Okay, it is nine o'clock and we do have a quorum, so we're called to order the public
utilities board for the city of Denton on April 12th, 2021.
The first item is public comment, do we have anyone who's wishing to speak?
This is Tyler Smith with staff, no ma'am, you do not have any public comments at this
moment.
We're going to the regular meeting.
Consent agenda, does any board member wish to pull any of the items A through D on consent?
Billy?
I'd like to pull item number A.
Okay.
All right.
Letter A.
Anyone else?
All right.
Do we have a motion to approve items B through D?
Okay.
Karen?
So moved.
Karen moved and I think Barbara seconded.
Okay.
Billy, item A.
Let me pull this up, excuse me.
I'd just like a little more insight into where this was and I'm looking at the, I'm sorry.
Morning, ladies and gentlemen, Jason Brown, Denton Energy Center.
Great.
Go ahead, Jason.
I'm sorry, Susan, but I just.
Okay.
It's all right.
My question.
Hold on just a second.
Okay.
Sorry about that.
I couldn't really hear y'all.
Okay, so item A is the contract with Asset Works for a CMMS system.
Correct?
We are basically getting into a whole lot of maintenance activities and work orders and
correct work orders and that type of stuff to where we are needing a asset management
system to track and control and keep historical data for the facility itself.
In addition to work orders and corrective work orders and maintenance activities, it
will also be taking care of all of our parts and that kind of stuff.
Do you have a percentage of what the cost of this new software will be as to the possible
expenditures coming from its analysis or maybe I don't understand what the software does
that much, Jason.
Yeah, so really I don't have a comparison versus the cost of the system versus the analysis
that will be done.
Basically a CMMS system is if you have issues on a piece of equipment, you would fill out
a work order and track work order.
Currently what we're doing now is all paper ledger and that kind of stuff, so it's very
time-consuming for staff.
Within this, it's a system.
You go in, you load all of your equipment, your assets, that type of stuff, and you would
actually fill out a work order in this system and keep it going that way.
Same with parts.
You can track your parts that go to that piece of equipment or that asset and it would keep
all of your associated cost for that piece of equipment and in the future, you can run
a report and see how much that piece of equipment has costed, maintenance, hours, parts, downtime,
that kind of stuff.
Lee, you had your hand up, do you have a question also?
Yes, ma'am.
Are you going to be taking your current paper-based system and moving it into the computerized
system or will you be starting from scratch to create a new database in that system?
A little bit of both, sir.
Basically what we'll do in the beginning is gather all of the data that we have currently.
Right now, we're storing them in files, so engine one has a file.
What we don't have is by asset broken down or subcomponent, so that will be an ongoing
task, but originally off of the start, if this is awarded and approved, we'll be loading
all of the assets and then as we continue, we'll keep putting all of that documentation
in the system, so eventually it will all be in the system.
Okay, so will the historical data that you currently have be uploaded into this computerized
system?
That is correct.
Okay.
Thank you.
Yes, sir.
Other questions?
Okay.
That's all I have, I want to do, it's a lot of money to convert and I think every system,
right now, everybody's converting a lot with technology, continuing to grow.
Wish I was in this technology business, but with that having said, I'll move approval.
Okay.
Do we have a second?
Mr. Ryback.
All in favor say aye.
Aye.
Motion carries.
The next item is consider the approval of minutes for March 22nd, 23rd, and April 5th
of 2021.
Are you moving approval, Karen, or?
No, I just had an amendment.
Oh, okay.
I'm pretty sure that we approved consent agendas A through C, not A, B, D, and E.
In the March 22nd minutes, it's just, it said that we, for the consent agendas, it said
that we approved A, B, D, and E, but there were only three consent agenda items.
Oh, okay.
Good catch.
There was no D and E, and there was a C. That's my memory anyway.
Well, and Kim, can we go back and look at the video and have that corrected?
We can do that.
Okay.
So, maybe we would amend it to be minutes approved with the corrections.
Yeah.
Okay.
Everything else looks fine.
Okay.
So, are you making that motion, Karen?
Sure.
Yes.
All right.
And the second?
Multitasking here.
Second.
Okay, Barbara.
All in favor say aye.
Aye.
Motion carries.
Okay, the next item is consider recommending the adoption of an ordinance for the city
of Denton, a Texas Home Rule Municipal Corporation, authorizing the city manager or their designee
to execute a contract with Wartsilla North America, Inc. for the supply of routine maintenance
supplies and services for the Denton Energy Center, providing for the expenditure of funds
therefore and providing an effective date to award Wartsilla North America for three
years with the option of two additional years extensions with a total five-year not to exceed
amount of $3,448,184.
Who's doing that one?
Jason Brown again.
Yeah.
It's me again.
Hold on just a second.
I think I got this figured out now.
Ms. Kim, I'm having trouble.
Is it sharing it?
All right, y'all can see me and hear me.
Sorry, I thought I had it.
So, Jason Brown, Plaint Manager, Denton Energy Center again.
The Denton Energy Center Equipment Maintenance Parts and Services prepared for you a short
presentation this morning to briefly discuss the need for maintenance parts and services
for this, for the equipment at the Denton Energy Center.
In this, we'll briefly discuss the major objective of this contract, types of maintenance, maintenance
intervals, and lastly, the bid summary for this purchase.
The objective of this contract is to help achieve the highest possible unit availability
for each engine.
The units must be available during high-priced hours to insulate DME customers for high-priced
market exposures and for performing equipment preventative maintenance to ensure unit reliability
and availability is maintained.
Despite best efforts, mechanical systems are subject to random failures, however, performing
routine maintenance and having spare parts on hand is the best practice to ensure unit
reliability and availability is maintained.
By performing equipment preventative, predictive, and corrective maintenance, we are doing everything
in our power to ensure the asset is maintained in tip-top shape to maintain efficiency and
reliability and availability to remain cost-effective for our customers.
In the next few slides, I'll briefly discuss routine maintenance schedule parts and the
benefit of these parts to help understand why we need this purchase of routine maintenance
parts and why it is a long-term solution to achieve our objective.
Please feel free to ask any questions at any time as we go.
The denture engine center, much like your car engine, it must be maintained routinely
as recommended by your equipment manufacturer to operate correctly.
This is called preventative maintenance program, where predictive, preventative, and corrective
maintenance activities occur.
Many components require routine maintenance to proactively inspect for where premature
failure and critical parts must be replaced or repaired.
The preventative maintenance activities are performed consistent with OEM recommendations
guidelines.
OEM is equipment manufacturer.
Based on operating hours, this chart just depicts our current estimation of when maintenance
activities will occur.
So 2020, 2022, 2023, all minor maintenance activities, and then it just keeps progressing
as operating hours continue.
All maintenance activities require a shutdown of the individual units, but we want to minimize
the length of time that they're unavailable for generation.
So having contract in place for parts and services on hand is crucial.
As you see in this chart, we are due for minor maintenance currently, and in the following
years until the first major maintenance activity takes place at about 12,000 operating hours.
As you can see from this chart, 12,000 operating hours were projected to be 2024, 2025, somewhere
in that time range, but keep in mind with the denture engine center being dispatched
against the ERCOT market, the time frames could change a little bit forward or backwards.
Our objective is to make the units available as often as possible, as I said earlier, to
generate the most revenue from the market.
So we must be prepared to perform the maintenance task to ensure efficiency, availability, and
reliability of the equipment.
Jason, I have a question.
Yes, sir.
The hours that you showed are generic, I presume, and do not apply to a specific piece of equipment?
So everything at the plant, well, let me go back just a little bit.
Most everything at the plant is hour-based maintenance.
So if the unit has a start command, it's all of the hour-based pieces of equipment that
fall into that category.
There are a few pieces of equipment that are calendar-based, so monthly, quarterly, annually,
but most of those are like safety eye washes, some of your motors for increasing intervals
and that type of stuff.
That answer?
I guess I was trying to get at the major equipment, the generators, so is that like the average
of their run hours or total run hours of all the units, I just wanted to get a little clarification.
It's individual pieces of equipment, sir.
So each one operates individually, so unit one through 12.
Unit one is engine generator and auxiliaries.
And then you have two and three and four.
So as unit one hits 4,000 hours, we do the maintenance interval for unit number one,
and then so on and so forth throughout the engines.
All right.
So that was a generic list, but you have multiple pieces of equipment, so it wasn't an overall
review of those.
Correct.
Gotcha.
Yes, sir.
Thank you.
Yes, sir.
So the major benefit of entering into this contract is that the best overall price for
the material on the market was achieved.
We will have OEM support on parts and services and troubleshooting, and best of all, we're
doing everything that we can do to ensure that we're maintaining efficiency to the OEM
standard to ensure reliability, availability, and cost effectiveness for our customers.
So late last spring, we began proactively preparing for current and future maintenance
activities, outages, minor maintenance, that kind of stuff.
So we hit streets seeking prospective bidders for this type of equipment with a formal IFB
for the parts needed for all of the minor maintenance intervals.
The specifications were posted.
They were sent to 95 potential suppliers, two companies submitted bids, one the OEM
and then a third-party company.
Of the two, one was partial and had higher prices than the OEM.
The partial bidder was rejected as an incomplete bid and also for not being qualified to work
on all aspects of the equipment.
We are recommending and requesting the approval of the maintenance parts and services in the
amount of $3,448,148 towards a lead to be funded from the Denton Energy Center operating
annual budget as needed based on operating hours.
And I'm free for any more questions.
Jason, I have a question.
Sorry, Ben.
I'll just jump in here quickly.
So do you currently have a company doing this work and this is a replacement for that company
or is this a new service altogether?
No, sir.
The major aspect of -- sorry, hold on just one second.
There you go.
Is that better?
That's fine.
So currently, the major aspect of this contract is not really a services, it's the parts based.
The services aspect of this is for unplanned emergencies and items that site staff can't
work on.
So logic based issues, control module issues.
If we have, say, a head or a turbo that needs repaired, we can send it out to their shop,
have them work on it, return it.
As far as the parts aspect of this, which is the big bulk of the money, right, to 2.6,
almost 2.7 million, we currently do not have a contract for parts.
What we've been doing thus far is using our current stock, our inventory parts, for the
maintenance activities and now we're running out of those parts and need to replenish so
that we can keep doing preventative maintenance.
All right, so this is a new service or operation to support the plant.
That is correct.
I'm sorry, Ben, I'll yield the floor to you.
Jason, you actually answered my question, so I'm good to go.
Oh, perfect.
Yeah, let's remember that Wartsilla is the manufacturer of these engines.
Correct.
Karen, go ahead.
You're muted.
Just to make some clarification, it seems like we've been over a similar issue in the
past when we were talking about warranty.
I mean, the plant is quite new and it's been under warranty and the warranty is now expired.
Is that what we're dealing with or the warranty period has run out?
So correct.
The warranty period ran out two years ago.
Two years ago.
Okay.
Yes, ma'am.
So in that, the only thing the OEM warranty had during the construction time period and
one year after that was issues, corrective issues and that kind of stuff.
The warranty never took care of maintenance and prolonged maintenance activities.
And Jason, you said you started this nine months ago, started looking into this?
Yeah.
We started the process late fall of last year.
Okay.
Any other questions?
Right.
Do we have a motion to approve?
Barbara?
Barbara's motioning and Lee is seconding.
All in favor say aye.
Aye.
Opposed?
Okay.
It carries.
And the next item, sorry.
Consider recommending the adoption of an ordinance for the city of Denton, Texas amending the
fiscal year 2020, 2021 budget and annual program for the services of the city of Denton to
allow for adjustments to the electric fund in $140 million for the purpose of purchasing
power during the winter storm Yuri event, declaring a public person purpose and providing
several several ability clause and an open meetings clause and an effective date.
Good morning, PB members, chair, Nick Benson, assistant director of finance.
Let me get the presentation pulled up really quick.
Okay.
So one slide, Susan, is what we have for this item really quick.
So I think this is the first time I've been in front of a lot of the new PB members.
So I just want to say welcome.
We're actually really glad that you're here and look forward to the conversations today
in the coming months as we talk about the upcoming budget cycle.
So we are in front of you today to amend the 2021 operating budget for the electric fund.
As you're aware, and it's been discussed by the public utility board of last several months,
we have had increased purchase power expense associated the recent storm event.
Those net expenses were $140 million, approximately, so we are looking to increase our appropriation
authority in the operating budget from $231.1 million to $371.1 million.
So this will cover those additional purchase power expenses and keep us within that budgetary
authority that the PB and city council approves.
That's it.
Thank you for questions if you have any questions.
I have one.
So the public purpose of this is that it was basically an emergency and under the law,
you can go ahead and do what you need to do and then come back and get approval.
Is that is that my correct understanding is correct, Susan, but but actually, you know,
in our expenditure authority that we have within the budget, the majority of the purchase
power expenses are actually covered in the original adopted budget of $231 million.
But but the you're correct.
We did come back after the expense occurred.
So yeah, we do we do like you know, for new PB members, if you're not familiar with it,
the fiscal year runs from October 1 to September 30 of each year, and we always try to come
back to you in advance if we think we're going to exceed the budget.
But in this situation, like Susan said, it was an emergency situation.
We're actually coming to you after the fact.
That's absolutely correct.
Any other questions?
Do we have a motion to approve?
We think we have an option, so I'll move approval.
Thank you, Billy.
Do and Karen seconding.
Okay.
All in favor say aye.
Aye.
And I see Mr. Ryback needed to step away.
So the next item management reports.
Madam Chair, PB members, the first item that we have here for you and the management reports
is the the January 2021 deck informal staff report and in the actual dashboard and certainly,
you know, Nick and other folks from finance are here if you if you have if anyone has
any questions regarding that report looks like none.
All right, so so the next item that we have for you is just the the future agenda item
matrix and obviously today we're going to be going through some wrap up presentations
of the previous fiscal year as well as an update of the current fiscal year for the
various utilities and I think Nick or Cassie will be going through that with you and then
on April 26 we do have scheduled a work session with the PB to kind of go go through but you
know what priorities you have for for the upcoming budget and certainly want to take
that feedback as we as we develop the budget and just you guys know we are already in that
mode and so we are already working with the finance department working through the various
budgets and and submittals for for the next fiscal year.
So this I think a good opportune time and just as a reminder this really kind of came
out of a discussion that Billy and Susan had with city management about you know PB's role
and and where things might fit in we thought this would be a good opportunity I think in
the future if we continue to do this we'll probably do it a little bit sooner than than
April but but again I think it's a good opportunity for if there's some things that you want to
see in the budget you want to give us a heads up that way we can become you know be better
prepared for them and then obviously come June we'll we'll be heavy into the budget
and we'll be coming back to the PB going through the various you know budgets you'll you'll
get you know line item information for each of the utilities and we'll be happy to answer
any questions that you have and as well as why certain things are being proposed and
needed but with that if there's anything else that I've missed on the on the future agendas
or if there's something that you'd like to see just feel free to let me know now or you
can always shoot me an email okay and then the last item that we have for you is the
new business action item again we still have some items on here and and Susan you would
probably I apologize for stealing your thunder here but you know some of these were were
questions that we had from Commissioner Ed Soph and Ed's Ed's has recently resigned from
the PV to to be a member of another another city commission or board and so but some of
these questions are still there certainly think they're still valid we'll be bringing
back the majority of these through our comprehensive solid waste management report that we'll be
bringing to you here in the next few months but with that certainly happy answering questions
that you may have or if you have for staff regarding any of these items questions all
right there's no question I think I think Barbara has one oh I'm sorry go ahead thank
you oh you're muted okay I wanted to ask you about on the it's mentioned that you did a
commercial bulk program to help property owners manage illegal dumping could you briefly tell
me what that I don't recall anything of that nature would you would could you tell me a
little bit about it yes ma'am I think Brian Warner's on here he'll be happy to respond
to that Brian yes ma'am just like our our you know residential bulk if a commercial
business owner has found that there's bulk on their property they've got materials they
can't fit into their dumpster normally because it's one-off or or something of that nature
they can call customer service and just like your residential crew we will send it out
send out a a truck to pick that material up for a fee I believe it's a $20 mobilization
fee and then a $5 per item fee all right so that that mattress and springs that's flinged
up against my dumpster I can get rid of it yes excellent thank you very much I wasn't
aware of that and again you know just call customer service nine four zero three four
nine eight seven zero zero and they will take care of you thank you very much Brian you're
welcome oh Karen go ahead I just quick follow-up for clarification Brian so the the business
owner who's already paying for the dumpster is also paying for the unauthorized dumping
correct okay I mean it's only $25 but it's bad the business owner has to cover it but
well and again pursuant to state law any any material that is on your property is your
responsibility to handle and manage regardless of who put it there so that's why it's important
for as we go through this process you know we've got revetments we're managing that material
remain we're managing access appropriately to our properties and that's the same thing
with graffiti you're responsible for repairing graffiti right it's along the same lines correct
okay same principle thank you I guess one out of three in bad residential you can get
two items picked up a week yes bulky items so okay any others all right on to concluding
items does any board member wish to congratulate somebody or something on a future agenda I
do want to thank Ed so for being on the board he's going to sustainability which everyone
who knows Ed will know that he'll be absolutely fabulous on that committee so I doubt he's
watching but if he does it is thank you Ed for your service yes he will congratulations
to you Susan on your new grandchild that's why you weren't here last time yes he's absolutely
adorable but what grandma doesn't say that right all right the next item is work session
receive a report hold a discussion and give staff direction regarding the fiscal year
2020-21 budget capital improvement program rates five-year financial forecast for water
wastewater solid waste and the electric funds good morning again Nick Benson assistant director
of finance and Susan there's four four presentations so I'll walk the pub through water wastewater
and solid waste and then Cassiog and the director of solid waste walk you through electric so
the water presentation is like 20-21 slides long if you want we can go through the entire
thing then take questions or we can stop halfway there is somewhat of a natural break in the
presentation so we'll get started please let me know if you have any questions we'll be
happy to answer them okay so really quick a summary of the presentation and what we'll
discuss today we'll talk about the 1920 end of your actuals look at the 10-year forecast
I know this may be the first time some of the PB members have seen it so be happy to
walk you through that in detail and ask ask any questions that you may have we'll address
them the capital agreement plan we'll look at that capital plan and what's included in
it and the cost of service overview so we did recently complete a cost of service study
for the water utility I'll review that with you shortly we'll have a little bit of rate
discussion that we'll talk about next steps as Tony mentioned earlier so this is the actual
water revenue for the water utility for the PB members have seen this before and those
that haven't I'll start on the left-hand side and walk you through it so our revenue is
grouped into different categories you can see at the top interest operating you have
some residential revenue commercial water for resale other white other water transfers
in and impact the revenue and talk about impact fees and a little bit also and 1819 actuals
you can see this is a couple fiscal years ago this is the most recent fiscal year that
ended the one we want to talk to you about today so as 1920 this fiscal year ended September
30th of 2020 this is the adopted budget so this budget was adopted during the budgeting
process last year and it took effect October 1st of 2020 you know actual revenue what I
wanted to walk you through you could see residential water cells are really close to that budgeted
number of 2.5 they did come in at 2.4 commercial was budgeted at 17.6 and came in at 17.1 so
a little bit below the budget but but fairly close water for resale is some of the contracted
wholesale agreements that we have out there with different entities did come in a little
bit above budget which is great so total resources for the department is 48.3 we did use reserves
of 1.2 for 49.5 and total resources the adopted budget did include reserve usage of 2.9 so
as you can see we did finish the year about 1.8 million dollars better than originally
budgeted water expenses by different operational units so within the water utility we have
different operational units we divide them by divisions we have an admin division utility
administration public affairs production distribution metering lab miscellaneous and these categories
help us in the cost of service model to establish the cost for each one and plug those costs
in to establish our rates so same thing here we had 1819 actuals 1920 budget 1920 actuals
and then 2021 adopted I did note on here that utility administration no longer has a budget
2021 and this budget was combined with water administration and public outreach and so
it was divided between those two one other thing I want to do is just congratulate staff
they did a great job when COVID hit last year of going into that 19 and 20 budget and really
looking at their operating expenses and doing some reductions during that difficult time
so just wanted to point that out we did have a note here at the bottom but you can see
we did have a savings just shy of 2 million so it's a great job by the operational staff
this is the 10-year forecast for the water utility I know this says five-year appear
but this is actually a 10-year period and there's a lot of numbers on this page I will
do my best to walk you through it from the left to the right so 1920 adopted budget as
the budget we just talked about so you can see 48.1 in revenue with that 2.9 million
in reserve usage 1920 actuals you can see that 48.3 that we reviewed a couple slides
ago with 1.2 in reserve usage as you work your way down the page you can see the adopted
expenses for 1920 and you can see the actual expenses for 1920 on this green line we always
do like to point out if there was any rate increases the 1920 budget did not include
a rate increase or decrease there was nothing and then going a little bit further down what
I want to point out to everybody is our operating reserve and we'll talk about this a little
bit later in the presentation and talk to you about what our current policy is and what
the recommendation is moving forward so currently you can see we have an operating reserve it's
made up of two components a working capital and operating reserve itself so total budget
we budgeted at 21.5 where we ended the year with using a little bit less than reserves
we finished about 23.2 keep moving down the page a little bit you can see we have an impact
fee capital reserve this is for a large capital project which is the Lakebury Roberts plant
expansion coming up in a few years we do have nine million setting aside in cash to fund
the design of that project so I want to be sure to point that out to the PEB today that
is a big project coming up moving down the page a little bit further down here in the
bold I definitely want to point this out to you these are those targets that we'll talk
about in a few slides so we have a minimum and a maximum we try our best to be in the
middle of those two as an indicator you know how the fund is performing do we need to consider
rate increases or operational you know decreases or savings within the fund to get us back
in that that range so in 1920 you can see the range was 16.9 and the max being 25.5
so that actual 21.5 falls well within that so that's one of those key indicators we talked
to the PEB and the city council about every single year during the budgeting process so
1920 actual we actually finished at 23.2 with that minimum being 16.3 and that maximum being
24.8 so we're definitely where we need to be just really quick I want to go through
2021 because we are in the adopted this person say adopted we're in the adopted 2021 budget
some of the new PEB members are not here we went through this budget cycles want to make
sure you are aware what's in it we have 49 million in revenue we are currently forecasting
or budgeted to use 3.9 million in reserves in 2021 so we'll continue those discussions
as we go through the 2022 budget process we'll keep you updated with an updated end of your
forecast but the budget does have some reserve usage included in it o and m budget you can
see we had expenses of 52.9 with a two percent rate decrease so the water utility did have
a rate decrease for customers which averaged about a dollar and eight cents for the average
residential customer and I'll talk to you about an average here shortly then just the
reserve target you're here at the bottom the adopted budget had 19.3 is what we were had
in the adopted budget for the end of reserve so it's still above that minimum target is
17.5 a couple couple big expansions I hear in the future and the point these are really
quick we'll move on the lake expansion you can see the debt service so this is the debt
that the fund issues to fund those capital projects this is the debt payment for that
debt and you can see a 2027 it's 11.6 then 2028 it's 18.1 that big jump there is that
Ray Roberts plan expansion project of 90 million some of the recent improvements staff had
made to that plan and plan to construct actually push this lake construction out the 2029 we'll
put the new budget together so I want to be sure to point that out to everyone this is
the five-year capital plan so we budget for very several things in the capital budget
you can see total was 51.8 it's got different components within it so one of them being
debt that debt payment I just showed you so in 2021 we had budgeted issue 35.5 in debt
we did recently approve a reimbursement ordinance for 23.7 million of that and then we do have
a notice of intent coming forward soon for your consideration revenue funding so this
is funded through the water rates and this is cash funding a portion of those projects
we do have some internal targets we like to meet with different type of projects within
the fund impact fee funding this is those projects within water they're impact fee eligible
most of those projects are growth related and so we did complete a study regarding that
in 2019 we updated it and those are updated approximately five years a little bit of aid
in construction the vehicle replacement of 275 000 so that total of 51.8 this is a fund
balance analysis we wanted to put this in here and update the pub so prior to the winter
storm event the finance department had started an in-depth fund balance analysis and really
what we wanted to do was to look across the utilities and see if our reserve requirements
were sufficient really when comparing ourselves to other municipalities or those professional
organizations and I'll show you some of those organizations on the next slide so nick before
you move on I'd like to ask a question from the previous slide yes sir okay I was a little
confused looking at revenue being added to debt and fees so I'm assuming that debt is
a payment and revenue is income it is I'm looking at this in the column I'm just a little
confused seems like something should be a taking away and other things should be an
ad or vice versa yes sir Mr. Abak let me um if it's okay I'll back up another slide and
show that to you I should have pointed that out to you um so on the on the pro forma is
probably the easiest place for me to explain it so these are the expenses here within the
water fund um in 2021 um you can see this revenue funded capital that's right here on
this line um this 13.96 that's an expense and then that debt that you're seeing this
is the debt payment for that debt so really what we try to do is not debt fund 100 of
all assets in the water utility we typically try to do 25 percent of plan expansions and
100 of those field service replacements so if we're going out to the street and replacing
the line that's already existing we've already incurred that debt for it that replacement
of that line is usually cash funded so they're both expenditure items um shown in the o and
m expense budget it's just one's revenue funded um utilizing rate revenue and then one has
a debt component associated with it does does that make sense rancher Nick this is tony
uh so mr rybeck um the grand total that you see on that that 51.7 million um equals equals
the expense so it's a so it's a balanced cip budget um so it's both it's both the the money
that's going to come in which is what's shown here but it's also equal to the expenditures
that are anticipated to be made in that particular year yeah yeah thank you tony and in in one
of the thing um terry nalti was reminding me too is this may help us um really what
this could say is revenue expense and this is a expenditure item and not a revenue coming
into the fund okay so it's revenue expense not income so that is my confusion okay yeah
so that's the cost of degenerating the revenue not the revenue okay yeah thank you that's
my confusion thank you yeah yeah we could simply call it cash funded um capital if we
wanted that may be a better term for it um but that is that revenue funded thank you
did susan name anybody else have a question maybe this i was just going to say it's really
just showing the sources of where we're going to fund the capital that that's correct we're
going to well we're going to use revenue to cash fund that capital so rate revenue but
you know it could simply be called cash funded capital absolutely yeah um someone else has
any questions i'll keep going along here please feel free to stop me again um so the current
reserve as i showed in the previous slide is 23.3 million was the minimum or 46 um based
on our findings that i'll walk you through here shortly staff does not recommend changing
any making any changes to the water fund balance policy but we definitely wanted to show it
to you in transparency and show you that we did do an extensive analysis of different
municipalities so um city of denton water utilities here at the top um at the time we
did it for the 1920 operating budget which is 51.1 million with that minimum target of
being 33 um the minimum reserve that equates to about 16.9 um and then looking at some
different utilities you can see in here lewisville mckinney garland frisco mesquite and grand
prairie and then you can see our 33 really falls really in line with these just below
frisco being 58 so professional organizations within the water fund we do look at several
different organizations when looking at metrics like this and really even looking at our rate
survey for each year that we participate in so the first one is the international city
management association also referred to as icma and the american water works association
which is awwa and i will put note that they do an annual rate survey that we participate
in within the city that really does a great job of benchmarking our rates with other similar
utilities throughout the state the water environmental federation which is wef and the government
finance officers association which is gfa and as i said on the previous slide based
on these different percentages in these organizations staff does recommend keeping the reserve the
same and not making any changes so this kind of gets into the second part of our conversation
which really a rate discussion and what i wanted to do is walk the pub through some
basic water rate terms review the cost of service study that we recently completed with
you look at those current rates and then look at some rate comparison charts and talk about
those next steps so water terms and some the two most common terms that you'll hear throughout
the budget in the rate discussion is the facility charge which is a fixed fee this is charged
to customers monthly based on the meter size and so does not alternate month to month or
change or vary it is one static fee that is adopted by pub and city council annually and
the volume charge is the volume metric charge is charged per thousand gallons in the water
utility i'll review those here with you shortly and those rates are grouped in different tiers
within the fund and then just some others going down you'll see these acronyms and their
rate ordinance and the utility rate ordinance is passed annually by the pub and city council
and that is available on the city's website so if you haven't seen it i'm definitely reach
out to us we can provide you a link to it and you can review it if you'd like this is
the cost of service rate design just kind of an overview of it so i'm going to give
a little bit of history when the last cost of service study was completed for the water
utility and the last one was completed in 2014 in 2019 the city contracted graph with
graph telus to update it again those studies are usually updated every five years um so
just over a year to get to get to get that completed and coba did slow it down a little
bit the staff is i'm glad that we did get this completed and we do want to note that
our consultant from raf telus is here today if we get into the results and you have detailed
questions and you'll be happy to answer those but the main goal of the cost of service study
is to establish cost of service based rates ensure revenue stability in the fund and ensure
fair and equitable rates and i do want to know to also give staff a working model that
we can update in those interim years so the consultant helps us update it every five years
but from year one to four one to five staff is actually using that model to update the
rates every year as part of the budgeting process when we bring them forward to you
so i think that was important to note this is a high level summary of the results of
that study the actual published document will soon be ready once it is ready we do plan
to share that with the public utility board but we wanted to give you a summary of what
the results were for the water utility and so residential you can see the cost of service
so the cost of providing service to residential customers is just about 22.8 million and the
current revenue is 21.2 so a little bit of deficit about 1.5 million which is 6.6 percent
under recovery so we want to make sure the pub was aware of this and commercial cost
of service is about 10.1 million the current revenue is 12.7 with a little bit of over
recovery about 2.6 million so 26.2 percent over recovery um irrigation um you can see
4.6 million um cost of service for current revenue 3.5 so just about a million difference
and then fire hydrants is is you know close to cost recovery just about thirty one thousand
dollars shy of it then wholesale is listed there at the bottom
um uh nick this is lee i was wondering um where do you um get a cost of service from
fire hydrants i presume the fire department doesn't pay to use the hydrants or do they
um so well that's a great question the fire hydrant the the fire department does use the
hydrants um for um emergency situations um and then we also get it so contractors around
the city have a meter that they can hook on to the fire hydrant that meters how much water
is taken out of that hydrant for it could be a construction project or a different case
so that that drives that cost for that and that's where that cost of service comes from
okay very good thank you for that clarification yes sir
so this was great information that the consultant put together for us um i'll start on the left
hand bar graph here and kind of walk you through it so what this does is shows you the distribution
of bills per thousand gallons of water um so you can see 3 000 gallons there's just
over 50 000 customers that fall in that tier 4 000 gallons over 50 000 so as you go you
know higher to the right of this chart you see larger water consumption um really the
way the rates are set up now and i'll walk you through in a second are really to incentivize
water conservation in the city and this is what this table shows so i wanted to be sure
the pbs saw this because it was a great message um the current deal the current bill distribution
um you can see here on this top right hand corner so the first tier within the water
utility for that volumetric rate so per thousand gallons and there's 89 percent of the bill
distribution in that tier which we definitely thought was important to point out 85 percent
of the consumption the second tier is 15 000 to 30 000 gallons which eighth percent of
the bill distribution being that second tier and then so forth going forward you can see
very few of the bills are in that 50 000 plus which is the largest tier we have in the city
so the majority of the residential customers are in that first tier and then this bottom
table of course is just a meter size based on uh residential customers so the most common
meter in the residential customer class is that three-quarter inch meter and i'll point
that right out to you here shortly this is the commercial distribution um same thing
here with this this graph you can see um the 1000 gallons is just over three anything below
that excuse me back up so 10 000 gallon increments on this so this would be zero to 10 000 gallons
on your left hand side 10 to 20 000 gallons then so forth going forward um so the majority
of the customers in that zero to 10 000 gallon range um meter distribution you can see the
three-quarter inch meter um about 1800 meters out there and then a two-inch meter being
the most common those two just over a thousand yes ma'am or does someone have a question
yeah barbara how often do you change those meters out i know you're on a regular system
i i would have to um ask pre-tim or steven maybe to address that question i'm not sure
on the change out change out time period hi uh this is pretendation of deputy director
can you guys hear me yes pre-tim we can hear you right yeah typically our program currently
is a 13-year yeah for those residential meters every 13 years we um have them on a cycle
thank you thank you pre-tim
all right so residential rates those are the current rates for the water utility i will
point out this slide is a little bit different that was included in your backup i had some
changes i needed to make to the current irrigation rates so i'll walk this um i'll walk you through
them here shortly um but the two components that we talked about earlier so the facility
charge is a fixed charge based on the meter size the volumetric rates are um they're seasonal
so we have a winter rate and summer rate and it's shown down here in this table so you
can see the the facility charge is consistent throughout the year is fifteen dollars eighty-four
cents this is for a three-quarter inch meter sorry did someone have a question okay and
then this is the volumetric rates um so you can see zero to fifteen thousand gallons um
that per thousand gallon rate is consistent between the winter and summer but once you
step up to that second tier from fifteen to thirty thousand gallons and that rate does
increase in the summer so as i mentioned earlier you're really incentivizing water conservation
this summer in those hot months when people tend to use more water and then the current
irrigation rates want to put these on here these are for individuals with separate irrigation
meters and this is for a two-inch meter also so fifteen eighty-four um and that volume
rate for that first tier in the winter being four or five second tier four or five and
of course over 30 is 405 but in the summer and it is higher for irrigation is 576 and
the second tier is 795 and 30 000 plus is 1064 and then you know staff does plan to
bring this back to the public utility board and fiscal year 2022's budget discussions
that will start here in the next month we'll run different scenarios answer any questions
you may have about these rates and how they fit into the pro forma so but these are the
ones that are currently in place commercial rates so same thing here you have a facility
charge and a volumetric rate it is broken to a winter and summer rate for irrigation
customers for regular commercial water usage there is no winter and summer block it's just
one rate so you can see the facility charge here of fifty dollars and ninety-nine cents
and that volume charge of four thirty-four so that bill does not change throughout the
year like a residential customer and if you're a commercial irrigation customer there is a
winter in a summer charge with the volume charge being slightly less in the winter than
it is in the summer this is the residential bill distribution and this was recently updated
as part of the cost of service study so you can see the city of denton here in the middle
seventy-eight fourteen this is based on seventy-six hundred gallons for the average residential
customer each month this is the average commercial bill rate comparison so you can see the city
dent in the middle of four fifty-one fifty-one and this is based on forty-five thousand gallons
which is that average commercial customer and this is something we put together last
year as part of the budgeting process and really what we wanted to show was is the rate
changes over the various fiscal years so you can see in the table from fiscal year twenty-fifteen
to twenty-seventeen the utilities had some rate increases starting in twenty-eighteen
we've actually had several rate decreases in the utilities with no increase so we thought
this was definitely important to point out to the public utility board and city council
but a great rate history for each of the utilities and then upcoming budget discussions no tony
mentioned these earlier so this is plan to go to city council on april the twentieth
next tuesday circling back with you on april the twenty-sixth with a priorities presentation
and then starting that fiscal year twenty-twenty-two operating in capital budget discussions may
through september i'm just willing to put those on there i know it's a lot of material
so i will pull it down and we can address questions that you may have any questions
i see none all right well great well let me pull up the next presentation which is wastewater
see if i can get it to share here all right i won't go all through all these individually
like i did in water it's basically set up the same way so the end of your actuals we'll
look at the pro forma and then we'll have a rate discussion afterwards and talk about
next steps so this is the 1920 actuals that we want to put on here so very similar to
water there's different water um i'm sorry wastewater categories that we receive revenue
into um so you can see we have a little bit of operating interest up here uh residential
revenue we have commercial revenue effluent irrigation we have wholesale other wastewater
we have drainage fees drainage drainage is included in this utility we'll see a separate
pro forma for that shortly some transfers in those transfers in our majority of cost
of service transfers from other utilities um to wastewater um and then impact fee revenue
so in 1920 the adopted budget had thirty six point seven million in revenue we finished
the year about thirty six point one million so really close to that budget um the adopted
budget had one point six million in reserve usage uh we actually ended up using about
seven hundred eighty three thousand so great news this fund this is the 2021 budget so
this is that current budget that we're currently in um current revenue at thirty seven point
six with no reserve usage and the adopted budget question yes sir so your actual and
budget for impact fees was exact it's a great question mr cheek absolutely so um what that
is that's a great point so the city does receive impact fees in the water and wastewater
utility when those fees are received they go into the impact fee reserve what we do
each year from a planning standpoint is we look at the impact fee study we visit you
know with the pub and the city council through the capital program and we determine a set
amount to pull from that reserve into the operating fund to fund those projects so that
number will always be equal to budget it is set up on an annual transfer great question
okay yeah i didn't remember that okay thank you um expenditures by operational units so
you can see administration rec reclamation collections filled services beneficial reuse
laboratory and so forth going down uh we'll point out that drainage is included in these
expenses and i'll show you a separate reform shortly um but you know total expenses in
the 1920 adopted budget about 38.3 uh with the actuals being about 36.9 uh they adopted
2021 budget 36.8 million expenses and similar to water is want to point out staff did a
great job in this utility uh really looking at those covid expense reductions last year
when we were going through and talking about that internally i mean with the pb and city
council so it come in below the budget on the operating expense side it's a 10-year
performance is similar to water we do like to look at things in a 10-year forecast some
of the growth come in the community is definitely a good thing to do um so very similar it's
set up exactly almost exactly the same as water so you can see the adopted 2020 budget
here in this column the 36.7 million in revenue we discussed with that 1.6 million in reserve
usage operating expenses here's that 38.3 million we saw on the previous slide uh with
that zero percent rate increase or decrease last year so we didn't have any increases
or decrease in 2020 we did have a five percent rate decrease in 2019 in the wastewater fund
and then 2021 here's the adopted budget that we're currently in 37.2 million in revenues
um basically a balanced budget and then operating expenses 37.167 um operating reserve definitely
want to show you this for the wastewater fund um so we finished the year at 14.4 million
you can see that number here uh moving down the page you can see what the existing target
is so 10.3 being the minimum 14.4 being the maximum so we're right there at that max
finishing the fiscal year which is great news for this fund i mean 2021 you can see we're
at 14.2 million um with the minimum being 10.4 and the max being 14.5 um going out in the future
years i did want to point out that the reserve does uh dip slightly below the reserve requirements
starting in fiscal year 2026 but this does not anticipate currently any rate increases in the
future so i want to make the public utility board familiar with that and make sure you're aware of
it as it said there's no rate increase is currently forecasted that's when we dip below it
the drainage performance so this is very neat performance that you just saw it is part of the
wastewater fund we do like to show the public utility board and city council this separately
each year and the drainage function within wastewater is supported by drainage fees
the drainage fees are made up of residential fees and commercial fees which is non-residential which
is the same thing so you can see residential is about 1.9 but commercial being about 3.1 for a
total of 5.5 so they did have a balanced budget of expenses of 5.5 you can see here they do fund a
lot of their capital from operating funds from revenue so revenue funded capital of 1.8 million
you can see that number here in this column we do set aside a drainage reserve is a million dollars
this is a component of wastewater but we do like to show it separately to show we do have a reserve
for this fund five-year capital plan similar to water there are different components within here
you can see the debt component so how much debt we plan to issue the adopted budget included 32.9
million to date we've approved the reimbursement ordinance for 26.1 million with the notice intent
coming forward to the pbn city council in the near future this is that cash funded capital this is
from the operating fund this is paying cash for those assets instead of debt funding on a 5.4
million impact fee funding we had i think believe one project that was eligible for impact fee funding
in fiscal year 2021 so this is an expense this is taking those funds and paying cash towards that
project for the appropriate amount so aid in construction and vehicle replacement 1.2 million
so total of 40 million
this is the fund balance analysis so very similar to water we looked at different municipalities a
lot of municipalities their water and wastewater utilities are combined so we did list them both
on the same table just wanted to point that out to everybody so currently the wastewater fund balance
a minimal reserve target of 28 with a maximum of 39 you see that number here so the current reserve
is 16.3 which is 42 and then very similar to water based on these findings based on the fund
balance percentage of the other cities and the other professional organizations that we looked at
we do not recommend a change to the wastewater reserve currently and this is something we can
continue to monitor every year as part of the budgeting cycle i think this is a great great
process the finance department went through this year and definitely is valuable this professional
organizations that we look at on the wastewater side very similar to water but we wanted to list
these out for you so you can see awwa there icma gfoa and the water environment federation
and then of course staffs recommendation keeping that reserve target the same i see uh lee has his
hand up yes lee uh yes uh nick if you could go back one slide thank you um i noticed that the
on both the water and wastewater frisco had much higher utility reserves than everybody else is
there a particular reason for that are they anticipating a new plant or plants to bring
online or to construct or do you know uh mr i'm back i'm i'm not familiar with their capital plan
i do know that the size of the fund is 100 million and it's likely that that that reserve
that you're seeing there 58 percent is for both water and wastewater we're looking at them
separately here's the water and wastewater are separate so if you if we were to combine these
and look at them together we would be fairly close to that number um but but you're absolutely
correct it currently looks like it is a little bit more but i'm not familiar with their capital
program okay thank you
okay um let's see here so this is the second part of the conversation just like water i want to
review some basic wastewater terms with you look at the cost of service results for wastewater
look at the current residential and commercial rates and look at some rate comparisons
um so very similar i don't have to go through the facility charge and volume charge again
uh but very very same concept and wastewater is water um some of the codes that you'll see
in the rate ordinance is sr which is residential wastewater service
sc is commercial and industrial water service and then sm is metered wastewater inside and outside
the corporate limits and then wastewater is the self-treated wastewater effluent which is irrigation
so the cost of service results um you can see uh residential is really close to cost recovery so
cost recovery being about 12.05 million but the current revenue being about 11.9 so within 64
thousand the cost recovery which is great and then commercial is 10.9 is the cost of service for it
it's that number here but the current revenue 10.7 so within 124,000 which is really close to cost
recovery also um equipment services and eating establishments cost of service is currently 1.3
1.27 with that current revenue weighing 1.5 so just about 238,000 over cost recovery
metered wastewater is 200,000 is the cost of service with that current revenue being 220,000
so wastewater is really close to cost of service um just want to make sure the pb was aware of that
definitely looks good um so the current rates for residential and commercial customers we just put
them on one slide here so different than the water utility wastewater service is billed per
thousand gallons um so there's two components to the rate very similar to water you can see a
facility charge um of 11 but the volume charge being three dollars and 80 cents and the average
bill for a wastewater customer or 31.52 and then for a commercial customer the average
bill is 233.84 um want to point out that the average on the wastewater side is a little bit
less than water um just you know contemplating the water does not go back to the wastewater treatment
plant facility so maybe use for irrigation purposes so for residential customers 5,400 gallons
and for a commercial customer it's 42,750
this is the residential rate comparison um so you can see the city of denton um right here
that 3152 that i mentioned that was several other cities that are surrounding or in our area
and then commercial there's that 233.84 that i mentioned just around middle of the chart
and then these next steps so april the 20th city council and then circling back to the public
utility board in april 26 with further discussions and i will pull it down susan for questions
all right any questions oh karen go ahead
uh sorry just a quick question um clarification the wastewater usage is not
metered that would just be gross the wastewater usage is based on the meter coming in and then
that's a percentage is that right that's correct yeah it's based on the winter um i was just trying
to look here really quick so it's based on the the winter average that's a great question so
wastewater service in the city is a non-metered service so how do we get that average usage for
a residential customer and it's based off the winter average and the winter average is established
established december through february if you're a new customer and you move in you don't have an
established winter average you're built a minimum of 5400 gallons until that average is established
once that average is established it would take the place of that okay yeah okay thanks there was
some confusion on uh social media about that billy go ahead yeah follow up we discussed this i know a
few weeks ago but how are we going to weight that with the crazy february that we had this year
so i may ask tony to speak to that i do believe that that was um tony you want to speak to that
yeah i'm here billy if if you remember um you went to council and we made the recommendation
to exclude february and so so that winter averaging is just going to be for those two
months for december and january just because we knew there'd be there was probably going to be a
high usage in february you know with all the line breaks and you know issues people were having at
home and so i think that was the right decision to make um and the council gave us that authorization
yeah just wanted to make sure it got out there again thank you yes sir
okay all right um in my final presentation like i said cassie will present electric i'll walk you
through solid waste really quick it's a little bit shorter not quite as many slides
okay so very similar to water and wastewater we'll look at the 1920 actuals we'll look at
the five-year forecast we'll look at the capital plan we'll look at the fund balance policy and
staff's recommendation so 1920s budget so i guess first here's the different revenue categories
that we have within the solid waste fund so we separate out residential residential recycling is
separated out for transparency we look at front load and side loads so this is commercial service
look at that roll-off open top service that's in the community then commercial recycling landfill
gate revenue which is that traffic coming into the landfill the dispose of items and then those
wholesale agreements that are yeah landfill wholesale agreements that are in place for this fund
and of course we have some transfers in which are cost of service transfers so 1920 adopted budget
you can see here we had total revenues of 35.4 million the fan use of reserves of three million
total resources of 38.5 so the end of your actuals we finished a lot better than that we did not use
any reserves in 1920 as we originally adopted budget had included one thing i do want to point
out you can see in the landfill wholesale here it increased from an adopted budget of 2.6 million
the actual coming in of four million so there's some additional agreements that were approved by
city council in the pb at that time so that number did come in above the budget 2021 of course this is
the current budget that we're in we do have planned use reserves of 4.3 million and then as we continue
through the 2022 budget process or we get started in it we fully intend to have a 2021 end of your
forecast for you to look at they really forecast where we think we're going to finish the end of
this fiscal year so that is to come just want to make sure the pb is aware of that
expenses by division so these are different operational units or divisions within solid waste
it's administration residential commercial um they have a collection special projects
and then diversion processing vmr and then keep getting beautiful which is kdb and then side
operations i do want to point out that kdb was moved to the parks department as part of the 2021
budget process i'm sure several of the pb members remember that discussion and so total expenses for
2021 were 44.1 million and we came in last year we finished last year's budget um just about
two and a half million uh almost three million below budget so very similar to water waste water
solid waste staff did a great job of looking at these operating expenses and making adjustments
accordingly so wanted to point that out this is expense by detail so you can see the different
expenditure categories you can see personnel occur at the top materials and supplies maintenance and
repair franchise fees are some different things moving down the page but those cost of service
transfers here at the bottom um debt service one thing we've talked about in the solid waste fund
for the new pb members is this fund has been doing a great job of transitioning from debt funding
projects to cash funding so you can actually see is that debt payment for this fund actually
continuing to decrease so in 1819 it was 8.9 million the adopted budget has it at 6.9 million
so staff's done a great job at looking at those projects and identifying the ones that we cash
funded and really prioritizing them so a great thing this fund i have a quick question if i
could jump in yes sir uh back on uh slide four actually um let me go back really quick here i
noticed uh solid waste disposal jumped up quite a bit for this budgeted year did you explain that
or what's going on there i can so in this number this 11.4 million and we'll talk about this in the
capital side and the landfill is actually cash funding and excel development and i'll point those
numbers out to you um let me see if i can skip ahead here and i can show them to you so this um
landfill cell construction that you see here this qaqc number that you see um in this landfill
equipment these numbers are buried in that 11 million dollar number that you see mr jumper over
there um on that on that pro forma so that is the reason for that increase this one year is just
cash funding that cell development thanks so here here's the five-year forecast um so you can see
the adopted 2020 budget here in this column we're in that three million in reserve usage that we
talked about we actually finished fiscal year 2020 with no reserve usage um so that left our fund
balance about 12.2 million uh with the targets being five to six point four million so well
above that target i mean 2021 we do have planned use reserves of 4.3 million drawing down on that
fund balance that i pointed out over here so it'd be 7.9 million finishing this fiscal year
still well within the reserve targets of 6.2 to 7.9 um and then continuing out in the future years
we do slightly dip below the reserve target in 2025 similar to water and wastewater that's not
contemplating any rate increases in the fund this is definitely something we'll consider to look we'll
continue to look at in the 2022 budget process um a couple other things some of the new pb members
i definitely want to make sure you're aware in this rate um revenue number that you see up here
the wholesale contract agreements that we have with some private entities uh will end in fiscal
year 2023 so when you see the decrease from 39.5 million in rate revenue to 34.6 million that is the
reason why so this contemplates those agreements going away and not being renewed just to make
sure everybody's aware of that this is the capital plan for the solid waste fund um just pulled this
up a short while ago but we did have a reimbursement ordinance for three million dollars
for a fleet expansion building that will be at the solid waste facility that will be included
in the notice of intent here in the coming weeks to issue debt for that but everything else in this
fund as i mentioned earlier they have transitioned from debt funding to cash funding and you can see
all the cell development is cash funded and the vehicle replacement is cash funded so definitely
a positive thing for the solid waste fund in the city the reserve analysis that we did for solid
waste very similar to water wastewater looked at several different organizations um that were out
there um we are not recommending any changes so the current reserve targets is 14 to 18 percent
that we saw on the pro forma and that current reserve about around 11 million or 29 percent
based on status finding we're not recommending changes to this reserve and you can see the
different cities that we compared ourselves to down here at the bottom so the city of arlington
dallas fort worth garland and plano and what their percentages are and then what that minimum reserve
target is in each one of these funds of course city of dallas being the largest about four times
the city of denton's annual budget size about 122 million it's definitely a larger entity
this is next conversations that are coming up that we talked about in the last couple
presentations and that concludes solid waste i'll pull this down for questions if you have any
questions all right thank you very much well good morning pb i'm cassie augen director of finance
and i'm going to walk through the electric presentation with you so let me share my screen
and similar to water waste water we are going to talk about the post winter storm
financial conditions which is a little different than what we've discussed with water and wastewater
but obviously we had some unexpected large expenses associated with the storm and electric
so we're going to go through those those and then what staffs recommended options for
for some of those expenses and then again the five-year forecast and also the fund balance
so you're probably already aware the the post winter storm condition for electric we did incur
209 million in collateral and ancillary charges with ercot for that winter storm event so after
we've netted all of the expenses it really totals 140 million and we did issue 100 million in
extendable commercial paper to fund that those expenses during the storm as a result of the
storm s and p did downgrade the the the city's utility bond rating and fitch placed all texas
public utilities on a negative credit watch as nick mentioned earlier before the winter storm
we had actually started looking at fund balance the policy and then doing an analysis of each
fund's fund balance needs post winter storm our analysis changed and as long as as well as our
recommendation for the electric fund we also have done a deeper dive of the capital program to
ensure that we we are selling bonds for the projects that we really need and in utilizing
cash where we can and then just some outstanding items that we may have an impact to the
to the fund in the future but we're we're unsure right now is that uplift and market repricing
obviously that that's still unknown but when we do have more information we will bring it back to you
so we wanted to discuss some debt funding options with the with the purchase power expenses for
electric we did issue the hundred million dollars of long or i'm sorry of extendable commercial
paper and that is coming due in may so we do need to make a decision on what to do with the
hundred million dollars of commercial paper staff's recommendation is to refund it using
30-year bonds but as i mentioned earlier the total cost of the event was 140 million
so we could issue an additional 40 million in commercial paper to cover the total of the
purchase power expenses and really um spread that major expense over several years instead
of hitting the fund all in one year and or option two is um we do not use extendable commercial
paper and the fund pays for it out of the fund balance and i'll show you that what that looks
like um as i mentioned the fund balance analysis that was recently completed before the winter
storm we staff was going to recommend no increase to the fund balance for electric however as a
result of the storm we we saw that the need for a large healthy fund balance and after discussing
with our financial advisors at hilltop we are recommending an increase of the operating reserve
fund to 100 million with a max of 150 million and you can see the bottom of the screen shows the
chart with the minimum targets and how we compare with other cities i do want to note these cities
this information is before the winter storm so we're likely going to see some increases in their
reserves as well especially given the the bond uh the credit watch and the bond downgrading
and so with a five-year forecast we wanted to show you what it would look like with
um the 100 million dollars if we refunded the 100 million with 30 year notes and kind of the
impact to the fund and you can see um you can see the debt service on that purchase power debt
service expense line or my mouse is um so it would be about 4.2 million dollars a year for a 30 year
note for the 100 million and you can see that additional 40 million of expense coming from
the fund balance and so um you can see this is the the fund balance that would be remaining
that's projected to be remaining if we did not issue another 40 million in commercial paper
so it'd really be taking it out of the fund balance and then you can see the
where we land on those targets as well as the recommended target and this is the amount over
under the new recommended target so it would really take substantial rate increases to to increase
back to that recommended target level and I did not include rate increases on this per forma
because we will be coming back to you during the FY 22 budget discussions to discuss rate increases
um but we're not we're not prepared yet and obviously the debt service will hit
next year so that will be a future discussion and I did want to point out we've made um this
projection for 2021 we've made everything match budget obviously that that's not going to happen
but we will come back with um how we ended or how we're forecasting to end the year during
the budget discussions but really wanted to be able to call out the purchase power expenses
and so the next option that I'm showing is the 140 issuing 140 in commercial paper
um you can see this this increases that debt service amount to 5.9 million every year but
that's again spreading it over 30 years instead of impacting that 40 million directly to the fund
balance so if we um if if pub recommends this option um it will keep our opera our fund balance
pretty steady um we'll probably have to have future rate increased discussions obviously
but we still stay at that hundred million dollar um fund balance target
I have a question so what would be the impact well I guess you're going to do that in future I was
going to say what's the impact to the rates of 5.9 million dollars but you're going to do that in the
future yes um we've looked at several different scenarios um and it really depends on how we get
through the summer too if um we have if we our revenues increase over the summer higher than what
we anticipated that will you know lessen the rate increase for next year so that's why we really
wanted to wait to talk about rates um to see how we end the year okay I understand
and then just just briefly if I may I apologize for interruption um when is the end of the fiscal
year the fiscal year ends September 30th and the new fiscal year begins October we're going to start
um the budget discussions like Nick mentioned in May so we'll be forecasting and you'll we'll be
having those budget discussions with you during the summer and so hopefully we can have a better
projection of where we're going to land at the end of the year thank you and so just in summary
these are some options for your consideration um I really wanted to get your recommendation for
council um again the issuance of 100 million we do have the outstanding commercial paper notes
that are coming due and we need to make a decision we are recommending long-term bonds and then the
second item is really that additional 40 million in purchase power should we um issue a commercial
paper to cover those expenses or or pay for it out of the fund balance and then the third item
is the fund balance policy itself um we do have a fund balance uh document that we if PB recommends
this option we'll we'll update it and bring it back to you for consideration and approval of the
actual policy itself um but we are recommending an increase um to 100 million for a max of 150
million in the electric fund and then just like we've just already talked about you know we will
be bringing back um the budget discussions over the next couple of months and have a better
forecast for you um as we start the 21-22 budget process and that last bullet point is bolded
because I did want to make sure everyone um knows that this will this will increase rates but we're
just not sure of how much yet and so we wanted to make sure that we are being transparent with that
but we want to we'll bring that back at a later date okay discussion
what do the board members feel on the items that they're asking direction for go ahead Billy so I
mean unfortunately we're in a circumstance where that hundred to 140 million 150 million possibly
does fall under an eca adjustment but I think it's barely honestly and still cost of service I
I do obviously think we have no choice but to finance this thing um so we don't hit the
right payers really quick here and run businesses off and run stop our development but um I mean
I certainly want to support staff's recommendation here
well and we we have started looking at the rate impacts and um we feel like if we if the purchase
power does fall under that eca component of the rate and it would have a less impact to customers
if if then if we put it say in the facility charge or your base rate we are running those
scenarios and we'll we'll be bringing those back for your consideration oh sorry just the one time
that one time hit in february that now goes into the eca rate for the next possibly 30 years so
that's I guess where I have a little bit of philosophy confusion I understand it was an
energy cost I mean but anyway it's just it's confusing a little bit in my head about what we've
done at the rate in the past and what we're doing with it now I understand that we're having those
staff discussions internally also we've been debating that very thing well Billy and this
tony uh I will add you know and um I think Cassie alluded alluded to this I mean we're
in the process of going through a cost of service study as well and so part of that process will
include that very discussion that you talk about is what should be in base rates versus eca and
what recommendations that we come we'll we'll be bringing that back to you um here in the next
several months and then the other thing too is um just know that we continue to work at the state
level on um you know trying to advocate for our customers and seeing if there might be opportunities
down the road for some more favorable financing through the state or at least through some
state-backed financing if those are if those are available to us then some of this debt could
potentially move to a more favorable finance which should reduce the cost of borrowing
that you know should lessen the impact over that 30-year period so yeah oh sorry go ahead Billy
Lee go ahead oh thank you ma'am um I have two questions if I'm looking at the math correctly
that's 40 million a year over 30 years is that 1.2 billion dollars um it's 1.69 million per year
in debt service so that includes you know we did um get downgraded on our bond rating um and then
I think I believe we're using a 3.5 percent interest um projection but I can verify that
and bring that back to you okay my other question to tony's point is there any activity
in the legislature currently um towards looking at some um either relief or as you mentioned some
kind of financing a vehicle on more favorable terms for utilities based on this unusual event
um yeah the um no no no direct relief um so there won't be necessarily a bailout if you will
that's been discussed um that's um that's unfortunate um but what's happening is that
there has been discussion this is bill called a securitization bill that does include uh the
possibility of doing something similar like we see on the on the water side with the water
development board where they extend financing at a triple a rated because it's it's backed by the
by the state of texas and so again um anytime you can you can go into a more favorable rating debt
that lowers the cost of borrowing so certainly that's something that's being discussed and
something that we're actively working with our legislative consultants as well as other mo us
and frankly the entire electric industry across the state of texas oh i'm sure everybody was
impacted so um ma'am if we do get a better rate are we looking at something like 3.5 to 1.7 or
3.5 to 3.1 or do you have any sense of that i don't have a sense right now um but as we as
we move through the process i i should be able to tell you a little bit better on the projections
for the interest rate oh thank you i appreciate both you thank you i'm assuming you'll do a call
date that's a shorter period than we typically do so that if this financing does come we can call
them and replace them yes and we're going to work with our bond council on what's the um the best
way to go about that given the potential um securitization okay um i'm with billy i i don't
like this but i think that it's it's what we need to do to finance the 140 million um moving forward
and just is what it is go ahead ben so i mean the issue is that the money has to come from somewhere
and so we're we're basically just trying to minimize the impact on customers correct right correct
so you you need some direction as does anybody disagree with staff recommendation no i don't
disagree just i want to make sure we bring it back and discuss about where it will be
or you know versus right versus the uh energy cost adjustment rate yes and we will do that
all right then thank you um then our final item is we'll be adjourning into a closed session
we will not come back but i need to read this before we go into closed session
deliberations regarding certain public power utilities competitive matters under texas
government code section 551.086 consultation with attorneys under texas government code section 551.071
receive a presentation from staff regarding the public power competitive
and financial matters about the delivery of power wholesale energy supply and risk management plans
hedge plans and strategies as it each relates to dme electric power and gas portfolio
and to the february winter storm discuss deliberate and provide input to staff regarding
the same consultation with the city's attorneys regarding legal issues legal status legal analysis
and legal strategy associated with the above matters and pending and potential litigation
where the public discussion of these legal matters would conflict with the duty of the
city attorneys to the city of denton and the denton city council under texas disciplinary rules
of professional conduct of the state part of texas or would jeopardize the city's legal position for
any administrative proceedings or potential litigation all right so i think i'm just going
to try to give um kim