 Good evening. This is a special meeting of the Burlington Electric Commission. It is May 19th, and we're having this special meeting specifically to discuss something that we've been discussing for quite a few months and in fact a few years, which is a potential rate increase. First, I just want to say because of my other position as a state representative, I will have to depart this meeting at 6 p.m. and then Commissioner Harrendine, who's our ranking member, will pick up as chair and I will try to join in and out if I'm not needing to be on the floor, but so you'll see me pop in and out and I apologize for that. Second of all, because we do not have a commissioner's corner or those moments that we normally have just a heads up to the other commissioners that will be seeing some communication from me regarding the reappointment process that we go through every year for appointee positions like the general manager position, so you'll be seeing that in the next week or so. Otherwise, it's not on the agenda, but is there anything else that anyone from the commission would like to raise before we dig into looking at the agenda itself? Okay, hearing none, so first up is the agenda itself. I'm assuming everybody is fine with it, but now is the time to speak up if there's something you would like to raise and have be addressed. Okay, hearing none. Next, we will move on to the public forum. I believe we do have members of the public joining us this evening. Laurie, if you could help us identify who they are. Well, I can see there's Luce Hillman, Colin Hilliard. I apologize if I'm not pronouncing these correctly. Karen Vastine and George Cattillo. Cattillo? Cattillo. And I believe that's it. Okay, well, thank you for joining us. And we'll just go in the order that Laurie, our clerk named. So, Luce, thank you for joining us and thank you for the email shared with us earlier today. Thank you. Is it my opportunity to speak? Yes. Okay. Hello, my name is Luce Hillman. I'm the Executive Director of Facilities Management at the University of Vermont. And we want to express disappointment in the way this rate increase was communicated and the lack of collaboration between BED and the University of Vermont. We are a very important client to BED. We hold monthly meetings. Our university engineer meets every month with BED to go over projects and any issues that may be coming up. And we are really disappointed that we were not given additional notice for this increase. We did receive a phone call in the middle of April saying there was an increase coming. There were no numbers at that time given to us. So, we are surprised by the 7.5 percent rate. We are also requesting that a detailed rate study be completed so that we can understand the impact on the different categories that we have, because we do have several different meters in different category styles in our 180 buildings. By this time, our budget for our fiscal year, which starts July 1, has already been completed. So, we already have our budget numbers set aside for the coming year. That usually happens in very early in the spring time. So, this is going to be a difficult fee for us to absorb in the coming year. We understand you haven't had a rate increase in quite a few years. And we understand that, but we still feel there should have been better communication and cooperation between this rate increase. We will be attending the Vermont Utility Commission meetings to express our concerns and regarding the rate proposal. Please let me know if you have any questions. Well, first of all, thank you for coming and speaking up. And I am sorry for the perspective and the experience that you're expressing. Personally, I feel like the commission at least has been discussing this at least since 2018. And it is true that numbers, specific numbers, have not been articulated in large part because there has been an ongoing attempt. And in fact, this is our third special meeting, I think, in the last month to really try to hone down and get the budget as lean as possible so that the increase could be as modest as possible. So, I hear what you're saying, Lucie. And I appreciate it. And I think it will be important for you to participate in the proceeding. I wonder, since I fly at the 30,000-foot level, if General Manager Springer would have any additional feedback. Certainly. Thank you. Definitely appreciate and understand. I imagine we'll hear this from others that having a rate case and having a 7.5 percent rate case can be challenging. We're coming out of a pandemic. It's a challenging year for a variety of different organizations. I would say that Burlington Electric at least has communicated with the University of Vermont multiple times about the potential of a coming rate case. Last August, I believe, we conveyed that our FY21 rates were not going to increase, but our FY22 rates were not yet determined and could be affected by the pandemic. And then we've tried an increasing specificity through the months of April and then into May to convey the range that we were looking at and then the ultimate number. The ultimate number was only determined as we sought and tried to find additional funding sources to mitigate the pandemic impact on our budget, which necessitated the various special meetings that the Commission has held. And certainly, we were working up until last week to try to have the number be even lower, if at all possible, if there were funding sources to to find. The only other thing I'd mention is this is really the start of a process, not the end of a process. So the notice that was provided via our public announcement yesterday was to make sure that folks could attend this meeting this evening. But also, we have a budget presentation tomorrow at the Board of Finance, which is another public meeting with public forum. We have a rate case consideration at the Board of Finance and City Council on the 24th, which is another public meeting with public session. And then if we are approved to file with the PUC, that will lead to a months long process that also is open to public participation. So ultimately, our rate case proposal will go through various vetting with public forum and input at a variety of levels of government, local and state. We certainly tried our absolute best to convey to University of Vermont for their budget planning purposes that we were uncertain about our rates in FY 22, and then the range and then the ultimate number as soon as we had that information in each case. Okay, thank you. As you know, most of you know, revenue comes from student tuition and room and board. That's where the majority of our revenue comes from. So these adjustments can certainly make impacts on our future rates also to our students. Thank you. Thank you. And I can certainly speak for everybody that we would prefer not to be doing this, and we would prefer to not be doing it at the tail end of a pandemic in particular. But here we are. Right, we understand it's been a tough year for the University also, as you can imagine. So we've had similar situations ourselves. Thank you, Luc. And thank you for the letter as well. If I may, I'd like to go to the next person here as the public speaker. Laurie, if you could help me, I only see phone numbers. Okay, we have Colin. Is he available to speak? Colin. I am here. I'm not Colin. I'm Kelly Devine, Executive Director of the Burlington Business Association. Colin is a staff member of mine. Can you guys hear me? Yes, we can. And thank you for joining us. Thank you for having me. I, you know, thank you, first of all, Darren and the team at BED has been doing really great stuff for Burlington. I want to say, you know, how much we appreciate when you work on climate change and, you know, just really being forward in the community and trying to make things overall better. I do understand, I actually worked in the electric utility industry for a few years, and I do understand that rate increases are necessary and we haven't had one for a while. But I am deeply, deeply concerned for both all of our small businesses and our property owners about this coming off a pandemic. The fact of the matter is, is that, and I don't know if you guys are aware of this, but many of our commercial property owners this last year basically gave their tenants a pass on rent during the pandemic and collected no money while they were continuing to pay the electric bills and the water bills and the property taxes, etc. And I know you guys postponed this rate increase last year. I think the real concern that I have is it's one thing for a rate increase to come during a time of pandemic, which is unfortunate. It's also unfortunate for a rate increase coming at a time where we need to rebuild our economy. We don't know if people are going to come back to office spaces. We don't know if people are going to come back to our downtown to eat and go to stores. The amount, the increase in online shopping last year was, was tremendous. And so we have, what we're facing right now as a business community is a potential or proposed tax adjustment, which for many of our commercial properties will mean a tax increase. I know a lot of commercial property owners in the downtown whose appraisal went up 100% or 150%. So their property taxes going up. Their water bill is going up and their electric bill is going up. And I just say that to sort of make the case for the fact that ultimately all of this trickles down to those small businesses. Our businesses are owned by local people generally. And our rents are not inexpensive and people just barely hung on in the last year. In addition, we have a real challenge when it comes to safety and security downtown. So I really just found out about this a couple of days ago. It was, it was difficult to get the information on the rate increase, but I'm glad I did. And I want to just make that case that this, while there's no question in my mind that Darren and his team have done an amazing job to calculate why this is necessary for BED, it is just coming at a really challenging time. And I heard you mentioned that commercial properties, I heard in the press release that commercial properties didn't pay, you didn't have as much income coming in from commercial properties because they were shut down. Well, we're not sure if all those commercial customers are even going to come back to their office space. We don't know how much vacancy we're going to have in our downtown. I've heard dates like July 31, September 30. I kind of see this, is this going to be giving them a reason to delay opening, to have people do remote work? I mean, read in the news today that Google has told all of their employees you can come to work or not. Offices are going to get smaller. So I always, my economic 101 always says, why are you going up on your price when your sales are low? It's usually when you offer a discount. So we really are all in this together and it's a very, very tough lift. I also work with our institutions and you bringing UVM back with students in full force, bringing the hospital back in full force, those are key stones to our economy. But I'm really here to speak about all those small business owners that I know are waking up every day right now and saying, can I make it to September? And if the landlord gets a rent increase, the tenant does. That's the way it goes. It's called a triple net and it's passed through. So just want to implore your commission to think about where we are and how tough this has been. And to finally say, Darren, to you and the team, if there's any way that I can help to find some other funds to meet this gap, count me in because I'm there with you. Thanks. Thank you, Kelly. I'm not certain you could say it any better. General Manager Springer. Just also want to reiterate, appreciate the comments. Fully understand the challenging moment that this rate case is coming in. The pandemic has created a challenge for so many in the community and we've tried to explore every option to mitigate the rate increase for precisely the reasons that you've laid out Kelly. So really appreciate that. Certainly, I think BED had sought various federal and other relief programs. We were unfortunately not eligible for things like the Paycheck Protection Program which could have largely replaced the lost sales revenue that we are going to outline in the presentation this evening. So remain open to opportunities for funding to help mitigate this and we remained open all the way through last week. We were just at the point in our budget process where we couldn't wait any further and had exhausted all the options that we were aware of to look for relief funds that could have helped to mitigate this. So glad to discuss further at any time if there are opportunities that we've missed and just appreciate the comments and the perspective that you've offered. And Laurie, if you could. We have a Mr. Cthulhu. Please feel free to speak and introduce yourself. Hi, I'm George Cthulhu. I'm the Director of Facilities Management at the hospital. So I think our primary thing is we would like more time to analyze what this is doing but it was a bit of a surprise to us and the cost is going to be significant to the hospital. As you know we're a not-for-profit organization that's trying to provide care to the community. So I don't have a lot to say this time because we'd like to analyze it further but I think we are definitely taking it back by this. Thank you. Thank you. And we have Karen Bastin. Hi Karen. Hi there. Thank you for having us and I work with George. So I work with the UVM Health Network and the Office of Government and Community Relations and just really appreciate that we're able to join you all tonight. And I just want to echo a lot of the comments from George and Kelly and Luce just to say that one of the things that I've been really appreciative of this last 16 months or 14 months I'm kind of losing count from the time warp of the pandemic. I've really appreciated the partnership, the strong partnership that all of our organizations have had with the city. I think that we shared in really strong leadership amongst our organizations and just to note things that have already been said is that everybody is feeling the impact of the economic uncertainty caused by the last 14 months. And that said and I think George said it well is that we're here, the two of us are really here to learn more looking forward to the presentation that Darren mentioned. And we do believe that this will be a significant unbudgeted financial impact for UVM Medical Center. We have appreciated the heads-ups that Darren gave to us just to let us know that there would be something coming. But I don't know that we had anticipated that it would be this high of a rate increase. And I think we too along with Kelly and I think Luce agreed as well is that if there's any way that we can find to keep us all a little bit more whole whether it's other funding resources or what have you we're here to partner with you on that. Thank you. I suspect we will certainly be looking for more opportunities and for wherever else we may find support. Not knowing where that may come at this time obviously we'll just have to keep connected. Okay thank you. Laurie I don't believe there's anybody else from the public? No that covers it. Yep. Thank you all for coming. And please feel free to stay and know that this is going to be an ongoing conversation. So we'll shift over to agenda item number three. This is Fiscal Year 2022 draft budget. This is a discussion and vote and this is Darren and Emily and just a note that you know I'll be stepping off of this at about 5.59 and then Commissioner Herendine as the raking member will pick up as chair and I will try to join in as much as possible. Excellent. Thank you very much. I would plan to go through some slides at this point that really cover the budget as well as the rate case if that's okay. Knowing those are both distinct items on the agenda I think it's the two are inevitably tied together. Darren I'm sorry. The budget we're going to go through assumes the rate hike. So to what degree based on I'm thinking we're hearing here is the rate hike? Not certain. Well I'll walk through the slides which kind of indicate what the budget is even with the rate increase and what the rate case necessity is and then the commission has both items as separate items but I feel like to present on one I should present on both essentially and then give you the chance to consider them distinctly. Okay thank you. I will share my screen if that's okay. Yeah and just as a note to your question Bob recall that the last few special sessions we've looked at you know one two three million dollars less in terms of cash on hand so you could keep that in mind if this potential draft budget if the rate case was not approved then we would be back to some of those previous budgets that we looked at over the last two to three Wednesdays. Can folks see my screen here? Yes. Okay excellent. Okay this is a presentation that we'll also be making tomorrow evening to the board of finance. You know starting right here with sorry couldn't tell if there was a question. Okay starting right here with one of the most acute impacts from the pandemic and this number actually has increased I believe by a couple hundred thousand even since we put this slide together but sales to customers are over 2.1 million now lower since the start of the pandemic compared to the budgets that we put together in FY 20 and FY 21 and obviously as you can see we've had declining sales over the few years even prior to the pandemic in part because we had some delayed project additions we had some customer loss during that period of time and those additions that haven't shown back up so there was some deterioration in sales even going back to FY 16 17 and 18 but really a significant decline driven by COVID during the periods of FY 20 and 21 so 2.1 million and really a little bit more than that now in lower sales to customers during that time. Another distinct impact from the pandemic is customers being behind on their bills we have as the commission knows suspended disconnections for non-payments through the course of the pandemic to provide relief for our customers we've done that even when there have been pauses in the state moratorium around that policy as you can see February of 2020 being the last non-pandemic month on this graph you can see that rearages grew they declined a bit in December and January as the VCAP state assistance program provided some relief to customers who were eligible but they've continued to grow and are currently over 1.3 million as of the end of April and that means less cash on hand for Burlington Electric which affects not only our operating cash but also certainly our ratings metrics as well. This is something that we've talked about a number of times at the board of finance and with the commission but really BED has moderated the growth significantly in controllable costs if you look back at the period between FY7 and FY16 it was a 5.84 percent since then it's been at 3.55 percent on average and the reasons for that are multiple but I think we can credit the reorganization effort that moved us from having 133 full-time positions down to 120 in FY16 and we're actually even lower now we're at 118 but that reorganization helped with lowering controllable costs or the growth in controllable costs. FY19 to FY20 we were able to do a blend and extend as the commission remembers on our Sheffield wind contract that yielded savings in our power supply budget and helped us at that time avoid a rate case in FY20. I don't know if that's fully represented here I don't think power supply costs are but we've made a number of efforts over the past few years to control costs in the power supply budget and controllable expenses and then we have some expenses such as transmission state and regional transmission expenses that go up that we can't control those are up 1.5 million between FY21 and FY22. Here is the kind of some of the basic statistics on the FY22 budget some of the assumptions we're starting FY22 approximately five million lower in cash on hand due to the COVID impacts I detailed the arrearage impacts and sales impacts customer capital projects is another impact where in a typical year we see a million or more in contributions to capital projects from customers who have BED staff doing work to facilitate improvements that essentially went away during the pandemic and is part of that five million dollar figure. You can see operating revenues assumed for FY22 that includes the rate change of 7.5 percent is assumed in the operating revenues you can see we are experiencing continued COVID impacts on sales we're assuming some moderate continued impacts during the course of FY22 we don't think it's prudent or supported by data to assume a normal budget year in FY22 relative to sales and I think the comments from Kelly Devine bear that out there's uncertainty in the commercial sector in particular so we can't assume that sales will be back at at pre-COVID levels we are seeing some increased rec sale revenue that's part of that operating revenue but as you can see operating expenses even with the rate change are still higher than operating revenues we have the transmission expenses that I mentioned up 1.5 million in 2022 compared to 21 this operating expense figure is including the more than one million in pension liability that we had previously not had budgeted and assumed in our operating expenses is now assumed in the FY22 budget as we've discussed with the commission we also have done some work to better forecast our allocation of labor for capital projects we think that in FY21 or 20 we've maybe over assumed the allocation of labor to capital we've done some work to make that more accurate in FY22 that does contribute to that operating expense figure we also are seeing increased depreciation expenses it's been about 10 years since we undertook some of the ARA projects to install advanced meters and some of those assets are seeing depreciation that's contributing to the increased depreciation in FY22 our net income is projected at 808,000 which would be 1.1 million lower than the projected or the budgeted net income in FY21 we don't expect to reach the budgeted net income in FY21 but as the commission may recall we had a budgeted net income of about 1.9 million for FY21 net income even after the rate change would be 808,000 so this would still be a very lean year with very little cushion for us relative to net income further assumptions within the budget this budget does assume that we would receive 1.3 million in ARPA funds from the city to support arrearage assistance and other pandemic relief efforts within BED so this budget is already assuming that we would receive that that's in the mayor's recommended budget memo to the board of finance and city council that will require further action from the city council before that's final but we've included it in the budget because it's an assumption in the mayor's budget memo as we've discussed we are supporting for the first time an energy assistance program for low-income residential customers in FY22 with one-time funding that would offset exactly the rate increase for those customers with eligibility to be determined by their being currently enrolled in the state fuel assistance program which is at 185 percent of the federal poverty level or below that's the eligibility for that program and over the long run starting perhaps in FY23 we hope to have a low-income rate implemented that would provide a discounted electricity rate to low-income customers for the future but in FY22 the energy assistance program would provide that support our capital budget net of customer contributions is at 7.9 million which is the same as FY21 this does assume that we would put forward and receive approval for a net zero energy revenue bond later in 2021 to help fund some of the capital projects this year and then further projects over the coming years the net zero energy revenue bond is an opportunity to mitigate some of the upward pressure that we might otherwise feel on rates over the next few years and it's a mitigation measure that we intend to bring forward later in the summer and fall for consideration and ultimately consideration by the voters our rating factor metrics commission is very familiar with these Moody's looks at them based on a three-year average you can see the benchmarks for the A rating which we currently have 90 days or more cash on hand the FY22 budget even with the rate case and all of the different assumptions we've made would land us at 97 days cash on hand so we exceed the A rating metric but we're not at the three-year average that we've been able to maintain of 113 days we know that the adjusted debt service coverage ratio has deteriorated over the last several years as sales have declined the three-year average is is 1.02 if you include FY22 the FY22 budget slightly ahead of that three-year average but not near the 1.5 that we really need to be at in the long run to maintain the A rating and the debt service coverage ratio which is required to be at 1.25 for our bonds is well above that at 4.45 so we're in a reasonably good position there further detail on the capital budget you can see that the 22 budget and 21 budget nearly identical the 22 budget capital investment equates to roughly 10 percent of the net utility plant and service so we're making a reasonable effort to invest in our system again it includes the net zero revenue bond assumption and it includes funding our IT forward projects critical projects that we need to update our IT systems and technology systems meter to cash systems that are in many cases end of life it funds the maintenance of our generation and distribution systems funds our Velco equity investment that is supporting with dividends our net income figure and it would fund with a state grant assistance a first electric bucket truck for our line crew which actually will help us replace a planned line crew truck that needed replacement at a lower cost and make it electric so that's a win-win with the state grant funding for that you know importantly given that it's going to be a lean year and a challenging year in FY 22 we are continuing to make important investments in our net zero energy mission on behalf of the city we will continue to be 100 percent renewable again in FY 22 the green stimulus programs will continue through calendar year 2021 and we'll look at options for how those could continue with support from our energy efficiency program in 2022 we have the funding set aside for district energy phase three work which is currently ongoing feasibility development engineering work we'll continue to fund rebates for customers for electrification and energy efficiency we actually have a sustainability position that's been open in our organization for a few years that can be funded in large part through the energy efficiency program which as the commission knows is a separate charge on the bill and so that funding can support filling that position without having a significant impact on our general operating budget and a variety of other programs here that would help advance the net zero energy mission would continue in FY 22 that's the budget presentation i want to spend a few minutes with the commission talking through the rate case our team has put together some slides that i think are helpful for contextualizing the rate case this is BED's rate change history dating back to 1980 as you can see there have been some significant double digit rate increases during that time the last change was an 11.33 rate increase in 2009 we've had the remarkable 12-year run since then of holding rates steady and you can see the proposed seven and a half percent increase on the 2021 calendar year as part of this you can also see other utility rate changes over that same period of time you know one of the things we look at is just BED electricity compared to other commodities in particular the rate of inflation we are the green line at the very bottom of this chart you can see the uptick after 2020 for the proposed rate increase despite that uptick we are still well below significantly below the rate of inflation during the 12-year period during which we held rates steady so in other words if we've been raising rates just at the rate of inflation for the past 12 years they would be significantly higher than they are today so we are delivering a strong value for our customers even with this proposed rate change. Residential rates relative to the other Vermont utility average and the New England average you can see residential rates for BED remain even after the proposed rate change significantly lower than the Vermont and New England averages. Mercial and industrial rates if you go back to 2010 when we the year immediately following our last rate change we were significantly higher than the Vermont average for commercial and industrial rates by holding rates steady over the last 12 years we've actually been able to dip below the Vermont average with the proposed rate change we would go again slightly above it but we're still well below the New England average and I think we've we've brought ourselves closer far closer to the Vermont average than we were after our last rate change in 2009 and then this combines all rates total cost to serve again we're the green line at the bottom even after the rate change we would still have total rates that are lower than the Vermont average and lower than the New England average here's another way to look at that you know you can see the blue line representing our current rates and the green line representing our rates after the proposed rate change you can see under the residential comparison we would still be lower than every other state average in New England including the Vermont average you can see with commercial and industrial we would be slightly above the Vermont average and above the main average but still lower than four other New England states and then you can see in the total rate comparison currently we are lower than in all the other New England states and the Vermont average after the proposed increase we'd be slightly above main but still lower than the remainder of the state averages for electricity this is a residential tail block rate comparison I think this is somewhat important as we look at electrification and people switching to electric vehicles and heat pumps we want to maintain a competitive cost for them to electrify the line that shows the EV rate cost is included in the the current rate and proposed rate segments here the proposed rate is in dark green and you can see that the EV rate is actually cheaper than any other utilities residential tail block comparison rate and obviously being able to do something for heat pump rates as well as EV rates would help us continue to be even more competitive for electrification in the future and that's something that we are exploring finally the energy assistance program that we've proposed we want to look at the bill impacts for residential customers here we mentioned in the press release that for our commercial customers I believe more than two-thirds or about two-thirds are on the small general service rate that rate bill impact would be roughly six dollars and sixty cents a month here we're looking at residential customer bill impacts for all residential customers the average bill impact would be 492 a month we did some analysis to look what the low moderate income bill impact would be and it's roughly four dollars and 27 cents a month increase however as as we've noted the energy assistance program would offset that entire cost for our low-income customers who qualify for the state fuel assistance program and they'd be able to enroll in this temporary energy assistance program with BED and see a bill credit on their bill each month that would offset the rate increase for FY 22 with the goal of providing a long-term low income rate starting in FY 23 and those are the slides that we have for the commission and for the presentation and I will come back to the call here and stop sharing my screen let's see am I now sharing sounds like it okay well questions just a moment lucas is raising her hand yes i have a question for darin darin when you are just just just a moment please okay this we can ask the public to participate in the discussion that's okay with me if you're brief but it's uh yeah it's only by permission you have permission thank you just a quick question for darin when you talk about rates does that include the franchise fees and the other fees um so for us rates would be volumetric energy charges that would appear on the bill the franchise fee i believe is a percentage fee that's based on the bill so the franchise fee rate would not change i don't believe but your franchise fee payment could theoretically change if your bill was larger and is that the same for the energy efficiency rate also that that's a percentage also right of your bill yeah the energy efficiency rate is actually set um hang on a second james the energy efficiency rate is set as a separate charge on the bill um and it is um it would be unaffected by this rate change it's a charge based on a separate proceeding and it's based on your kilowatt hour usage uh so it's affected by the rate case uh in this instance okay thank you commissioners before i start in well darin um your presentation is excellent and compelling i did have a couple of questions one is one thing that's driving this is our ratings metrics and we've asked you know previously what does that get us gets us low interest on loans is there any way to put a number on that because we're making a lot of concessions to chasing that yeah i well we do have a number uh in a way because between the city and the b ed ratings increases we know that we're saving as of 2019 more than seven million for rate payers in reduced interest rates since the efforts to improve the city's credit rating and bd's credit rating took effect in 2012 so so the city financial health report from 2019 outlined a seven million dollar savings approximately for rate payers at that point in time but i would argue that the ratings metrics also are an indicator of financial health of our of our balance sheet and we've we've looked to the 90 days cash on hand as being a prudent measure not only for the ratings metric but also just to ensure that we have enough cash to fund our operations if things go poorly or if there's something unexpected that we don't end up in a situation where we have to incur short-term borrowing at high interest rates in order to fund our operations for example and the adjusted debt ratio which we we've hovered below one percent and this budget would move us above one percent is really looking at our ability to pay for all of our operating expenses to pay for our debts and to still have a reasonable kind of operating balance sheet so you know we try to balance the moody's factors they don't drive every piece of every decision here but we try to use them as a proxy for for reasonable financial health okay let me just ask about that seven million figure was that a net present value or was that an annual per year that was a net present value of current and future savings as of 2019 okay but that's uh we've had this conversation before uh we're talking about a couple of million deficit per year and so it seems to me we should be comparing a per year figure for what we get from the improved ratings rather than a sum over time suitably discounted so if you sure uh you get my point instead of a cash flow issue rather than one here it's it's cash flow on one hand and it's money in the bank uh so to speak otherwise no understood and I think the most immediate kind of potential benefit of having a strong credit rating is if we do pursue a net zero revenue bond this fall um our credit rating will directly determine our interest rate on that revenue bond uh and we'll have the opportunity to save our customers uh significantly potentially on interest rates there while we take steps to fund a number of our different programs and capital projects uh in a way that that mitigates some of the rate pressure so in the immediate term if we think about the credit rating uh keeping a strong credit rating will benefit us if we go for the net zero revenue bond but there is some estimate of the savings I take your point in terms of how you might compare it for budget purposes relative to uh the way the city presented it in the fiscal health report in 2019. James? Can I just add one quick little here too which is our market contracts for power and potentially and for REX also are indexed or have an effect of our credit rating too so again it it affects that as well. Okay uh questions from other people? No I don't have any what's a good presentation it's a tough decision. Well okay I have another question which is this 30 000 foot view uh at the end of the last meeting I asked what our debt service was and yes you can look it up it's about 12 percent of our annual budget and I think we have something on the order of 60 million dollars in debt something like that. What's the right number are we appropriately in debt are we too much in debt uh are we paying too much uh interest uh I already know part of the answer is the interest rate is so low don't sweat it but uh. Well that is part of the answer I think in the immediate term because one of the items that we're bringing forward tonight is a is a financing item for one of our IT forward projects where the interest rate is uh incredibly attractive and it makes sense to incur the additional borrowing because it will mitigate cash on hand challenges for the upcoming fiscal year and provide us with attractive financing. I do think that we've actually reduced our debt load over the past few years um but I I think that the adjusted debt service coverage ratio is partly a proxy for the question that you're asking um it you know in terms of how much debt we have how much debt we're paying uh relative to our operating revenues and expenses the adjusted debt service coverage ratio takes all of those into effect and then also looks at things like the city pilot payment which might not be included in other ratios that we have for ratings metrics so being above one uh in the adjusted debt service coverage ratio and ideally being closer to one and a quarter or one and a half is a good indicator that we are balancing our debt needs and an appropriate use of financing with the revenues to pay back the debt. I don't know if Emily has other other thoughts to add on that. Oh yes I would also add that the other thing to consider I think is the level of capital investment we need to make um to keep our plant and in good health and condition um and the degree to which we are sort of funding that long-term asset with long-term financing sources um you know bond-issued debt being you know the primary source of that long-term financing for us and with our relatively strong credit rating and now the city's improved credit rating you know we've been able to borrow that um borrow for those bonds that attractive rates right which help keep rate payer rates low um and so I think that's you know Darren is correct right that the adjusted debt service coverage ratio indicates sort of our ability to fund debt or capacity to pay debt service at a certain level um but then there's also analysis of how much we're investing in capital each year how much of that capital investment is covered by a long-term bonds versus how much are we funding out of current you know cash sources of funds and is that balance correct and are we leveraging are we basically making are we leveraging our debt capacity you know high enough or are we making the most of our ability to borrow at low rates um through a bond and geo bond issuance authority okay um I guess I'm you as usual plan devil's advocate saying if we if we had to you know do something dramatic what would it be but I don't need an answer for that I do hear you say though that a certain of our assets are depreciating and uh that means life is going to be more expensive in the future and okay uh it was sort of implied today sorry I inferred today that the seven and a half percent is still a little negotiable and might be affected by uh input in the public and city council and of course later from the utility commission uh what about that and also what about the idea of a phased in rate hike ramped up two two good questions I think I can speak to those um the 7.5 we feel given all current assumptions is the minimum necessary to fund our operations uh responsibly in FY 22 uh produce at least some positive net income and maintain uh healthy moody's ratings metrics again not ratings metrics that are fully at the level that we want them to be particularly adjusted debt uh but but at levels that we feel comfortable with um in terms of financial health um these two questions are linked if we had been able to receive additional funds to mitigate some of the pandemic impacts uh be they you know local state or federal relief funds we would have had a larger cash on hand reserve and we might have been able to have something like a two-year staggered increase um you know four and a half percent this year four percent next year for example instead of seven and a half percent this year we would have suffered further with our adjusted debt service ratio in that scenario we might not have even been able to hold it quite above one oh uh in FY 22 but we might have been willing to consider doing that if our cash on hand was high enough in that scenario to give us cushion to essentially operate at a loss uh during FY 22 um absent additional funds um we don't feel we can propose a lower rate case than the 7.5 and in fact using the department of public service uh metrics for what the rate need would be um we believe we could justify up to a 12 and a half percent rate case uh using the regulatory metrics that uh are typically associated with a rate case we certainly don't want to do that we're not seeking that uh we understand that that would be even more challenging for the community so 7.5 is uh is the lowest number we feel comfortable proposing to to safely operate and and maintain financial health during FY 22 um if if next week somebody said hey here are here's two million dollars of relief funds that will help offset your lost sales we could certainly look at at a change but uh we went up until last week working every possible effort to achieve that outcome and um despite the relief funds that we have access to uh potentially for a rearage assistance uh from the city and state uh we don't see any other further avenues at this point in time for additional relief funds oh i think i think you may be muted uh commissioner her indeed yeah um commissioners and uh folks from the public last questions well our task tonight is to vote on this issue so i'm calling for a motion bob i like this is uh jim i like to make i like to move to approve the fiscal year 2022 capital and operating budget as presented okay one moment are we voting on that or on the rate hike i know we're voting on the budget just voting on the budget right now i'm assuming right next vote will be for the rate case okay uh then sorry uh are there any questions on the budget specifically i don't i think the presentation pretty much explained itself uh the staff and naren did a great job on it i'm concerned okay now here's the motions i'll second it we're ready for a vote on the budget okay commissioner shagman hi commissioner herondine hi commissioner stebbins i believe she's on with the phone hi thank you and commissioner wittaker hi thank you oh boy all right uh we have a second uh vote which i guess we can move to right now which is on the rate hike motion please bob this is jim again um i move to recommend to the board of finance and city council that authorization to pursue a rate increase but the puc in the amount of 7.5 percent for services rendered begin in august 1st 2021 second commissioner shagman hi commissioner herondine hi commissioner stebbins hi commissioner wittaker hi thank you next honor agenda is financing of it forward project emily please thank you so this is a a new item um that has we've added to the agenda tonight um and i haven't discussed it before because the the details of this um i was and the team were working on um up until you know last week um but so this goes back to you may recall in the spring of 2019 um then finance director jim reardon uh brought to the commission and ultimately to the board of finance and city council um a proposal or our term sheet to um enter a lease purchase findings agreement financing agreement with key government finance incorporated which is a a division of key bank and the the line of the financing line was intended to um sort of provide additional cash um in the short term to sort of to cover the it forward expenditures which were going to be significant and sort of you know unusual in our normal capital budgets right we we have not over the past you know 10 or 15 years had this level of anticipated expenditure or capital expenditure on it systems and jim knew that these um expenses were coming uh and explored this as a as a possible funding source to sort of smooth out the lumpiness in our capital expenditures through this period while we're implementing these new systems um so as part of as we looked at the budget this year and the challenges we were facing um with covid and uh knowing that we were likely uh going to need a rate increase and ultimately did ask for one um i renewed sort of investigating this option for financing uh with key bank and with another firms we looked at two proposals uh the key bank proposal is very attractive um so essentially what this will do is it would be a short term note to 48 month um loan essentially uh to fund the meter data management system which is the first of the four major um it forward systems that we're implementing now um and it's a uh they have operatives uh in the term sheet in the packet you'll see um a tax exempt interest rate of 0.895 percent so less than 0.1 percent or sorry less than 1 percent um interest bob you're ready to correct me thank you i see you there um and so it's uh you know a very attractive rate um and this will allow us to uh you know bring in um 800 thousand dollars in cash to uh pay for the implementation of the project and then pay it off at very low interest over the next four years um so if the commission approves this uh measure tonight we would um present it to the board of finance and city council next monday and if authorized to proceed um key bank would complete their credit review of bd and then we would proceed to you know final negotiation of final lease agreements um with the support and guidance of the city attorney's office any questions a question for gabrielle are you back in gabrielle or are you uh still a spectator i am back in the we are the house has adjourned until 745 this evening okay then here's the baton we've got it thank you for having me um so i i still seem to have a another 30 000 for view of this this is a low interest deal what uh makes it different from others and does that make it even lower in interest because of that in other words why do this i did you do this i think it's it's to deal with our or to mitigate anyway the um the cash pinch that we're in from uh in large part because of covid as darin articulated um and we have a considerable capital expense um for this it system that's not you know unlike our distribution plan and generation plants where we sort of have ongoing an ongoing level of capital expenditure this is the it foreign projects are of an unusual magnitude um and as i said it's a it's a way to bring um cash in at an attractive and low rate uh while while we need it um to help maintain that day's cash on hand balance at the end of f y 22 my recollection if it's helpful is that when we put this budget together even with the rate case we were at 92 days cash on hand roughly and that this financing arrangement at such low interest rates was able to bump us to 97 days and give us a little bit of cushion against the 90-day metric that we uh ascribe to yes thank you darin that's exactly right okay we can't get this kind of interest for everything i presume yeah right okay dang all right thank you questions from other commissioners so so i apologize i um was i literally joined in at the tail end of your presentation or or discussion emily um so uh in review uh back in 2019 we did agree to that 1.5 million um and is this this is an additional um 800 000 no sorry i probably just but if i'm voting i should know of course no worries at all um yes so the the yes the commission the board of finance the council approved a term sheet 1.5 million and that was essentially the authorization to then execute an actual lease purchase finance agreement which we ultimately have not acted on yet right we never completed a transaction after the 2019 approval in part because we had not yet completed the procurement process for it forward so now that we're at the point where we have completed that procurement process we are moving forward with an implementation i decided to revisit and get sort of fresh term sheets um for both from key government finance and another financial services firm um just to explore that option that jim had set up for us in in spring 2019 that makes sense so this would commit us at this stage only up to the 800 000 level okay thank you for the clarification i wouldn't mind a 0.9 percent but and this is only money that you'll use if you need it right yes that's right it would be um because we have begun the mdm implementation we've already made um you know a small percentage of payments to the vendor like a small percentage you know of the overall project um and we could this is all subject to you know final term negotiation with key government finance but the way they um described it to me is that we could receive cash at closing for the amounts that we have been invoiced for and can prove payment on to date and then the remainder of the funds would go into an escrow account and then as we were invoiced by the software vendor for the work on the project that those invoices would be paid out of those escrow funds um so that the the balance of the escrow account essentially would be down to zero when the project was completed and we had accepted the software thank you mm-hmm and if if we were not to do this what what would be plan b we would fund it out of cash right and to Darren's point this this measure allowed us to bring forward a you know a 97 days cash on hand budget with this financing included this funding source included as opposed to a 92 days cash on hand on June 30th without it commissioners um other questions or feedback or thoughts or uh is there um a readiness to make a vote let's vote on it so there was language uh within our um memo document and while something pulls that up i just want to um throw out there that um it'd be great if you can give us you know periodic updates in terms of how this works out in response to your comment just said oh what can go wrong sorry Gabrielle you should i'll blame you you can blame me i mean go ahead Emily i think it's a you know it's a fixed interest rate right over the course of the loan so i don't think there's an interest rate risk uh to be considered um perhaps interest rates could fall even lower and we would be you know have missed out on an even lower rate i think that that risk is also low given how low the interest rate is um the project could be delayed you know so we would not receive the cash i suppose within the time frame that we have budgeted for that would be probably of all the things that could go wrong the most likely you know just from a pure probability standpoint given software implementations and that things you know delays can happen um but the MDM is the current schedule is to go live by late November December time frame so even a six month delay it will still be completed within FY 22 so i feel like we have some some cushion there jim did you want to make a motion sure make the motion i move to recommend to the board of finance and the city council authorization for burlington electric department to enter into a lease purchase finance line agreement with key bank for a amount not exceeding eight hundred thousand dollars for information technology investments second second rule call commissioner shagman i commissioner herondine hi commissioner stephens hi commissioner whitaker hi thank you thank you and uh thank you also for catching me i know everybody else had just heard that so i appreciate everybody's patience and now we have our annual um fiscal year 2022 general obligation bond this is also a discussion and vote and still with emily yes so yeah as you know uh the commission annually um votes to recommend to the board of finance and the city council um that we receive a that bd be issue a general obligation bond under the city's general obligation charter authority um in the amount of three million dollars that three million is included in our budget assumed in our budget that you just voted on um as a source of funds for fyi 22 um this year as last year the city um will be in will be issuing a bond anticipation note uh in july and then that that bond anticipation note will have a term of about 12 to 14 months and then it will be converted to a general obligation bond in fyi 23 the fall of 23 so this year the city will issue a new bond anticipation note for all of its fyi 22 general obligation borrowings and then it will later this fall convert last year's bond anticipation notes into general obligation bonds so the way the city has um this new practice they have adopted of bond anticipation notes followed by um general obligation bond issuances just changes the the process and the the the language that you approve essentially that the the language you use in the motion to approve the borrowing but the end result is the same a general obligation bond of three million dollars um that's assumed in our budget as a source of funds thanks um commissioners questions follow up uh sorry for this but over the past have we basically spent these monies yes we have this helps to pay for our uh you know this year and last year 7.9 million capital budget okay questions no it's him straightforward i mean this is the way that the budgeting works right so hence the annual nature of it if someone would like to make a motion sure this is Jim again make the motion i move to recommend to the board of finance and the city council the authorization for the direct the chief administrative officer to pledge the credit of the city by issuing a ban or bonds in the amount of three million for the year 2022 fiscal year for electrical capital improvements shagman roll call mr shagman hi mr herondane hi mr stevens hi mr wicker hi thank you thank you um there's nothing else left on the agenda if anyone has something that they would like to raise we typically have a end of the agenda commissioners comment period um but if not then we can have a motion to adjourn uh gabriel i just want to say thank you to darin and the staff i think they did a really great job on this um i think you know they definitely spent a lot of time on this with us and themselves and like i said i just want to say thank you to them uh we definitely don't want to rate increase nobody does um and we like these go 12 years without one again but we know that's not going to happen but i i really think they did a great job on this so thank you to them thank you commissioner shagman um i certainly echo that comment and uh uh yeah i just really appreciate all of you guys working the extra hours and and also really appreciate the other commissioners for repeatedly showing up from for these extra wednesday special meetings um i think it's important for us to you know keep waving the flag and keep the communication going and uh keep sharpening the pencil as many times as possible so just like to thank the commission uh as well for for all of your effort uh all the meetings and um uh all the digging in with us on this budget it's been an extraordinary uh budget period the challenging one uh rate case is never a welcome development and we appreciate your diligence and and ultimately your your support in recommending the rate case to the city council okay let me say that uh thanks for my hard copy this is the most complete as far as i know uh packet ever on a budget and uh it's all in there and uh it's impressive and actually useful if you go through it which i more or less did a quick question on our rearages uh i think at the end you said we're hoping we're going to get a million and a half to cover them if that weren't to happen do we end up typically eating those well there are there are a couple sources of potential rearage assistance funding uh for fy 22 there are some state programs uh there's the v-wrap program which uh supports renters at certain income levels with some level of utility rearage assistance there's an expected second round of state assistance along the lines of the v-cap program that we had for residential commercial customers and we expect if the city council acts on the mayor's recommendation that there would be a 1.3 million in pandemic relief and a rearage assistance funds available through the city arpa funds our hope is is that those collective sources will help all of our customers catch up on their bills before we would begin disconnection for non-payment again at some point presumably in fy 22 but to answer your question yes if absent those sources of funding we would not have a great argument to you know to keep those you know rearages on our books they would probably be written off in some way shape or form in large part at the end of fy 21 because of those rearage assistance resources we can make a good case to you know keep those balances on the books uh live for fy 22 in order to uh be able to cover them with a rearage assistance okay thanks anything else okay if we could have a motion to adjourn i move to adjourn and i won't see you for a couple of weeks second i'll second commissioner shagman hi mr herondine hi commissioner stebbins hi commissioner whitaker hi meaning adjourns at seven six forty eight thank you thank you thank you