 Good afternoon. Hi, Bob, it's Roberta. We're just waiting for people to join. Sir, thank you. Hello, everyone. I think we are still waiting for Board Member Grable. I spoke with him earlier and he should be on the call. So I'll wait a minute or two to see if he joins. Okay, great. It looks like we have all the board members. Director Burke, do we have everyone on staff on the call? Yes, Chair Watts. We have everything all staff needed for this site. And this meeting. Great, thank you so much. All right, well, we will get started and call the meeting at 1-0-1. If we could get a roll call, that would be great. Yes, Chair Watts. Here. Board Member Grable. Here. Board Member Wright. Here. Great, thank you. Are there any announcements? All right, seeing none. We will open it up for public comment. We are taking public comments on item three. If you wish to make a comment via Zoom, please raise your hand. If you are dialing in via telephone, please dial star nine to raise your hand. Secretary, do we have anyone raising their hand for public comment? There are no public comments. Great, thank you. We will move on to item four, 4.1, New Business. Director Burke, if you'd like to introduce this item. Sorry, sorry about that. My screen disappeared and I can unmute you or unmute myself, I apologize. So item 4.1 is our preliminary water and wastewater cost of service review and an update on our reserve policy. And Deputy Director Zanino will be starting this item and then we will also have our consultant firm doing the presentation. So Deputy Director Zanino. Good afternoon, everyone. I will be turning this over right away to both Bob Reed and Mark Hildebrand and then I will be running the slide deck for them. So moving through this, we saw you a couple of weeks ago and started to discuss with you the rate setting process that we're going through. We've actually met with a few of you as well with your perspective or respective city council members. So this information is probably starting to become somewhat familiar to you but Bob and Mark are going to go into some more detail today and get into the cost of service study. So, and I'll talk a little bit at the end about some of our communications plan going forward. So with that, I'm gonna start sharing my screen at the presentation for you. All right. Okay, yeah. This is Bob Reed and I'm gonna let Mark lead the presentation today. I did most of it last time but I'm gonna let him do much of it this time around recapping the financial plans as well as getting into the cost of service analysis and the rate calculations. So Mark. Great, thanks Bob. Can everyone hear me okay? Yes. Okay, great. So go ahead and go to the next slide, Kimberly. So, what I'll be covering today will be the first three bullets. I'm going to do a quick overview of our, the study and the scope and then recap the financial plan results which have been slightly revised since the last time. We're not gonna show this in as much detail as during our last meeting because we think that you're familiar with that information. So we'll just recap some of it and then show what's changed a little bit as we hone in on the final recommendation. And then we will, bullet three is new information. We're gonna start introducing you to the specific rates that are being proposed and how we derive them and what those look like for specific bills. And then I'll hand it back over to Bob and he's gonna go through a discussion on your reserve policies. Next slide. So just as a general methodology that's used for almost all rate studies follows these three steps. We first go through your revenue requirements which is also referred to as a financial plan which is really just looking at all the money coming in and all the money going out and determining what sort of rate revenue adjustments need to be made and whether a debt strategy makes sense or not. So it's really at the highest level looking at the overall financial picture. Next we go to the cost of service which is the cornerstone of Proposition 218 which is the law that regulates these rates and it just ensures that we are collecting the right amount of revenue from the different customer classes based on how they use the system and the cost to provide service to them specifically. And then in the rate design, once we've identified how much we wanna collect from different customer classes the rate design determines how we're gonna collect it whether it's going to be through fixed charges or volumetric charges and how to balance those things. So we'll be covering all three of these topics in today's meeting. Next slide. So here's a overview of the fund for this applies to both water and wastewater and it just shows the general source of revenue most of which comes through user rate revenue that's the largest source of revenue. And it goes into various funds, the operating fund which is made up of a series of reserves. Bob's gonna be getting into details about what those reserves look like and the intent of each one of those later on today. Revenues also go towards your CIP creations to pay for capital projects as well as your designated reserves. And ultimately those monies are used to spend are spent on O&M costs, debt service and capital. Next slide. So here's an overview. We cut out most of the information that shows some details on the financial assumptions that we went into the financial plan, the operating costs whatnot because we think we covered those in pretty good detail. This slide should be familiar to you as well. We left it in simply because when we do these financial plans, the capital spending usually has the largest impact because it's the one part of the budget that you have a certain amount of discretion over. So we just wanted to show you what that looks like for the next five years and beyond. For the on the water side, the spending is going to basically increase at the rate of the CPI generally inflation. It's going to be increasing incrementally as the cost of delivering capital projects goes up. On the wastewater side, it's a similar picture. And on the sub-regional, it is increasing by about a million dollars a year based on planned needs for different capital projects. Sorry, I've got us can't quite see here. There we go. Nope, no, I just hit that. Sorry. There is in the on the wastewater side, it's important to note that in about five years, there's going to be a significant amount of existing debt that's going to be retired. And that is going to make room for quite a bit more capital spending when that happens. So you can see we have the asterisks there in future years, but there may be a capacity to increase the capital program significantly when that debt service begins to retire. If I could jump in for a moment, Mark. One of the things that the city has recognized is a need to expand the spending on capital projects to rehabilitate and upgrade, replace existing infrastructure. And much of what's shown here for water and wastewater is just sort of inflationary growth. But as Mark indicated, there will be room to expand on the wastewater side as the debt service falls off in future years. We are seeing more than inflationary growth on sub-regional, but this is an area that will continue to be something that the city will need to look at in terms of making sure it's staying on top of its replacement needs in the capital program. Yeah, yeah, absolutely. Okay, next slide. So here is the high-level picture of the water utility and Bob explained the different components of this slide. And I'm gonna see if I can find my pointer option here. Are you able to see my cursor? No. No. Oh, yes, yes. Oh, there's someone else's cursor. That's Kimberly's cursor. All right. That's gonna be my cursor. You won't be able to actually point at them. So... Okay, well, I was gonna point out that the background, the background on the upper graph, the dark green at the bottom is your non-rate revenue. And the lighter or the middle green, there is the amount of rate revenue you currently get from your existing rates. And then the light green at the top represents the additional rate revenue that you'll receive as a result of the percent increases that are being proposed down at the bottom of the slide here. So you'll see that the recommended increases for water are 3%, 4%, 4%, 4%. So a little bit lower in year one purposefully to as in recognition of the current pandemic and recognizing that we should do what we can to try to minimize the rate increases in the immediate future. The superimposed over the green are some columns that represent expenses. This graph is really well balanced. So it's sort of hard to tell them apart a little bit but because they're kind of the same, the columns are as high as the background in every picture. But that basically shows that the expenses are balanced out with the revenues every year. And that's the name of the game in this exercise is trying to make sure that all the expenses are being paid for by projected revenue. So the light blue at the bottom would be your normal O&M expenses. The hashed in the middle is the existing debt service, existing and future debt service. And then the dark blue is your capital spending, your cash-funded capital spending. So you can see every year they're about at the same level which means that it's the budgets in balance for those years. And the graph down below shows your target revenue levels. The dark black hash represents your target and the light blue solid line represents your actual ending fund balance. So you can see the target jumps up significantly next year, this year. That's a result of the increase in the proposed catastrophic reserve and that's a topic that Bob will be getting into in more detail later on. But you can see that because of the fact that you have undesignated reserves in your fund right now, you are able actually to absorb most of the costs of increasing your target reserves in year one. And there's just a little bit of building that needs to happen in the coming years to get to that new target level. Next slide. So on the wastewater side, the graphics, the same idea with the green in the background and the blue columns in the foregrounds. And again, they're balanced for the most part. The amount of undesignated reserves that you have existing now is a bit lower relative to the total target that you're gonna be looking for in the future. So you can see that light blue solid blue line there in the reserves is gonna be built over time. We're not trying to do it immediately. Again, in recognition of the current pandemic, we're not interested in trying to immediately achieve that new target reserve level. We do think that with such a significant change to that target, it does make sense to achieve it over time to ease into it. And so you can see that with 4%, two 4% rate increases and then two 2% rate increases after about five years, we will get to that target reserve level. So the next slide, I'm going to transition to the cost of service rate design. So I just wanted to field any questions from the board if you have any at this point. This is all should be pretty familiar material, but the percentages have changed a bit as we've fine tuned the models. And so I just wanted to make sure there weren't any questions before we switch gears. I'm just curious the water and the wastewater. So the water you're, you know, the out in the future you got 5% and in the future on the wastewater you got 2%. Yet the fund balance, excuse me, the target reserve levels are significantly higher. The difference between the target reserve and the fund balance is significantly more in the wastewater than the water, yet the rates are lower in the wastewater. What does that mean? You know, a lot of that has to do with, I mean, there's a lot of numbers behind this obviously. So it's a good question. A lot of it has to do with the fact that wastewater is going to be retiring a significant amount of debt in the next five years or so there's a lot of outstanding debt that we'll see its end in that time period. And so it's actually a bit the opposite on water. There's some debt service that is existing but hasn't actually quite hit yet. It was planned to begin paying the debt service out in the future. So I think that would probably be one of the reasons. The other reason is that water does have one element of its budget, a significant part of its budget, the Sonoma County water purchases, which is going up by a steady 5% or so per year. Wastewater doesn't have that kind of cost escalation in its portfolio for the most part. So I would say those are the two main reasons why wastewater is seeing a more sustained increase in its rates over the next 10 years. Bob, can you think of any other reasons? Yeah, I was just going to clarify the Sonoma water, we are assuming a 6% rate increase in their rates each year. And that does represent a pretty significant chunk of the O&M costs for the water utility. And they've been in the five to 6% range for the last several years and we're estimating 6% a year going forward. And I think Mark is correct that, there's a lot going on on the wastewater side with debt service and the link with the sub-regional system and so on. If we were to have larger rate increases on wastewater early on, we would sort of overshoot the mark. And so we, that's why we're seeing just that long string of 2% in that graph. Okay, thank you. Sure. Any other questions? Okay, Kim, what if you could go to slide eight? So here's just a summary of the rate increases as they stand now. Again, these are preliminary numbers. We continue to massage the numbers. Most importantly, there's a debt issuance that's still being sorted out regarding the UV project with wastewater. We have some assumptions in the financial model regarding where that service will end up, but the numbers aren't final yet. So that should occur within the next month or so. Is that right, Kimberly? That we'll have final numbers? Yes, we're actually going to try to price bonds. We're really watching the market right now, but we'll probably price bonds by the 9th of November. And then we'll have a much better picture of what it's going to look like by that point. But it could be a little bit later. It's really going to depend on timing and what happens with the election. So our financial advisors and our underwriters are currently just paying attention to what's happening before they actually price the bonds and then start to issue them. Great. And we tried to put in conservative assumptions for what that final debt service will look like. So I don't anticipate there'll be any bad surprises, although again, it's not final, so we don't know. But that debt service also will be shared with some of the member agencies within some regional and so ultimately, regardless of what the interest rate ends up at, I don't think it's going to have a really big impact on these percentages. So we shouldn't expect any huge swings as a result of that, but to be determined. I have one more question. So what's been kind of gnawing at me a little bit is this a blended rate between the fixed and the commodity or how does that all work? Correct. Yeah, in years past, the fixed and the commodity has been broken up and increased at different paces. Going forward for this financial plan for the next four years, we are going to be increasing both parts of the rates at the same pace. Okay, thank you. And Mark will get into it in a minute with the cost of service analysis, but as we update the cost of service analysis, there will be some differences in what happens with the service charges versus the commodity rates as we dial the rates into the proportionality requirements that results from the cost of service analysis. But beyond that first year, all of the rate components would go up in lockstep by an equal percentage for water and same for wastewater. Right. So in other words, results will vary in year one because the rate structure is going to be tweaked a little bit. And so some customers with higher water usage and different size meters will see rate increases that hover in and around that 3% for water, but it won't be exactly 3%. But in years two, three and four, everyone's rates will go up in lockstep at 4%. Okay. Next slide. So as we get into this cost of service and rate design, just a few points to be made. When we do cost of service, as I pointed out before, you do need to justify the proposed rates based on the financial analysis that we did and Proposition 218 requires us to allocate those costs to your customers on a proportionate basis. It's the cornerstone of that loss. So generally speaking, almost entirely the current water and wastewater rate structures that you have in place have been retained. So we're using exactly the same methodology as was proposed and developed back in 2015 that has been used over the last five years. That being said, even though we're using the same methodology, the numbers that we're putting in are different. So as we go through that cost of service methodology, there are certain costs associated with capital or with water purchases or with operating costs that get plugged into that cost of service analysis. And as those numbers vary a bit from what we saw in 2015, there will be tweaks that you'll see to how much, how many costs get allocated to the fixed portion versus the volumetric portion. So there will be changes in the structure, but it's not because the methodology has changed, it's simply that the inputs have changed. And that's totally natural utilities experience changes over time. And that's why we do these cost of service studies periodically just to updates the structures and make sure that they're reflective of the current cost structure. The one significant change that we are proposing, and this gets back to Director Wright's question or it's indirectly tied to it, is that up until currently, the city has been using automatic pass-through adjustments based on the Sonoma Water Rate changes. So in other words, as Sonoma Water has announced what their rates were gonna be for the next year, a portion of the city's rates were modified to pass that cost through. Which changed over the last five years is that Sonoma County's become much more transparent and much more organized in providing projections to its member agencies and communicating better what they expect their rate adjustments to be. And the information that we've gotten from them recently has been that rate increases will be on the order of five to 6%, probably closer to 6%. So we feel comfortable going ahead and assuming that the rates will go up by 6% over the planning period. It's only four years. And so if we're off by a little bit, that's actually perfectly normal. We're gonna be off by other parts in the study as well. It's, we made some assumptions about inflation in general. We don't have a crystal ball. And so we do our best to make these assumptions in the past, the pass-through made sense because there was a lot of volatility in what we were seeing from Sonoma Water. And so it just made sense to use a pass-through since we could, but now that their rate increases have gotten more predictable and more steady, we feel comfortable putting in assumptions. And that's gonna help a lot from an administrative standpoint to be able to just lock in those rates for the next four years and not go through the administrative process of updating those rates. It's also going to increase the transparency of your rates quite a bit. So your customers aren't left guessing what their rates are going to be next year and the year after that because you can't publish it until Sonoma County's water rates come out officially. So we think for those reasons it makes sense to go ahead and eliminate the pass-through. I know that's probably one of the most significant changes that we're proposing. So I wanted to go ahead and pause here for any questions. Yeah, well, my greatest fear is that we have a drought for many reasons on many levels, not just financial, but as we, if we have, if Sonoma Water sells less water they definitely charge significantly higher rates based on the amount of water they sell. So anyway, who knows, I imagine our system has a way to go back and revise the rates also if we get totally out of, you know, midstream out of whack. Absolutely, absolutely. And two points to that. One, yes, you could always go back and revise your rates if any part of your cost projections is significantly off, but even more, you know, more appropriately is that you do have water shortage rates in place and we're gonna be updating those. And so those take into account in the event of a drought what your cost profile looks like. And so if a certain drought stage is announced then those water shortage rates will be implemented. And Bob, we haven't gotten into that part of the study yet. So you're more familiar with the specific lingo for the city. So can you fill in for that? Sure, sure, yeah, the city, Santa Rosa Water already has water shortage rates that would kick in during various stages of shortage. Those are being updated as the urban water management plan is being updated. That's kind of in a parallel trap going on right now. And that urban water management plan includes the water shortage contingency plan which is where the shortage rates are. When we get to the Prop 218 process to adopt the new water and wastewater rates we will dovetail in those shortage surcharges at that time and it'll be done as part of the same Prop 218 approval process. And so that the shortage rates will account for what you just mentioned, Director Wright, is changes to Sonoma County's rates that would be anticipated given different levels of drought. So to the extent that we can predict what those changes will be, those will be incorporated into the surcharges. I think you, if I might just, I think Board Member Wright might be remembering some history that we've had with the Sonoma County Water Agency when we've had times of drought and because the water agency's rate structure is such based on the restructured agreement that it goes back and looks at previous year's sales or previous three year sales and that can result in a significantly high rate increase. I think we would continue to, as we've done in the past, work closely with the water agency through the TAC subcommittees that we put together to review their budget, to look at changes we can make. And if, and I'm really hoping we don't get into a drought situation, but if that does occur and we are looking at significant changes, we'll look at our budget, we'll look at fund balance and rate stabilization options that we have. And if need be, and we have to go back to the Board and the Council and recommend a higher rate increase to deal with that too, that is another option that we have as well. So we're not locked in to this. This is the rate increase we're proposing. These are the maximum rate amounts, but if something is significantly changed and we need to come back to the Board and Council, we can reprop 218 notice and go through that process. I'm hoping that won't be the issue, but that is an option for us too. So we do have options if something like a 19.9% rate increase rears its ugly head as it has in the past. So I just wanted to hopefully address that. Might be the question you were kind of asking for member Wright. Thank you. Thanks. Next slide, Kimberly. So these are the general objectives that were sought out both now, but also as I mentioned, we haven't really changed the methodology and so these are a summary of the objectives that were really followed back in 2015 to come up with the rates that you have currently in place. We were looking to ensure financial sufficiency and sustainability, complying with legal requirements. That's really, you start with legal compliance and then you try to incorporate everything else. Encouraging water conservation, revenue stability predictability, minimizing rate increases, affordability and public acceptance. So these were all things that we thought about very actively during the process and they're all built into the rates that are being proposed. Next slide. So the principles that were followed to come up with these rates, we organized your costs into different buckets. First, we look at customer costs. So these are costs that exists that are allocated to do different customers regardless of whether you're a large customer or a small customer. These usually have to do with billing costs and account costs and whatnot. And so every customer is assigned an equal amount of customer costs regardless of whether they're large or small. Then we looked at capacity costs. So that's really the size of the system and the costs associated with your infrastructure and the size of your pipes and your pumps and whatnot. And we assigned those costs to each of your customers based on the size of their meter because the meter is a reflection of how much capacity is required to serve each customer. And so it makes sense to allocate the cost of capacity to each customer based on the size of their meter regardless of whether they actually use the full capacity of their meter, the district, the utility needs to be ready to serve that meter at any given moment. And so those costs should be assigned to those customers. And then the final costs or the final main cost there is the commodity costs. And so that's the cost of on the water side purchasing the water and treating the water. And those costs are assigned to customers based on the amount of usage. As a sort of subset within the commodity costs you have your water supply and water conservation costs. And so as we assign costs to water costs to customers based on their usage, we have to determine how we're going to allocate those costs to the different tiered waters. You have two tiers. And so we look at your different sources of supply and your water conservation costs as ways to determine to justify how much tier one costs as relative to tier two. And we'll get into that in a little bit more detail in the coming slides. And then on the wastewater side, what we look at is the cost of treatment. So we're looking at not just not only how much sewage flow comes to the plant from different customers but also the strength. And based on the strength of the sewage that's gonna drive costs such as energy and chemicals and whatnot. And so we've created different strength charges based on the assumed strength coming from different types of customers. Next slide. So those three main categories, the first three that we mentioned in that previous slide are shown here graphically. You can see the customer costs at the smallest portion. That's really a lot of administrative costs and billing and whatnot. Your capacity costs is your next largest cost category and that's associated with repair and replacement and maintenance of the system. And then on the water side, the commodity costs is on both sides, the commodity costs is by far the largest component and that's paying for the sources of supply, treatment and disposal of the treated wastewater. I wanted to interject here. If I could, the customer costs and capacity costs go into making up the monthly service charges for both water and wastewater. And you can see for water, it's about 25% of the cost go into the service charge and about 75% ends up in the commodity, the water usage rates. On wastewater, it's closer to about 30% goes into the service charges and the rest into the commodity costs. But it's part of our objectives here is one of the important objectives for the city is to have conservation oriented rate structure. And so there are certain fixed costs included in the volumetric commodity cost category. So those aren't entirely volumetric variable costs. Some of them are fixed costs, but that helps to create the conservation oriented rate structure that you have in both water and wastewater. Yeah, yeah, good point. Okay, next slide. So here's a depiction of your water, your tiered rates for water. So you can see on the bottom there, these represent the first two are your tier one and tier two for single family homes. And you can see that the tier one is proposed to be at about $6 and tier two is going to be closer to $7. Multifamily and commercial is actually the weighted average of the two. So you can see it ends up at about $6 and 40 cents or so. And then for irrigation, you can also see there's a tier one and tier two. The general costs at the bottom are identical. You can see for each of the, regardless of the type of tier or the customer class, those general costs are allocated the same. The difference, and if we could focus on single family tier one versus single family tier two, you can see the tier two for single family is the blue part is a little larger. That's going to be a water supply cost. And the reason that it's a bit more for tier two is because tier one gets the benefit of the local groundwater. So there's a certain amount, it's not a whole lot of water, but you do get a certain amount of your water supply comes from local groundwater and it's far cheaper than the cost of the import of purchasing Sonoma water, water. So because that tier one water, tier one gets the benefit of that source of supply, the unit rate per gallon of water is going to be slightly lower for tier one. The other part, that's the green portion at the top of tier two there is your water conservation costs. And so what we're doing is that we're assigning the costs associated with conservation that we're recovering those costs from tier two water usage with the idea that your larger water users are the ones who are driving the need for a water conservation program. And so they should bear the cost of that program. Again, the multifamily and commercial don't have tiered rates. And so their rates are really the weighted average of tier one, tier two for single family. And then irrigation, tier one, tier two have a lot of the same dynamics. The reason that the water conservation costs appears larger here is simply because the amount of water involved is a smaller denominator and so ends up being a larger unit cost per gallon of water. Okay, next slide. So here are, there's a lot of numbers here but you have quite a few rates to look at. We wanted to sort of have a one slide with all of your rates. So here's the water rate schedule as it currently stands and what's being proposed to be effective July 1st, 2021. And then in the FAR column, we have the change in those rates both in terms of percentage and in terms of dollars. So you can see that the tier one rate for single family is going to increase about 3.4% or 20 cents. And the tier two is going to increase by less than 1% or about 4 cents. As you look down those percentages, what should be going through your mind is that ultimately those numbers should all, the weighted average of all those percentages should be 3%. We mentioned earlier that the rate increase for year one was, the rate revenue increase for tier one was going to be 3% but that results may vary in year one because of these changes to the rate structure. And so this is where you're seeing that none of them are actually going up by exactly 3% somewhere above, somewhere below. The one piece and the other thing that might catch your eye is that most of these look like they're over 3% that caught my eye and I looked into it. The reason that's happening is that the one number that has an unwieldy or it has a much bigger impact than you might realize is that 0.6%. So the tier two single family water usage is about, I forget the exact percentage but I think it's about a quarter of the total water usage across all customer classes happens from single family tier two. And so that low 0.6% there is having a bigger impact than you might realize. But ultimately all these percentages do, if you add up all the rates, the weighted average comes out to 3%. Bob, anything to add? There's a lot to talk about on this slide. So I wanna, I guess the only thing that I would add is that as we continue to refine the rate calculations, these numbers will change a little bit as we move forward in the process. But it's these little differences in each of the rate components that are the result of the cost of service analysis. And then in the subsequent years, they would all be the 3% or the 4% or whatever the overall adjustment is. And you wouldn't have those differences beyond the first year. Right. Okay. Any questions on this? Cause the next I'll show the wastewater one, but these are really the sort of the final results for the water rates. So do any of the board members have any questions on this slide? No hands. Okay. Next slide. So here the same rate schedule for wastewater. And you can see in this case, what's happening is that the increases on the usage rates is going up a bit more than that 4% that's happening in year one. And the monthly service charges are actually negative in some cases or across the board. So that's generally just pointing to the fact that there's a little bit of a shift. There's a little bit there. We're gonna be collecting a bit more from the usage rates and a bit less relatively from the fixed monthly service charges. But again, for these, the weighted average just come out to 4%. And you can see it's pretty even for the usage rates. It's about 5.7% across all different types of customers. And on the monthly service charges, it is going down a little bit more for the larger meter sizes. Any questions on this one? Okay, next slide. So here is a pretty extensive table that's showing some bill impact analysis. So people always wanna know all these numbers are great, but what does that mean for my bill? And so what we've done here is we've tried to take a cross section of different types of customers and what they might experience. So the first four there are different types of single family residential. We picked from low water use up to very high water use. We assume they all have the same meter size and you can see the water usage assumptions there in columns three and four. And then the various columns show their bill with their current rates, their water bill with current race wastewater bill total. And in the last columns at the end shows the total change in the combined bills. So for a low water user, their monthly bill would increase by about $4.21 or 3.4%. And as you look down the table, you can see those percentages are quite similar across all types of customers. Typically we see a pretty, we can often see a pretty large variation and how much different types of customers are being affected. In this case, these numbers are all quite close to one another. I wouldn't expect that it should be too challenging in terms of explaining why certain customers are being hit more than others because it's really not, that's not really part of the story here. But you can see those percentages are in line with the 3% increase for water and the 4% increase for sewer. And that's really a reflection that we're not making significant changes to the rate structure. It's just updating the cost of service analysis. And if you do have more significant changes to the rate structure, you can have much bigger swings in those percentages for various customers either up or down. And so not making significant rate structure changes helps to minimize that variation. All right. Okay. Well, that's the end of my presentation. We're gonna switch gears now and go to the reserve policy update. So any last questions before we switch over to reserve? Okay, hearing none, Bob, take it away. Sure. So we had showed this slide a couple of weeks ago with our initial meeting with you and it summarizes the fund and reserve balances, the primary components of the fund and reserve balances as of the end of last fiscal year. You can see the water utility has a little over 21, almost $22 million. The wastewater about 18 and a half million and about 8 million, a little over 8 million for the sub-regional system. And these are comprised of first the operating reserve and your current policy has that set at 15% of actual operating and maintenance expenses. And so it's a calculated amount. And these reserves are really intended to provide working capital and help with cash flow needs and just sort of a minimum balance that we always want to have available. We then have the catastrophic reserves and these dollar amounts are consistent with current policy. But we are looking at increases to that based on recommendations that are coming from one of your engineering consultants. I'll talk more about that in a minute. And there's also a geysers reserve, which is a kind of a separate component of the catastrophic reserve. There's a little bit of money and a rate stabilization reserve for the wastewater utility, a million dollars there. And then pretty significant amounts that are undesignated reserves for both water and wastewater. What's not shown in this table are the monies that have been set aside for CIP projects, money that's been appropriated for those projects as well as money for sub-regional member agency refunds if they wanted that money going back as well as some of the bond guaranteed upon debt service reserve monies. We've factored those into our analysis but they're not really key to the rate analysis but those monies also exist within each of the utilities. So if we go to the next slide, talking, focusing now on the catastrophic reserves, you've got a recommendation that the water catastrophic reserve be increased from 5.75 million up to 17 and a half million. So that's about a, what almost a $12 million increase or just about a tripling of the size of that reserve. But for the most part, that money is available in your undesignated reserves. And you could just designate those undesignated reserves as catastrophic reserve. And for the most part, fund it that way. You may or may not want to designate all of those undesignated reserves. And that's sort of a policy choice for our purposes and doing our financial analysis. What we do is first we make sure you have that operating reserve and then we fill up the catastrophic reserve and then beyond that, you'd have undesignated reserves but you could decide to leave. Some money is undesignated even if the catastrophic reserve pockets weren't completely filled right away. The wastewater utility is also looking at a pretty significant increase from 6.8 million up to 21 and a half million for the wastewater collection system. There isn't enough money in wastewater and undesignated reserves to fill up that bucket. And so we're really seeing that, being able to fund that gradually over five to even perhaps as long as 10 years and keeping pretty nominal rate increases rather than building up very quickly. And then the sub-regional system currently, the sub-regional catastrophic reserve is at 1.7 million. There's some analysis being done now to see what that should be. We've right for right now have assumed that that might go to $10 million but that's a number that may change as we move forward over the next few months. So that's a uncertain amount. And then there's the geysers reserve which is currently one and a quarter million and that would increase to 3.3 million. One of the other things that we're suggesting with the update to these reserve levels is that going forward that you adjust these target amounts for inflation so that you keep up with a time value of money over time. Otherwise they sort of deteriorate over time. And also that the policy allows for a broader range of potential uses of the catastrophic reserves and so that they could be relied upon to address either increased expenses or revenue shortfalls that might result from other events rather than a significant earthquake such as fires, floods, drought, pandemics, all of those things that we're actually seeing right now. I think we have always believed that if you have reserves for a specific purpose that you use those reserves when conditions warrant and you've never really used your catastrophic reserves and we see that there could be a way to really help you mitigate the financial impacts of some of these significant events and in that way reduce the need for unplanned rate increases. And so you could use some of these catastrophic reserves if for example as Director Wright had indicated, if you got into a drought and the Sonoma water increased their rates significantly, that was sort of unplanned or unanticipated that you could bridge that gap at least initially with your catastrophic reserve. So it's one of the tools in your toolbox and we think that it ought to have provisions for more flexible use of those reserves if needed. And then moving to the next slide. So we're looking at the current reserve policies. We've made some comments and edits for that and we're sharing that with staff and having some discussions. But for the most part, it's maintaining the current operating reserve at 15% of actual ONM costs. That's for working capital cash flow needs. For our purposes, we don't use that in the financial planning, it's always there. You never dip into that. And as a business practice, that makes sense for the city to do that as well. The catastrophic reserve updating the language there to incorporate those larger target amounts and then to also adjust those for inflation. Going forward and then to allow for greater use of those reserves. And then there's language in the current policy for rate stabilization reserve that will continue. There's a million dollars in the wastewater rate stabilization reserve. I think there's some discussions with your financial advisors as to whether that's necessary or not, but it is being dialed in and maintained in the current new debt issuance. So that may be an issue to look at at some point in the future but probably not in the near term. The policy also specifically mentions capital reserves. And you don't really have any money specifically identified as capital reserves and the way that you fund your capital improvement program by with your CIP appropriations from our perspective, that language in the policy probably isn't needed based on your current practices. So we think that that's probably something that you could remove from that language. And then also the current policy doesn't explicitly mention undesignated reserves as a term that talks about reserves that are effectively talks about that but doesn't use that specific term. And so we've kind of tweaked the language that allows to have some undesignated reserves. And that provides greater flexibility for the utility in dealing with financial issues. I mentioned the way that we look at the reserves that we fill up each of the buckets and whatever's left over is undesignated but you may decide that you want to keep some of the reserves as undesignated as you go forward even if the targets aren't necessarily being met for the other reserves. And then next slide, I think that covers the reserve. Yeah, are there any questions on the reserve policies? I think we'll be coming forward at some point with specific recommendations that way for the reserve policy with specific language there but we are working on those right now. And then I think we'll turn it back over to Kimberly here. So I'm gonna talk about more fun stuff but I just wanted to know first to make sure there aren't any questions or follow-up questions for Bob or Mark before we move on to the next piece. Robert, I think you would see if there were any hands raised, correct? This is Board Member Grable. I just had a quick comment. I liked the breakdown, the slides. I think it was about four slides ago where it shows kind of in real terms what the average cost increases would be to households, commercial properties, six-inch sewer lines, all those different categories. I just wanna make sure we remember the value of those slides and how we communicate this both to city council members and the public to make sure that it's really understood in real terms. What people will be paying or what the average customer in some of these brackets will be paying because obviously that's what really matters to most people who are not in the weeds so deep. And I just wanna make sure that we're cognizant of the readability of those numbers for the average citizen and making sure that we have those kind of first and foremost when we're communicating this certainly makes it easier for me and my family to see in real budget terms and just assuming that other customers and families will wanna know that as well. So thank you. And that's perfect timing moving into then what we're talking about next which is the communications plan that we are and have been working on. We have recognized over the years that we are trying as much as we can to move away from telling people what the percentage of an increase is and to actually show them what it is that they will see on their bill. So we are making that effort to make sure that they're seeing dollar amounts and total bill impacts instead of just telling them that we're going to do an increase by a certain percentage amount. So thank you for that, Board Member Grebel. I wanna just talk a little bit about the campaign that we were putting forward. We know that we are in some very different times right now. We are not getting really FaceTime, I guess you would call it with our public anymore. We're not seeing them. And so we know that we need to get the message out. And so we are starting a value of water campaign. The key messaging you can see here is how we are investing in our public water system and that it's critical. We will be creating videos. We have some that are almost ready to go and we will be releasing those videos fairly soon, at least the first one, and then we will follow up with two other videos. These videos will be really talking to our customers about what we do, about the importance of our infrastructure, about the amount of work that goes into creating and maintaining potable, clean, safe drinking water and treating and reusing and recycling our wastewater, as well as the work that we put into being stewards of the environment. So we will be having this two-phase multimedia campaign, the campaign coming out and hopefully being able to have community meetings that will be virtual, since we can't do those in public. If we get the opportunity to do them in public, we will. But then we will also start the Prop 218 process, which is also a very public process that is brought before both the board and the council in early next year. And then with that, you can kind of see a little clip of how our videos will come out. We will be using the video to show pictures and get out messaging around the reliability of our water system. Also reminding people that we are not a for-profit organization, but the work that we do is, and the money that they pay for the work we do, all goes back into the system to make sure that we are providing that safe drinking potable water and that we are reusing and recycling as much of that wastewater as we possibly can. We have multiple avenues here that we're listing that we will be using to connect with our customers. And we have our e-newsletters, which if you're signed up for, we are getting them very regularly since all of the emergencies have been happening. We will be using social media and digital advertising. We will be posting everything on our website, as well as using bill inserts and radio ads. And with that, I will answer any questions that anybody might have or take any feedback. Great, do any of the board members have any questions or comments? I don't see anyone raising their hand. I will turn that off then, so we are back just to video of everyone. Okay, great. So if that, if no board member comments or questions, we'll open up to public comment on item 4.1. If you wish to make a comment via Zoom, please raise your hand. If you are dialing in via telephone, please dial star nine to raise your hand. Secretary, do we have any raised hands for public comment? No, there are no raised hands. Great, thank you. And with that, I believe that comes to the end of our presentations. Staff, do we have anything else anyone else wanted to add? Since there's no additional questions, we do have some next steps. Great, thank you. That I was, didn't show you the slide on, but I will just kind of walk you through them. I apologize. Yeah, we are waiting for that bond pricing so that we can finalize numbers more and see where the debt service and especially that refunding, which could save us a significant amount of money for our ratepayers. We will be bringing forward more information on the Catastrophic Reserve policy revisions to you and hopefully have the sub-regional target for Catastrophic Reserves done fairly soon. We were going to have a meeting in early November, but we're going to push that out only because we're waiting for all of these other pieces to come into place before we move forward with meeting with you again. We'll have an administrative draft of the staff or of the cost of service report for you and that we will likely be looking for or requesting a recommendation on that to the full Board and Council early next year once you've had a chance to review that and we have also had a chance to review that. We will also be looking and working on our draft presentations that will be going to the entire board, not just the subcommittee and that final report and then of course working on the Prop 218 noticing that will be going out in March of next year. Thank you again, I apologize for skipping over your end of your presentation. With that, are there any Board member questions or comments about the next steps or any other part of the presentation? Okay, great, thank you. Thank you for your presentation and continuing to supply us with information as you get it. I know that these are all preliminary and you guys have things that keep changing and I appreciate the individual meetings with our city council members. I think those were helpful and I know those are going to continue based on need and as more numbers come in. So with that, it looks like we are ready to adjourn. So we will adjourn the meeting at 205. Thank you. Thank you. Thank you.