M projects increasing based on the fact that we are seeing many failures at the Laguna treatment plant. And so there are some maintenance projects that really need to be addressed. I'll discuss the purchase of water actually on a later slide. So in addition, we will see if approved some additional increases in the budget. In this budget cycle, we are requesting but not have yet had approval on them for some staffing increases. So the first two you see here are two USOs. One will be in the water fund, one will be in the sewer fund. For many years now, the water and the wastewater systems have been increasing in size and complexity. However, we have not increased staffing and as a matter of fact, we decreased staffing levels several years ago by two USOs when the city was making citywide cuts and it was requested that each department make cuts. And so this really is adding back those two USOs to help with the maintenance of both the water and the wastewater systems. We are also asking for a supervising lab analyst. This position is needed now because the state has imposed regulation that requires certified environmental labs to comply with the NELAC Institute standards. This requirement calls for even higher quality assurance data tracking and this position will be added to assist in achieving that. In addition, we are increasing one CE tech from part-time to full-time in current development to assist with changes in regulatory timeframes and council goals for processing permits. And as well, we are reclassifying four positions in various divisions to address changes in workload. There will be one vehicle that is needed for the new USOs that we would hire if they're approved. And then one vehicle we need to replace was dropped out of the replacement program at some point. And so we need to replace that vehicle and there hasn't been funding built up to replace that. And so you'll see that as part of this line item as well. As I say that these are not yet approved so they are not shown in the budget but they will be adjusted if the approvals are made. This just is showing you the effects of those increases on each of the funds. The largest increase being in the sub-regional funds and that is based on those O&M projects that I talked about and the professional services increasing in addition to all those other uncontrolled costs. This is a graph of the total Santa Rosa water proposed O&M budget expenditures. I wanted to provide a little bit different look this year of the expenditures because the citywide budgeting system includes the costs of water billing and the administrative fund and lump sum totals on different line items in the budget. You'll see them on the water billing line item and on the overhead line item. But that doesn't give you a true depiction of labor and benefit costs. So I thought what would be helpful is to pull out all of the labor and benefit costs and show it to you in this graph so that you can see what those true costs are and what the true expenditures where the what categories those expenditures are going to. And I just wanna point that out because if you were to go through and add up the line items on all the other slides for salaries and benefits it wouldn't match here because I've pulled out or I've extracted those labor and benefit costs from those overhead and water billing line items. This is just a chart that shows you line item by line item, what the expenditures are proposed for this year on the water funds. You will see that the largest increases are in salaries and benefits as we discussed for the water funds. And that's just due to that two years of increases being reflected here and the wellness payments. As I mentioned before, operational supplies are increasing significantly as the price of goods are going up. And insurance, you're seeing and a significant percentage increase while it's not a huge dollar value but that's because insurance premiums are also increasing. So this is the purchase of water which I said I would talk about a little bit later. You will be seeing the Sonoma water proposed wholesale rate increase at the full BPU here in March. It's on the slide that shows all the dates. I'll give you the date a little bit later. But here I'm showing you what the increase is. It is higher than in the past few years which is due to drought and deferred projects that Sonoma water is expecting to work on this year. Since Sonoma water is fully volumetric with no fixed charges, their revenues are more volatile in a drought. And we are seeing that reflected in the increase. I will give you a little background on how we get to this, how the recommendations get through all the way through and approved for Sonoma water. There is a budget subcommittee for the technical advisory committee or the TAC. That group which I am the chair of reviews the budget for Sonoma water. And then we go to the TAC and we recommend the increase to the full TAC. Then the TAC votes on it. They determine whether or not to then recommend the increase to what is called the water advisory committee or the WAC. And then we also here at the city have it go through BPU and city council. And that process is so that we can or is that city council can direct our WAC committee member how to vote on the next recommendation which goes to the Sonoma waters board. So ultimately I point all of this out because ultimately all of the steps leading up to Sonoma waters board are only just for recommendation. And Sonoma waters board makes the final determination in the final approval of the actual rate. I will point out though that Santa Rosa water did develop our current rate schedule based on a 6% increase by Sonoma water. So this is incorporated in the current rate structure. And since we no longer have a pass or a pass through from the wholesale rate we have planned for increases up to 6% at this point. So this is just the graph of the water side over the water fund and the expenditure categories. Then we'll move on to the wastewater fund. You'll see the same main increases increases in mostly beyond controlled expenses. You'll see vehicles are one of the largest due to fleet or the garage increasing the cost of services. Sorry, my light went out, my light went out in my office. I'm sitting to you still. So there are increases for fleet and because we have a large fleet you will see that our increases are pretty significant in this fund. You'll also see once again that insurance premiums are jumping which are creating quite a large percentage while not a gigantic dollar amount. And then this is just also a graphic of the water fund and the categories of expenditures. And then finally, this is the look at the line items for the regional operations budget. You'll see the same trends in this one. I'll point out here again that the O&M projects are increasing significantly due to failures at the plant as well as professional services increasing due to regulatory requirements. Operational supplies on the regional side are also seeing a sharp increase and that is mostly due to the increased costs and chemicals. So on the regional fund slide when I give you the full picture there are actually a couple of additions on it so that you can see the entire amount that will be allocated to the partners. First is there is miscellaneous revenues you will see there that is a negative number that comes out of the total. We have revenues that come directly into the sub-regional fund and what we do is we take those off of the O&M costs before distribution to the partners. There is also an increase in the O&M reserve. When O&M costs go up we also have to increase the reserve by 15% which the partners are also responsible for a portion of that. And then finally, I also include debt service in this total number slide for you. And then I will show you the allocations to the partners a little bit later. Each year now we are showing you the revenue to expenditure slide which you will see indicates that we do have higher expenditures than we do revenues on the water fund. On the water fund this is mostly due to a decrease in revenue that we will see because of drought and all those increased expenditures. But as we've discussed in the last meeting we do have a good amount of undesignated fund balance that will cover these costs which will avoid any impacts to our customers' rates. On the wastewater side you will also see included here the contribution that we make to the sub-regional system. We are responsible for about 73% of the costs of the sub-regional system and those are paid for out of the wastewater funds. We'll be able to provide the same coverage for those extra expenditures from fund balance with no effect rates. I wanted to provide you once again with the total reserves that we are seeing. We did look at these last time and I give you a lot of detail about it but I'll just give you a quick recap reminder which is that these are reserves that are based on a picture in time which is June 30th of 2021 which is the end of the last completed fiscal year when finances or the financial audits are done and complete. I also wanted to point out again that the large and designated fund balances were from some unexpected revenues during COVID. We had FEMA reimbursements that came in as well for projects that we had front loaded or paid for prior to building and then FEMA reimbursed us for them and then also a large transfer of cash funding that we were holding on to in the sub-regional fund in order to provide cash for part of the UV project which we did not in the end use because we got such good rates on our bond issuance. So next I will show you the contributions from the partners. So this slide is providing you with the overall total of what is allocated to the partners outside of debt service. So it includes the O&M, it includes the CIP budget. It also includes that increase to the reserve that I talked about on a previous slide and then it also includes the reduction of the miscellaneous revenues which come out of the total that has been allocated out to each of the partners. On this slide you're seeing the allocations or the contributions that will come from each of the sub-regional partners. Each of the various components of the total expenditures are distributed in different ways and they're all defined by the sub-regional agreement. So the O&M costs are distributed based on the last full year of actual flows. So we determine the O&M expenditure budget, we remove those miscellaneous revenues and then we allocate those costs based on the actual percentage of flow from each of the partners from a previous year. The CIP is allocated by a percentage that is defined for each partner in the agreement and debt service is allocated based on when debt was issued and the project it was issued for. For this year we are and we have proposed to our sub-regional partners that sub-fund balance be used to keep the increases around 6%. However, our partners may decide to use more or less of their fund balance that is at their discretion to make their increases a little higher or possibly no increase at all depending on how much refund reserve they have left. For Santa Rosa water, we are proposing using $400,000 of the fund balance from the sub-regional fund which reduces the transfer from the waste water fund. And this was shown or incorporated into that revenue and expenditure slide I showed you previously. And with that, we are going to go into the capital improvement program into a little more detail. I'll go through a couple of slides and then I will hand it over to Mr. Allen. So first we just always like to show you the number of assets that we have in our system. We have a very large complex system with lots of different items in it. And so it's just a good depiction. I think the slide of showing you everything that there is for us to maintain and take care of. So the planned funding were at these dollar amounts which is $14,200,000 for wastewater, $13,100 for, or sorry, for water, for wastewater, $13,100,000 and then regional at $9 million. When I show you the pie charts in a little bit you'll see the total dollar amount, the exact dollar amount that has been allocated for each of those funds. This is a document overview. So also posted with your agenda and presentation you would have received the five year CIP funding sheets and this is just a little legend for you in order to understand how to read those sheets. I will remind you that the approvals that go through during this cycle of budget are only for year one and the years out from there, those four years out from there are used as a planning tool for us. And we also have staff here to answer questions as we get through. If you have any questions on the projects that are shown on the five year funding sheets or any of the projects that Andy is also going to address. So I'm also giving you just a graphic view of what the types of projects are that are going to be funded by percentage of money that is going into those different types of projects. This is the water fund CIP and then the wastewater CIP and then finally the sub regional. I did wanna point out that sub regional or the regional system CIP sits at $9 million this year. This is increasing by a million dollars every year per agreement by the partners. So each year we continue to increase the cash funding into the sub regional CIP by a million dollars. And now as we move to the next slide I will hand over the speaking to Andrew Allen the supervising engineer for asset management. And he is going to highlight some of the projects for you. At the end of the presentation I of course will be here and other staff members are available to answer any questions that you may have. Thank you, Deputy Director Zanino. As indicated, I'm gonna give you a brief synopsis of the capital projects that are coming into the program this year. We have what I call is five new projects, truly new there are four, the top four on that list and three of those are water and sewer replacement projects. We do have the Crosstown trunk that we starting into the program. And then we mid year we started a project it's called in different places, different things. Sewer trunk lighting uses design build. In the future slide you will see it as the Lano Road trunk or the Lano trunk. So we started that mid year to get things going but it is really the biggest and boldest brand new project here. We do have many continuing projects, sewer trunk projects, realignment and lining we're continuing on neighborhood replacement projects and working on our reservoirs and pump station upgrades. Slide the picture there shows those projects that are currently in the CIP and the red dots were the locations of the various brand new. Again, except for the one down in the lower left which is the Lano trunk project. Next slide please. So one of the highlight two projects in our local water and sewer. This one is the Terralinda Buena Vista phase two water and sewer replacement project. As you can see in the picture where that is to the right of the screen where that project touches Terralinda, Terralinda phase one which is already in the design phase is moving forward and then we're adding this as phase two to move farther up into this neighborhood. We have a six inch AC sewer main and putting in eight inch PVC main. And then the water system is four inch and six inch AC and cast iron. And we will be replacing that with eight inch PVC. And one of the great along with replacement of aging pipe we also will be improving our fire flow deficiencies up in this section. With the smaller diameter pipes there was some flow restrictions and that will aid in fire flow in the region. Next slide please. So here we go with the kind of the big ticket item on this year based on studies by our consultant. We are, it's demonstrating the deed for lining of quite a bit of the Lano trunk. And so this will be phase one. And we're estimating this to be about 7,300 feet that extends into the plant itself onto plant property and up Lano road. It's a 66 inch diameter trunk through this whole corridor. So a big project that we're funding and the decision as to if will it be design build or not hasn't been decided, but it's, we are moving this forward and over it to capital projects as once we get the funding approved for this as one of our higher priority projects. Next slide please. So I'm going to also highlight a couple of projects that are in the regional end of our business. We're going to, we are in the process and we're almost completed design of a mitigation bank. And so that will, should be going to construction this year and will help us with development of Endangered Species mitigation bank. And it is already on sub regional properties and the concept is the mitigation credits used for city projects only. And so we've estimated that this will be a benefit to the city lower costs than if we have to go out and buy these credits. Next please. In addition, we've just completed or we're almost completed with a study of the Laguna treatment plant, electrical infrastructure replacement. And so we know that there's a great need over to get that our electrical infrastructure replaced and upgraded. So you can see there's a, you know it's all kind of small, hopefully you can read it on the slide and in the picture, but you can see throughout the plant we have needs for these upgrades. This funding for this current year is for to get this project into design. And then funding for future years out will be for the actual construction and the trying to part of this evaluation will determine if we're gonna do it in phases or put it all out to bid as one big project. So that will be certainly hitting our budget this year and we'll continue over the next several years. Next slide please. And that concludes my discussion of current projects that are in the CIP. Thank you. Okay, so we're just providing you with the budget scheduled here. You will see us many times. If you choose today to make a recommendation to the full BPU, we will probably be canceling the March 30th subcommittee meeting. So we will let you know that after the end of this meeting. And then with that, we will move on to any questions or discussion that you may have. Okay, board member Wolff, do you have any questions? First, I think it's a fantastic representation. The needs for added staff, I think we're explaining adequately. Obviously, the capital projects funding is needed. I'm happy that we've made some fund balance reserves above what was anticipated in our last year's budget. And Chair Wright, if you may want to make some comments, but I would be prepared to make a recommendation. Just one other comment or question is, in our rate setting, it seems that we don't, we don't add any factor or reserve or allowance for changes in law requirements. I just wanted to take note of that. I know as an engineer, your job gets harder as you go along. Sometimes people are going to change your requirements, sometimes in the middle of a very extensive capital projects that require a lot of engineering and cooperation. So I just wanted to note that I think we are being conservative in the rates and that the budget's been adequately explained and I'm able to make the recommendation if you agree with that as well. Is there an answer to that or are we just gonna, okay, my only comment is on the fund balance. So we've been depending on that fund balance and is that fountain of youth gonna continue to flow? What is our thinking, is our fund balance, do we anticipate our fund balance to be substantially positive next year based on what we're doing or are we gonna be right on the cusp or what's your read on that? We do, I'll actually go back to that slide so you can see. So as you can see, typically, we have a middle. It didn't pop up, Kimberly. I need to share your screen. Oh, I'm not sharing it, I'm sorry. Hold on, I forgot but it was removed. All right, can you see that slide now? Just see the opening slide. I have to find the same slide on my, I'm looking at a big PC and I'm watching. Hang on, I will get to it here. We must be on the wrong screen. Let me switch over to the other screen so you can see it. So at the top, if I just go, I can find the reserve slide on this presentation. There you go, you should see it now. I just picked the wrong screen. So all right, so as you can see, all of our other reserves are by policy and required. So those do not fluctuate at all. We have not seen reserves this high in a very long time and we have not, they have been building. So you can see that undesignated fund balance is what we're talking about using some of this year. The only way we would really dip into any more of that would mean that we would have to well overspend our current and proposed budget and we would have to go back to city council and you would see us again because we would have to have an appropriation made to cover those expenditures. So we don't expect that we will take a big chunk out of this but we do have a lot of items or not a lot of items, a couple of items that will be coming to you and discussing in the future. One of which is we would like to see our catastrophic reserve policy increased. And so some of that undesignated fund balance could be used for that. And there may be a couple other things in the future coming our way that we'll discuss with you that we could use some of that undesignated fund balance as well. But we have a sufficient amount of balance left right now in order to cover these expenditures. We don't know what will happen obviously there can be emergencies or other things that can happen that can require additional expenditures throughout the year but all of our budget and our financial model is all built off of historical increases. So we looked back many, many years when we built our financial model to make sure that the increases we were including in the financial model were appropriate for what we think will happen which would mean these undesignated fund balances may go down some, but there should be probably you'll see a pretty good positive balance and that is again next year. Okay. My dog. Sorry, Flynn. He's got a dog over there, I hope. Yeah, he's the guard dog. Okay, I have no other questions. Board Member Wolst, do you have a recommendation or do you want us to have some more comments? Yes, sir. Just one comment please and then I will make recommendation. Even if the catastrophic reserves aren't what we thought they should be we were saying is we do have plenty of other reserves. So if the catastrophic reserves, let's say we're zero we would still be able to use the operating reserves undesignated reserves, the rate stabilization reserve and we do have reserves and CIP if we can call that. So there's plenty of cash and that position that's not tied up in assets that we've already purchased when I looked at the financials. So that's why I did that. If we do talk about increasing any reserves that would impact the rate parent I'd like to discuss the need for those new guidance coming out of entities sort of consolidating their reserves looking at them holistically. So if one catastrophe happens some of the other reserves might take care of it but I think it's a solid plan and we're ready to go and I would like to make a recommendation and my recommendation is that let me get to the end of this slide but the Santa Rosa water staff requests of water public utilities that this budget subcommittee recommend the proposed fiscal year 2022, 2023 operations and maintenance, CIP and debt service budgets and the regional partner allocations to the full board of public utilities. Or remember right you are muted. Sorry to mute the dog. Okay, we are now taking public comments on item 3.1. If you wish to make a comment via Zoom please raise your hand. If you are dialing in via telephone please dial star nine to raise your hand. And secretary, do we have any comments? We do not have any public comments. And board member right just for clarification did you second that motion? Oh, sorry, I'll suck at that. I'm a little confused about my sequence here. Okay, now we vote. Is that right? Secretary Ather, can you have a roll call? Yes, board member Walsh. Aye. And board member Wright. Aye. Passes unanimously. Okay, we have the roll call. Okay, so now I think we're adjourned. Is that correct? Any other comments? That's it. Thank you, everybody. Thank you for your time today. All right. Thank you. So committee, we are adjourned and we will go ahead and cancel the March 30th meeting then. Okay, very good. Thank you all. Okay, bye bye. Plan for stepping in. And thank you for doing us all this information and thank you director Berberta. Thank you.