 I don't know if you want to get started, I can start. Yeah, I'll go ahead and call it to order. And it looks like your commission might be full capacity too. Okay, yeah. Why don't we go ahead and get started since 430. Good afternoon. Welcome to our April 6th, 2021 special meeting of the city council. I have a few announcements and then we will move on into our meeting. Today's meeting is being broadcast live on community television channel 25 and streaming on the city's website, cityofsanacruz.com. All council members are participating in this meeting remotely. The water commission was invited to virtually attend today's meeting as well. I want to thank the public for staying home to view today's city council meeting. Please, if you wish to comment on today's agenda item, call in during the staff presentation using the instructions on your screen. Please mute your television or streaming device once you call in and listen through the phone. Please note, there is a delay in streaming, so if you continue to listen on your television or streaming device, you may miss your opportunity to speak. When it is time for public comment, press star nine on your phone to raise your hand. When it is your time to speak during public comment, you will hear an announcement that you have been unmuted and press star six to speak. The timer will then be set to two minutes. You may hang up once you have commented. And I would like to ask the clerk to please call the roll. Thank you, Mayor, Council Member Watkins, Callentary Johnson. Here. Golder. Nice to meet you, Mayor Brunner. We have just one agenda item today, and that is the policy briefing and action on various water department, long-term financial planning and rate making topics. For members of the public who are streaming this meeting, if you are wanting to comment on this, now is the time to call in using the instructions on your screen. The order will be a presentation of the item by staff, followed by questions from the council. We will then take public comment and then return to the council for deliberation and action. And turn this over to our water director, Rosemary Menard and Rosemary, we are ready for the presentation and discussion tonight. Mayor Myers and Vice Mayor Brunner, for making this time available, it's really the privilege to have a concentrated hour with you or so in the next little bit to talk about the water issues that we've been working on. Before I get going, I would like to acknowledge that we have most of the members of the water commission with us here today. So we've been working on these issues with them pretty much in a very intense way over about the last eight, 10 months. And I'd like to make sure that during your conversations that you have an opportunity to hear from them as we go through. So I hope that will be feasible. And I know they're not shy, so they'll be raising their hand. And we have made them panelists so that they can participate in that part of the conversation. And then we also have with us a number of people from the water department staff. So there may be that at some point in this presentation, I'll ask some folks to make additional comments or provide some color commentary on some topic that is specific to something you're interested in. And then finally, I have with us today Sanjay Gar who's our consultant for a lot of the rate making work that we're doing. And he will actually share with me a couple of the elements of the presentation particularly related to cost of service analysis and then to the water pricing objectives work that many of you provided me with input for. So thank you very much. I'm gonna go ahead and get going. And I'd like to make this kind of as informal as possible. I know this is a formalized meeting and we are doing a presentation. We do have a number of action items or areas that we want for you to give us some input on. I'd like to sort of do this presentation in a way that allows for there to be a break. There's topics that are all related to each other but there's still quite a bit of content. So I will go through this and then stop occasionally see if there's questions, see if the water commissioners would like to make comments on various things and then move on when you're ready. I've noted in the presentation a number of places where there's an action item requested of you. I'm not necessarily suggesting that you take the action item when I get there but I'm sort of reminding us all that those are the items that we would like to get some feedback from you on. So with that, I'm gonna launch into this presentation and I hope to do it in a way that makes it understandable to you and to those members of the community who are watching. So to start with, I wanna talk about utility financial planning. This is relevant to us because we're basically a self-funded business and we're a utility that only has water rate, revenues and fees and charges as the source of our resources. So we do financial planning kind of the way the whole city might do the financial planning or any kind of a business or other kind of private sector utility would do financial planning which is we look at what we need and we try to set our prices to make sure that we recover what our costs are and be able to meet our financial obligations. This is the financial planning conceptual model we use and there are a number of really key elements here that are outputs, the long range financial plan which we have a one from 2016 that we'll be updating this year and then propose rates. Those are key outputs of what we're doing but there are a lot of really important inputs to these things that each one of them that I think are important for you to understand. We're not asking you to make decisions on really any of these elements today but I think it's really important as we go forward into the work we're doing over the next say six, nine months on rate making that you have a sense of what the process is and what are the legally required inputs, what are the ones we're using because we wanna make sure that we're aligning ourselves with community goals that kind of thing. So I'm gonna quick go through the financial plan inputs and talk a little bit about those and then we're gonna talk about revenue requirement and then we're gonna talk some more about some of these other elements of the elements of inputs into the water rate making. That's kind of, this is your touchstone to go back to and say what is she talking about which does that relate to something that's on here and almost all of it is related to something that's specifically on this slide. So we do have inputs to the financial plan, our reserves and debt service coverage ratio, these are financial policies and then revenue requirements where we have to give operating costs in our capital program, the CIP inputs and not just for one year but typically we do this for five years. So it's a five year forward looking analysis. The reserves and the financial policies we have from the 2016 plan that these are our reserve levels, 180 days of operating cash, $10 million in rate stabilization reserve, $3 million in an emergency reserve and then 1.5 times debt service coverage. With debt service coverage means that if you have a $2 million annual debt payment you have to have net revenues at the end of your fiscal year of $3 million so that the banks and the people who loan you money can be sure that you're going to be able to pay the debt service. So it's like if your mortgage was $1,000 in order to meet the one and a half times debt service coverage you'd have to make sure that every month you have $1,500 in your bank account. And this is an important issue because it helps to drive how much revenue we have to produce and as we're debt financing a lot of our capital, our debt amount, how much debt service we're going to carry each year is going to increase over time. I've included this chart and it's very busy and I will make these slides available to you later but the reason that the financial policies are so important have to do with the credit rating. The Water Department has its own credit rating and issues that are by our revenues that we generate and all of these items on this piece of paper which they won't be a test on later really help to see when someone is looking at our credit worthiness what kinds of issues they take a look at. So things that are in the community like the unemployment rate of the community, the annual utility bill as a percent of median household income these are sort of characteristics that might be community based. Clearly the financial strength having to do with days cash on hand, operating revenues, the debt service coverage, those kinds of things are really important from a financial strength. They look at your ability to manage and whether we're in compliance with regulations and then there are legal provisions as well. Up up the sort of 2016, a long range financial plan kind of where we are. We've made a lot of significant accomplishments since the end of having that plan adopted in June of 2016. And that includes that we've funded all of our reserves by 2019. So we are carrying 180 days of cash. We do have a in 2018, 2019 we had 10 million in the very stabilization reserve. We had a $3.1 million emergency reserve. And it was a darn good thing because in 2020 we use some of those reserves to address various kinds of emergencies, including the pandemic, floods, fire and it really helped us to have some of those resources available so that we could make good decisions over time. And we maintained our strong financial position in spite of these many challenges. So, and then finally, in terms of the 2016 our long range financial plan was designed to help us begin the capital reinvestment process that we have actually funded and are working to implement now. So we've made substantial progress not only on the planning work associated with that but a number of the projects that were on that list early ones have been put out to bid and they're in construction or they're completed. So I think that's a really, that plan has stood us in good stead and I think going forward, we'll be bringing you an updated plan in the next few months. The rate making process and thinking about financial planning is what your revenue requirements are. And this is one where we've also done a lot of good work in the last number of years. Knowing that the operating costs were one thing and there's a somewhat more predictable because we inflate them at a kind of, modest rate over time to represent the cost of beneficiaries and the cost of chemicals and the cost of somewhat more predictable than the cost of our capital program. So we did a lot of work in the last six months looking at revenue requirements particularly focused on CIP spending and trying to really understand from the CIP projections what kind of revenue increases we would be likely facing if we did various kinds of capital programs. And so that's what this next little section is gonna talk to you about. And then I'm gonna give the water commissioners a chance to participate in this process and also that made this recommendation to you, give them a little bit of a chance to talk. So we had an ad hoc subcommittee. They got to understand our financial model. We developed a range of future CIP scenarios which I'm gonna talk to you about briefly and then they asked us to develop and analyze an additional scenario which we did and came up with a recommendation. So this is the element that is our operating costs and you can see that 2022 is lower than 2021. It's that way because we worked with our managers to ask them to really sharpen their pencils and look at a way to the 2022 budget based on 2020 actuals. And they did that by and large of some inflation in here but this is about 8% lower than 22 or that 21. So our operating budget we've made an effort to really try to tighten that up as best we could as we go forward. And then with respect to the Santa Cruz Water Program and the Capital Program, you might recall that we have three basic elements, renewed diversions, pipelines and pumps, station project that was affecting the property at 1220 River Street. It's just recently completed. You're gonna have a notice of completion of that project on your agenda next week. We're obviously working at the Neal Creek Dam on the issues related to the pipeline that goes through that dam, the inlet outlet structure and replacing that pipeline. We've got work that's going on in our treatment plant, a big project getting under construction later this month that is a multi-year project, $45 million concrete tanks replacement. And then a project that is going forward under a progressive design build strategy that is for rehabilitation of the water treatment plant and then supply augmentation work that's also going on simultaneously. So this is a lot. There's no doubt about it that this is a major effort to reinvest in our community and our community's water system infrastructure and assets. And it's not free. It's expensive as all get out. Water commissions group were sort of a small, medium and large, if you will. One was just complete the work we have currently underway. And so you don't get any investments in water supply or treatment upgrades. It has an $189 price tag. It requires a 7% and estimated 7% year over year annual revenue increase, not rate increase because revenue increases get distributed out so in a different way. So it's not a one-on-one, but it's an annual year over year revenue increase in order to fund that program. And most of the spending would be done by fiscal 25, which is not that far away. Scenario to active projects, treatment upgrades at Graham Hill Water Treatment Plant and then some supply projects. It has a 10-year cost of $377 million. It requires a 10-year year over year increase in revenues and the spending declines after 2028, fiscal 2028. And then the current baseline CIP, that sort of, this is what we need to do, $110 million is a very large number over 10 years. It would require a 14% year over year increase in revenues and spending would go till 2030, fiscal 2030. So these are the projects that went through that process. These are sort of the things that they considered. What are we buying with these resources? We have infrastructure reliability and improvements versus if we don't make investments, do we have degradation and further failures? That's, you know, if you have a car and it needs repair and you don't make the repairs to it, you know, you can't expect the car to provide the same level of reliable service that it might have done historically. One of the other factors they talked about was the continued vulnerability to drought resulting from deferring supply augmentation projects. It's a, you know, clearly here we are, we're at a, we're in another year where it's been really, really dry and we're seeing how vulnerable we are to these, you know, climate change driven weather patterns that we're seeing. We know that just like in a, you know, if you have a leaky roof in your house and it starts to really rain and you don't want everything in your house to be ruined, you have an emergency repair and it's not cheaper. It, you know, and if you don't really deal with the roof problem, then, you know, you can accumulate quite a bit of spending on any kind of emergency repairs for pipeline failures or other infrastructure failures. And this is not, you know, it's not, if it's not a planned expense, doesn't mean it's not an expense. So when, in reviewing these and sort of the value proposition associated with each one of the alternatives ad hoc subcommittee asked us to develop a fourth scenario that extended the schedule from 10 years to 15, 16 years and to sort of smooth out the cost over a longer period of time, which is what we did. And that turns out to be 53 million because these are all inflated dollars. So the longer it goes out, the bigger the cost is. It requires a 10% year over year rate increase. So it's sort of the same as option two that we talked about a minute ago. Some of the projects, these are some of the projects that would get pushed back a little bit in order to sort of smooth this out. So the recommendation for revenue requirement is this plan associated with our, also with our operating costs for the next five years. And this is the important input for us to use in rate making. And so that is, this is the sort of graphic that shows the cumulative of dollar amounts and apologize, I should have talked about this before and the spending patterns for the three options. What you need to do today is to authorize us to use the water commission recommended revenue requirement in rate development. It doesn't commit you to whatever comes from that, but it's kind of saying, we need to use something, this is the, we wanna work with and we wanna then bring you the proposed rates associated with that. I'm gonna stop here and maybe Donna, if you want to, if you wanna see if any water commissioners wanna raise their hands and make comments here. Yeah, that's great. If there's any water commissioners at the meeting that would like to make any comments regarding where we are right now in the presentation, go ahead and raise your hand. Sierra, Ryan, go ahead, Sierra, welcome. Hi, thank you for having me. I see Doug has his hand up too and I think he was on the subcommittee who worked so hard to bring this to the commission, but I just wanted to let you know that as someone who is the commissioner, we heard this presentation a couple months back and it is a lot of money and we acknowledge that, but we spent a lot of time discussing that we really felt like these were things that we cannot put this off anymore. Part of the reason it's so expensive is because things were put off in the past and we can't continue to do that. We're seeing the impacts and we have seen in other parts of the country what can happen if you don't invest in your infrastructure and it fails you in a catastrophic way. It's something that, well, it's going to be a lift for the community. I think people understand that it is something that just has to be done and we did take into account that this is going to be challenging for some people and there are some equity issues that we're continuing to discuss and we'll be discussing through some of the rate making processes we move forward with that, but I do wanna say that as the chair of the Water Commission we all really did support the work of this subcommittee and this plan that they came up with we really felt like they did a lot of really thorough due diligence and that we really felt like we didn't have many, really have a good other option like this is the path that we felt the most comfortable going down. Thank you for considering. Thank you, Sierra. Doug Inkvors next and then Alejandra. Thank you, Mayor Meyers and building on what Sierra had to say as a member of the subcommittee I can reflect a little bit on some of the thought process we went through. I guess for me it's all as big a bite as it is to propose obligating the city to this kind of an expense over the coming years. I really do see it as converting a necessity into a virtue. This is work that we have to do pretty much across the board, particularly as relates to the conditions of the system as it exists today and ensuring that our future supplies are reliable and resilient, able to serve the community in the face of climate change. What got me over the hump was the recognition that particularly now with historically low interest rates, you're actually some good generational equities in financing this rather than trying to do everything on a pay-go basis. This has been historically our approach and that is the folks, us, our kids, our grandkids who are gonna enjoy the benefits of this are gonna be the ones who'll be paying for it as it's financed over an extended period of time. And I also wanna commend staff for the engagement and flexibility they brought to the conversations we had. We looked at some alternative financing scenarios and things like that. And some of the ones I brought up were probably kind of harebrained, but staff entertained them anyway and modeled them out and we came to this recommendation with which we feel quite comfortable. So I hope it meets your expectations, thanks. Thanks, commissioner. And commissioner Paramo, welcome. Thank you, Mayor Myers. My name's Alejandro and I was also on the ad hoc committee alongside Doug Anker and Walt Waldlove. I won't repeat some of the things that you mentioned, but I'll say that we were certainly thorough in our process in meeting with water department staff and worked together of the course of around five meetings through the fall and through the spring as we were looking at assessing the different scenarios. I was grateful that through that process and we tried to work through different scenarios and not just the ones that were presented as the three that we had initially looked at and went out to the fourth scenario to try and smooth out the potential spend and revenue requirements over the longer period of time. And the results of that analysis, I think, led to a rate increase that was at least a bit lower than what was initially played out into that scenario three while accomplishing everything that would be part of the current CIP. And echoing what Doug said around going towards system resilience and system reliability and building out to the future, it's certainly a large expense, but an investment that would re-dividend over the period of time. One comment and thing I'd mentioned when we were looking through the modeling scenarios, there was also no inclusion of any sort of grant funding or assumptions of potential grant funding that could potentially come into play. It's possible that there could be potential sources that can augment some of the revenue increases or what could there be through grant funding. But the modeling that we looked at and the results that I'll put it, I assume for no grant funding in the scenarios. So just wanted to comment on that. It was something that I was asking about and looking into when we're assessing the situation in the scenarios and thought it was worth sharing here as well. Thank you very much, commissioner. Is there any other water commissioners this afternoon that would like to comment right now at this point? And then I have a question. Council Member Brown, do you have a question or comment? Yeah, thank you. I was just gonna ask if even if folks from the water commission, if you don't have a comment, it would be great to just hear who you are and who's here. You put in a lot of work and all volunteer time and really do a lot of heavy lifting for us. So it'd be great to just at some point do that. Thank you. Right, that would be great. You've heard from three and I think we only have six here today. The other three that you didn't hear from are Walt Wadlow who's been on the commission for this is his last year out of 10. So he's been a really wonderful asset to have as a participant in this group. And then we have two new commissioners. We have Tom Burns who's representing the outside city ratepayers. And then we also have Justin Burke who joined our commission. Those two joined our commission in February. So those are the six and the one who's not here happens to be on Guam right now doing some work and his name is Doug Swarm. Thank you for asking that, Council Member Brown. Okay Rosemary, you're gonna, we're gonna come back to these individual actions. So we'll take the detailed questions later. Okay, great. Okay, so moving along, I wanted to give just a couple of rate making. One of them is how much water are you gonna sell? And so this is an important question. When we had to make this choice in 2016, it was pretty hard because we just reduced demand water through restrictions in 2014 and 2015. I had no idea. I made a guess. It seemed like it was really low, but turned out it was like not that low. So we recently updated our water demand forecast and that forecast has resulted in, sorry, I'm gonna hide this. Okay, has resulted in an update to the long-term demand forecast that goes out to 2045, that's a billion gallons a year by 2045. You'll see that there's a fairly good size chunk of increase that's happening in the 2020 to 2025 timeframe. I've looked at the data. It's that's driven mostly by increments of housing as opposed to, there's some population growth, but the big chunk of that's driven by increments of housing. And not surprisingly, the forecast is a little bit more certain in the very near term compared to the further out years. So I think that this data all comes from Association of Metropolitan that this forecast kind of tells us what we've seen over the last several years is kind of what we're gonna see for the next two and a half decades. And I think that that's not a big surprise given the fact, we have a very conservative population. We do have some population growth and we have some growth in things like the university that's proposed. I'm not saying that that's supported necessarily it's gonna happen, but it's in here, the LRDP, the university's LRDP demand is in this forecast. And it's very flat in the next couple decades. And then we're seeing, I just wanted you to see this graphic, which is this is the forecast from 2015. It assumed we would go from a restricted area back to about 3.4 billion gallons a year and then slightly decline to about, with some additional sort of growth and development going on in this timeframe, but conservation and building codes and price elasticity of demand would generate a kind of a flattening of that curve in the last 20 years of the timeframe. And this demand forecast is 20, 30% lower than that and pretty flat over the coming number of years. So in the assumptions we'll be using this about how much water we're gonna sell we'll be using this data for those assumptions. Another element is under Prop 218 we're required to base our rates on a cost of service analysis. And for this element of the presentation I'm gonna ask Sanjay Gar our consultant for more of the presentation because he's an expert at it. And I think he'll be able to answer your questions and talk you through any questions or issues you might have. So with that I'm gonna turn this over to Mayor, council member, city council public my pleasure to meet with you today and to talk to you about cost of service. We do cost of service for a couple of reasons. As Rosemary mentioned, first let me just step back just to make sure we're all on the same page. So as Rosemary talked about, she talked about the financial needs of the agency of the water utility and it's basically about how much revenue we need to collect on an annual basis to cover operating costs, CIP. The second part of the is basically how to allocate that cost who should pay for what and what's the appropriate share of cost. And that's what the cost of service is about. It's basically about slicing the pie or creating pizza slices of pizza in some sense. And the reason why we do that is because people use the system differently. And here's an example of two systems. You can also think about two different customers. Yeah, system one, system two. And if you can see system two has this high use in the summertime while system one uses the water relatively the same throughout the year. And if you think about the infrastructure that's needed to provide that water service, system two would need larger facilities. They would need larger pipes, storage, pumping and all those larger facilities, of course, cost additional money. And so the goal here with cost of service is to ask ourselves which of our customers are sort of using the system more so maybe in the summertime, not necessarily in the wintertime and at seasonality and who should be paying for that. And we do this analysis as cost of service analysis first is equitable. We wanna make sure everybody pays its fair share. We also do it as Rosemary mentioned because of Prop 218. Prop 218 voter initiative and there's been series of court cases associated with it which basically says that there needs to be a nexus between our cost structure of running the water utility and the rates. So a simpler way of thinking of it is that rates shouldn't be arbitrary or capricious. There should be a logic and rationality with our rate structure. So end of the day, by the time we're done with the study we have a rate structure that makes sense for your community. It also embraces the values of your community. So we can do that too. But there are some constraints and I'll be talking about that. Next slide please. As I mentioned, different customers use the system differently. You do have different customers for instance, you have UCSC as one example. You have North School's AG as another example. Rosemary will be talking about the elevation charge and also inside outside customers. So there's different customers in your system that use the system differently and we should have a rationality for how they use that system. We look at the cost of running the utility, the cost structure. We look at how people use the system and we marry the two together. The main thing though is that each group has to pay its own way. We can't have any subsidies allowed. And this is a constraint with Prop 218 unfortunately that because maybe we want to have rates sort of lower for certain social economic groups of our customers which may be warranted because of Prop 218 we can't use rates to do that. So each rate customer class has to pay for its fair share. So that's the constraint with Prop 218. So what we do is Rosemary and if you click the next slide we have a little animation there. So basically we have, we know how much revenue we want to collect. That's the revenue requirements, the annual basis that Rosemary mentioned. And then we start looking and I ask herself what's the cost of the supply? You don't purchase water, you have it. But there is some costs associated with that, the miner. There's some base costs that's the average demand. There's peaking costs, that's the additional cost that's needed for the summertime. Your service area is that much and people don't use that much water as we know during the summer. But there is some additional capacity. There's meter maintenance cost to maintain the meter, customer service to issue the bill, and then also fire protection as we know, which is important. So we want to identify all these cost structures. Then we go to the next slide. And then we start allocating these cost structures to each customer based on a rationality, based on either demand, based on the meter size, based on issuing a bill, or based on actual peaking or capacity. So we go through a methodology and a logic where then we know what each customer should pay in their fair share of their cost. And we can go, I think that's it for me, right? Yeah. Back to you. Right, so Sanjay signed off. Any questions about the cost of service? This is done backward looking using a base year, in our case with fiscal 19, and then the proportions that get established for all these costs get used in forward looking projections based on the, so that if customer used 10% of the base cost in 2019, then they're gonna pay 10% of what the base cost need to be kind of going forward in the years that we're projecting costs for. I have a quick question, Rosemary. You mentioned that this was done sort of following what would be required under 218. Does that, does the law require that too if you're just looking at rate changes for your customer base then? I mean, I'm just curious. It's a good analysis to do anyways, because obviously we wanna understand how to communicate costs of service. Every payer, every rate payer. But I'm just curious about whether that's legal or required versus the 218, where you have to show that benefit assessment. Yeah, I will answer it the way I think, and then Tony, Kandadi or Sanjay, you can add. Basically, you have to be able to demonstrate that whatever rates you have in place reflect the cost of service. And if you can do that in some way that doesn't require this kind of detailed analysis, that's fine, but the standard that seems to have been set is this level of analysis. Okay, great. Thank you. Tony or Sanjay, anything, Dad? I guess I would just say that the courts in case law over the years have seemed to have adopted a more and more refined or required more and more refined analysis to accurately attribute costs to the properties that are being served. And so this type of analysis could have been done with a little bit more general assumptions and guesswork in years past and the courts have really been trying, have really been taking closer look at how rates are structured under the requirements of Prop 218. Thank you. Okay, in terms of the water rate development process. So we're going to talk a little bit more further down in the agenda tonight about finalizing the water pricing objectives because this is sort of like what policies do we want the rates to reflect? We can create rates that meet the cost of service analysis and still achieve or work to achieve some of the policy objectives that those of you looked at the pricing objectives you saw that there's a whole variety of different outcomes you can try to evaluate. Identify and evaluate rate structures, alternatives and that work is going on right now. We're going to be bringing some stuff to the water commission next month to kind of talk about some alternative rate structures and what they might look like very preliminarily. And then rate proposals for council review and ultimately public review through the Prop 218 notification process, public hearing. The timeframe for these things are probably the 218 authorization process that go ahead and do the notification is late August and the coming back for public hearing and council action in late October, kind of roughly. You today, some work that we've been doing on affordability because it's a really big issue for me. I think we've talked about this a couple of times in earlier sessions where the water department has been presenting information to the council on one thing or another. Share with you today some issues related to affordability and the analysis has been completed and a conversation we've been having at the water commission about an alternative to possibly explore and that's a question we're asking for your input on today. So for the study that we've done is that, water and sewer system costs have been and will be increasing because of capital requirements and to some degree operating costs but largely driven by capital. We know that many and the income levels of many households are not rising at the same light rate that we're increasing the rate. So we know that's a mismatch. And there are, there's very strong both nationally and certainly in California right now on water service. We have things like the AB 685 which is the human rights to water piece of legislation that the state has adopted and an effort in 2015 I believe to look at low income water rate assistance programs and to try to see an assessment of what it would cost the city to create some kind of a safety net program for water rate payers, not just in Santa Cruz but around the whole state. And so we know that this is a big issue this morning. I did a webinar with a member of the Fennett Environment and Public Works Committee about affordability, water affordability issues and I shared this analysis and talked about our capital program with driving our costs. And they are, the beds are looking also at a, at a, you know, some kind of a way to address this issue because it's really become clear through the pandemic and before really that the, you know equitable access to water is a public health issue in our country. And we need to be able to have people have equitable access. And the current business model that we operate under, which is all this stuff has to be funded locally, gets in the way of us being able to achieve that outcome, which is really important. So David Mitchell, who's the same person who we work with on our water demand forecasting to do an analysis for me, did the first one in 2016 after the last rate increases. It was much less granular than this one. But I've asked him to sort of update that, given our current rate structure. And then once we get sort of proposed rates to update it again, kind of looking out five years to see how things might change over that period of time. So the, we did a approach that looked at very disaggregated information. It's on the census block group basis, looking at essential indoor use. That's what IE, EIU stands for. It's a wintertime consumption basically uses a median disposable income that's created by taking median household income in each census block group, subtracting median housing costs so we get a disposable income, and then dividing the water or water and sewer bill by that. And there's some metrics that we can talk about there. Looking at poverty prevalence as another factor, and you'll see a sort of a burden, financial burden matrix that we'll show you here down the road, and then to create a score for each census block group. And the numbers in these census blocks are the number of housing units including, they include the multi-family as well as single family. And so this is all in the water service area. So it includes Santa Cruz plus the areas outside the city that we serve. And I mentioned how the strategy has worked, water bill for essential indoor use using February consumption divided by household income minus median household income for the census block, median housing costs for that census block that then becomes a quote unquote a surrogate for disposable income and same for water and sewer. And this is the, these are the metrics. These are longstanding metrics that exist in, that came out of EPA a long time ago when these numbers were, oh my God, they're thick, we could never get that high. 2% median household income for sewer service, 2.5% for water service or 4.5% combined. There's a lot of talk about it, these are right metrics, but because we got this to disposable income instead of just median household income, just these metrics seem to make some sense at least to use as a place to start. And there's a series of these maps in the, in the staff report and in the more in the document I provided that kind of give you a sense of where things stand at the moment. And you will see that, you know, but sorry, this thing is in the wrong place, I have to move you all over to the other side of my screen. You know, 86% of the household under 4.5%, we still have about 5,000 households that have more than 4.5% is being spent on utilities, water and sewer. An attempt to sort of try to create a financial burden matrix. So taking that water and sewer costs per, you know, per census block versus the, looking at the census blocks where they have a, what percent of each of the households in each census block is making incomes less than 200% of the federal poverty level creates a, you know, two parts of a sort of a matrix that then you can plot the pieces against. And that's what produces this, when you're looking at a low number of households in the census block group, you know, less than 200% of the federal poverty level and people paying less than 1.5% for combined water and sewer. That's a low financial burden versus down here where you've got, you know, more than 50% in a census block group, that has more than 50% of the households in the census block group incomes that are less than 200% of the federal poverty level. And they're paying more than 4.5% of their household income, the disposable income. That's a high, an area with a high burden. And that, this analysis produces this figure, which shows that, you know, in general, 80, 75, 80% are kind of in the moderate or lower, but we do have, you know, six or 7,000 households in our area. And these probably aren't surprising areas to see called out on this graphic where, you know, we have high financial burdens. The theory over here in LIVO, for some of you might not be familiar with it, is there are a lot of mobile homes in this particular area. And actually, quite along this whole sort of corridor in the LIVO area that seem to be contributing to some degree to, you know, what we're seeing in these desert nations. And Rosemary, when you use this, I can't help but notice some of the area on the far left. I would assume probably some student housing. So how do you measure that kind of resident if they show up in the census? I mean, they obviously would have hard time, but how do you factor in whether their parents are paying for all of that? How does that transform that? Yeah, I mean, this is a big question. And we've had conversations, Lee Butler and I, when this data first came in and these results first came in, it's been a long time sort of staring at this and kind of saying, what do we think is going on over here? And are these census block groups over here, particularly heavily, typically heavily populated by students, you know, lots of rentals there that relate to the university, maybe, maybe not. What I would tell you is that, you know, it could very well be that the students don't report income and this is under the, the data mostly comes for the income stuff and that comes from American Community Survey and that's updated. So it could very well, they're not reporting income, but it doesn't necessarily mean they don't have income. And that's not something that we can get at with this particular analysis because the data sources don't tell us that. We would have to do something, you know, like go into one of these areas and try to do more of a house to house or some kind of other survey that would help us understand what might be going on there. But I think that we do know and we can see some places in the, where there are challenges that sort of line up with what we would think. This is the sort of River Street, you know, the Ocean Street, Upper Ocean, sort of upper river area that sort of seem like those are areas that someone asked me, is there a problem there? I might nod my head and say, it looks like that seems likely to me. Yeah, I agree. I agree. Okay, thank you. The conclusions of this current, you know, the analysis of current conditions is that sewer service today is affordable for most households struggling. And we know that as we go forward, you know, and water rate increases and sewer rate increases as a result of, you know, need for capital reinvestment that this is going to be an increasing issue in our community. One comment I would make about what we're seeing here, there's a designation called disadvantage communities is particularly related to water service. I don't know that that definition that I'm thinking of applies more broadly, but there is a definition that is applied statewide to air struggling with water service and the affordability. With the exception of beach flats, we don't have disadvantaged community, designated disadvantaged communities in Santa Cruz. And it's not because we don't have people who can't afford to pay. It's that they don't all live clustered in the same, you know, concentrated area. So there's an issue there with the way that definition is used. And you know, you will often see, I think with SB 200 that was passed last year that, you know, puts $130 million available for communities that are disadvantaged communities largely mainly in the Central Valley that are struggling with, you know, providing adequate water service to their, to their customers, to their populations. Those are disadvantaged communities where that money is funneling. But in general, Santa Cruz wouldn't qualify for any of that because we don't meet the definition, the classic definitions that have been used and determining. And you will see that then, you know, the rescue bill, the COVID rescue bill that the federal came out recently and certainly the, the Biden jobs proposal, the big, you know, infrastructure thing that has disadvantaged communities are high on the list. But in general, we don't qualify for that in the classic way of thinking about these problems. And I didn't put any slides in about this, but I wanted to mention it here because it's a decision that we are gonna be asking you for feedback about the water commission and the water department staff have been talking about a strategy for paces, for thinking about separating out the capital costs that are really driving the rate increases we're looking at and putting those onto the tax bill as a fixed fee that would go onto the property tax. One of the things that would do is stabilize the rate, the monthly bills because you would then just have the monthly bills recovering the capital or the operating costs. And it doesn't make the costs associated with the capital go away. And if you're a property owner, it certainly doesn't make it, you know, you're gonna pay over in your property tax and then you're gonna pay your monthly water utility bill or what, you know, if you're getting a combined bill, you're gonna pay that. But it does seem as though that there may well be a way to justify that as a way of thinking about how to make water service more affordable to a general purpose rate payer. And, you know, we're asking for you to give us some feedback on whether or not you want us to pursue this idea in developing rate proposals. I'm gonna stop here for a second and see if there are questions and also maybe Mayor to see if water commissioners or other council members want to ask questions. Not make comments. Any hands from either commissioners or council members. Go ahead then. Keep going. Yeah. We're coming, just raise this hand. Taking notes and I've lost my voice. So if you can't hear me, I'll try to repeat myself. I guess one of the questions that's come up and that's been a concern is, you know, if it's cost is put on, push to the property tax bills, how that might impact many of the rental homes in the community, because ultimately that cost is just gonna get pushed on to the renters. And so is there any, I guess, it seems like either it goes on to the rate payer who lives in the unit or if it goes to the property tax, and that can help you push on the rate payers. So I don't know if there's been any thoughts or discussion around that. And we'll have better options than another. Yeah. Well, we don't have very many options. That's one reason why it's maybe an option. I think the other thing that we were talking about is that until fairly recently, state and local taxes, of which this part of your property tax bill, which is, if you live outside the city limits, you're paying your wastewater already on your state and local taxes, that those used to be deductible on your federal income taxes, it didn't mean that they were, no one gave you a tax credit for it, but it was still made a change to your adjusted gross income, right? A while ago. But arguably we're in a position where that kind of write-off would happen. It wouldn't necessarily be a one-on-one transfer of these costs, the other piece of it. And I don't think it's a stabilizing the monthly bill. And many renters do pay the monthly bill, even though they wouldn't. And so I think that's the biggest benefit. I think that it's one of the few things we can do, and you can make the case that it's the property owner who's really benefiting from the reinvestment in the system. It's not a perfect solution. There aren't very many utilities that have done it. It's the right thing for us to do or not, but it certainly is something that we're asking, do you want us to consider it? Because there seems to be some nuggets here or there that might make it worth considering. So it seems like if it's just a thought based on this conversation is that if you have, even for example, your properties that's vacant, they might not be consuming that water, but if it's tied to that property tax, those individuals are so responsible for kind of helping to invest in the water infrastructure, which everybody needs. So that's another positive way of looking at it. Yeah. Thank you. Okay. I'm going ahead and moving forward. So certainly this is the water commission also was to look at water pricing objectives. And so I'm gonna, again, I'm gonna turn this back over to our consultant, Sanjay Gar, to talk about this because we did get some input from you and we also have some input from the water commission and what we'd like to do is sort of summarize that and then at some point when we get past a few more things to go here, but not that many, we can talk about, are these the ones that you want to have us begin to think about using and shaping actual rate structures? Ready for me to go ahead, Sanjay? Yes. So Rosemary mentioned we want to do a pricing objective. So in this whole process, we've figured out the revenue, we do the cost of service, meet prop 218 requirements, but even within prop 218, there is a little wiggle room we have where we can meet the goals and objectives of your community and embrace the values that you have. And so that's the purpose of this pricing objective. We asked you to fill it out and thank you for doing that. The water commission did that and you did that too. And what we want to do when we look at this is we first want to understand what are our goals, what are our values of our community? What makes sense? And so that we have a rate structure that reflects that within still the bound, the prop 218. And then we want to look at the business case, especially if we're looking at some kind of alternative rate structure in the sense that it doesn't require a new billing system, staff, especially those who are a little bit more, potentially have more administrative costs associated with it. And then the last thing of course we want to understand is the customer impact. So, you know, whenever you change rates, rate structure cost of service is a zero sum game because if someone sees a reduction, that means someone else must see an increase because we're still trying to collect the same amount of revenue. So we want to understand those impact that who are we affecting so we have a good understanding of that. Next slide. So these are some standard pricing objectives that we used. We asked you to rank them to see what makes sense in your community. And based on those ranks that we got both from the Water Commission and from you from City Council, we examined them and actually Rosemary and I looked at them and we compared notes and see what are the themes. And we did see some themes. So the next slide. Basically, and it was interesting that we found these, they're very similar to these three themes that the Water Commission and City Council said that some minor nuances, but basically to ensure water for essential use is affordable and accessible. So that's one thing that was very clear. Second was is that we want to make sure we have the revenues available and stable to meet operating capital and customer service levels. And then lastly, we want to maintain transparency and equitable for capital and water reliability. Those were three themes that I clearly saw both from the Water Commission and from City Council. Another concern that city staff had was it said that given the resources limitation that administrative aid should be important. That wasn't as important, but that's important for staff. So we want to design a rate structure that meets those three needs. That's my challenge in doing that. And so I'll work with you on that. And those are some of the options that's why Rosemary brought up the property tax because it does, as you can see, some of these sort of conflict with each other. And so there's a balancing act here about what makes sense. And so that's why the property, that could be an option. I'm not saying it is the option, it's one option on the table. Okay. I think this is all we have on the pricing objective. There are no right or wrong priorities or answers here. And I think that we can certainly come back to this when there's an action item asking you to give us specific feedback about, are you good with these themes? Do you want us to talk about more of this, et cetera? Any comments or questions from the Water Commissions or the council members at this point? I'm not seeing any hands, Rosemary. Okay, great. I'm trying to raise my hand, sorry. My favorite. Thank you to Rosemary for that exercise. And I'm happy to see, I was curious for those results to see that the Water Commission, as well as the council members, were similarly aligned in the priorities there. But it was really informative and helpful. So thank you for that, Rosemary. You're most welcome. Thanks for your input. Do have you take action on how we're gonna structure the rate? So rather than waiting all the way to the end, this was a little bit like revenue requirements. And there's a couple of nuances here. Let's talk this through so that we can make sure that when we do this, we don't have to go back and do this part over again because we changed our mind about it. So the first one has to do with elevation surcharges. We've historically had elevation surcharges. The last time we did race, it was kind of a one-size-fits-all. I think everybody was paying 51 cents per 100 CCF or 748 gallons. Anyplace you were pumped, you were being paid, you were paying that. Kyle Peterson, our customer services manager, that when they had to explain what this was to people, they were having a hard time wondering, how come, you know, I have one pump and the person that lives way up here is getting three pumps and they're dividing our service area into three lift zones. The green lift zone is pumped once, so everywhere you see green on this means there's a tank that pumps the water to that air from the gravity zone to that tank and then to the customers. Anyplace that's pumped twice, the orange area, is these include, these are the names of the pumping stations and you can see there's some smaller orange areas over here off of the Graham Hill Road and the Pasa Tampo area. Pretty much it's green and then there's fairly good-sized orange area over on the west side, these small orange areas here and then the third pump zone is the university tank six, which is up here in this pink zone. What we would like for you to give us approval to use is to basically create, you pay 19 cents per 100 CCF for each pump zone. So if you're in pump zone once, you're paying 19 cents times two. If you're in pump zone two, you're paying 19 cents times four basically, right? And if you're in pump zone three, you're paying 19 cents times the number of units times three pump zones of six. Everybody in this except for the folks who are in pump zone three, it's less, it will be less money. In pump zone three, it's gonna be slightly more. Like I think they're currently paying 51 cents and they would pay 57 cents under this one item under here, under action items. Talk with you a little bit about this elsewhere, inside-outside surcharge. I've been using a variety of ways over a very long period of time. And there is a document that if you'd like to read the 100 plus year or 85 year history, I can certainly provide it to you. But it was originally when we did this in 2016, well, we did the analysis in 2016. It was intended to recover any area-specific costs associated with providing water service to outside city customers. And the analysis that we did, which I could show you all kind of tables on, but I decided to spare you, is basically that's between those used by inside city customers only, by outside city customers only, and by shared. And then you use a strategy called equivalent meter units, which is a kind of a normalizing thing to say, how would these costs be distributed based on equivalent meter units? The result of that is that we've seen in the analysis was conducted in 2014 and this year, that there is a slight difference in the way those costs look on a per equivalent meter unit basis. And so the question then becomes, all right, is that difference really associated only with outside city customers, or is there something else involved with that? What I would suggest in the elevation surcharge is that you have to treat similarly situated customers the same. This is one of, as the city attorney mentioned earlier, there's quite a bit of legal body of work, if you will, that's evolving relative to the Prop 218 and how that whole construct is being applied in rate making. But one thing that's become clearer and clearer over the years is that similarly situated customers must be treated in the same manner. From 2016 analysis, that the issue between the inside city customers and the outside city customers was basically fewer connections per mile in the Live Oak area, for example, meant that there would be fewer connections to it, which meant there are fewer people to pay for the maintenance of the system. So it appeared to us based on that analysis that population density was a key factor, housing density, connection density was a key factor in the way that drove that analysis. And when we got into this review, this map, which was linked in your document, was put forward as an example of the fact that population densities vary across the whole service area. This clearly is a larger part than just our service area. But you can see that there are some areas in the outside city customers that are denser and less dense, just as there are ones in the inside city areas that are denser and less dense. And so the analysis that we conducted has lots of details to it, but in the end of the day, the recommendation is to eliminate the inside outside service area surcharge because it does not appear to treat similarly situated customers in the same manner. If we were going to retain it, we would theoretically have to go to each one of the areas and look at population density and make a determination about whether that belongs in population density group A, B, or C, and that did not seem like a strategy that was very tenable. I see that the city attorney has brought himself onto the screen here. So, Tony, do you wanna make a comment? I'm just here to support at this point. I think that was a very good simplification of the analysis that went into that with regard to really what the race study did with it looked at a whole lot of different buckets of costs, and it assigned a percentage value based on that inside outside density assumption. And when we really carefully looked at it this time around, we basically came to the conclusion that if we were going to have an inside outside surcharge remain, we would have to do a much more refined analysis. And in the end of the day, it really would make a great deal of difference in terms of the differential between outside and inside. And so that's why I think the recommendation at this point boils down to just make them uniform. Fair, Rosemary? Absolutely. Thank you. And to change the elevation surcharges and to eliminate the city customers at this point. I don't know if there are from the water commission. And Rosemary, you're looking to, again, I just want to make sure council members were, so we're going to take all of these, we'll go through these actions in a motion later on tonight, but if you have questions. Right. I am not seeing any hands. Rosemary, I've laid this out, so I appreciate that. Just from a personal perspective, super complicated and major discussion really for our community. Because for those who may be listening tonight, all of our water sources are locally derived. So we do not get a pipe from the Central Valley or any of the snowpack from the Sierra Nevada here in Santa Cruz. So when it comes to water, we are literally on our own here in Santa Cruz County, not a lot of counties like that in California. So very important, obviously very important resource for our community. And so thank you Rosemary and everybody that the water team for, and especially the water commission for spending so much time on really one of the most critical questions we have before us is managing our water resources into the future. So thank you for the presentation. Rosemary, is there a slide that captures, I've got my, yeah, and maybe it's this one. It's probably the very beginning one. It's the four actions on it. Yeah, I think the, yeah, I don't know if I can make this. I know it's in our packet. Yeah, so fundamentally it's the five year revenue requirements is one we've asked for authorization to use the revenue requirement. And then it's on the portability analysis we've asked for input on whether or not you want us to further pursue the property tax. And then the pricing objectives we've asked for you to give us your feedback on the themes that you saw and whether or not you're sort of good with that. And then it's the action item on the elevation third charge and elimination of the inside-outside third charge. Okay. Okay, great. And for council members, this is the obviously listed in the agenda item too. I will go ahead and ask if there are additional questions from the council at this time. Okay, I see hands. I'm just gonna have council member Cummings, council member Watkins, council member Golder and council member Collentary Johnson. So this will be for questions. And then I will take it out to the public after questions from council for those who may be listening tonight. Go ahead, council member Cummings. Thanks, I had a question. I wanna thank the water commission and all the water department staff for all their work on. This was a really thorough presentation and to get so much detail in. I think it was really concise and really clear. So thank you all for everything you've done to help bring this forward. I did have a question regarding I think it was the census data for calculating the affordability rates. I was just curious if that was the most recent census data and if it wasn't, is that gonna be recalculators anyway? When this comes back to us, we'll be able to see kind of a comparison. So this work was done in the fall, in the kind of September, October timeframe of 2020. The new census data is just now becoming available if I understand it correctly. So this is done based on American community survey, which is a kind of a data set that is sort of kept up more current year by year. So it does not include the most recent census data. As I mentioned, the plan would be for us to bring back and this is kind of the here's where we are and here's where we would be in five years if we adopted these rates. And it will use the most current data that is available from whether it's census data or something else. When that product is developed, it will use the most current data that's available. Great, and then I guess a follow-up question of that. You know, for the kind of it's related but what's the rate changes that we make? Will there be kind of updates from time to time to determine whether or not we need to make any adjustments? We simply try to do this as we try to set them for a five-year period and there's a schedule that kind of gets adopted and adjustments to them lower. If, for example, we got a big grant for something and so positive way as a result of that, we kind of make adjustments lower without doing a Prop 218 process. We can't make adjustments to either the structure of the rates or the cost of the rates without that's higher without doing a 218 process. So we try to do them and the five-year chunk seems to be the biggest chunk you can do, try to do them that way but you can always make decisions to not fully implement the things that you've already approved. We did this last year when we decided to defer the rate increase that the council had approved in July of 2020, right? We didn't have to do a 218 process so that we were able just to defer that for one year. We'll throw my question, thank you. Thank you, council member. And council member Watkins is next, please. Thank you, Rosemary. Thank you to our commission in terms of some of the water supply sources and toxic water flowing into certain areas. It's something that I think we have to maintain at the forefront of what we're doing and also the sort of the migratory patterns that we might see with increasing heat in certain areas in terms of just population growth, et cetera. So as we move forward, definitely our top of mind. I agree with the themes that emerged and I also really understand the cost, benefit and the pros and cons of them. I guess one of the things, one, maybe two questions for clarification is one in regards to the themes that I want to see as a priority area and the commission and the council sees as well. But one thing I think I heard was that there was concern around some of the administration that's gonna be required to really ensure those things can get done. So I don't know if you wanna just say a little about maybe that's gonna be the planning that gets factored in but in terms of the implementation, ease and implementation and oversight. And then the last thing I wanted to ask about was the property tax and I appreciate the correlation that you made in regards to these investments really being essential to taxpayers in terms of the long-term investment. But you were saying that not a whole bunch of jurisdictions have these kind of certain nuggets and so are you envisioning that we would have to have this kind of unique Santa Cruz hybrid potential proposal coming forward in the future? Yeah, so I think those are sort of my two clarifying questions. Okay. It's a really good challenging comment and this is always the can you do and frankly you can do almost anything, right? You could decide every household could have its own water budget based on how many people live there and you could make it every one completely separate or you can do it in the opposite direction which is to say now the one example I think I used in one of the conversations I had in advance of this meeting was okay so you had a Comcast and you don't say well I use it on Tuesdays but I don't use it on Fridays and they tell you to write them a check and they don't care whether you use it at all, right? And so one end of the spectrum and very, very in the weeds, very individualized is at the other end of the spectrum and somewhere in between there is something that's both implementable, easy for customers to understand it's implementable to get it put together and then to maintain, right? Because I've got customer service people who answer 60,000 phone calls a year and a chunk of that is explaining to people what in the heck this bill means and so making it so that it's transparent and easily understandable is a really big priority. Make it has to do with the property tax thing and it's a very common for wastewater utilities to be on the property tax. It's not done in Santa Cruz that if you think about why we don't see so many water utilities on the property tax bill it has to do with policy decisions we've made over the last 30 years in the water side to think about how to send price signals to people about the value of water through the structure of their rates and you can't do that if you're gonna send a bill to the county comptroller auditor once a year that they're gonna put onto the property tax it can't make assumptions about somebody's gonna use this much water in the winter and that much water in the summer it's gotta be based on something that's fixed in relative to something to that property a meter size for example. So it's one of the reasons that you don't see that strategy getting you probably before 1960 it might have been quite common because utilities were flat fee services and in many cases that's why you see wastewater utilities on the property tax bill because they're the same monthly in and out for many entities anyway. No thank you for those clarifications I really appreciate it and I follow your logic for sure. And next up I have council member Golder. Sue Rosemary and everybody I think it's funny I was writing questions and they kept crossing them off because your presentation was so thorough but there's one I still have I know you mentioned that we still have to fund everything locally and I'm assuming that means nothing coming from federal and state level. That being said is there any infrastructure that we can share or with our regional neighbors like Soquel, SLB, Scott Valley and then just for comparison like how do our rates compare to our in-county major restrictions? Sharing infrastructure certainly on the water supply side of the house we're definitely looking at that all the time and we're working right now up in the Santa Margarita groundwater basin with Scott Valley and San Lorenzo Valley and trying to look at regional projects and thinking about how to do things that solve more than one person or one entity's problem for example. So the answer is especially in this county because we are all isolated whether you're on groundwater or on surface water makes a lot of sense for us to work together regionally and that has been something that we've been doing for a long time. I wouldn't be the least bit surprised that some kind of regional projects emerge for implementation and you will recall that sometime maybe late last year or early this year I forget the council approved extension of agreement between us and the Soquel Creek Water District to do these water transfers for another sort of five-year window. So it's something that's already happening on a small scale and likely will be happening on a larger scale going forward. The rates like what would some of your SLB year pay versus like what residents of the city that were working? Yeah, I mean, I don't have that yet but when we bring back proposed rates, we'll bring that. I mean, because it changes all the time. We have an old version from 2016 but it's not up to date. We haven't updated it yet. For contrary Johnson. Thank you so much. My colleagues have said and thank you Rosemary and your team and the water commission for this incredible work. This was a lot of information and very dense but presented in a very clear way. So thank you for that. And a lot of my questions have been asked but I do have sort of comment questions on a couple of the areas. So going back to the property tax office for water district move to a similar structure and wondering if you could touch on how that's worked out for them, how it's generated revenue, whether there were impact fund renters, what the impacts have been after three years of shifting to this fee structure for that community. And then I'll ask all my questions and then I'll pause. And then the water affordability analysis really, really struck me and your comments around the definitions around how there are specific definitions around struggling service area and how we don't fit that definition and that 21% of our households will be in the high burden, excuse me, high affordability. So I think, I don't know if it's a question or just a, I mean, this is something that we struggle with as a community in general because of our size and our census. We don't fit into a lot of these definitions. So I don't know if he's connected with other communities that have the same, are in the same situation. I don't know. I don't know what question there is. It just really struck me as very inequitable way of defining this advantage of struggling areas and what we can do about that. I don't know. So those are sort of my comments and questions. Thank you so much. Great. Thanks for those great questions. So we haven't done a lot of research and checking out with them about how it's gone. And certainly if we were, we'll do some additional research. I know that Sanjay Gar has been working, this works all over the state and probably broader than that on with utilities. And so they're a very good source of contact for where people have thought of this and why they've done it, if they haven't done it. So that is the kind of work we would do going forward if you give us direction to at least bring you something to further consider. With respect to the definition of disadvantaged community, actual specific definition, I should have done that beforehand and send it out to you. It has sort of bothered me from the get-go about, this just doesn't, it means that unless you have, this is, people with low income or other kinds of conditions that fit into this mold that all live together, you don't get to be, you don't get to be considered as having challenges. And that's clearly just not the case, right? And so I think that one of the about affordability and the conversations about equity of access are really important conversations that are beginning to really get going nationwide now. And I think that's really a positive thing because you can't divide things in quite the neat little way that they've divided things up to now. Things are a little bit more complicated. I mean, one of the major chunks of money in the Biden infrastructure bill that came out earlier this week is billions of dollars for replacement of blood service lines. Well, we don't have blood service lines here, but if you live in Chicago or if you live in Milwaukee or some other places, you've got blood service lines, but the rich people have them just as much as the poor people, right? So that money is gonna flow to deal with that sort of public health issue associated with those particular ancient pieces of infrastructure. This is a big issue that's starting to get talked about in a much broader way without so great a kind of let's draw a nice little circle around it so we don't have to think about it as big an issue as it really is. That's great to hear. So maybe some space and opportunity for state and national advocacy, how we redefine it. Thank you so much. Those are my questions. And Council Member Brown. For presenting all of those components. Let me go to my notes. When it comes to multi-units sharing one meter, how is that represented? Housing unit based, the housing blocks, or each one of the census group blocks has a number of housing units. It includes both the multi-family and the single-family residences in there. And the data we did provide to the consultant who did this work, the data for the properties, well, all of our properties in multi-family, single-family. And so he assigned those out to the geographic blocks and they're represented there as a number of households versus the costs associated with service to those number of multi-family households in that census block, right? So the cumulative information about median household income, median housing costs are done based on one of the housing units. Okay, thank you. And 21% of the households are already struggling and that was the percentage you had mentioned. Yeah, so the conclusion was that, from the sort of hattertly high burden, that's the 21%. And again, it's based on median household income. And we had the question earlier about, particularly in a place like Santa Cruz, which has a student population, and this was 2019 data, so the COVID hadn't really affected it. In a place like Santa Cruz, are those folks who really are trying to figure out how to make ends meet? And therefore, they're not being able to pay their bills or they're struggling with that, or are there folks who are paying their bills because someone else is paying their bills, basically? I will tell you that. I will tell you that we have looked at community where we've hung 48-hour notices, which is a pretty common thing before the COVID. Please pay your bill within 48 hours. They're gonna turn you off. They've looked at actual shutoffs. They don't congregate in one part of the city or another. So there's not a correlation between where people are shut off or are noticed that they're gonna be shut off and those census block groups we saw. Maybe why, but there's not. Thank you. Those are my questions. Thank you. Council Member Brown? I'll add my appreciation and many thanks for, as always, a really clear and well-organized presentation. And I'm sure a lot of work went into that and you make it look so understandable and, you know, it's not. Well, and the, you know, it just feels overwhelming when I think about it, but, you know, you give us ways to try to, you know, to wrap our minds around it and make decisions. And I just so appreciate it. Thank you to the water commissioners as well. I just had a follow-up question on the property tax. The idea of potentially shifting capital infrastructure costs to property tax bills. And I know this is, I'm intrigued by the idea, so I will see what my colleagues think when the time comes, but I do think it's worth exploring. In terms of how, and maybe this is a question that would be for further research if we decide to go in that direction, but in terms of the question about how to make that, the process for making that happen, you know, I'm sensitive to the administrative burden that you all faced and also communications about changes and all of those things. And so I'm just wondering, is that something that you feel like is feasible or might be feasible? I mean, obviously you're bringing it to us, so there's some potential there, but what does that look like from based on what you know now, how to get there if we were to... Right, a communication part of it with the customers and making sure there's clarity. That's a challenge, there's no doubt about it, but the actual mechanism is you would set a revenue we collect right now and the infrastructure re-investment fee would be the surrogate for it because that revenue is currently set to recover the cost of page-ago capital and all the capital-related costs, right? So we would set, and it would be distributed, or we would say how much revenue we need to collect, it would be distributed by meter size across the whole range of meters. And then annually, in something I think it's August, we would send to the county comptroller a list of all the applied to, you know, the total value, you're getting your money. And because of what's called the teeter, the tax payments are remitted to the entities and if they're not paid, the county deals with it. And then on the tax bill has the bonus of having people have the rating agency see that you have a really strong way of getting your revenue from, you know, the necessary revenue you need. So that's a good thing. It does involve a 1% chart. It probably does result in some changes to our shade with billing, whether it's fewer costs, you know, calls or as the bills get bigger, especially over time, you know, more people struggling, et cetera, those kinds of things that might not be as much of an issue. So that's what we know about it. And there has been some legal analysis of preliminary legal analysis. And Edith Driscoll said to me when a conversation I had with her, she said, if it's legal, it's fine with us. It has its challenges from a communication thing and making people don't, you know, not think that you're hiding the ball, that kind of thing. Thank you, I appreciate your thinking on this. Okay, I have one question and then I'll turn it over to the, turn it back to for public comment. I understand where basically the, the Water Commission's recommendation is to use, I think you called it scenario four, right? I just want to confirm that publicly. And my question was, so there was an extension like the other scenario two and three of another five years to pay down, to basically try to kind of spread, obviously, those investments over a longer period of time. And I'm just curious, what made 20 years fail? I guess it's my question. Oh. Look at extending that out over a, you know, I'm just curious whether that debt burden just was too long, too high, or just curious what made that. The stuff that we've got in this window is a thing that if you wanted to spread it out longer, it would mean spreading out the construction. I'll give you an example. The concrete tanks in half or three year construction cost to spread them out over a longer period of time. And you have those kinds of projects, then you end up, you know, in theory, having to spread the construction window out longer in order to spread the cost out over a longer period of time. A diminishing return, right? Right, got it. Okay, that makes sense. Yeah, that makes sense. Okay, great, thank you. I'll go ahead and unless there's any other council member questions or questions from commissioners, I will go ahead and turn it over to members of the public now. And if you are interested in commenting on the policy briefing in action on various water department long-term financial planning and rate making topics, press star nine on your phone to raise your hand. And when it is your time to speak, you will hear an announcement that you have been unmuted. You can then press star six to speak, and then the timer will be set to two minutes. And I see two attendees, two folks in the public who would like to comment on this item. The first phone number ends in 1810. Yeah, this is scary. So the city has a monopoly utility and in that sense does not operate in a competitive environment and is in a position to abuse that on purpose or not. The water bill as well as all municipal utilities are not a cash cow to be milked. So you know, a principled approach to management of that resource. It is not really fair from census blocks to determine rates, it just isn't. Income has no basis to determine water rates. We're buying water like anything else. Fix a fees for all property taxes in any form makes no sense. There are proper team considerations, there are usage differences not related to property tax and diverse population in any census district exist. In the end, this is about buying water period. After all costs are received, recover, excuse me, water should be cheap in what years especially. This chatter about water affordability reads a bit like socialist nonsense. Water is not to be used as your version of a social justice instrument like welfare. We have welfare for that and cities have zero welfare responsibility, at least insofar as charging some people more and some less based on their territorial average income location. Progressive taxation should have that pretty much as a social program covered. And if it doesn't, that is the federal government's decision. Thank you. Thank you. Next number ends in 1-847. Go ahead please. Yes, good evening, mayor and members of the city council. My name is Linda Will-Schusen. From 2013 to 2020, I was a member of the Water Commission representing outside city customers. I'd like to convey my support for recommendation number three on your agenda, which is to approve the elimination of the rate surcharge for outside city customers. And I'd like to thank the water director, the water commission, city management, the city attorney and the city council for supporting this recommendation. It's a good time to put the outside city surcharge behind us and allow us to move forward with the important work of repairing, upgrading and financing our municipal water system. Thank you very much. Thank you. Appreciate you calling in. Welcome back, Linda. Okay. And I see Sir Ryan also with your hand. Yeah, before you start your deliberations, I just wanted to thank the staff for their excellent summary of the Water Commission's recommendations over the past eight or nine months. There was a lot of work that went into what felt like a fairly brief presentation of all things considered. And they just did a fantastic job synthesizing our consensus and our comments and concerns were all addressed well before it may be presenting before you today. So I just really want to thank them and thank you on behalf of the entire Water Commission for taking the time to focus on this subject, which is purely important to our community here. Yeah. Thank you, Commissioner. Seeing no other members of the public, I'll turn this back to the council for comment and deliberation and just for the public. We are basically being asked by motion to accept the Water Commission's recommendations and authorized staff to use the Water Commission's recommended forecast of future revenue requirements. For fiscal year 2023 through fiscal year 2027 in its financial planning and rate making work to provide direction to staff as appropriate regarding exploring shifting some part of the monthly utility bill revenue collection to property tax. Three would be to approve the elimination of the rate surcharge for the outside city customers and four is to approve the revised approach to elevation surcharges and authorized staff to integrate approach into ongoing water rate making work. So those are, that's our requested actions for tonight and I will look for further deliberation by the council. I see council member or Watkins, please. And then council. Thank you, mayor and oh, I'm sorry. And then council member coming back for you. And we have to move the recommendation as you stated it is listed in our agenda report and welcome any kind of additional comments or direction associated with the various items that accompany those elements, but I just also want to echo our, you know, the thanks and appreciation for full and important work and the really thorough truncated version of the presentation that we represented with this evening. So thank you all for all your work, you know, and I know it's ongoing and we're lucky to have a really great committed community and a really excellent and stellar team here at the city. So with that, I'm happy to move the recommendation as presented. And council member Watkins on item two, which is provide direction to staff as appropriate regarding exploring shifting. So your motion would basically say that staff should explore that. Is that the direction? Yeah, I mean, yeah. Yeah, given the conversation and sort of just the insights into what could be possible there, I think it's worth exploring unless there's any concerns or additional input from my colleagues or commissioners or staff. That's sort of the overall sentiment that I heard. Great. I have council member coming and then vice mayor Bruder in that order. Thank you, mayor. I just had a question. It seemed like in the report that we were provided, there were five recommendations and yet four were presented. And so I just wanted to get some clarification on that. The fifth one is the water pricing objectives. I apologize that's a sort of input on water pricing objectives. There was a slide in the presentation about the themes. And so if you have things to add about that, that'd be great. But that's what we're looking for there. Great, I was just curious because I just wanted to make sure we captured everything. Right. Thank you. Yeah, I'm happy to second the motion. Great. So we have a first by council member walk-in and then a second by council member Cummings. If I may real quick and to the make of the motion, I'm just... I think you've got muted, Justin. Oh, there you go. It was just for clarification that we'd include that additional recommendation. So that would be reflecting Bonnie, the presented rolled up objectives that were presented, correct? Water policy themes, yeah. Yeah, okay. And the PowerPoint, nobody's stated that yet. Are they in the PowerPoint? Yes. Yes, there's a slide that has those that Sanjay presented, I believe, correct Rosemary? Yes. Hold on a second. I can tell you which slide it is. And I can articulate these for you. Slide number basically says that priorities are, ensure that water for essential use is affordable and accessible, provide sufficient and stable revenues to meet operating in capital and customer service levels, maintain transparency and equity for capital and water reliability needs. Okay, I have... I'm going to put myself in the queue. I just have one comment. You know, given all the legally reclining with community goals and the shares pointed out, we just can't put off anymore. I'm pleased and applaud you for this work to this point. And I'm glad we can continue forward with some, some sustainability for this. Thank you. Thank you. I just had one comment on the property tax, Tony. And only because I, weirdly enough, I have a little question. And only because I, weirdly enough, I have a little, well, I do have experience with this because this is what we use in our groundwater agency to actually raise our, to raise our revenues to operate the groundwater agency. And my understanding under the Constitution, just based on what we do, Tony, this, we call this a regulatory fee, though. So, you know, we have those powers under the Constitution, under the Sustainable Groundwater Management Act. And those were afforded to us, but is this, as you have to, I mean, we do have to do a notification, but this would not go to a vote. And this is just a notification. And unless we had a protest, we would be able to levy that correct. Yes. And just a little bit of background. Groundwater extraction charges. I'm not sure what the nature of the fee is that you're talking about. Is this chance for administrative, administrative piece, basically administrative and planning right now? Okay. We don't charge an extraction fee, yeah. In any event, water service charges, our property related fees are charges and they're subject to the requirements of Proposition 218, and putting the charge on the tax roll would not change that. So what you would essentially have is the Prop 218 notice, which would be to adopt the raise. And you can do that. You can adopt a rate schedule up to a five year period with gradually increasing rates. And then annually, you will do a, basically a calculation of the charges applicable to all of the parcels that will be subject to the, to the charge. And that's done by resolution. And it's just applying the rates to the individual parcels and creating a big spreadsheet. And then adopting another resolution ordering that the charges be added to the, to the tax rolls by the county assessment. So it has, you have to be both processes, but it's very common. It's more common for sewer agencies than it is for water agencies, but it seems like water agencies are starting to lean in the direction of putting things on the tax roll for this type of capital infrastructure facility charge. Yeah. I appreciate the comment. I think Rosemary that you mentioned on sort of the benefit to the property, obviously to the, to the property. I mean, property becomes devalued pretty fast if you have water. Yeah. Do you have a comment as well? Yeah, I just, just a clarification. So with the GSA's and we also do that kind of work familiar with that nature, that falls under Prop 26. It's that venue. And with Prop 26, you don't need to do a Prop 218 notice. I mean, it's a different route. And as you said, it's a regulatory fee right here with this fee. This would follow the Prop 218 process. You would have to have this administrative record, which is one of the deliverables we will provide. You would have to send out a notice to the property owner for 45 days. You have the public hearing, as long as the majority of the property owner is on protest, city council could consider the adoption and if city council does adopt it, then as mentioned you could put this on the property roll and there is a procedure associated with it. And it's normal with the, then it falls exactly very similar to the GSA approach because then you was putting on the APN and their parcel. Thank you for that clarification. So with this track to, so if you put it on the property tax roll but, you know, someone's got a home that they bought in 1972 so that assessment is really, really low and then you've got someone who bought a home in 2021 and that's you know, the property tax, you know, went up 1%. So you, how do you how do you deal with that severity? It's not based on the property tax assessment at all. It's like some, some parcel taxes are $20 or a parcel or, you know, it gets the base feed and it gets attached to the parcel. That's right. And just a clarification, we would most likely, our recommendation would be based on meter size. So every property has a meter and larger your meter, more capacity and more infrastructure use you could use so it makes sense for you to pay more for this infrastructure charge. Got it. Thank you. Any other questions? Okay. So we have a motion by councilmember Watkins seconded by council member Cummings to accept the water commission's recommendation and authorized staff to use the water commission's recommended forecast of future revenue requirement for fiscal years 2023 through fiscal year 2027 in its financial planning and rate making work to provide direction. We provided direction to staff regarding exploring, shifting some of the part of the monthly utility bill, revenue collection to property tax, which we have said, yes, please explore that. Three is to approve the elimination of the rate surcharge for outside city customers. Four would be approving the revised approach to elevation surcharges and authorized to integrate approach into ongoing water rate making work and five would be to confirm the water pricing objectives as provided and high priority themes in the motion language here. So that is our motion this evening and I will go ahead and call for a roll call vote, please. Thank you, mayor. Councilmember Watkins. Aye. Councilmember Johnson. Aye. So that motion carries unanimously and that concludes our meeting for this evening. Again, thank you to Water Department staff and the whole team and thank you to the Water Commissioners who joined us tonight. Thank you. Bye, everyone. Bye.