Jun 14, 2016 City Council on 2016-06-14 11:30 AM

Good afternoon. I wanted to welcome everyone to this meeting of the Dent City Council on June the 14th, 2016. It is 2/47 and we are moving into our work session reports. I do have a question for my colleagues. We do have a closed session item which is an update on a case and so we have an attorney here that is obviously on the clock. I suspect these next work sessions will probably be two, three, four hours. So just wondering if you wanted to take that and get him off the clock or we've had citizens who have been waiting. We've got attorney closed session waiting so I'm just putting it out there to the council for if you have any desire to change the format or to change the order in the agenda. If not, we'll move forward. How much by the hour is he getting paid? I mean is that a serious question? Yes. I'm just trying to figure out how much it's going to cost us if we can't do that. We can't do that? Okay. Do what? Yeah, no. I mean it's. So if I say his meter is running, I don't think that this presentation will take very long, probably 15 minutes about . I'm getting a head nod over there from Mr. Daylark. About 15 minutes. Yeah. All right. So y'all want to go ahead and take that closed session item first instead of. Sure. All right. Okay. Well, we will then go into closed session at 2 48 p.m. Convenient closed session under consultation with attorneys under Texas Government Code Section five five one point oh seven one. I wanted to welcome everybody back to this Denton City Council meeting Tuesday, June 14th. We are reconvening an open session at three forty seven. I appreciate the public's patience in that regard on that last closed session item. Thank you all very much. I apologize for any inconvenience. We'll go on to work session item one eight, which is receive report and hold discussion, give staff direction regarding the preliminary F.Y. 2016 17 proposed budget capital improvement program and five year financial forecast. Thank you, Mr. Mayor. I'm going to ask Mr. Chuck Springer, who is our director of finance, if he would present this work session item for your consideration. Thank you, Chuck. Thank you, George. And I'll move as quickly as you want me to, Mayor. I do have 30 slides. Thank you, Chuck. Great presentation. The objective of today's work session is just to present the preliminary estimates for the 16 17 budget. I want to stress that they're preliminary until we get final values at the end of July and receive clarification of city council budget priorities. Any additional feedback the council would like to give before the proposed budget comes to the council from the city manager. Just real briefly to give our schedule here in terms of the city's fiscal year starts October 1st to September 30th. So we're required to pass a budget by September 30th by state law. There's kind of two components to passage of the budget passage of a tax rate property tax rate and then passage of the budget. State law changed a few years ago and there's a different requirement for those two items. The tax rate now takes a city council vote. I'm sorry. I'm sorry. The tax rate takes a vote of 60% or more. So for our city council size that would be five. The budget is just a simple majority. We've kind of had some questions. So I wanted to give this information under state law. If the tax rate is not set by the council by September 30th with that 60% vote, what occurs is the lower of the prior year tax rate or what 's called the effective tax rate becomes the tax rate, the lower of the two. In terms of the budget, if under the city charter, if the budget's not adopted by a simple majority, the budget is submitted by the city manager is deemed to be the budget. The adopted budget covers all the operating and capital expenditures. I've listed here kind of the major operating funds that are covered as well as the internal service funds that are covered by the budget. In terms of the general fund, and I'm going to kind of go over the general fund the next several slides and then get back to some of the other funds, it's broken down into four categories that relate back to the city's strategic plan, neighborhood services, and those are the departments and divisions there, public safety, transportation, and administrative and community services. Just to give a little bit of background, this is the current adopted budget for this year. In terms of general fund revenues, you can see about 37% from ad valorem taxes, about 28% from sales tax, and then it drops down from there. So that's just kind of a brief breakdown for '15-'16, and this just gives you a brief breakdown on the general fund expenditure side in terms of where it comes from. You can see personnel services, salary, and benefits is getting upwards of three quarters of the general fund budget. Just so the council's aware. Question, Chuck? The next time we have a presentation like this, because you 've shown us these before, an earlier slide you showed the general fund being broken down into about four areas, safety, neighborhood services, two more. It would be helpful for me to show another pie chart with the breakdown of the budget into those four areas, too. I will make a note of that when we come back during our budget hearing. And you can blame me for the extra slide. We will bring that back. I wanted to go over a little bit of what occurs in terms of budget transparency, what we've put out there. A couple of months ago, we put out the dedicated budget page for this year, and we've done this. I think this is the third year that we've done the dedicated budget page. Out there, we have a budget idea submission form so there are members of the public that want to stress a certain area in the budget or have a specific project that they're interested in. They can bring that back. When we bring the proposed budget to the council at the end of July, we'll let you know what we've received from that budget page. We have a short video kind of summarizing the budget process, and we also post all the presentations, proposed budget, and budgetary agenda items. We've already put out there, for example, all of the departmental presentations we've had. The police department, the fire department, those as well as my presentations are already out there. And as those occur, we put those out there. We also do as we release that kind of a social media push to make people aware of what's out there and encourage them to be involved in the process. In terms of just the basic dates, the utility budgets are considered by our PUB, the Public Utility Board. They're scheduled to take action on June 27th to recommend budgets for the city's utility funds. We received the final certified values by July 25th set by state law. We scheduled the city council workshop August 4th. We try to send out to the council by the end of July the city manager's proposed budget. We've set public hearing dates of August 23rd and September 13th for tax rate. There's usually two hearings on the tax rate and one on the budget. State law has publication requirements and separation requirements. So we kind of have set those dates ahead of time to make sure we're meeting state law. And right now we've scheduled budget adoption for council consideration September 20th. I want to go over the themes in terms of for this year's budget. It starts off with funding for the strategic plan outcomes and action steps that have been set by the council. Another theme that we've had for several years is continue the expansion of street maintenance. An upcoming theme in this year's budget will be to expand public safety response capacity. Go ahead, Councilmember Hawkins. Thank you, Mayor. Chuck, on the street maintenance expansion, would it be possible this time around to see what we had budgeted last year for streets and what we'd actually spent or how that all gone? We're trying to figure out our capacity. Yeah, and I've got a slide, several more slides forward. That at least I've got the actuals through 14-15. So I've got the actual, the numbers I show. But that didn't show the spent too, right? Yeah, those are the actual expenditures out of the CAFR. And actual revenues out of the CAFR versus like for 15-16, I'll show you what's budgeted. Thanks. For the utilities, replacement and expansion, for the electric utility managing the TNPA debt requirements to maintain a competitive compensation plan, and to kind of maintain the conservative budgetary and management practices that have been highlighted in the rating agency reports and stressed in the rating agency reports. So we'll strongly maintain our AA plus rating. Yes. Under a maintained competitive compensation plan, just want to emphasize how important it is to get that consultant study back. That, you know, I know you're targeting August 1st. Correct. And if there's any conversation with the consultant that sooner than later would be best. So keep the heat on. Thanks. We will do that. I'm going to go over kind of preliminary five-year plan. So I wanted to give you what assumptions are in there. And some of these have changed from the budget that was adopted last year, and I'll show a one-year comparison. Based on preliminary values, we're estimating an assessed value increase in 16-17 of 10%. We get weekly values from the appraisal district, and based on those values, that's what we're estimating. We've changed the estimate. Historically, we've done just 4% every year going forward. We've changed next year to 6% just based on the strong growth we've had, and some of that relates to new development. Part of, you know, that growth includes new development as well as reappraisals. And I'm saying net after some economic development incentive payments. Some of that value, if we have a rebate agreement, that value comes onto the rolls as new value, but we may be reb ating some of that money. And in 18-19, we've gone back to the 4% assumption. The debt service tax rate, I'll go over that in a little bit. We're estimating that it's going to decrease slightly for 16-17. The total tax rate in these projections, we show it remaining the same. And as you remember, go ahead, Matt. I've got a question on the 2017 to 18 going to 6%. Part of my request in having this sort of budget based upon the next year forecast and then what it actually is was because of somehow, sometimes the large difference between what we sort of forecasted in that first year out and what the actuals were . So I guess why did we go to 6%? Because we've been using 4% all along and then we switched back to 4%. So why are we going to 6% that first year after that? Help me understand that. We're really just in discussions with the management staff. I think we have all been very surprised at the strength this year in terms of the current year where we're estim ating that 10%. We'd seen a jump up after the recession and then we'd started to see declines. So I think we're surprised at that. So one is just the strength we're seeing this year somewhat carrying over into next year. And the second is just an increase in economic activity in terms of building permits and that type of activity that's going on in the city. Okay. I guess and I understand that. But truthfully, my thought is because I've asked for it to be based, you know, to give us sort of a budget of what the forecast was and then the difference so we can sort of figure out what the council priorities are based upon that. That it was increased to try to give a little bit more room in that sort of baseline budget presentation. I just because we've had this high growth the last two years as well. We had 11%. I think it was a couple years ago. So I'm just I'm still trying to understand. And then it drops back down to 4%. So it may be my cynicism, quite honestly, but I just it's almost as if well if we're going to base this next budget year on what we forecasted the year after, you know, the first year after. Well, then we're going to give ourselves a little bit more room. I'm sure that's not what's happening. But help me understand the change to the 6%. I mean, I hear what you're saying, but I still I'm not making the connection. I think that what we're trying to do with the forecast is really important. We're trying to show you what our best estimate is of what we think the revenues are going to be. If the council has a desire to have a lower number that you want to see a budget based on, then we can certainly do that. I think what we're trying to show you is what we think it's actually going to be and show you what those revenues are. Just like the 10% that Chuck has on this slide. In a few slides, we're going to show you the difference between that forecast and what we had in the forecast last year. I know, Mayor, that's one of the things you were interested in seeing. So we'll show you that. But again, we're trying to show you what do we actually think that's going to be this year. So I think that's a different question. And it really kind of gets back to what are we trying to do with the forecast? What's the purpose of that forecasting document? Chuck's going to go through that in just a minute. So that may help you. Do you have a question? Along with the forecast regarding assessed values, I appreciate the fact that you mentioned that part of your forecast is based on building permits. Because I'm really curious of what we finally see as assessed value increases. What percentage of that is simply that notice that I got from the Denton County Appraisal District about what they project the value of my home to be this year as compared to last year. And what percentage of the overall assessed value is the result of new development that's come online? Do we have those numbers or will we have those numbers at some point? We will get them for this year when we get the certified values. We have them for last year. One of the notices, we actually put it in the front page of the budget that shows here's the additional revenue we received in property taxes versus the prior year. How much of that was from new development and how much of it was from reappraisals. And for last year, we're up about 8.6%, I believe. About a quarter of that was from new development. So about 2% of the growth. Somewhere between 2, I would estimate this year, somewhere between 2 and 3% of that 10% will be new development coming on board this year. New houses, those type of things that are new this year. New houses or businesses or, okay, thank you. Council Member Baguieri. And so, so that we're clear Mr. Springer, when we calculate effective tax rate on that cover page, it does not include new property that's on the rolls, correct? It's excluded in the calculation. When you go through the effective tax rate calculation, you back out new value. Right, so when, I'm sorry, you please. I was going to try to, the effective tax rate calculation, it's a complicated calculation set by state law. But in theory, what it's trying to get at is what tax rate would bring in the same amount of dollars, the exact same amount of dollars from prior, the property the year before that was on the roll is really what it's trying to get at. So when we talk about effective tax rate, we would be talking about exactly what we got this year plus whatever new property came on the rolls as well, correct? Correct. Okay, thank you. In terms of sales tax, we're estimating about a 3% growth. I'm saying above the revised estimate. I'll show you the numbers in a minute that show that our sales tax we're projecting this year to be higher than budgeted. And I say net after the economic development incentive grants. We've got a few of those grants that are kind of one time sales tax incentive grants when the businesses are constructing where they get the sales tax rebated. So I've kind of had to build that number up and then draw it down as those projects end. And then. I have a question, I'm sorry, Council Member Hawkins. And so on that final sales tax amount for September, we don 't know that really until kind of the back of October. And that number just changes everything just slightly, but we can get it pretty close. Our sales tax, we get two months in arrears. So in other words, we'll know what we collected in sales tax for this fiscal year by the time we get sales tax in November. We'll collect sales tax through September. So there's a two months lag in receiving the sales tax versus the months it's for. Okay. And the franchise fees, all growth in the franchise fees is transferred to the Street Improvement Fund. I'll go over the Street Improvement Fund, but recognize there's been some direction from council to take. It's about 6.228 million that's still in the general fund and franchise fees. And one of the items in here and an item to be considered will be, do we want to start transferring that amount over to the Street Improvement Fund, taking, reducing the amount that goes to the general fund right now . In addition to the growth. In addition to the growth. Right now, we're taking over to the Street Improvement Fund is all the growth in franchise fees. Yes. Does the franchise fee include the poll attachment fee that we charge to those utilities who attach to our utility polls? I don't believe so. Is that complete? That revenue comes into the utilities, but it doesn't come in as well. It comes into the utilities like our electric utility. Our electric utility pays a franchise fees based on their total revenues. So the electric utility is paying as a franchise fee on that revenue as well as the other revenues that come into the electric utility. But it doesn't come directly to the general fund. Just a proportion of it. Okay. Is that confusing? And then fund balance. We have a policy of 20% and we've proposed and had some discussions with council about having it with the resiliency reserve so we can have up to 25%. And that would just be for kind of a major catastrophic event. Council Member Begayre. Is 20% our 60 day operations? Is that right? It's a little bit more than that in the general fund and really the fund balance in the general fund. One is to kind of cover cash flow. I mentioned that the sales tax is about two months in arre ars. Our property tax, we tend not to receive that until December and January when folks pay that. But it's also a reserve for any kind of extraordinary events in terms of weather related extraordinary events or downturns in the economy. A cushion for that. One of the important items is related to the rating of the city. They like to see a strong general fund balance by the rating agencies. And that's always one question we always get, where are your reserves at? What's your policy on reserves? That was going to be my follow up question was if we place a larger amount of money in the reserves and then we're asked to draw upon it for whatever reason, would that have a positive or negative effect on our bond rating potentially? You mean to go above like the 20 or 25%? I think that they consider that a strong reserve and I think above that isn't going to strengthen our rating. In terms of how we have it set up now, if we draw down below that 20%, our fund balance policy calls for us to return it to 20% over a five year period. So it gives us some time to build it back up should we have some kind of significant event that we need to draw it down for. That wasn't exactly what I was trying to get at was if we put more money into this reserve and then we draw from it, do we take a hit on our bond rating or is there a negative to that? Is there a negative aspect to putting more money and then having to draw from the reserve in terms of ratings? I don't think there's a negative impact depending on what you drew for. The rating agencies, if you draw out of there, they like to see it for capital expenses or one time expenses. They don't want you to build in a recurring deficit. But they understand that those funds are going to be used and you don't want to have, you kind of want to have a balance that's enough that you're comfortable with. But at some point you may want to draw that down to a little bit lower level. Thank you. Just having the money sitting there. Just so you know what's in the five year forecast for compensation and benefits. It's really a 3% average merit increase. Some equity adjustments and step increases as required by the agreements for civil service. Again, the compensation study is scheduled to be presented on August 1st. Future fiscal years kind of have the same assumption that's what we just built in for the model. And health insurance assumes a 6% increase in city contributions for the upcoming year and going forward. And we'll analyze that as we get closer and make a recommendation at the end of July for employee contribution rates. Question, Council Member Wasner. Yeah, two questions. Last year I believe we had a 6% increase as well in the city contributions to health insurance. So that would be 12% that we are contributing in terms of increase. I just want to go on the record that this would be year five of pay raises, 3 to 5%. And that I really want a study that 3 to 5%. I had some issues last year and some questions that it was year one, year two, year three, year four. And now we're looking at year five. And now I hear that it's part of the next five years as well. So I just want to go on the record that I just have a real problem with that. Thank you. When you say 3 to 5%, where's that other number? Is that the civil service number? When you said the pay raise of 3 to 5%? Because we had some pay raises last year that fell in that 3 to 5% range. It wasn't just three. Okay, so maybe I need to understand when you say you're building in a 3% average merit increase, that's sort of the big pot of money. So if somebody gets a 5% -- I'm just going to say 5% raise -- and somebody gets a 1%, it's still within those parameters, so what you're saying is individual kind of raises as well as an overall average. Is that my understanding? I'm just saying fundamentally to have built into our budget automatic merit pay raises, I'm fundamentally questioning that, that this is year five again. Okay, all right. Yes? It seems to me that automatic raises are the step raises for civil service. That a merit raise is not automatic. It's based on merit. So I think that -- I mean, unless everybody merits an automatic raise, are we confusing terms here? Because a merit raise is by definition not an automatic raise. It's based on merit. And I understand merit. I was saying I have an issue with a 3% to 5% pay raise when somebody's making a really high salary. And we had this discussion last year. We'll have it again this year. And what I brought forward last year was some kind of level 50,000, 60,000 and below. Instead of having just one broad here's what we're going to do in terms of pay raises. Because it's every year. Sure. Okay. All right. Thank you. Oh, yes, Councilmember Rodin. Mayor Pro Temp, I'm sorry. That's fine. So in that, you mentioned at the beginning looking for a study on this, I guess. Was that one of your questions? Well, council asked for a compensation study. Right. Okay. So I guess as that discussion moves forward and we get that and I think we're planning on getting that as part of this budget cycle, correct? That could be all part of the discussion. Okay. Yeah, I mean, I appreciate your perspective. I heard that last year as well. I worry that us from this vantage point just putting some numbers or some arbitrary caps on that. I wonder if that meets any expectations out there in the real world marketplace. So. And this is just a discussion. Gotcha. You're just throwing your thoughts out there. I am. Appreciate it. Mayor. Oh, yes, I'm sorry. Well, to add to that, last year, did we talk about setting up a special fund account for raises and once that was depl eted? Am I remembering that correctly or? No. No? We didn't? Okay. Yeah. Thank you. Sorry. To go back, I think Brian had mentioned kind of what's the purpose of the five-year forecast. And this is kind of from the finance perspective or from the finance department, but it's really what we use it for when we're looking out the five years is to evaluate the budgetary decisions, the single-year budgetary decisions for their long-term impacts under conservative scenarios. And it's really to ensure financial affordability and sustainability of budget decisions. For those of us like myself who have been doing this a long time, we've been through a lot of budget cycles and seen downturns in about every decade that I can point to starting the oil bust of the 80s if you're in Texas in the late 80s. And some in the 90s and Y2K and all of these different things. So one of the things we use it for is to look at what are the budgetary decisions we're making today and under what we think are conservative assumptions, are those affordable going forward just in terms of dealing with that. So as I put it, the assumptions are conservative with the hope that future years will perform better than projected. The last three years it has performed better than projected , but there were years passed in 2007, 2008 where it performed worse than projected. So that's kind of just generally the purpose of the forecast. Now with that, I'll get into the forecast. Got a question. Mayor Pro Tem. And on that point, I guess this is a question of the mayor to some degree based on an earlier question you asked about the projection for next year. Because I really appreciate a conservative projection. I've seen other governmental agencies that don't do that and they're always constantly kind of having to kind of reel back every year and I think that's problematic as well . And I get what you're saying. I think when you're talking about wanting to kind of start off the assumptions based on what our forecast assumptions were. My concern, and you were wanting to cast that in a cynical light as to maybe that's what accounts for that 6%. But I do wonder if that's the approach we take. Where the starting point is going to be what we forecasted for that given year. If that's not an incentive for everyone, ourselves included , not just them, to start thinking less conservatively and trying to become more risky in our forecasting so that we have a more realistic picture from year to year. And I probably could have couched it a little bit better in my comment. But I think that's when I saw that, you know, do it conservatively. Because in the past we've always used a 4% just sort of as this is what we're forecasting. And if we're going to change the budget process to where it 's like going in, okay, we're going to have this budget based upon whatever percentage that is. In the past it's been 4, what you're saying for this upcoming budget would be 6. I don't know if, especially in light of some of the legislative discussions we're having, because we can always go back and change it as a council if we make more. So yes, I think if we have a 6 or 7% still trying to understand the budget process, how does that impact people in their budgeting process going forward? So I'll say it now. I mean, I'm probably going to ask that that be put back down to a little bit lower number than 6%. So are you saying you're okay with the 6% or are you saying you're thinking it should be a little more conservative than that? >> No, I think we're looking at two different goals here. I think when they're talking about forecasting, like you mentioned, they're trying to be conservative so that we're not getting ourselves into a long-term financial headache. I think what you're trying to say is we forecast it based on 4% or whatever that happens to be if it's property taxes and 3% sales tax. And then somewhere along the line throughout that year, there's kind of a new forecast taking shape in the budget office that is the determining factor for what they base a budget off of, correct? And maybe I'm not understanding what you're asking for. I think what you're asking for is to say the budget team ought to stick with whatever was forecasted at this point when they start their budget process for the next year. And that's the starting point so that we kind of what is left to quote unquote play with at the end of the day is that delta between what was forecast and what's real. Is that- >> That's it. >> And so I just, it's sort of, I'm curious as to if we move in that new paradigm that that number changes different from what we've been using that same number for the past since I've been on council. And goes back to that same number in years two through five . So I'm just curious as to why given all the circumstances around maybe a different budget paradigm as far as forecasting and preparing a budget, the number changes than what it's changed to than what it's been the last five or six or seven or eight years. And then what it's also changed to moving forward in the rest of the five year forecast. So and I would rather that number be conservative so that my whole purpose in this discussion has been so that council has more of an opportunity if there is going to, and we're going to have a slide that shows the forecast last year and what the, and it's substantial. I mean it's substantial. So that's my goal is to say what is it that we need as a really base conservative base budget. And then if we have something more, because six percent to me that's that's not very conservative because when you look at our history, I mean over the last 10 years, I believe when we had some when I had some data for some testimony for the legislature , our average has only been like three or four or four and a half percent. So now we're going beyond that. And it happening in a year when there's been a desire to base budgeting on that very next year. So I'm probably going to want that to go back to what it was. Okay. Thanks. Go ahead. We can. Sure. No, I understand. Yeah. Go ahead. Let me highlight a few things on here for the council. I've got the adopted budget and you see the current estimate here. This is what we're estimating. You can see we're estimating revenues to be higher than the adopted budget. The majority of that difference is sales tax coming in. We're estimating now about seven hundred thousand higher than budgeted sales tax has been very strong, at least through the first six months of the fiscal year and expenditures. We're estimating that a little bit lower. Really two areas. One is fuel savings has been even higher than we projected. Hopefully it stays there. I was afraid I jinxed it as soon as as soon as I made these estimates. I think gas went up about 30 or 40 cents, but also we've seen a little bit more turnover than we'd expected. So our salary savings are a little bit higher as you have new individuals come in. Generally, they tend to come in at a lower level. So you have more salary savings. And I think that tends to be a reflection of the economy that we're just having more turnover because of the opportunities for people across the board. So those are the two items. So you can see that we had budgeted an increase in the fund balance about 155,000. I'm showing about 1.8 million. Chuck, we had a question. So overall turnover for this slide specifically was a beneficial thing, but that's kind of interesting. There's typically a lot of training that goes along with that, you know, and you can lose some of that, those new h ires, especially. That's one of the most expensive things for a small business owner. In terms of productivity and those kind of type of things, I think it affects us just in terms of pure dollars in the general fund. It has that kind of impact. But in terms of productivity and the ability, like you said , to retrain and those type of things, it causes some challenges. But it doesn't necessarily hit the bottom line budget, those kind of issues. One of the things that I think it might be interesting to see because of a lot of discussion that I've heard regarding a desire of folks for us to consider adjusting our tax rate to somehow offset either part or all of the increase in property tax valuations would be what would happen, what would it mean in terms of our projections if we adjusted our property tax rate down? So that instead of realizing a 10% increase in valuations in terms of revenue, I hope I'm making myself clear, we only realized something more equivalent to 5%. So that of the property tax valuations going up, we somehow split the difference with new revenues for the city and money going back to the taxpayers. So is it possible for you to formulate what that would mean in terms of a reduction in the tax rate to split the difference of that 10% valuation increase and prepare a new fund projection like we see here based on that reduction? And it may be that it's too early to do that, and it may be that I'm being too aggressive or not aggressive enough in terms of what would be the interest of other council members in terms of considering. But I would love to see, you see, because you have under revenues, you project a one cent tax increase out in 2021. Well, gee, what if we're looking at a 1.5 cent decrease in the 16-17 budget in order to just split the difference of that valuation increase. What does that do to the projections out? I'm kind of curious to see what that would do. Yes, we can model that. Okay. And realize that part of the impacts in those future years is the funds that you budget. So just to jump to the next line on here, showing about just a touch under $5 million available for new expenses. And I've got a couple slides forward. I'll go through that. But if you budget less new programs, then the numbers are smaller that roll forward. So if you reduce the tax rate and budget fewer new programs or programs requested, then you can flow that forward and it may not have as big an impact. So it's kind of both sides of the equation in terms of what you're budgeting and new programs as well as what you're setting the tax rate at. But yes, we can model that going forward with a different tax rate, assuming the tax rate stays the same going forward. Yes, Mayor Pro Tem. Thank you, Mayor. If we were here last year and then the year before, where was that one cent tax increase? Last year it was in 16-17. And so the next slide I'll show it moving out. And to just highlight on here that the couple things I wanted to highlight is I'll go over this, you know, kind of what's available above the baseline. I also wanted to highlight that these numbers going forward are kind of cumulative. What we would have available for new expenses in year two is really just about a million three in additional. It assumes that four million nine rolls over to the next year. So each of those years are just the difference from the prior year. It's not that the numbers get larger. Does that make sense? So in other words, year two you probably have about a million three available for new expenses. Year four about the same million three million two fifty. I also want to point out, yes, the one cent tax increase was moved out here. And one of the things we want to make council aware of in the fire discussions, there was a discussion of a fire station aid at the next bond election. And one of the big drivers when you add a new fire station is actually the personnel to do that. So this is a projection just for the engine company. This assumes that a medic company was funded for station aid. I know that's in this year's budget. But assuming that this would be the cost of just staffing the personnel for one fire station. And I know there's some consideration even in the future of more than one. So we've kind of moved that out. But just to make council aware of some of those kind of looming large impacts that are really if it's in a bond election package and we're building the station, we need to be aware of that future impact of staffing the station once it's completed. I'm trying to make sure I understand that. So the year two projected there, that's six point two million. That's only available if that four point nine million is not used. No, it is used. This is assuming that we allocate additional expenses this year of four point nine million. Then basically this four point nine would roll up into the base expenditures and you'd have a million to available here. But it's just kind of how I'm showing it. If I show it the other way, it's even more confusing. So 110 plus that four nine equals 115. And that's how I got you now. Thank you. Chuck, real quick question on that. When we go from the preliminary budget of 16-17 to year two projected under base expenditures, it's about a little less than five million. All right. It goes from 110 to 115. And when we look at the budget from 2015 to 16, the preliminary budget, and then we look out at years projecting outward, what is that large increase due to from this year to next year? Some of that is in the base expenditures for year two, we 've got those large sales tax agreements that are kind of one year agreements. We've got two of them that I think are in total about a million seven, a million eight, where if the companies that were building those projects, if they source the sales tax so it's indent and they're going to rebate a majority of that. So it kind of it bumps up that one time expenditures on the 380 rebates for those sales tax agreements in 17-18, a little bit 18-19. So wouldn't it correspondingly bump up the revenue then because it looks like it's got you. All right. I see that. You see a bigger jump in the revenues. And we've also got a 380 agreement that will start one of those years. So we get the additional revenue from that facility, that large facility, but we'll also have a corresponding payment. I built those into the base revenue. So that's why when I talked about like sales tax and property tax, there's only so much growth net of the economic development. I kind of put the same dollars up in revenues that we were going to expand. Yes. To piggyback off of that, Mayor. Thank you. There had been some pretty significant discussion the last couple of years about when those rebates are done, rather than rolling those monies into the general fund or putting them in as new expenses, or available for new expenses, that we were going to roll those into an economic development fund separate that we could use since we have not been accustomed to spending them. We are accustomed to spending those and having those available to give us a little bit more flexibility in terms of economic development packages for new businesses coming in. Are you building that in or have we not rolled that assumption in? Well, the council in the '15-'16 budget budgeted $150,000 additionally for kind of a second economic development fund . We had the downtown reinvestment, $150,000, and that's built in each year, that $150,000. That is? Yeah, so in other words, the second year, this year we'll put in $150,000, next year we'll put in $150,000 in that fund to grow. So that was kind of the outcome of that discussion. In terms of the agreements rolling off, we have a few small rebate agreements, but none of the large ones really roll off until I think there's a sales tax agreement that rolls off in 1920 or 2021 is the first large economic development agreement that rolls off. I thought we had -- Yeah, Denton Town Crossing is rolling off here pretty soon, isn't it? Okay. Okay, so it's not really an impact until year '19-'20. In terms of large dollars, real large dollars. And maybe I -- because I know -- and I don't think we've discussed it yet. We -- at the last budget discussion when we were talking about the economic downtown incentive, whatever we're calling it now, we were -- did we have a discussion on what to do with it? We haven't had a discussion on what to do with that yet. There's an item on the agenda. Is it the 28th, George? Okay. That's going to be coming back. Okay. All right. I thought I'd seen it on the matrix. Okay. So that's where we can discuss it. All right. Got you. Okay. If I'm okay, can I go to the next slide? Yes. Roll on. This is the comparison -- Five more slides. This is the comparison -- gets faster. A few more slides -- to last year's estimate. And I've kind of broken it down with a little bit bigger detail in terms of the -- this is the estimate of the five-year last year for '16-'17 that was adopted in the budget. And here's the current estimate for the upcoming fiscal year. You can see a big difference in beginning fund balance because of the additional fund balance. But here's the ad valorem tax. It's kind of the difference between that 4% growth and 10% growth. You can see down here we had the one-cent tax increase that we've backed out. And you can see sales tax doing better, again, by about a little over 700,000 than we projected. But you can see some other revenues are below and some are above for a net of about 2.5 million higher revenue that we 're estimating right now than we were last year at this budget time. And you can see basic expenditures are down a little bit. Again, I talked about the salary and benefits being down a little bit. You know, when you assume a 3% growth and the growth in that is less than your base expenditures, you start off a little bit lower. So the net is about -- when you back out the 250 for baseline, the net is about 2.7 -- somewhere between 2.7 to 3 million greater than what we anticipated having last year in the financial forecast at a conservative 4%. >> But 875,000 of that is also that projected one-cent tax increase. >> Negative 875,000. >> Right. That's what I'm saying. >> And percentage-wise, we're about 2% higher in revenues and a little less than 1% below in expenditures. In other words, .7% below where we were projecting. We're a little bit lower in expenditures, about 2% higher in revenues. >> Okay. I'm not following you. >> I'm just highlighting these numbers. >> Okay. I got you. >> In terms of total revenues, about 2.2% and expenditures were below the estimate by about .7%. Just give you an order of magnitude. >> Okay. Yes. Mayor Proctor. >> How normal is that downturn with the fines and fees? Is there something that happened this last year? >> We've been seeing kind of steady declines in that. I think there's probably several reasons for that. You know, one of them may be just demands on police services where they don't have the time to do traffic enforcement that they did. Another is road construction at I-35 and those type of places. It's kind of hard to speed if you really want to sometimes when you think about it. So those are down. We've generally seen, you know, a little bit of downtrend of that. >> So that's generally made up of police enforcement fines and fees or? >> I think the majority of it is and just in some discussions with the judge, my understanding is that's not unusual for what the region is experiencing and what we're experiencing in the state. >> Okay. Thanks. >> And I think that the police chief explained that a little bit last week that over time, in terms of answering calls, that our police department has fewer hours available during a shift to actually just simply be on patrol and looking out for traffic violations. So I think that that has had an impact too. And again, I think that's a regional trend. In terms of, I've just kind of put some numbers on here and this gives you the idea of total supplemental packages that have been presented so far. In terms of the general fund, I listed that about 4.7 million available and these are just kind of some of the potential priorities. I know that council's had discussions with, I've listed three items from the fire department and the other fire department request that I know we've heard. The police department, I've got three requests from them in terms of staffing and other departmental request. The public safety radio conversion and the computer aided dispatch I know came up at that police discussion. When we talk about designating all franchise fees to street maintenance in ten years, the first year of that would be moving an additional 622,000 over. So that's listed as a kind of a supplemental package. But in reality, what that does is reduces revenue to the general fund by 622,000, transfers it to the street maintenance fund. So I've listed that one, parking lot maintenance and replacement. When we did the OCI study, we included parking lots in it so that will be coming back to the council pretty soon. And I think the council directed us to look at a long term program to maintain the city parking lots. ADA compliance is another issue and just other potential priorities. So I give that just to give you a kind of a brief idea of what's coming in terms of total supplemental packages. Question on the FY 2016-17 available for budget priorities. That's the total. You're saying in the forecasted budget last year, we had 2. 02 million. Correct. And so we're saying that we're doubling that or more than doubling that. Yeah, it's this number here that's 4.7 million. I just kind of carried that over. Okay. Yes, I'm sorry, Kevin. The city manager had asked us, I don't remember what the deadline was, but to get you some budget recommendations from ourselves. I turned in I think about 10 of them. I imagine others did as well. And I'm sure as part of the budget discussions, you guys are looking at those. But at some point I think it would be helpful to share what council member kind of put in as part of that process. Because at some point we're probably going to need to get some of that on the table just to kind of have that discussion as part of our process. And I don't see everything that's been shared. This summarizes them in pretty broad terms. As was the case last year, I'm going to give you a spreadsheet that shows all of them and it will identify which ones came from council members. And obviously this is to illustrate to you the magnitude of what we're trying to consider to shoehorn into that 4.7 million dollars, assuming the other assumptions we're making are accurate. But you will get that in detail soon as we finish refining that list. Thank you. Well, that was my question. When do we get that spreadsheet? So just soon. Coming. It's coming soon. Okay, thank you. So question clarification then, when we say that this 4.741 million dollars is available, as you call it, to sort of shoehorn into the budget, this is based upon that our tax, that our ad valorem taxes increase to that 10 percent. Or whatever that estimate is. And the tax rate stays the same. And the tax rate stays the same. If the council would like to adjust the tax rate and that's one of the priorities, then that number would change. Would most likely go down. Right, but what I'm saying is that very number itself, that 4.741 is based upon if we have, unless we're saying, it's based upon, okay, I got you. It's not built into the net. That's just what you're asking for. But that's assuming in the budget, in your last slide, is we have those revenues and that if we wanted to take off the tax, if we wanted to cut the tax rate, we would just take something out of there, plug in that negative number and that's what, okay, got you. The other potential priorities is, do you all have a detailed breakdown of that? That's the spreadsheet that George is talking about that we 're trying to refine and get out. And as far as on the public safety radio conversion and on the computer aided dispatch replacement, is the computer a ided dispatch replacement the one that has to do with the 911 call center? Yes. Okay. Is that a one time expense? It could also be a debt funded expense. I've got a little slide a little bit further where I talk about it. But that's, is there some component of ongoing personnel or operational expense or is that the equipment, the cost of the equipment? That's the equipment cost. I think the ongoing personnel where you see police and fire dispatchers when the chief had talked about that dispatch study and needing additional personnel. That's up in the personnel, that ongoing cost. And there may be some, I'm sorry, there may be some maintenance costs associated with that that's ongoing. The point that Chuck made about the $3 million for the dispatch center, even the public safety radio conversion, those are element $17 million is what we're looking at and considering with the, even if you assume the $4.7 million opportunities that we might have. But some of the rest of that $17 million, we're looking at other options for how to fund those rather than with operating expenses. So those are potentially capital funded. Well, and I would hope to think that somewhere down the line, and I'm sure we will in the more formal budget discussion is, we had an increase in the fund balance of almost $1.6 million. Which is money that, I don't want to say it's what you find in your couch, but it wasn't really accounted for anywhere in any budget. So to me, I think that in some respects, depending on the particular item that may be a one time expense or even part of a tax rate, that money can come into play. And in prior budgets, the city manager's budget a lot of times had recommended spending one time items out of the current year. We did, I think, $600,000 or $700,000 in the current year. We did that same thing. So I'm sure some of that will be coming. And we did that last year to buy the ambulance for our station number seven and a couple of other things. And so I think that I think it's good that we're talking about that. We could also be thinking in terms of our upcoming conversation on, I can't remember if it's the downtown tip or the downtown tours. One of those two. Possibly using some of that money to fund the parking lot replacement. That's downtown. We could do that. We could also, I would like to know if there's a possibility of instead of $2 million for the public safety radio conversion, if that's not necessary to be fully in place for two years or three years, that or the computer aided dispatch replacement, if rather than taking a full head of the $3 million for the computer aided dispatch replacement this year, we just do a cruel finding. We put in a million this year, a million next year, and a million the following year until we get that done as a way of taking a little bit less of the bite off of trying to stuff 17 pounds of potatoes into a five pound potato sack. Thank you. I come out with these homey little things from that time to time. It's something of being over 60. And I think I've covered this in terms of the budget development, the mentioning that approximately 17 million of supplemental packages and some may be considered in the capital budget. And just the continued emphasis on efficiency and service improvement efforts, the LEAP program, the innovation, the LEED government program. So many times we talk about service enhancements or additions, but just want to let you know we're working behind the scenes to make those service improvements with what we have now. Just a couple charts to give an idea of where we fall. We pulled these numbers from everyone's financial reports after the end of the year. So this is where Denton falls in terms of sales tax per capita to cities in our region. And we've also included some that are other cities with similar utilities and assessed valuation per capita. So you have an idea of where we fall. There was some questions and I'll give a little bit of information on our taxable value and our exemptions in terms of 2015. This is just a breakdown of where the city's property taxes came from, the net taxable value. So this is after any exemptions. And you can see about 47% from single family, multi-family, commercial and industrial, vacant and other as oil and gas and utilities. Yes, I'm sorry. Council Member Gary. Would it be possible to get like seven year data on this that shows the various percentages in the breakdown? We've got that history, yeah. We can put it together. Thank you. And Chuck, are you able to and you may not be able to, on that oil and gas and utilities? That's pretty broad. I mean, I know you can pull your mineral interest off pretty easily, but is there a way to break that down further between oil and gas and utilities and I'm assuming utilities are what? Well, like the value of private utilities. If you have a gas utility, those kind of things, cable companies, gas utilities, their value of their assets within the city. Okay. Okay. All right. Kind of public utilities not owned by the city, so to speak . But yeah, I can break down that a little further. I'll just be curious. The next one I'm giving is just the exemptions in terms of exemptions and these, the slide before was net taxable. This is after the exemptions. To give you an idea, we have tax abatement agreements, disabled persons and veterans. Disabled veterans is set by the state. The disabled persons is the over 65 and disabled persons exemption. Freeport exemption is for goods and transit that was adopted several years ago. The homestead exemption is our half of 1% or 5,000, whichever is less. Historical property is property that's been improved within the historic district. The over 65 exemption and pollution control set by state law. So that just kind of gives you a breakdown of those exempt ions. I guess, and just maybe an informal staff report or something. On the Freeport exemption, I know what it is. I know we've talked about it. Just would like to see a more detailed representation of where that is, who it is, how we get to this value. We can give an explanation. It's really goods and transit that are only stored for a certain amount of time and then sold outside the state. But within only a certain area. I mean, Freeport is in that Freeport area? Yes, within. It's geographically. Right, yeah. And you've probably heard of triple Freeport, which is where the school district, the county, and the city have exempted Freeport property for economic development purposes. But we can do an informal. Just a basic report on that. The homestead exemption, just to give a little bit more detail. There's the level of it. It's about, I think I did the slide before, about 63% of single family residents receive that. So it has to be your primary residence. So in other words, if you own property that you rent out, that doesn't receive a homestead exemption. It's just if it is your permanent homestead. And in terms of residents that qualify for the over 65 exemption, about 6,500 and 266 qualified for the disabled. Both those last two, you only qualify if it's your homest ead property. Question, Council Member. And on the over 65 exemption, has that number of residents that qualified? I would be curious to see how, if that stayed stable or if that's grown over the last several years. So if we could come back with some. With the same seven year history? Yeah, I think we'd be curious to see if we can see a trend rate as to how that's moving. Because a lot of us are aging each year. Speak for yourself. Yes, Council Member Roden. You got nothing, Roden? Yeah. Okay. And I wanted to talk about this. Do you have a question, Keely? Well, I have a question. The homestead exemption, the max increase on that is 10%, right? Well, it's different than the exemption. The maximum value your homesteaded property can go up from one year to the next in terms of value increases 10%. So if it goes up more than 10%, you'll kind of say, here's what we think the market value is, but here's what the maximum value, you know, taxable value is this year. That's not really an exemption. That's a state law requirement in terms of the maximum value that a homesteaded property can go up in any given year. Does that have anything to do with our 10%? No. Okay. Just coincidental, I was trying to find the word. But nothing to do with our 10% estimate. It just happens to be the same thing. Okay. Council Member Begheri? It's not really a question. It's more of a comment. But I did the math on the homestead exemptions and then the over 65 exemption. So it looks like 6477 residents qualify for over 65. The value of that is 2.1 million and some change. That equals $329 per over 65 exemption. And then if we look at the homestead exemption, there's 17, 181 homes that qualify for that. The value is $596,000 and the total value is $34 for that. Is that about right on the values? Okay. The over 65 exemption is set by the City Council and it was raised over the last several years. I think it was last year that we hit the goal of, I think it was being raised from 25 to 50,000 and hit it last year. So the over 65 exemption is up to 50,000. The homestead exemption in value, in taxable value, homest ead exemption is just up to 5,000 in taxable value. So you should probably see about a, you know, 10 times higher in terms of dollars, which is pretty close to what yours was, I think. Thank you. Mayor Pro Tem. No, I'm sorry. Please. No question? Oh, I thought you had a question. I'm sorry. And this next one was some information that was requested to put in here in terms of just some, the background on the over 65 and disabled person tax limitation, which is different than the over 65 tax exemption. This is actually a tax freeze, is the terminology for it. This is the state terminology. It can be adopted by city council action or an election must be called if 5% of the registered voters submit a petition. It impacts homesteaded property, again, of those who are over 65 or disabled under state law. For disabled under state law, you have to qualify for Social Security disability benefits and then you qualify under state law. In the first year of the limitation, and it's really set more on a taxes paid to the jurisdiction. So in the first year of the limitation, if your taxes were $500, that sets the limitation. So a qualifying owner may pay less than the limitation in any given year. If the next year their tax bill went down to 450, they pay less. But they can't pay any more than that limitation once the freeze is put on. >> I have a question regarding that. So if a senior, somebody who's already 66, 67 years old, and they already have the homestead exemption. They had a house that was $150,000. And they have a $50,000 homestead exemption. So now they're only paying taxes on $100,000. And if a tax freeze went into effect, does that already, do they already get credit for this $50,000? And so this freeze is in addition? >> If the exemption is left in place by the city council, in other words, that exemption is set by the city council on a year to year basis. So in any given year you can change it. If that's left in place when the freeze occurs, then yes. Your freeze would be based on your taxes paid after that exemption. >> Okay. >> And just a couple things under the tax limitation may be passed to the surviving spouse. If they're disabled for somebody who's receiving the disability freeze, or if they're 55 years and older when the qualifying individual dies. >> Yes. >> Just to make everything clear, that school taxes are already frozen for the 65 and over. So those are already just frozen. >> Correct. Under state law, the legislature did that for all the school districts. The counties and cities are this first bullet that I said either council action or election has to be called if there 's a 5% submitted petition. >> And again, it's not paying zero tax. It's just that the tax is frozen so that seniors can base their budgets on what they know their expenses are going to be. >> Mayor Pro Tem. >> Is your proposal to add the freeze over and above the exemption that's already in place or to do away with the exemption and replace it with a freeze? >> Other cities keep the exemption and add the freeze. >> Okay. Do we have any data in terms of just looking at that chart? I thought that was kind of remarkable, the comparison of the numbers of folks who take advantage of the over 65 versus the homestead and vast difference amount of impact to our revenue stream. Do we have any data in terms of the demographics of folks who fit into that category across our city? Or even a heat map of where that's coming from in our city? Certainly we at least have addresses of folks who qualify for over 65 and that could be analyzed to some degree or at least property value or something like that. >> I would think we get the tax roll that is turned over to us from the appraisal district and I could think under GIS we could probably do some type of map of that. I haven't seen it so I'm not going to guarantee that it's always reasonable that we could do that. >> And the reason I ask, I know we have some senior communities that are pretty high, perhaps fixed income, but high fixed income compared to other demographics in our city. And that to me should play into how we analyze that and understand the need and the pressure that are on our senior population as to who is taking advantage of this, who needs this, and what that situation is like. I think to just understand that, that would be helpful. >> One other, and I'll tell you philosophically I'm opposed to this and I could go into all the reasons and I will whenever I need to. And for the record, I'll be 65 in February, February 15th in case there's any gifts and cards that want to come my way. But, but. >> In a five pound sack of potatoes. >> In a five pound sack of potatoes. >> With only five pounds of potatoes in it. The thing that I think is going to be most important as decision making on this is if this were to be put into place, what does it cost to the taxpayers? What does it cost the city budget? And because I need to know if this is a very small amount of money, that's one thing. But if it's a pretty large amount of money where in order for me to get my tax, Ed Valorum taxes frozen, I'd like to know how much pressure, how much, in order to keep the revenues the same for the city, how much more pressure does that put on Joey's taxes and Keeley's taxes? And most everybody else in this room's taxes. Because what it means is either, because of the lost revenue, is either we're shifting that tax burden to younger families and younger individuals or we're cutting services. And maybe the 65 year olds have a whole list of services that they are willing to have cut that they receive. Not services that somebody else receives that they're willing to have cut, but services that they're receiving that they'd be willing to have cut. >> And just the last thing, that there's some ability to transfer that tax limitation to new property in the same jurisdiction based on a proportional formula. If you move from one house to another, the freeze stays with you. It's just a proportion based on the value of the new house versus the old house. >> Is that statutorily prescribed? >> Okay. >> Getting away from the general fund, I'll jump into the street improvement fund. And I know these numbers are a little small, but one of the reasons we have them out there is 11, 12 was the first year that we set up the street improvement fund. So it kind of gives some historical comparison. Joey, when you were asking me here, all of these years here are actuals in terms of revenues and to expenses in terms of what we've spent in terms of revenues, expense. You can see for the most part a little bit less here, but we drew down on fund balance a little bit here. We added the fund balance a little bit there. Here's what we're projecting in the current year, projecting revenues to be a little higher than expenditures . And going forward, you can see this is just with the growth , not any additional transfers of franchise fees. They would stay the same in general fund. We're looking at growth of about, roughly about a million dollars a year in operating revenues. We've also built into this the bond sales that occur and just to highlight in 15, 16, if you remember, we lowered that bond sale a little bit just to do some kind of catch up on where we were and we moved those dollars out a little bit. So that's why the dollars jump up and down a little bit. In 2021, I've kind of got in red that 6 million. 1920 is the last year of the bond authorization, so that would just be if we continue to do streak maintenance out of bond funding with a future election. >> Well, I have a question on this. Strange. >> You're making sort of weird over there. >> That gave me power here. >> So in terms of seeing a projection with dedicating the entire franchise fee over ten years, so 600,000 a year roughly, I think to be able to see the impact of that on your five year forecast would be helpful as well as seeing that on here. Because it's interesting where we're at at 2020, of course that's not ten years out yet, but aiming towards an additional 6.2 million. I think what this, why I think I've advocated for this in the last couple budget cycles is essentially would mean an additional commitment of ours of $600,000 a year for the next ten years. Out of general fund, what would be otherwise general fund in there, which is a significant investment and shows that we're moving this thing down the line. It helps not rely so much on bonds as it is going forward. But it does give us a predictable revenue stream in that year ten moving forward. That everything coming into franchise fees, and we know that grows over time, then becomes dedicated. And we can't kind of, I guess we could as an active council turn back on that. But it becomes a more difficult thing from a mechanical point of view to do so. So I would like to see moving forward just to see that in this chart and also in the forecast, five year forecast. So we can understand the ramifications of that. Of course, we know that's also going to have ramifications on this year's supplemental options by 600,000. So just to understand that. I mean, just roughly, if the first five years, you'd have about $3 million more by 1920, but $3 million less on the general fund side. But we'll bring that schedule back in the August budget presentation. I'm just going to go over the other funds pretty quickly. Electric utility fund. This is just their five year CIP excluding any renewable dent in plan. And their base rate increase is projected to be about 4.5% this year. But they're also proposing to lower the ECA rate again. So that the net impact to their customers with a little bit of variance will be flat in terms of rates. The water utility fund, their focus, they've got some large state highway projects they have to fund. Five year CIP is about 123 million, but only 42 million funded by debt. The rest is revenue funding or existing proceeds that they haven't spent. Continued costs for zebra mussels and they're proposing rate increase of about 5% this year. The wastewater utility fund, their five year CIP, 63.3, only about 20 million funded by new debt. And their proposed rate increase right now is at 2%. And the solid waste highlights some of their major projects . About 11.3 of the 69 or 70 million is revenue funded. And about 1.8, 1.5 for standard carts and large carts, which are the main residential ones. And 2.5 or 3% for commercial. With these utilities increases, could we just see how that financially impacts just the typical customer? Yeah, I'll come back in August and have it all put together . And again, these are recommendations for the PUD. Hopefully we'll come after the 27th. So after that point, we'll have some proposed budgets to bring forward. On the standard cart and recycling, do we look at other cities to see? Because at one time I had heard that we charge a lot more than some other cities for our carts. Have we done that? There's a comparison in their budget presentation to PUD that if you'd like we could include in the one to council. That kind of compares our rates to some of the other metrop lex cities. And then they have a second one that compares to kind of green cities around the country that have some of the similar programs that we do. So they kind of have two tables of fees. And is that based on a standard cart? On a standard cart. So yes, they have those charts. There's a couple charts that I can bring that they have in their budget presentation. The Tourist and Convention Fund, we had actual revenues of about almost 2.17 million in 14-15 and have a fund balance of a little over 1.8 million. Right now we're estimating their revenues at about 2.256 for 15-16, a little bit above budget. And the HOT committee will be meeting sometime in late June or early July to look at all those applications. And the committee will recommend a budget back to the council for that fund. The Debt Service Fund, and this is based on the 10% growth in assessed valuation, estimating that the debt service tax rate will decline slightly, about 3/4 of a cent. If you remember last year we went up about half a cent, 3/4 of a cent. This would come back down. The kind of expenditures in these funds are really already set by the sales we had this year. Next year's CIP, when we sell, really impacts the following year. And the recommended capital program will be presented with the budget based mainly on the current six-year plan of the 2014 bond election. But again, there may be some additional items like the CAD system or others that we recommend consideration in the capital budget beyond what we've had in the past in that budget. Just to make sure, so what you're saying is on that first bullet point, we're estimating a decline, but that's based upon the now current estimate of a 10% growth. So if council decides to do something different, then that means that may wind up back where it is now or just decrease slightly or? No, that rate is just, you just take what's your total assessed valuation and what rate is necessary to pay your debt service. That won't change. What would change by the lowering of the tax rate is all the impact from that would be to the general fund. You know, the bond covenants are that we're going to pay our debt. Gotcha. So if property values, whatever they're at, if they're up at that 10%, we just do a calculation and say this is what we need as a debt service tax rate. But if we decide to, so the way that that rolls into the total tax rate is if we decide to do something on the O&M side. Correct. Okay. All right. Okay. This just kind of shows one of the questions we get a lot is general government debt because didn't has a lot of utilities and tends to have more debt than other cities that don't have as many full service utilities. This is just a breakout of our general government debt. It breaks out the debt that's being paid by our utilities and kind of a comparison of where we fall to that same group of 17 cities. I see Frisco is a pretty big outlier, but if you remember their assessed valuation per capita was about a double what anyone else's was. So in terms of their property values, their debt is pretty well in line, but in terms of per capita, it's a little bit higher. Councilmember Gregory. Thank you, Mayor. One other question that I would like for you to come back and give us some information before consideration. As my memory serves, right now in the pension fund for most of our employees, TMRS. TMRS. The unfunded liability is about 17%. And I was just wondering if you could come back to us with some discussion of if we took the unfunded liability down to 10%. What are the pros and cons of doing that and what are the costs of doing that? And there may be almost no pros or cons, I don't know, except the cost. But I'm curious as to what the cost would be if we push that up a little bit, our part of the payment, and if there 's any rationale for doing that. Okay. It's a question that comes up in election cycles, but it's a legitimate question to consider and for us to know about because of the situation that some cities around the country have gotten in by not adequately funding the pension. Follow-up to that. And Brian, you might be able to answer this question or check. We've talked about this and that we have a certain contribution to TMRS. And then we do have an unfunded part, but I thought we were also paying something in on an amortized basis, maybe not to cover all that. So is this delta he's talking about, the 17%? Is that what he's talking about? Yeah, he's talking about what's our pension funding as it was at the end of the last year. We haven't gotten this year. We were funded at I think 83.7%, so 16.7%. Okay, all right. And part of our rate that we pay is to pay off that unfund ed liability in a set time. It's a closed amortization period. So I think we're down to like 19 years. Within 19 years, we'll be at 100% funding. So we pay off that unfunded liability over a certain amount of time. And then when we hit that 100%, our rate that we're paying to them will decline and has been declined. So then that 17% is that amount that you're saying is amort ized in what did you say, 20 years? I think that we have 19 years left. Then that's the one that we're closing the gap on that we 're paying. Is that my understanding? Correct. Okay, all right. We can bring back some information on that. Any other questions for Chuck right now? Yes. Would it be possible on slide 30, you had general government debt per capita. Would it be possible to get a slide that looks like that except it's just cities with municipally owned electric companies? And it has our debt per capita compared to Garland and these various other cities. Are you talking with the utility debt or without the utility debt? With the utility debt, yeah. Please. We can do some, I don't know if all those cities are going to have all of the full services we do. I mean, some have electric debt, but I don't know, Garland doesn't have a landfill or solid waste. And some of them don't have their own water treatment plant , wastewater treatment plant, all those kind of things. We did a comparison, I think, of, we can bring back a comparison of cities, water debt, wastewater debt, electric debt. Broken down that way, so we can do that. We can provide that. Yeah. And I guess too, to my colleagues, as I talked about this meeting with Brian, if there are some things, and I'm going to use the salary range, the merit increase range is sort of one of these particular types of things where if there's something that you really want them to look at specifically analyzing, like Councilmember Gregg, you said, if we cut the rate by a percent or two. So if there's something that is just a burden of your heart to make sure that it gets into this budget analysis that we haven't talked about, this is the time, or drop them an email so that when we get to the budget cycle, it's not something that all of a sudden comes up and we're sort of, if we know about it, if we don't, that's okay. Yes. I have a list, so I've got my list in front of me that I gave to the city manager. Can we assume that if that's been put forward in that fashion that that's being analyzed or something? So if we have a follow-up question to it, we can get some responses to why it wasn't recommended or was or whatever. Okay. Thank you. Great. I guess for me, it would be, and I think we're having a work session from planning in a couple of meetings I think Amy's going to make. Because I know last year when we talked about the number of FTEs that we added, especially in the planning department, that we had some pretty extensive discussion about project docs, track it, and those other things on, you know, and one of the concerns I expressed was are we filling gaps in technology with people? And do we have the kind of technology that we can sustain or that is efficient, or are we filling those gaps with personnel? And I'm not sure I've heard much about that, but probably this year I'm going to be a little bit more of an advocate for that, because I just think that I continue to hear from the development community just some concerns with not the personnel process of planning necessarily, but sometimes just dealing with the software interface gets very cumbersome and sometimes creates more staff time to try to answer the questions, to try to fill those gaps. So I really want us to continue to look at that, because we had a pretty strong increase in FTEs last year, which really drove up, I think, the budget. So I want us to be mindful of that and really help me look at that. Anything else for Stan or for Chuck? Okay, we've got, thank you Chuck, we appreciate that. Very good, very good discussion. We've got dinner here, so why don't we break for about 10 minutes, 15 minutes to grab dinner, and then we'll call agenda item 1B of our work session reports, which is receive report, hold discussion, and give staff direction regarding the renewable dent in plan. Thank you, Mayor. There are at least two parts to this next work session item. So I'm going to ask Phil Williams, our general manager of D ME, if he'd start off with trying to respond to some of the questions from our last work session item, and then we'll move into ask Brian Langley to present some financial issues. Thank you. Thank you. Council, you asked for an update in response back to some of the questions that was asked last time about discuss plant configuration options and finance options. We'll be talking to plant configuration options. Brian Lang ley will be coming up to speak among the financing options. So plant configuration options, the number of engines 12 or 9, number of plant sites 1 or 2 sites. You could do that with either one. You could have one site with 12, one site with 9, two sites with 12, two sites with 9. The capital cost and how we came at these costs and the potential savings was we got indicative quotes from the engineering firms and from engine manufacturers of what the capital cost would be for these different sites and for the different engine configurations. And then we used the Brattle Group, the model they had as they indicated before, their model a little more sophisticated than ours. We gave those numbers to them to run the model of what the savings would be under those different plant configurations . Phil, can I ask you a real quick question? So remember when we got the information that in the original when the RDP first was sort of rolled out that with the 12 engines, two sites, and all the assumptions that it was going to be a certain amount, I think we've talked about the savings in open session. So it's going to be like about half a billion dollars in savings over the 20 years. Correct. So let's take the 12 number of engines, number of plant sites, to total cost, base case savings, low gas savings. Is that 975 supposed to be, you said you handed them these numbers and that they, but you're not saying that where you gave us that half a billion over 20 years savings? Correct. They came back with 975. Under what we considered a high gas scenario, they considered that a base case. And so under a higher gas assumptions than what we'd had, they assumed that as our base case and came forward with those numbers. Under the low gas savings, they had the 410 million, which is close to the 500 million we had. So we were in between that as far as what our gas assumptions were. And so the gas assumption, what you, so the savings based on us having these 20 years of contracts at a fixed price, well, you know, that cost stays the same. What your varying is, is what your cost of business is usual. Well, that cost goes up and down. You don't have those contracts, that cost is going up and down based on what you think the gas market is going to do and how that affects wholesale electric prices. Okay, then I may want to get with y'all fine just to understand, because I understand the sheet y'all gave me about how we got to y'all's number. I need to have a little bit, because that's almost double. Now, I don't know what y'all were using as your gas prices and all that, but we can. Jim, I mean, their gas assumptions were for that base case model, their gas assumptions were higher than what we had for the 500 million. That's a principle difference, right? You mean the cost of the energy or the gas being higher? Gas being higher driving up the market cost that you're having to buy. Okay. All right. So having one plant site instead of two plant sites for 12 units would save you $23 million of upfront capital cost. And, you know, and the savings would be the same. So why would we recommend that? Because as utility, electric utility folks are risk adverse . We place a high value on reliability and resiliency of our electric system. That's what provides electricity is such a high percentage of the time. And low outage is we build our systems to be ready for when a tornado hits in 20 year period in North Texas and takes out transmission lines. We don't want our whole plant site taken out by a single event. And that's usually what we gauge our system by is you don't want any one single event to take out your whole take out a significant part of your system. And so that's why you build resiliency and number of subst ations we have to be able to back each other up. And the same thing with these engines. We wanted to separate them 10 miles apart to give them the best survivability. As far as in the event of a tornado hitting North Texas, I storm taking out transmission lines or severe cold weather taking out gas pipeline infrastructure as far as freezing it up or taking out supply of it. And so that's what most most of the reason for this. What we found is an additional advantage of having these sites is the land that we have around those for buffering would provide the opportunity to look at all these suggestions that I know you and I are both getting from several people of, hey, have you looked at this? And there's certainly some new technologies coming on that we should look at battery storage, gas, you know, compressed air storage. Those are, those are certainly items we should look at in the future. And by having this land available around this site, you'd already have the electric infrastructure around their support doing pilot projects around those sites, as well as room for some sort of some community solar fields. And so that's one of the advantages of having the multiple sites. Question. And Phil, if all 12 units were on one site with that limit how much they can run because of our air permit and possibly change the numbers a little bit. So when I've asked that question, and what I've gotten back from staff in the past as well, it depends. It depends on how many starts and stops how much you're running units and so we took a year that Brattle had in the study. 2019 average emissions for units with the expected starts and stops and run times that those units would have and having those engines at one site. The VOC, all these emissions are within ranges for our permits for one site, except the VOC. The VOC limit is 50. But 50.93, that's close. That's so close that, you know, this is the maximum that these units would admit based on specifications that we've given the manufacturers. And the expectation is they will perform even better than this. But these are the guaranteed maximums that we have from them stated in contracts. So, there could be a limit, and certainly, on average year, it wouldn't be effective. In a 2011 heatwave summer, you could reach that limit and have to limit your operations if you're at one site. And what we would see is the loss in revenue potential for that one year could more than enough pay for the additional cost of that one site. In other words, you could lose $20 million in revenue potential that one year by having those units at one site, having them limited when you have such a high demand during those kind of years. But, you know, those kind of years aren't going to happen, you know, to all 20. But those two out of 20, when that happens, I know Green City of Greenville put in units right before 2011. And in the winter of 2011, they were because of, they were limited because of their gas supply. And so they looked, they could have made other arrangements that would have more than paid for itself had they known that kind of winter was going to come up. But, you know, it's difficult to predict that. Yes. On that point too, I guess as you mentioned the revenue, the potential revenue loss of a very hot summer with having these on one site. I guess the question becomes, because the reason I asked the question last week relating to this was knowing that there are limitations to how much we can run them at a particular site. I thought that there's potential in that in thinking about there seems to be some concern from certain percentage of our population about running these beyond what's needed to firm our own renewable load. And we know that we can't just simply run them when we need them to back up our renewable. We know that air cuts are going to call us. So if there was some sort of limiting factor that limited how much beyond what we needed it for that was being sold back to the market, I thought there might be an interesting added value. But what I'm interested to know is what overall impact that has on our projections in terms of our savings over the life of these things. So in other words, is the chart going out 20 years, assuming two different spots, and if so, if one was taken offline and all 12 were put on one spot, how does that impact our savings moving forward because of that impact on revenue? So most years, it wouldn't. I mean, average years, it wouldn't. It just be exceptional years where the limitations and and and there are limits were limited to so many times at that site due to the permit that's been issued. I guess my question, though, is I hear what you're saying about the exceptional years. I guess my point is, is when my question is, when you did your pro forma looking out 20 years, did you factor in a certain number of exceptional years to understand what our savings were going to be from this entire plan, assuming two plants, or did you not even factor in exceptional years as a part of that equation? What the what the years it's it's it's kind of like that that question that Councilmember Begarry asked Brad all last time, where they had a guest chart and had prices jumped up and down, and then they get to their trend line. And, you know, it's smooth. And that's what's in the projections going forward. Will there be volatility in the market to make that jump up and down each year going forward? Yes. What do we model the average for all years going in there, but that average includes volatile years, you know, from the past. So go to the previous chart then. So just from it, I guess to answer my question, just from a savings perspective, you're saying one and two plants, there's no difference. As far as potential average savings? No. That the, within that average, there'll be, you know, statistically, there 'll be a couple of years that will be abnormal weather that you'll wish you to have them separated so you can run more for the those exceptional years. So are in the event of an exceptional event. And so, when we build our substations, when we build our transmission lines, we build our systems, we build anticipating, you know, just like you do a drainage system, you can build anticipating that hundred year flood, that exceptional ice storm, that tornado that will come through at some point. And so that's what this is proposing. So one more thing just to kill the source in my mind. When we're talking about the two sites, I think there's a percentage quote of 30% of the time that's what's when that's running, it's powering, it's backing up our own renewable energy. 70% of the time it's running, it's going to the grid to power for others. Does moving it to one site change that equation at all? I don't think so. Yeah, no, it's still the same. Okay, thank you. So, I just want to go back to the emissions just to confirm that if there was one one site. We would not fill it EPA mission guidelines at all. No, we wouldn't know. We would not. I'm sorry, I couldn't hear that we would not do what fill the EPA mission guidelines. Did you say fail? Okay. Hard to hear. Yes. So one one site versus two, and I understand the total capital cost is the cost to acquire the land and build the plants. But if I look at two plants, I'm looking at double the repair and maintenance, because we're talking about plants that operate for 30 years. So would you address that in terms of if you have one plant with with 12 engines. And if you add two plants with six engines each. They like I said, the one of the value points for this proposal for us is the simplicity of the engine operation. And so we propose the same staffing, whether it's a one or two sites, with a plant manager between those they go between those, but we'd have approximately the same staffing, the the operation may if it's 12 units, the operation maintenance is the same. I mean, you're still doing it. What your decrease in is the capital cost of the land up front. And some and of course, in the design build is approximately still the same. So I mean, you would save some air connection costs gas pipeline air connection costs some electric and air connect costs and some main cost. But you still have two buildings to to maintain over 30 years. It would be one big building with 12 inches and that instead of one. But two sites would be two buildings. Correct. Okay. Okay, so regarding the base case savings and low gas savings. I'm assuming those numbers are. Let me ask this way. What is the net present value of those numbers. I know what the net present value of the 410 million is because in the report is about half. So when that present value is, I'd have to bring that back to you. I don't have to have top my head. But we can calculate that. Thank you. Got a question to help. Because I'm a little confused when because I've heard. I've heard that when the that of the energy produced. I think the numbers have been tossed around 30% of the energy produced will go to be firming up our renewables. And 70% will be. So, we're both a load serving entity. And in this case, the generator right now is generator. We 're the generations given screen. As a load serving entity to back up that load. We have to ensure our resources coming in. Coming into the system is the same as our load taking out to protect us financially. Because we're not equal. If we're not equalizing those. No, no, I get that. So the times when the when the winds blowing right our solar contracts, when all those things are producing and are caught. But our cops tracks our units because because the price is right for the market. That would be times that we'd say that's producing for their cop market at times when our units when our our other resources are not producing. And the market energy is going up. I mean, if our resources are available, but the market energy is still cheaper than what these units are, they were buying off the market. It's only these units come on when our resources are producing our renewable resources aren't producing. And the market price goes up. Then you're striking units and that's served. That's a firm up our load to protect us financially and protect us from whatever the market price is going to. Okay. And so we've got and Craig myth this these sort of basic percentages. But I've heard that well, 70 percent of these energy produced by these plants will be for the or caught market. That's what I've heard. Okay. But yet also know that we are we are expecting to get is it that I get the numbers confused. Is it 13 percent is what this is supposed to produce just to serve our own load. Right. And 17 percent off the market. Right. So if we've got 30 percent and 70 percent, 30 percent is firming up the renewables that don't show up, which we're already that's and then the 70 percent. But doesn't that 70 percent include the 13 percent that we 're we're getting from our own for our own load? I think we're talking about two different pie charts here. One was the 17 13 and no, no. I understand that. But I've just heard I've heard one of the big one of the oppositions or one of the concerns is that we're building these things. But 70 percent of the energy they're producing are going to be for the benefit of quote unquote the or caught grid. All right. Is that 70 percent? That means we've got that 30 percent that's left. 30 percent of the energy that's left. I'm just using those two numbers. I'm trying to understand. So if that 30 percent does that encompass, it's one thing for us to back up our renewables. We also it's it's projected to meet some of our own low demand that our renewables cannot that they're not meant to reach. It's that 13 percent of whatever. And so take that into some kind of megawatt hours. Well, that's going out to the market. I mean, we're generating that it's going out to the market, but it's for our own load. So this 70 percent of energy that's quote unquote being produced for that. Does that include everything that we're generating besides firming up our renewables? Because if it does, then some of our own load that we're having to meet during peak times in that 13 percent is in there. Yes, well, I think so. I'm following this. Maybe more of a whiteboard discussion. We need to have a problem because well, the reason I say that is when I looked at the spreadsheets that you all. Gave me about what that I won't go into specific numbers, but they were generated. You broke it down into the deck needed to serve our load, the amount of megawatt hours and the energy sold to Urqu hart. It's very specific. Well, the energy sold to Urquhart was less than the energy sold to meet our load. So that's why I get confused when I hear what 30 percent's going for us, but we're selling 70 percent to help the Urqu hart market. So now there's something that's not I need to pull those worksheets back out. Look at them sit down to answer your question. All right. But I think one other point to make here is there will be times where our renewable contracts alone will be producing more than we need. And so we'll have during especially during shoulder months off off peak months, not this summer. We'll have excess energy from our renewable contracts that will also be selling into the Urquhart market because those contracts are signed that we take it whenever the wind blows or whenever the sun shines, no matter what our load is. And so we'll have excess capacity that will be selling into the market. And that's kind of part of what we're having to draw a line on. Where is it? Where is it cost effective that we have these contracts, we take advantage of the cost that that that's offered to us in today's market compared to getting too much? Because there will be times where the contract price we sign could be less than what we're going to be selling into the market at. So we that's a tip. That's where we we've kind of been cautious as far as looking at how much we're going to buy. Well, and I guess I can't see. And so. So in when you gave us the DME projections of the savings between, you know, half a million, half a billion and then based upon different scenarios. You also had in there what how that would impact our rates. Correct. All right. So at this scenario would be this rate, this rate, this rate for the next four or five years or six years. But we haven't done that based upon these numbers. And I say that because let's say we use their best case scenario, nine hundred seventy five million dollars savings . Well, if we based it on five hundred million, then that's going to change what those rate decreases look like. And if we use their low gas savings scenario, a four ten, which is lower than what you all estimated, then that's going to change what that rate scenario looks like. So I think it would be helpful to see based upon the and I didn't see it in the report. I don't I don't think they broke it out in the report. As far as the effect on rates. Yes, it's not just an effect on cost and cost would translate to rates. I think it would be helpful to see, OK, we've got three numbers now we've got their two numbers base case and low gas. And then we've got you all estimated to see how those play out if they're all based upon not the same criteria, not the same assumptions, but the methodology. In other words, gas, you've got the same formula. It's just we're plugging in different gas prices and all that. So I'm assuming based upon what you said, that's the case. And that is the same formula. They're just using different numbers coming up with a different result. They did. And, you know, I would we made those estimates. One of the things we stated was we felt like those were conservative estimates. In other words, we felt like five hundred million dollar savings was conservative. That it would be more than that. So this kind of proved the point of yes, it could be more than that, according to what Brattle said. But their model, there was a few places in it where they it 's not just a gas price that they made some. They had some different assumptions on ancillary services as far as what we may assume something and they felt it was too high or too low. And so there are some differences in there also as far as ancillary service assumptions. Well, but they are not most most of it is because the gas price assumptions. They still came up. So it'd be interesting if you plug those savings in. What do you think your anticipated rates would need to be to achieve that based upon those? OK, we can do that. All right. Sorry. OK. So this is all about 12 units, one or two sites. We also looked at nine units. And so that does, again, reduce the capital cost. But it also significantly reduces the savings. And so just making the case that the units for us, as Br attle said, not for the market, not for a merchant market plan going in. Alone. But for us, because we have load to serve that we have an obligation to serve and we have a need for ancill ary services and we have a need for backup of renewable contracts that it creates a savings. And so the investment in the additional units does pay off additional savings and more than pays for the additional cost. But also the other thing it does for us is provide again additional reliability, financial reliability backing us up when the market takes a while term. We've got enough units that we can serve our load and avoid the peaking cost of the market from time to time. Yes. So it's the same. It reduces the savings because we can't run them as often to sell the energy. Is that where the same I'm running. I would be running as often. I just don't have as much there. I don't instead of having 220, 225 megawatts. I've got whatever that works. I mean, how many megawatts less. I've got only nine twelfths of that capability. But we're so at that during that time I had to go buy off the market and the market's very expensive. So you're saying that nine engines wouldn't be enough for us to cover our load that you would still have to go buy off the market. Yes. Our peak load in the summer is 350 megawatts. And so the size of the unit we're proposing is 225 megawat ts. And so if you decrease that by that amount, then there'll be times where I don't have enough to me or low and I'm having to buy off the market. I'm having to buy off the market and it's most expensive time. You go ahead. Is there a reason why we're not looking at coastal wind for peak time? We are rattled and you are. Yes. Because that is around the same time with the peak. So could that possibly cover that? At times. But I mean, coastal, like all wind, has a variability to it. It has less variability than West Texas wind. But it's also further away and has more transmission congestion risk also. And so that's one of the other things we're going to look at. I mean, there are several factors. There's panhandle wind, far West Texas wind, wind forward mustard, coastal. All of them have different patterns. We will look at the best pattern that fits our load, but also is the most dependable for the price as far as meeting our load. Can you explain the congestion risks? So years ago, when wind farms first started coming popular in Texas, in far West Texas, there was significantly more generation built in West Texas, because that's where the wind is. And the load is in Dallas, Fort Worth, you know, down the I -35 corridor to Austin and Houston. And so to try to get all that generation as it becomes a significant part of the ERCOT generation mix to those load centers, there weren't enough transmission lines, and they would become overloaded. And they would have to back down the wind generators and increase fossil fuel generation in the closer to the load centers. So to overcome that problem, the Public Utility Commission authorized $6 billion worth of transmission lines called the competitive renewable energy zone transmission lines. And those projects were authorized on a quicker path and authorized and built those out. Most of them have been built out now, and so that solved the majority of the congestion problems. But as more wind continues to build in other places, they're still at times during peaking hours. It's reduced it, but they're still peaking hours where there still is a congestion problem. They're having to back down the wind, and you have to run some other generation to replace it. I guess to follow up on Councilmember Briggs' question about the load, and that you would have, if you only had nine, you'd have to go out and buy energy from the market. It creates a little bit higher risk. That's factored into these cost savings. I mean, that's included in those cost savings. Right. That's what decreases those savings, is I have less megawatt hours to have less generation there to generate for when we need it, but also I have less generation available when ERCOT needs it. And so I lose revenue in the ERCOT market. I also lose the opportunity to for offsetting our load and having to buy into the market. And the savings numbers both for reduction in our cost and revenue we make from the ERCOT market. Okay. Sorry. Did you have a question? So I did not see this particular slide in my backup. And I find I'd like to get a hard copy of that. Sure. And if I'm simplifying this too much, then let me know. What it seems to me that I'm seeing is that if we went with nine rather than 12, if we did this at all, and then we decided to go with nine instead of 12, we save 30 million or 31 million upfront capital cost, but we lose 175 million or 90 million in savings for a net loss , so to speak, of 60 million to 145 million. Am I getting it? No, that's exactly it. Okay, thanks. Okay. So the maximum amount of capital cost savings that we could have under this scenario is about $50 million. $53 million, is that right? Capital cost savings? From the 224 to the 171? Right. Right. Plus interest, that's actual cash, whereas the savings amounts, we are using some very sophisticated methods. However, they are projections, correct? Both of those numbers are projections. So I just wanted to differentiate between those two categories of numbers. That was a comment, not a question. Thanks. Okay. So the next item that the council had asked about was financing, and Brian's going to come up at this time to discuss that. I'll let you pull up your presentation. All right. I do want to spend a few minutes talking about some of the financing options that we've been considering with the council. And before I begin my presentation, I wanted to take an opportunity to introduce a couple of folks that we have with us today. David Mednich is our financial advisor with First Southwest , and we also have Rudy Segura with McCall, Parker, and H orton, our bond council firm. So in case I get into trouble or can't answer a question, I 'll ask these guys maybe potentially help us. Oh, sorry. So to talk about financing the renewable dent in project, we've identified two options for your consideration that we want to try to get some direction from the council today of if you were to proceed with this project, how would you want to finance it? Those two options are certificates of obligation, commonly known as just COs or revenue bonds. And I'll talk in a moment about just some particulars of each one of those types of financing tools. But for either option, staff is recommending we consider a parameters ordinance by the city council. This is similar to what we do for all of our bond issues is that the council authorizes the bonds to be sold within a certain time frame, at a certain maturity, interest rate, and so forth. And so the maturity of bonds that we're looking at would be not to exceed 20 years. The interest rate would not exceed 4%. And that would also include something known as capitalized interest not to exceed 24 months. And this is a little bit different than what we typically have for our bond issues. And the reason for that is this is a construction project which we would expect to take about two years, 18 to 24 months to complete. And so rather than having that interest expense or debt expense in the years of construction, we would want to issue slightly more debt than we would otherwise need for the construction, and then take those debt proceeds to pay that interest cost in the first couple of years. And when I show you the debt table, I think that'll make a little bit more sense. Essentially, it's interim financing for the construction project. And all the numbers that we've been showing to you have included the capitalized interest as a component. But I wanted to make sure you knew that that was the 24 months of modeling at this point. So that would be part of that parameters ordinance. And at the same time, we would also issue a maximum dollar amount to be issued as part of the parameters. So staff would get directions of here are all the types of parameters or terms that you can issue bonds under and what those restrictions are. Does that make sense to everyone? Again, very similar in terms of how we've issued debt in the past, just a couple of terms may be a little bit different with the relationship to the capitalized interest . So the maximum project cost estimate, we went through some of this. [ Silence ] [ Silence ] About that, but we don't know the exact cost for some of the land acquisition, and that could add some unanticipated expense. So with that said, we still expect the construction and land acquisition costs to be approximately 220 million. Again, that's dependent upon the council's discussion of how many number of engines that you want to purchase, how many sites. But this is the two-site scenario with 12 engines. The figure I think Phil was showing just a moment ago was around 224 that we're looking at. So we still expect those costs. However, due to these factors that I mentioned to you just a moment ago about the exchange rates, interest rates, land acquisition costs, if we proceed next week with some type of authorization for a debt sale, we would look for an authorization of up to 240 million plus the capitalized interest, which would range between 20 to 25 million dollars. So the total debt sale, the total debt that we'd be incur ring was approximately 265 million dollars in that scenario. Again, we expect it to be the 220 in the construction fund plus capitalized interest, which would be more in the range of 240 to 245. But just because of some of those unknown factors and some contingency elements, we wanted to have slightly more authorization if we do that soon. And that's something we can certainly talk to you about if that's your direction. Right. Okay. So when Phil was up there with the projected financing costs, I don't think these other kind of this is what we'd like. This is the capitalizing. I don't remember seeing that in those figures. So it'd be interesting because this is based on the 12 engines, two sites. Is that correct? That's right. Yeah. It'd just be interesting to see how that breaks down for the different scenarios that were presented in the in that last slide. Sure. We can give you those scenarios for each one of those that you'd like to look at. So let me talk to you a little bit about revenue bonds and tell you how those work. And then I'll talk about CEOs and then look for some direction. The way that the city had essentially revenue bonds are a pledge of revenue to pay the debt service. The way the city has approached that is we've always pled ged our utility system revenues, which are water, wastewater , drainage and electric system, those revenues to pay for utility system expenses. We haven't issued utility system revenue bonds since 2010. As you know, we've been issuing CEOs for that purpose. But that's how typically we've done that in the past and how we would propose to do it for any type of revenue bond issuance for this particular project. You could do it for just electric system revenues, but there probably be a premium to do that be a little bit more expensive on the interest rate side. There is no. I'm sorry. >> On the presentation earlier, the utility debt was 427 million already. Is that CEOs or revenue? >> Those are anticipated to be CEOs, self supporting CEOs that we'd have the revenues from the utilities to pay. >> Okay, thanks. >> So on revenue bonds, as I mentioned, there is a revenue pledge, but there is no pledge of property taxes. And that's the really distinguishing characteristic between revenue bonds and CEOs. You can capitalize interest during construction and one year after completion. So for this particular project, it could be up to 36 months , where again, we're only proposing 24. Typically, you see slightly higher interest rates on revenue bonds than those that carry a property tax pledge. Just because if you're an investor, you're buying one of these bonds, you want to have the, if you have the revenue stream from the entity plus a property tax pledge, it's perceived to be less risky. You have more certainty that you're going to get your money back and so you have slightly lower interest rates. >> [INAUDIBLE] >> Altari? >> Yeah, question. >> What's an example of slightly? >> I'll show you some, in a slide in just a moment, I'll show you the difference between the CEOs and the revenue bonds that we've modeled. >> The rate increase. >> Mm-hm. >> And the differences. Another benefit of revenue bonds is that you can sell the revenue bonds in one or more series under an approved parameters ordinance. So if we had approved parameters ordinance on June 21st from the council, if that's the direction the council has, then within the next 12 months, we could issue them in series. So I could have $100 million this issued and then after that to match up with the timing of the construction and the timing of the contracts that we were approving. And then I could have a $50 million issuance and then a $30 million issuance and so on. With CEOs, you don't have that type of flexibility, so this gives you a little bit, revenue bonds give you a little bit more flexibility to manage your cash flow and your expenses . >> Well, and a point of that too, you don't want to pay interest on money you don't need to use yet or am I not? >> That would be the idea, yes. >> Okay. >> If you were to issue them all at one time and you weren 't actually going to be spending them for several months, then you would be paying that interest. >> That's correct. >> The last thing on revenue bonds that I'll mention is there is no prior notice that's required to sell those bonds. So we'll talk about in a moment for CEOs, there is a notice of intent that has to be prepared and approved by the council and notified the public that bonds are going to be sold. For revenue bonds, the council can just simply take action to approve that ordinance. I'm going to keep going. One other point about revenue bonds that I wanted to just briefly mention, and we've had some discussion with the public utilities board about this and also sent some information to the council. But we're in the process of doing revenue bond refunding, and that's for all of our existing utility system revenue bonds that are still outstanding. So we have been refunding those bonds each year when the opportunities arose with general obligation refunding bonds , putting a tax pledge behind those to generate savings and slowly over time, we've been defeasing all of the utility system revenue bonds that we have. This will be the last piece of that, and we're anticipating that that refunding would take place in August of 2016. The debt service savings on that refunding are substantial. About $4 million for the lower interest rates, which is a very, very good thing. But one of the primary benefits of this is that we'll be able to release what we have in restricted funds and our debt service reserve funds for other purposes. We'll be able to get out of the revenue bond covenants that we've had since 1954 here in the city. That means about $17 million will be able to be returned to the utilities and used for capital projects and some other purposes that we'll talk about to you in the budget process . We'll also have an opportunity to write a new bond covenant for any revenue bonds that we want to issue. And in your packet, I gave you a side by side comparison of some of the key terms that we're looking at with the old co venants and the new proposed covenants. But essentially the things that we're looking at doing is removing the requirement to have a debt service reserve fund and reducing the coverage requirements on the debt. And these are really just to modernize the covenants to be consistent with what we're seeing in the marketplace right now. We don't think there's any kind of adverse interest rate impact to these. These just give us more flexibility, which we think is a good thing. But I wanted to make sure I brought that to your attention because you'll see that as part of just our normal debt iss uances going forward. And if you were to decide that you did want to proceed with the revenue bond issuance, the bond covenant will be different than what we've had in the past. At least that's what staff would propose to you through a financial advisor and bond counsel. And maybe I'm getting confused because I remember when you talked about one time, I think it was an audit finance or something, where we were re-funding, we were issuing COs or GOs for utility revenue bonds and that utility revenue bonds have a, what's it called, a debt reserve? >> Debt service reserve. >> Debt service, that's not what you're talking about here, or is that? >> No, I am. That's what we still have. These $17 million is we have that reserved and these were covenants that we had when we issued revenue bonds in the past. >> No. >> Right. >> Well, I thought, I recall from that conversation, because that was one item I brought up about when we were doing this, what do we do with that money that's released from the debt coverage reserve fund? And I'm pretty certain, I thought that it was very highly restricted. What you could do in most of that was to go ahead and just lower the amount of debt that we were refinancing. >> That's right. >> So that's not what we're doing here. >> But this one, all of those revenue bonds will be retired , so you no longer have the reserve requirement at all. >> Okay. >> So that's different. It's different than, in the past, what we had been doing is refunding those bonds and reducing the amount of reserve that we had to keep. And so the difference between what we had and what we could reduce it to, that got entered in part of the refinancing. This is now that you're refunding all of that debt, you no longer have to have the reserve at all. >> No, I understand that. >> Okay, I understand that. >> No, I get that. I think though, and I thought my understanding was that it was almost a statutory requirement, or that there was some financial requirement that you had to take that money and use it to reduce the debt that you were refinancing. Because we talked about it pretty much in length because it was a sizable amount, and it's like, hey, can we use this money for something else? >> I think Chuck's itching over here to make a comment. >> Okay. >> He's going to do to me what I always do to him. >> Yeah, I just want to make sure I understand because it seems like I- >> Turn about fair play. >> What I understood then is very different from what I'm hearing now. >> These funds you see here, there are funds from those reserve funds that are going to be contributed to that refunding. So these funds you see on the bottom that are being released, there's more than that that's going to go into that refunding. So we are defusing some of the outstanding debt with that cash. So there's kind of federal tax law requirements in terms of doing that. So not all of the funds from the reserve fund that are released are these three cash figures you see. There's a portion of that that's going into the refunding that's cash refunding. >> Okay, so then help me understand, and I won't belabor this, but it's important to me. So when we had this discussion before, when we had a big refunding of revenue bonds going to GOs, and that was a specific question of what do we do with that cash that's based upon that reserve? It was my understanding that we pretty much had to do it, because I thought we could go use it for something else. We could use it for something else in utilities, we could whatever. But it was my understanding that no, we really need to do this. >> We had to contribute that because of still having outstanding revenue bonds. Because this is taking out the remainder of the city's outstanding revenue bonds. Some of that has to be contributed, but some can be released. >> Okay. >> When we did it in prior years, we had to contribute that release of the reserve fund to the refund ing. But we are contributing some of it to the refunding this time, but because it's the last of that revenue bond covenant to be paid off, some can be released back to the city. And this is reserve funds, and there's also some other funds or some other covenants in here that are kind of reserve funds. But we have to put money up for system replacement. We have to put maintenance funds up. There were some other funds in there other than specifically just debt service reserve funds that we had to hold on to the whole time we've had these bonds outstanding . And that's what part of those funds are also. >> Okay, all right. And then I saw your hand and then Joey. >> So I wonder if you're thinking of the utility itself like in the charter or the ordinance after everything's been paid and then the 6% is transferred, the rest has to go. >> No, this is not return on investment. >> No. >> Mayor, if I could, just so that we don't get off track. >> Chuck and I can get together and we can prepare a report to show you previous financing and what's proposed for this so you can see those pieces. >> No, that's fine. The point of me bringing it up was not to get us confused on the issue, but I just wanted to mention that if you decided that as a council that you wanted to issue revenue bonds, the revenue bond covenant would be different. And I wanted to make sure I alerted you to that issue. I think that's a good thing from our standpoint. It gives us more financial flexibility. But I want to make sure I talk about it. >> Quick question. So if the funds are released, could they be used to reduce rates for our users? >> Well, that's one of the things we're looking at. We're going to be using them for many of these for capital projects and the utilities. So rather than issuing new debt, we'll use these for capital projects. And we also are looking at some reserve levels as well. So we'll have some pieces of that that we can bring forward to you as part of the budget process. >> But we could discuss having these for the rate payers or a portion of this. >> It could be a portion, yeah. >> Thank you. >> Councilmember Hawkins. >> Just to make sure I understand, so if we were to go down this road, there would be a new revenue bond covenant. >> Yes. >> It would be different. Would it still require having a reserve fund in place for the new revenue bonds that would issue? >> No, that would be an optional requirement that we would put in. But the plan would not be to use that. That's correct. Unless market conditions change at some point in the future and it was required. >> Okay. >> Okay, Councilmember Geary. >> That was my question was do we have to put funds in reserve? But then I don't understand the bonds test and your proposed old and new revenue bonds. >> On the additional bonds test? >> Yeah. >> Yeah, that's when, if you were to sell, there's two things. So there's the debt service reserve. And to answer that question, no, we would not have to have reserve levels for that in the new bond covenant. The additional bonds test are requirements we would have in the bond covenant of after you've issued your first series of bonds and you want to issue additional bonds in the future, what are the requirements to be able to do that in part of the covenant? So that's what those are for. And that's coverage ratios essentially. I'm sorry to make this more confusing than it is. >> No, I'm sorry. >> Again, I just wanted to mention to you the covenants. If that is a direction that we decided to go in the revenue bonds that you understand there's some differences. Again, my perspective is a good thing. All right, let me transition out of that slide. That was a good one to transition away from. So certificates of obligation, COs, unlike revenue bonds, this has a pledge of property taxes. And for utility system purposes, what we've done, as I mentioned to you, is we've pledged both the revenues from the utility system and we've had a property tax pledge on those when we've issued those for utility service and projects. If they're just issued for general government purposes, it 's just a pledge of property taxes. You can capitalize interest with COs as well. They do carry, as I mentioned to you, lower interest rates typically than revenue bonds. And I'll come back to that in a moment so you'll see the actual rates that we're predicting. That's due to that property tax pledge that I mentioned. What we've been doing over the last several years is we've transferred any of that differential between the revenue bonds and the COs. We've transferred that into the street improvement fund or the street maintenance fund. And so when Chuck was going through his presentation earlier, you saw a bond sale savings revenue source. That's what that is. That's what each bond issue that we've had that's been contributed to that and continues to be contributed over the life of that debt. And that basically occurs because the rates are set as if it were a revenue bond debt service. And that's what the utilities charge. But then that delta is what the utilities then pay back into the street fund. That's right. The way we've approached it is that property tax pledge, since it's the city, the taxpayer is acting as a guarantor on the debt, that's compensation back to the city, the taxpayer, for that purpose. At least that's the best process we've had. So that's a policy question too. If the council wanted to have a CO for this particular project, would you want to treat it the same way or would you want to have a different process? So there's no real savings to the rate payer this way. It's just that there's extra money that goes into the street maintenance. Right. The rate payer, if it had been revenue bonds, would be no worse off is kind of the way that we're looking at it. Do you have a question, Bill? Yeah. So if we used CO bonds, there would be a delay of probably 30 days if we decided to go forward with the project. You have to wait 30 days to see if there's a petition before you pass the intent to sell. And if there is a petition, then that means that there would be an election that would have to take place if there was a petition that had 5% or more of the registered voters . Right. So that time frame would mean if that happened, I mean it's June now, so if it's July and then it's August when the petition comes in, by the end of August, is there even time to get that on the November ballot or would it have to be on the May ballot? The election for a November election would have to be called in the August time frame. I think it would be the middle of August. And Rudy, we can get you more specific dates on that, but it would be the middle of August. It would have to be called. And I think there's a window of time based on state law. So it could be a 90 day delay if it was in November election. And if it was in the May election, November, January, February, March, April, May, now that's seven more months. That's, I don't know how many days that is now. Because that's ten months, 300 days. So what this could mean is at least a 30 day delay to wait for, to see if there's a petition. And then it could be 90 days before a November vote or it could be 300 days before a May vote if the timing was such that it couldn't be on the November ballot. Madam City Attorney, I believe has a comment on that. Thank you, Mayor. State law requires us to call the election, i.e. pass an election ordinance, 78 days prior to the date of the election. And I've calculated this in another context. I don't have it firmly fixed in my mind, but it is in the August 22nd, 23rd time frame, somewhere in there. August 10th through the 22nd. Okay. Thank you. Thanks. What was that? We get that comment on the record. It was August what? Rudy, security, it indicated August 10th through the 22nd would be the window. Okay. Yes, we're calling an election. But you also have to back up another 20 days that the city secretary is allowed in reviewing the petition signatures. So it's a 78 plus the 20 plus another 10. So it's really 78 , 20, and 10 in terms of backing up for those petitions to be turned in. So you're really looking at petition signatures being delivered to the city secretary by the end of July, mid-J uly, someplace in there. Well, it's June what? 13th, 14th today. So it's basically in a month. So that's helpful because I didn't figure that in. So that means it would probably be a May election. We have one more comment. Just for a little clarity, our charter does have certain provisions for reviewing these petition signatures. And again, we looked at it recently in another context. So you accumulate several different provisions under our charter. It comes to approximately 35 or 40 days, somewhere in there , depending on how the calculations come out and what happens with regard to the validity of those signatures and the call of our elections author, i.e. our city secretary on those signatures. You'll see in the information I have in just a moment that the earliest we think we could get something to you would obviously be next week on the 21st if you wanted to actually approve a notice of intent to issue COs, then you would have to wait at least the 31 days that I've indicated here. We would have an opportunity to bring that back if the council chose on August 2nd for approval. So that would be if you wanted to go this route for the financing, if you wanted to have a notice of intent and then a CO ordinance, that's what we would propose to do to bring it back in that timeframe. I know this may be a little bit difficult to read on the slides, a lot of numbers, but I wanted to show you to Councilmember Briggs a question earlier. The estimated cost for COs, and that's on this left hand side, certificates of application, the estimated, what we call true interest cost is 2.99%. These are today's interest rates. Our best guess of interest rates with about a 25 basis point cushion, just to have some variability. And utility system revenue bonds, we estimate that rate's about 3.12%. So about 13 basis points is the difference on revenue bonds versus COs right now. You can see the debt service over the next 20 years, as I mentioned to you, the capitalized interest, we wouldn't have any debt service for those first two years , 24 months, and then it starts up in fiscal year 2019 and continues on. And you can see the cumulative difference between the revenue bonds and the COs is about $4.4 million over the life of that debt. I also want to point out that this is a $240 million construction fund scenario. Again, we hope that's high, that it wouldn't be that high. We expect that to be more like 220 or 224. But if you had it for the 240 that we've run, this 300, I'm trying to make sure as I show you this, that shows up, the 335 figure here, 335 million over the course of 20 years. The numbers that we ran in September of 2015 with higher interest rates at a $220 million construction fund was 337 million. So the rates coming down has been a positive impact on this project, even if you ended up issuing more than the 220, the total debt service payments were projected to be less. I just wanted to point that out for you. >> Question, Council Member Begay. >> Yes. >> Okay, I'm comparing this slide in my brain to Mr. Williams' slide about projected savings. And in particular, I'm thinking of that $320 million amount over the course of the life. Assuming that's the correct number, we have to take that savings amount and pay the projected debt service. >> My understanding is that net of debt service, that savings net of debt service. >> Okay. >> Now there's still an NPV aspect of that if you want to see what is that in today's dollars, but that is net of debt service. And that was at the 337 million over the course of 20 years that I mentioned to you before. That's the numbers that we ran out with. >> Okay, thank you. >> Okay, last slide. For the record, I only had eight slides. I just want to make sure everybody knows that. So obviously today we're looking for some type of direction . Number one on the project, is the council looking to move forward with a project? Are there additional details? That's something that we're looking for in today's work session. And if so, what is your financing preference that you have, COs or revenue bonds? How would you like to proceed? If you are looking to move forward with a project, we would propose on the 21st, I know there's a resolution that I circulated yesterday. So now it's in the backup for you to consider. That would be a resolution we could put on the agenda for the council to consider. And then if you did want to proceed with the financing, we would either put on the 21st agenda, again, at your direction, the notice of intent to issue COs. Or you could have a revenue bond parameters ordinance to be considered by the council. If the revenue bond ordinance is approved and proposed, we would be asking for authorization up to 265, 240 million for construction, 25 million for capitalized interest. And then be within the next 12 months that we'd have the opportunity to issue that. Now, I say that's the authorization, but as contracts came forward, the council would actually authorize one of the contracts that you want to approve. This would just give us the authorization to finance it. If the notice of intent is approved by council, if you went that direction, as I mentioned to you, we'd bring back that parameters ordinance for your consideration on August 2nd. July, we began working on the official statements. These are the offering documents to the marketplace for the bonds. We'd meet with the rating agencies to obtain our final ratings. And then in August, we'd actually refund the existing utility system revenue bonds that we discussed and begin the issuance of revenue bonds or COs. So that's my presentation in a nutshell. And again, hope this was helpful. We want to try to provide you with some options to consider and hopefully get some direction from council of how you want to proceed. Councilmember Hawkins. To Brian, could you just touch a little bit on, so I understand correctly, revenue bonds, how they are pledged or backed compared to COs with property taxes. There are many utility customers, rate payers in our city that do not pay property taxes. Does that really mean anything? What is your take on that? Well, I mean, the revenue bonds, as you mentioned, I mean, they're backed just by the revenues of that system. If you issue them as a CO with a tax pledge, they're backed by the revenues of the system and the taxes back that up too. So you are obligating potentially some non-people that are paying taxes potentially, but that aren't benefiting the rate payers or they're not a part of the rate system for the utility as an example. So ropes and ranch would be an example of a development that is not served by DME, but are taxpayers. There's also the flip side of that is that you have some non-tax payers like UNT that are benefiting from the electric system. So that's kind of the differences. I hope that makes sense. It's really a policy question of who. Does it really, does it matter? I mean, just as a policy, I mean, just, I'm trying to, it seemed like a very important thing to touch on, but I don't know if it ultimately matters in the end. Well, if you're asking my recommendation, I mean, my recommendation for this type of issuance would be to do revenue bonds for this. And the reason is because this is of size, it's larger than anything we've ever done. The type of facility is different than anything we've ever done. And I think it should give us perhaps some pause, but that 's a policy question for the council. It's a little different than the wires aspect of our business, which we've been issuing COs for. And it's much larger than anything we've done before. Thanks, Brian. Council, Mayor Pro Tem. I was going to say in response to that too is given the community conversation, and there's still folks who think that this is financially irresponsible, I don't share that view. I think this is a financially very responsible approach towards our energy future. But for those who do, there is perhaps comfort in saying, well, let's then just put it on the back of this particular , put it on the utility system to be able to be all the backing of that. And then it will never come to the taxpayers. So if that gives a bit of comfort given some of the controversy with this particular issue. I tend to think too that if we go with COs, we've got to think about the possibility of this going till May. And not just going till May and going into election, but having a very divisive community conversation on something that we've already had almost eight months of discussion on . And so I think if council's comfortable that we have a consensus, that we have at least four votes to move forward with this thing. In my mind, we've had a lot of community conversations. It's time to move forward. And I'd be very uncomfortable making a decision that could possibly extend that out to May and all the costs and the community discontent that that could cause in the meantime. >> Well, and to add to that, I'm thinking more in terms of the dollars to the rate payers. Because we've been told by the consultant that time is essential. That the longer that we wait, the longer that we delay, the longer that we are going to end up being pushed into a position of buying all of our backup power off the market. And we know that that's more expensive. We've been given estimates of what it costs on a daily basis. And if we're talking about a delay of 300 days at a significant rate per day. Now, granted, when it's spread out among 50,000 customers, it's not significant. But with 50,000 customers, if they have that much more money in their pockets that they can be spending at the coffee shop or at the clothing store, something like that. That's better for everybody in town. And so this delay has the potential of having a big impact on the rate payers. And I don't want that kind of a delay. I'm not worried about the election. I think it passed. That doesn't bother me at all. But I certainly do worry about just one more delay that is going to add significantly to the cost of the rate payers. >> Brian, is there a certain capacity the city has with issuing COs, if we were to go the CO route, would that limit us to issuing any CO debt in the future? >> No, provided we can show the revenues that we have to back that debt. There's not any kind of difficulty that we have. You do have a limitation on tax debt that you could have. And I believe it's 250. It's a tax rate of $2.50. It's very high. >> Okay. >> But provided we can show self-supporting revenues for those bonds that we've issued, there's no limitation that I 'm aware of. And David, Rudy, please correct me if I'm wrong. >> Thanks. >> Okay. >> So your question before us, revenue bonds or certificates of obligation? Not a lot of interest difference between the two. It looked like 2.99 versus 3.1. So not a lot of interest difference. And I know we haven't really honed in on one plant versus two, but the one plant cost, I think, was 201 million. So when you're talking about authorizing up to 265 million, I'm assuming that the bonds would be based upon what we decide to actually spend. So that's your question. Revenue bonds, COs? >> Yes. I think the first question is proceed with a project or not . >> Right. >> And then the second is -- >> How to pay for it. >> How to pay for it. Yes, ma'am. >> Councilmember Begay. >> To place this in the context of the entire electricity utility debt, we have a total debt amount of 476 million, is that right? >> Let me pull that up. As of September 30th, the total principal that was 379, total principal and interest is 547. So let's use principal 379. As requested, this project would increase that by 265 million dollars. >> Yes. >> So 80% of the total amount of our current debt is what we would be adding onto the balance sheet. >> That's correct. >> Okay. Thank you. >> Any other questions? >> Are you wanting direction? >> Are you talking to me? >> Yes, sir. >> Oh, I don't know who you're looking at. No, what I was -- yeah, we've got basically three questions . First of all, is there a desire for the project in general? Number two, if there's a desire, is there -- what is the plant configuration or the plant numbers? And then thirdly is the type of financing. >> So before you comment, let me say a few things or just a couple comments. First of all, on the revenue bond interest rate -- >> Yes, sir. >> -- the 3.12, I believe it was, was that assuming the new bond covenants in place? So in other words, if somebody said, we're not doing that, we're going to have to have the old bond covenants in place , does that rate go up? >> No, we're not expecting any kind of rate impact as a result of that. It is based on what we think -- our last bond rating that we had for revenue bonds was several years ago. The rating for those is AA minus. The general obligation rating is AA plus. So we haven't been through a rating process for the utility system in a while. So it could be that we come in at a higher rating than what we've had in the past and that delta could be smaller. That's just our best guess at this point in time. >> Okay. Secondly, I think -- and some of this may be for closed session as far as specific numbers, but I know when we first started this conversation and as we talked about the different scenarios and the savings and things such as that, two primary facts that impact that particular, you know, this project. Number one is TNPA. TNPA is gone. We don't allocate any money to TNPA based upon at least the spreadsheets that I saw that there's no money coming out from DME, the city of Denton, rate payers for any obligations for TN PA. Number two, it's the renewable contracts. I mean, that's the whole purpose of this. In fact, I think Dr. Spell said that without the renewable contracts, this is a non-starter. I mean, he uses different terms, but that's sort of how I took it. So those two major facts and foundations for this project are still in flux. The TNPA, we're still trying to figure out exactly what we 're going to do with that given a lot of different parameters. I mean, we're fixing to be looking at, you know, some different structures of the joint operating agreement and everything, and so there's some flux there. And we heard last time that of the two renewable bids, which that's the first time we'd even seen what the proposals were coming back from this RFP for renewable contracts, these long-term contracts, that one of them has been taken by someone else. One of them is still available, but I'm sure the timeframe for acceptance, I don't know if the bid is still outstanding on that. And if so, if it is, I'd like to know that. And if you're able to disclose what that -- you probably can't, but what those megawatts are and what the price of that is. Yeah, I can't disclose the price, but yes, other contracts are available. We've had one farm that bid that has since been subscribed out, and so they've taken themselves out of the market. But I think to add to the discussion that Dr. Chavelle had last time that we had, one concern that I have is there's a window here of the wind production tax credits. And if that -- the tax credits as presently authorized start going away in 2017, 18, 17. And so my concern is, is as we approach that window, the number of farms available to acquire wind from, they stop building new farms. And so that means the supply of wind energy becomes fixed, and that means as more people keep demanding it, then the price would go up. So that's one concern I have is if I get too close to that window, then I lose some of the price advantage we have available to us at this time. Right, which would impact the benefit of this. And so that's one of my thoughts is that we've put this forward to -- and I understand time is of the essence. I get that, because they are facing those things. So this is -- and I'm not speaking about any kind of time delay or anything. I'm just saying from my perspective as I think through this , and based upon the savings, even the savings that the Br attle Group has presented, gave us three scenarios. The RDP -- whatever they want to call that, the DEC RDP, status quo, which is with TNPA, and status quo, which is the market. Well, the status quo with TNPA did not include us having the rice engines. It was just how we're operating today. So right now what we're looking at, and it's uncertain, is how long we're going to continue to stay in TNPA, which could affect this to some degree larger than others, but it could have just a minor impact. So that's the fluidity of this. It is. I mean, one of the discussions we've had is as far as the relationship between this plan and TNPA. Well, it's going to be very unlikely that we're going to flip the switch off TNPA, flip the switch on the renewable plan exactly back to back. That there's either going to be a gap that we're going to have to fill with market, or it's going to be some overlap. And what I prefer is have overlap so we don't have market risk. But it's not going to be an exact match. All right. And so those are some of my thoughts. I've got some more thoughts on the financing, but we've got a couple questions before that that we have to answer. So I think you had a comment, and then I think you had a question. Is that right? Okay. Well, I'm trying to figure out a chart here. It seems like you're right. We have to decide, give staff direction on whether to do the project or not, yes or no. The size, nine or 12 units, the number of sites, one or two sites, and financing, COs or revenue bonds. And the first question decides whether or not we even have to bother with the other questions or not. Is that my turn? Yeah. So my question is for maybe Phil or are you, is it possible we can still go ahead and get the renewable PPAs since they 're so important to this plan and they're time sensitive without knowing what we're doing with TNPA? Without knowing that part of it? The contingency on the PPAs and the structure I don't want to buy those PPAs under. Firm or not firm. It's not dependent on whether I have firm or non-firm. It's more dependent on how am I going to firm it up. TNPA is not the type of unit that would be as useful for backing up wind and solar. It just can't. It has a ramping rate of like one megawatt per minute, whereas these are 44 per minute. So it's just such a difference in performance that they don 't complement each other. And so when we went, I'm sorry can I? No, sure. So when we did the solar PPA before, what were we thinking in that scenario? That we could firm up, we could find either go to the market or use TNPA for 30 megawatts. But I think as we stated at that time, 30 megawatts of solar was the maximum. We wouldn't recommend buying any other renewables without some policy or decision about how we would firm up additional renewables. So if you got the renewable PPAs, is there a possibility to go back and firm them or do you have to do it all at once? The contracts. I guess the knowledge of how we're going to firm it up would determine what terms and conditions we'd have for the PPAs and determine how we would format the type of PPAs we 'd go for. So you have to know what you're going to do when you get them is what you're saying. Yes. Okay. Yes, go ahead. In the Brattle Group report, it talks about an adverse renewable environment or adverse renewables. What does that term mean? I'm sorry, I had to look at it and see what context that was in. An adverse renewable environment? Yeah. Adverse renewable conditions. Jim, here. This is Jim Maynard. I think Brattle mentioned that adverse renewables mean if renewables didn't deliver the energy that we depended on. And they stated in the report that that's not a sustained condition. It's more like an hourly condition or a daily condition rather than would last a year or 20 years or anything like that. So it doesn't have to do with cost, it has to do with output? Right. The variability of the renewables. Okay. That's it. Thanks. Also, if you could, Phil or someone, sort of help me understand, in the report it talked about 10% physical electricity from our 40% wind contract. That's really, that's the first time I've really heard it put like that. And so it's my understanding that if it's only giving us 10%, we're buying renewable energy credits or certificates for the rest. So if we're looking at buying, and if 70% is renewable, what does that translate into megawatts? Not megawatt hours , but capacity. Because I've always, are we talking about, we're wanting to get renewable contracts up to 100 megawatts, 70 megawatt, 75 megawatt capacity for renewable contracts? What are we trying to get? To 70%? Yes. So 70% of our megawatt hours would be physical energy from renewable farms. If you have a renewable farm, wind or solar, you really have two products that you sell to the market. One is the physical energy itself, but also if someone's wanting to claim that energy as renewable energy, they also have to buy the renewable credits. Those wind or solar farms can sell those two products separately. They can sell them together or they can sell them separately. And so what we bought in our next year contract was 30 meg awatts physical, plus 30 megawatts of REX that was included with that, but also in addition another 30 megawatts of renewable energy credits. A renewable energy credit is a megawatt hour that was generated by a renewable source. So when you buy a renewable energy credit, you're paying to a renewable energy producer for that piece of their product , for the right to call it renewable. And so when we say we're at 40%, that means you take the number of megawatt hours in a year by the total megawatt hour sales we have to get to that 40%. So we bought essentially 60 megawatts of renewable energy credits year round for a total number of hours a year, 8760 hours, to get to that number of megawatt hours. Under the renewable energy plan, we'd be buying the physical energy and the renewable energy credits, and that cost is included in the plan. So one real quick question. So when we say 70% renewable, we've got the number of megaw att hours down there at the bottom, the 520, but if we were to go 70% where that number at the end equals 40.43, and that was 70%, then where it's 60 megawatts, what would that need to be to produce that? Is it like 90? Is it -- do we know? It's about 50%. And I guess it's a different market -- this is done buying a fixed amount hour after hour with the renewable energy plan. We're talking about buying whatever is produced. While the renewable energy sources don't necessarily produce a same amount hour after hour, and we can't predict when the wind is going to blow or exactly how much the sun is going to shine. It is pretty predictable over a year's time. And so over a year's time, we'd get so much physical energy and renewable energy credits that came with that when it was produced. So that would -- so if somebody were to say -- if I'm going to give you a contract for 70%, would it be a 90 megawatt contract with RECs and physical energy and all that? Would it be -- So to back into it, let's say -- let's use round numbers here. We have a million and a half megawatt hour sales. 70% times a million and a half would be -- 1,035. Yeah. Million and 35 is the same. We'd have enough renewable energy credits and the fiscal power that would -- And so if we divide that by the 8,760 megawatt hours in a year, that's what gives us that -- Right. Okay. Okay. Okay. Thank you. Keely and then Mayor Pro Tem and then -- yes? So right now we have the Greensense program where residents can tap in or pay a little bit extra for the 100% renewable which -- Right. Is RECs, which we -- how much of the renewable energy credits are we purchasing right now to -- So we buy enough to be 40% plus whatever the number of Greensense subscribers we have to cover their kilowatt hour sales. I mean, we're buying megawatt hours of renewable energy credits. So the individual households is how much -- An average household is 1.3 megawatt hours. It's 1,300 kilowatt hours in a month. And so we'd be buying enough to cover that load also. Okay. Okay. Okay. I still need some tutoring on this distinction. So in 2009, we bought a certain number of megawatts of firm physical energy plus a certain number of renewable energy credits to equal out to what is essentially 40%. Now, what we're doing now, it sounded like you said, we're buying 70% physical renewable energy. But then you said, and you get the renewable credits for that energy that you've purchased? Correct. I mean, we can then take that and trade that or use that or sell that or something like that if we don't need it all? Yes. It becomes a commodity that -- It is. There's a market for it and there is a commodity for it. I mean, that's where we go to that market to buy the additional RECs that we need to get to 40% plus the Greens ense program. Whatever we don't have from the next era contract, we go buy it from the market. And so, yes, you could be -- we probably would be a seller in that market instead of a buyer. Well, but the 70 -- the renewable energy credits -- forget the physical power. The renewable energy credits is what allows us to say we are 70% renewable. Right. So we're not going to sell them unless we have more than 70 % of the renewable energy credits that equal our 70% low because if so, then we couldn't claim that. Right. Okay. Does that make sense? Yeah, yeah, yeah. So I guess it's broadening my understanding of what a REC is. It's what gives you -- it's like the LEED program. You pay that extra money to get that certificate for LEED, but you can still build the building. Right. LEED certified. That's a good analogy. Yeah. So the REC is what allows you to say we -- if we didn't have the RECs with this wind farm, we couldn't claim 40%. Right. Because -- And Jim was just reminding me at the beginning of the plan, we would have more RECs than we would need to claim 70%. Maybe we could be more. Okay. And so we'd have something we could sell. So -- I'm sorry. I'm sorry. I thought you were -- Because this raised some controversy over the last week with certain folks as to whether or not we're -- so to just be clear, moving into renewable dens, the 70% is real physical renewable energy. The physical and the RECs, which is both products that a wind farm or solar farm or a landfill gas sells. All right. All right. Thank you. Did you have a question? My question is how much savings in the RDP are from the PPA s? Like do we -- have we separated that out, I mean, just talking about all the PPAs and the physical energy, I'm wondering if we have -- Not really because the reason we can buy those PPAs is because I have some way to firm it up. The reason we proposed to plan in the manner we have is we 've seen now that as this renewable market has developed, the way we originally bought renewable energy from Nextera with them firming it up is not the most economical fashion to buy renewable energy in. The more economical fashion to buy renewable energy is just to buy the energy whenever it's produced, whatever it's produced, and we take on that risk of firming it up. Because we found we can take on that risk and firm it up through having the units ourselves, then depending on somebody else to have that backup for us. That the premium they charge to have to utilize somebody else's units to do that is very expensive. Is it the same with other companies? Because I assume there's other companies besides Nextera that do this. I mean, are they -- is it a premium for everyone? What we've seen is there's fewer companies that have both, that they're either a wind company or a solar company or they're in a merchant generation company. And there's fewer people who are in all those businesses. And so that forces you to have to make separate contracts with different entities to buy those different portions of it. There's fewer people that are integrated. I got you. So -- I'm sorry, go ahead, Joey. So is the -- are the recs -- let's take for instance, we've got -- let's just use Nextera because it's up there. When they built that wind farm, forget the rec part, the capacity of the wind farm as far as if it was at 100% was 30 megawatts. Is that right or 60? It's more. It's 112 megawatt capacity, runs at 37% of capacity, say for an average over a year. Okay. So the recs are based upon the physical power generated. Correct. It's not based upon its potential. No, sir. So you've got 100 megawatt wind farm. If it's only producing 20 megawatts or whatever that translates into megawatt hours, you only get the recs associated with what it's producing. Correct. That's why you see some wind generators bidding a negative price into the air-caught wholesale market at times because they only get paid to production tax credits and can only generate recs if they are spinning in producing. So then on the Nextera wind farm, when we say we're only getting 10% physical power, that means it's a 10% capacity. I mean, from basically what it was rated. So that 10% was 10% of the megawatt hours. Oh, gotcha. Okay. Not at their capacity. What is that capacity factor for them? What's that translated into? That would be a competitive matter. Oh, okay. Okay. All right. Well, I'll ask that in closed session. All right. Man, I thought we were going to have an attack from over here to the flank. Okay. All right. I totally cough whenever I get closer to that. So I guess we're -- are there any other questions? I mean, we've got to sort of move forward with direction. Are there any other questions that people need to -- yes. Yes. Mr. Williams, how hard would it be -- let's say there were one site. There was one site. And that one site had six engines on it. And we were going to phase in more engines as demand required it. How -- what is the -- is that feasible? Is it complicated? Would it require shutdowns? And the reason I'm asking this is because of the TMPA situation. We have 100 -- we have some megawatts from TMPA. And I'm wondering how -- that overlap period could be a very long time if we were to proceed in this way. So that's why I'm asking, what is the scalability of this project at one site? So the indicative pricing we've gotten from manufacturers is there is economies of scale. And so we wouldn't get as effective pricing for six units as we would for 12. And so trying to stay -- because we thought about, you know , can we stage this and do it? But the design-build contracts, the land cost is fixed, you know, for whatever you put in at this time. So that's fixed. And then the design-build cost and the engine cost, there is economy of scale here as far as bidding. And it drove up the unit cost considerably. We can get you the numbers of how much the unit cost went up because we've looked at that before. And we'll get that back out to council again. Is there any questions anybody needs to -- because if we have a closed session item on the agenda for this topic, and so I think it would be sort of odd to try to give direction and then have a closed session item that people are still needing to have questions answered in order to make the decision. So I'm just going to sort of throw that out there. And if people are ready to sort of state a direction for them, or if you still have questions that need to be answered and they can only be answered in closed session, then I need to know that as well. I don't need closed session already. Okay. Does anybody need any closed session discussion on this? Okay. Well, good. We just got rid of one of our closed session items. Okay. Yes, Council Member Gregory. I'll go. Project, I say go for it, yes. Size, I would say 12 units. Sites, I would say two sites. And financing, I would say revenue bonds. Okay. Council Member Wasney. I still prefer one site with 12. I come back to maintenance and repair times two versus just one. And if I think we need nine engines to work this program, it would give us three additional units to have a unit down for repair, but to keep it on one site. And I prefer the revenue bond. Okay. And I'm guessing that means that you would move forward with the project. Yes. I'm just trying to write all this down as we're going. Gotcha. Yes, move forward with the project. 12 units, two sites, revenue bonds. Okay. Move forward with the project, two sites, 12 units, revenue bonds. Okay. Does that mean you don't want to talk or you're shaking your head at me? I am not ready to move forward with the project. Okay, all right. I still think there's other options that weren't explored that the scope could have covered. Okay. All right. You first. No, I'm the chair. I get to go last. No, I'm just teasing you. That's up to you. It doesn't matter to me. You first. Okay. It's like what? Yeah. You know, I've thought a lot. I've probably spent more time on this issue than anything. And I have to say that given the -- when I look at the options, we've got 12, two sites, revenue bonds, which to me is sort of the home run hit. When I look at not doing the project at all, that's sort of the strikeout. That's probably an incorrect term, but that's how -- it's all or nothing. I mean, this is how I've seen this discussion. And when I look at the numbers and when I look at -- when we talk about our own five-year budget financial forecast, I mean, we hear oftentimes during the budget process that when you get out to those four and five years, it's merely speculation. It doesn't -- you know, it's hard to predict out that far. Well, we can imagine it's hard to predict out 20 years. So I can't say that I'm for the home run. I can't say I'm for the strikeout. I don't mind taking risks, but I also want to make sure that I'm cognizant of the risk. And based upon at least the numbers that were on the slide as far as the savings, I'm more comfortable with nine units because I think it lowers the risk. As far as the two sites or the one site, I think I would prefer to see it on one site away from the airport. But if we split it up four and five, I don't know if I'm going to have as much heartburn. My concern on the revenue bonds versus COs, this is devi ating from our paradigm that we've typically used for these kinds of infrastructure improvements such as transmission lines, substations. We've done COs for the very purpose of getting that street maintenance fund a contribution. I don't like that somehow if the revenue CO bond has been couched as if we do COs, we somehow -- if we don't do COs, we're going to preclude a vote. And if we do COs, then it might be that a vote is going to take too long. I think that's -- I don't know if I want to use that particular kind of decision to -- outcome to make my decision, even though it is a factor. Given the fact that this is a little riskier than our transmission system because we do receive revenue from our transmission system, given the fact that if somehow this does -- of course, this notion of separating taxpayers from rate payers, I don't subscribe to that simply because we're all sort of in this together. I mean, if it got to the point where one of our utilities has failed and we're only relying upon the collateral of the revenue bond for the bondholders remedy, we've got much bigger problems in this city than just that issue. Having said that, if we're able to get the lower number of units and maybe the one site away from the airport, ideally that would be my preference. I could agree to the revenue bonds because it reduces the risk simply by the reduction of the number of engines. And it also concentrates the -- I don't say concentrates, but it consolidates them into one site instead of spreading it out over the city and understand the redundancy factor. But we've existed with that for 30 years with TNPA and we 've suffered from that. I mean, quite honestly, there's been times when the plant went down that one year -- or that February 2011. So it's hard for me to step out and do the 12, honestly, because by the time we get past five or six or seven or eight years, it's really anybody's guess. But I do believe that the timing is critical. I do believe that if we wait two years, 18 months, three years, by that time the wind credits are already rolling off. And so you will have less wind generation. And plus reducing it provides at least more alternatives that if something, as things begin to develop in later years, we haven't really hit our debt capacity. We can still have some capacity for debt if we need to employ or deploy some of these new alternatives as our needs grow. And if we look at the savings, I mean, I know you all were conservative with your half a billion, but so somewhere in the middle, the truth is between theirs and ours, well, then I think we still have some really good potential opportunities for lower rates in the future. So that's my -- those are my thoughts. Mayor, can I ask you a question? Yes, you can. So you're for moving ahead with the project? With those particular parameters, yes. Can I ask a question? Yes. Sorry. The sites had two different permits on them, right? So the non-airport site, is that only permitted for nine? Seven, I think. Yes. The non-airport site is only permitted for seven. So there's no way to achieve the nine in one site, right? Mayor, I guess I'm trying to clarify what your suggestion is. No, no, that's good. I mean, so you're saying that the non-airport site is seven , the airport site is how many? The airport site is 12. The non-airport site also has some limitations on the transmission system that exists today as far as getting the output, as far as being the one site that you put all the units at, it has some limitations on transmission. Well, so that limitation kicks in at how many -- because we plan for six. If it's permitted for seven, we plan for six, and it would take those. So it has the capacity to do that. I'll have to take a look and see what the capacity would be if it has the capacity without building additional transmission lines. Well, because that's -- It's seven. Okay. Seven, okay. So the limit for the transmission system, that's already permitted for seven, is the limit of the transmission system. Okay, because I was going to say if we have to build more transmission capacity, then that's additional costs that -- I don't know if we factored into this. Okay. No, sorry. So I'll think about that on the site. I mean, I'm not going to -- I don't know if I would say I'm not for it if the site's -- if we split them up. I just -- it would just be nice to have it at one site. Given the scale of this project, that it's based on a number of projections and assumptions, the fact that we're increasing the debt load by an order of magnitude that I -- if you'd asked me two years ago, that's something that I should have a say in, I would just laugh at you. Given the gravity of the project, I think this deserves the opportunity, at least for public say. It may be that they don't care. I'm very cognizant of your comment about how divisive it could become, but this is so much tax money that I think it deserves using the route that the legislature has put into place via certificates of obligation. I don't believe it's appropriate for revenue bonds. I think that there's more than doubling -- I'm sorry -- more than 50% increase in total amount of DME debt, and people deserve to have a say in the amount of debt that they take on, more so than just elected representatives. So I am personally incredibly uncomfortable signing up my city for that kind of debt. Regarding the project, it appears the direction's clear, so I would ask that we restrict it to one site, and I understand that we're losing some savings with the engines, but I would ask that we scale that project in phases, because yes, we are losing the savings on the engines, but we are also saving money on interest as we go along. So I would ask that we narrow the scope of this project as much as we can and still provide reliability. I would say throughout this process, I've learned a lot about what values drive an electric utility versus what values would drive a public representative. And I definitely respect DME's emphasis on reliability, but I personally cannot let that trump what I view to be fisc ally conservative positions and fiscally prudent positions regarding debt, particularly when we're taking out that debt. Again, not to circle back, but it is based on projections. It's based on projections. Can I ask a question on that? Yes. So when you talk about taxpayers, so what you're saying is you would say your preference would be CO's? It is CO's, yes. Okay, so we have a little bit of, we have some non-cons ensus in some areas. It seems like there's at least a consensus to move forward with the project in general. There doesn't seem to be a consensus on either the number of engines or the site. And there seems to be a consensus on the revenue bonds save , you know, your comments in opposition to that and then Ke ely, your opposition to the project in general, at least for now that you needed more time. If I misstated that, then please correct me. Yes. I was trying to keep track and what I'm saying is, and I didn't understand if Councilmember Begari would vote for the project or not, but it seemed to me that we had at least one, two, three, four, five yeses to the project. I counted one, two, three, four yeses to 12 units. I counted three that wanted two sites. I counted three that wanted one site. I thought I heard Hawkins, Gregory, Roden and Wasney saying 12. You wanted nine? I'm good either way. Nine is the requirement. 12 would give them backup if something went down. But I would support nine, one site, and I could support certificates of obligation as well. Because the interest rate, the interest rate is so similar. The staff needs to know how to prepare the material for next week, so I guess they need to prepare it both ways because then we're split and that means that even though you're against the plan, you might be the deciding vote on whether it's 12 units or nine units, one site or two sites, but it looks like the revenue bonds have it over CL. I'm sorry. Well, if I had to say I would prefer one site, nine engines and COs. Yes, this is like deja vu. We've gone through this on something else. Procedurally, next week, is the idea that this is bundled into one proposition? Is the idea that it's separated into this matrix that Dalton has suggested? Which seems odd. I mean, easy in terms of getting direction , but in terms of how we're kind of what we're voting on. Are we voting on a resolution that would include the terms upon which the matrix is based on? Madam City Attorney, you want to weigh in on that? We have prepared a resolution and I think you're actually in possession of that draft. Of course, we were preparing it with whatever information we had and not in light of this discussion, so we can certainly modify as we need to and adjust accordingly, but we do plan to put a resolution in front of the City Council concerning the approval of this project. We can include these other pieces as well, depending on the desires of the council. Okay. Any comment or response? Well, yeah, I mean, I guess in terms of how this gets played out next week, Dalton almost talked about it as if, well, we've got a split vote here, we've got our own consensus here, so when we get to this vote, what you think on this matters. It doesn't sound like it's going to be divvied up to that extent. Am I right? So we're going to have. Well, and correct me if I'm wrong, Dalton. I think what he was trying to get to is, I mean, let's just take me for instance instead of picking on anybody else. You know, I expressed a preference or I expressed a position, all right? So let's say it was prepared 12 units so forth and so on. If I want nine, well then I vote no on it because if that's where I am. So I think what he was trying to figure out is do we have a consensus or do we have four in either one of those categories? In all of those categories, is there four? But yet the problem is you almost have to be four, I don't think we're going to be voting on them individually. Like, well, do you want 12 units? Yes or no? Do you want one side or two sides? Do you want, I mean, that's not how I look at it. I look at it as a complete package. Then I guess we need to get more information and that is, is everything off the table for me? Meaning there's a no vote if I don't get exactly the configuration of these plans. That sounds to me what you were suggesting is that if it's 12, two sides, you might vote no. That would be interesting to know that it's completely off the table for you. Versus, that's my preference, but if the overwhelming consensus is to go in a particular direction, then yeah, I 'm going to be. No, I can tell you that I can clarify that. As I said, I don't, I can compromise to the nine because I think that's somewhere between the, the, the home run and the all or nothing, because it is a 20 year projection. There's so many variables in place that if we find that we need to come back and do something different as far as if we need more capacity with with additional plants or additional solar or battery storage or something like that, it gives us the opportunity to at least have that built in. So that's probably the thing that is more of the deal killer for me is not, I mean, whether it's at one or two sites, I mean, if you split them up four and five, then you 're going to have a reduction of, you know, whatever the problems were at either one of those sites. Revenue bonds, CEOs. And I understand the time issue. I mean, if it came down to revenue bonds or CEOs, I could, I could go either way, but the number of units to me is what is the, is the larger risk for me based upon just the whole proposal. Then I appreciate you clarifying that that's helpful. In my interest in 12 was really just based on what the experts have suggested both from our team and Brattle seemed to lean in that direction too. And so that issue is probably beyond my expertise to say one way or the other. Some of these others are a bit more, it's the political will to go one direction or the other in terms of after we've heard all the information. That issue is so technical in nature that I give myself pause for saying, well, this is a bargaining chip and I think it's a compromise point. I do have a question of our team as it relates to nine versus 12, just so that I can get comfortable one way or the other. So as I understand it, when the Brattle group came by back and they said nine units is sufficient for the load that you'd be expecting in the short term, what was that term that they were projecting? So the statement that they made in the report, I don't have it memorized, but if I recall correctly, it was saying nine units what's required to enact the plan at this time. In other words, it doesn't allow for growth into the future . So the plan is proposed was to put in those units, and then all of our growth in the future would be with additional, what we planned on with additional solar contracts. And we'd already have the backup we'd need to get those additional solar contracts as we grow in the future. So more nine units is what would meet our backup requirements to firm up 70% and be there for when the plants open in 2019. So that's interesting. So in the in the event that we want to grow in renewables beyond 70%, the expectation is we also will need to grow and backup for those renewables in order to support that. Is that the I'm going to strongly disagree with that statement. Okay, that's fine. I only because when I've looked at all this I mean we're looking at 13% to come from our two for these gas plants to service the load that the renewables will not read and most of that is during peaking time. So we nine is more than enough to cover the renewable aspect. It's the peaking time. It's the, it's the summer, and it's that 13% that we also have to consider so. And if we're short on that I agree but what I thought I heard you say was, that's what we need just to cover our renewables but that's not I don't think what the report was saying. Because this whole time, when I look at the spreadsheet about the renewable hours about the hours generated what's needed for load and what's needed for our car. There's, I mean, there's still quite a, if we took out the ERCOT hours that were designated as going to the energy market not meeting our load, not servicing our renewables, we wouldn't need near the 212 megawatt but part of this plan is also to meet the peaking demand that we need to meet that load. And you need these units in addition. Yeah, I mean, there'll be times when yes we're getting all we can for renewable contracts and these units would run in the summertime. Just to meet our peaking load. But there's many hours that, there's many hours when the wind lays down or sun doesn't shine, that we'd have load that we need to meet also. Sure. Yes, but that, but what I thought I heard you say was that if we don't, if we don't have 12 then we can't, we can 't increase our renewable percentage because we won't have the capacity. If these were only meeting the firming up, and they weren't used to generate the 13% that we're going to get from them to meet our load, which is part of this peak. I mean, you've got, you'd have 13% that you could go into that so so paid. And I don't know. This page 52 in the round report has a comparison nine units, and to reduce percentage of renewables with nine units versus 12. So it has a table. And what is that table 13. Is that on the is that on the proprietary reporters. Yes. Page one. 52 table 13. Page one. 52. And so you see the drop happens, you know in year 2019. As you pointed out Mayor, there isn't a difference, because it does provide what we needed in the beginning. But then as you go forward in future years, you can see their percentage decreases down to 2038 the difference between 70% and 53%. But isn't that because also as we grow our load increases, so you need to have capacity to meet the load, regardless of your renewable portfolio. Right. And so what I've stated before was the plan was, I think, was to put the units in and all the units are going to need to backup renewables you're going to need you're going to acquire, and we would require additional solar contracts for our growth in the future. So if I could, so my read of this chart says nine rise units in 2019 would firm up renewables up to 77.9%. But as we look at growth in the overall system, by 2025, it would only firm up 68.4%. By 2034, it would only firm up 57 .2%. So that because of the growth that's anticipated, 12 units would keep us at 70% through 2038, nine units, we would drop out of 70% by 2025. Correct. Well, okay. That's also a 20 year, I mean, that's a 20 year projection. It is. I mean, these are all and so. It's our projection and I mean it's your belief into is didn't going to grow. I mean, we look at all that open space, we have around didn 't anticipate that there's going to be electrical load move in and our load will continue to grow. And that's assuming that we don't find any alternatives. Within that 20 year period to help firm up renewables or to provide some additional renewables that don't require as much natural gas backup. Correct. Okay. All right. Okay. Good question. Yes. Just a dovetail off of that that also assumes that the price of renewables doesn't drop. Correct. So, I mean, part of what the plan and the value we see in the plan is that wind is at a good point. I was talking to Cyrus Reid from Sierra Club in between the meetings today, and that wind we feel like is at a pretty stable point now, and may even when production tax credits go away, has a risk going up. So we're at this time, feel like it still has some room it could go down. So that's why we wanted to take out when we can now take some solar, but leave some future solar additions for the future because we feel like there's an opportunity for solar prices to continue to decrease some. Well, this may or this may be a discussion because basically what you said when you summarize the chart was that Councilmember road and Councilmember Hawkins and yourself said 12 units. You'd said 12 or nine but is that a is 12 something that you could that you could support. If you look at the chart, the nine units start to go to pot in 2025. That's not in 20 years. That's in what six years from when it starts. So if you're going to do the capital outlay, you do it right, or you're going to have to go back in six or seven years to, to add to it. And at that point now, all of those price charts are just gone because, but so it sounds like what you're saying is 12 units is something you could support. I think it's if you're going to do nine, you need to do 12. Well, I'm asking. Yes, I would do 12. Yes. So in that sense, you have four who will do 12. And it would seem to me, Phil may need to get back up here. It would seem to me that that I don't want to seem like that we've got the number. But what I'm hearing also is we really couldn't afford to do a 20 year renewable contract if we can only permit for six years. Right. I mean, it does change. It all it all for supply and it alters how much renewable energy we can go out and buy for 20 years. If I don't have the backup for that much. But also on your chart. Well, that's fine. You've got 12. So I'm not going to belabor that. It sounds like you've got 12 units. So then on the sites, everybody was at two. But I think you you were at one site. So is that something that that's a deal breaker for you? OK. All right. Yes. So if 12 are at one site, how does that affect that air permit? And 12 can be at that one site. Right. Bill said we're fine. That's right. Sorry. I said earlier. So a long day. Yeah, it has been. And the OK. So I mean, yes, it would run. We'll have we'll have some year to we'll have some years where we limited. So then I want to come back to that. So then on the financing. Revenue, revenue, revenue. Either. So that's revenue. So the only difference right now from from the consensus of four is either one site or two sites. You have your four on two sites. No, no, she said one site. Didn't you? She said one site. So the question becomes that that's really seems to be the obstacle, at least as I see it, because I don't know if we can pick and choose. Like if she doesn't want to do it, if she says, well, my preference is this. This is voted to me together as a package. We're not going to be voting on these things individually on 12, one or two sites. I mean, because you. So if your question is, well, I vote against it if it's at one site. No, I will not vote against it if it's just at one site. I think it's a better plan to have it at two sites because of the redundancy, the reliability. It's meeting the goals that we've talked about meeting all along. Remember the original goals of renewable reliability and reduction in rates. So so I would prefer that. But this isn't a deal breaker for me if it's at one site going to 70 percent renewable and having 12 units so that we stay at 70 percent renewable. Those are pretty essential. It's not a deal breaker for me either. No, it's not a deal breaker. There's a good plan. OK, so then that means the site would be the airport site because that's the only one that's permitted for the 12 units. Am I correct on that? All right. Go ahead. I'm sorry. Well, may I suggest that we that we not necessarily say that because it might mean I mean I'm talking about for now. OK, it might be possible to have 12. We permit the other site for 12 units and it might be better to to it might be better to have two choices in terms of price of sites. I don't know enough about the. Yes. I thought filled that I hear you correctly that the transmission lines can only they only have so much capacity . So these the sighting has to do with the size of the transmission lines. Right. And based on the price of the sites. If there's enough price differential, I'm trying to say too much without having to go into closed session. Price differential could be enough that it would be worthwhile to build the extra transmission capacity at the other site. What OK, what I hear you saying is instead of deciding on a specific site, look at the differences of what it may require, including transmission, including repermitting. And yes, yes. Can it be a different site altogether? Like does it have to be either of those at this point? I I think I think part of it is just what the infrastructure that's already in place like the transmission and the gas lines and so forth. But I think Phil. Sorry, I couldn't hear your question. I have to ask Howard to. OK, I understand. Oh, I think they were talking about it could be a different side altogether than either the either one of the ones that we're looking for is a crosshatch between gas and transmission. And so that that eliminates a lot of spaces. OK. All right. Any sounds like we at least have direction from council or in that regard. The staff have the necessary direction to draft whatever is . You want to come up here and. Yeah, summarize. One side, 12 units. Revenue bonds. I believe that was it. That it. The other questions. To make sure you want a for the June 21st meeting you want a revenue bond ordinance on your agenda for up to 265 million dollars. Is that correct for the parameters ordinance? If that's what this means. That's what I think. I guess that's what I'm asking to make sure 12 units. That's the cost that we've kind of looked at. And is that I just want to make sure I have that direction. And is that the ordinance then that when it's voted upon would be the do we have a separate ordinance resolution quote unquote approving the plan and then you're voting on the revenue or is it or is that basically the de facto. I think what we looked at is a separate resolution for the plan itself. And that was included in your backup. It sounds like that'll need some revisions to have that. So that would be the first item. And then right after that would be the great. All right. Anything else on this particular agenda item. Staff has direction. Can I ask a quick question. Yes. And this is just for the benefit of one of our council members who mentioned that you didn't feel like you got enough information. And so leading into next week's vote. I want to make sure that we have the opportunity to get you any information you need. Do you want to let us or staff know what those questions are that you have that are still outstanding. Well I was particularly discussing talking about the the Br attle report when it was status quo coal and I mean the plan that we're talking about compared to the three options that we were given this. This does look great. But like I said the coastal wind energy was left out for peak. The 70% renewable with market backup was left out. There were there were some other options in there that the storage wasn't updated. There were it wasn't correct information in the report regarding storage. These are the things that I'm talking about. I feel like we're making this decision and we don't have all the information to make the best decision. But if I have to I guess pick the lesser of the evils is why I said what I did today. Because I don't think that all the information that I want or that we should have is going to come to us in a week. But thank you for asking. I appreciate it. Well I say that because I think I've heard that out there in the public that saying we're not getting all the information. And I'm sensitive to that because we're here doing that right now. We've had the last three how many hours we spent on this two three. And I want to make sure for the sake of the public that they understand that we all have the same chance to get those questions answered. We have for the last eight months. And so I just want to if you have specific questions I really do want you to get them answered so that you feel confident one way or the other. And I would just like that to be part of the process. We don't get there for a vote and people are saying I still didn't get my questions answered. Well I was specifically talking about in the storage the emails from a couple of different storage experts or vendors that had approached DME. And that we I haven't seen any of those discussions or options included in this plan and if it would work and how much it would cost. One final question. And when we talk about a percentage like we say 70 percent renewable not sure who will answer this. But are we basing that percentage off of our average load? Is that real? Because we've got peak loads of 300 megawatt needed. We're basing that off the megawatt hour sales in that year. So we're forecasting what our megawatt hour sales would be for the next 20 years going forward and maintaining 70 percent of those megawatt hour sales as renewable energy. So then outside of our if we include all of our peak our average load not in megawatt hours but in just what we need megawatt capacity is was it 200? Our peak is 350 and we project that going up of course in the future I think by 2019 you're looking at 380. Our minimum load that we go down to you know on a 68 degree night will get down to 120, 150. Our average load would be around between 200 and 250. 200 and 250. Okay. Any other questions on this? Yes. Just a comment. I really, really hope that your projections and Brattle Group's projections are conservative and they 're accurate because if they're not and they were overly optimistic anyway I can't breathe. That's all. Because you're sick not because of your comment right? No, the blood is rushing out of my head and if the projections are wrong then it has catastrophic consequences for our finances. Okay. I agree. I mean it's a big challenge being in the electric business because that's all we have to do every day is forecast what are the needs of the community and their electric power needs and how are we going to meet those needs. It is. It's an awesome task. I mean it's one that is challenged and one that we take on to look at it for tomorrow. Tomorrow literally and for years out we have to plan the infrastructure to meet those needs and it's a challenge that we take on and do. I guess in the spirit of additional information given sort of the parameters that we're we that the council has given direction on. If that changes because I know we've talked about capacity factors and all that with one or two sites but so that Br attle Group thing that you put up there where it said 12 units at one site. There was no financial impact as compared to two sides whether it be you got it. You've got a limitation on the average over 20 years. There'll be some years there'll be an impact but okay. Okay. I want to make sure I coastal wind storage and renew ables back by the market. Was that the three things that you were asking for. Specifically certain types of storage. Correct. And you know which one of them. Right. And so yes I mean there's one of those I'd like to address in the closed session. We're not going to well I think we're going to have a closed session but if you want to have a closed session we can. We can talk about that later because we're going to go into closed session for some other things. Yeah. Okay. Any other questions comments. Okay. I believe that completes our work session our public work session. Have a cheat sheet. No no that's not that's a different one. Okay. I want to convene in the closed session now at 745 according to pursuant to Texas Government Code section five five one point oh seven one which is consultation with attorneys. And certain public matter utility competitive matters under Texas. One point oh eight six. All right. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. We're now reconvening in open session at 825. I will now go into our special call meeting in which the following items will be considered. It is again 826 June 14th 2016 items for individual consideration. Item one a considered option of ordinance accepting competitive proposals and awarding a public works contract for construction of substation precast security fences for municipal electric. Does there is any staff presentation? Don't believe so. We don't have one unless you have questions about it. This is the contract that was there was a protest filed on and we've gone through the hearing process and have made a recommendation. All right. Councilmember. I move approval of the item. Councilmember Hawkins. I'll second. All right. We have a motion to second. Do we do this by show of hands or eyes or is that shares discretion? Okay. All in favor please signify by raising your right hand. All opposed by like sign. So the motion carries five to two. And I believe is there any concluding items? There is concluding items. Anybody have any concluding items? Yes. So during the police presentation we had just I guess it was a slide on the animal shelter. And so I would like a little better staff report or some more information on the animal shelter. Like how do we calculate the live release rate because we had that on there and so I'm just kind of a little bit more on that. How many animals are actually returned to the shelter and the number of dogs and cats euthanized monthly and the process and protocol for that. Okay. Any other? Yes. Councilmember Baguerre. Is this where we mention new items or items that we would like? Yes. Okay. Yes. Not clear. I would like to mention that I have requested an inquiry into potential dispatch center consolidation. And at some point would like to hear something about feas ibility regarding that potential occurrence and the costs. Also would like to look into the distribution of our economic incentives to see how they are being distributed. That is, are there one or two or three players that are getting large percentage of the funds? The reason I would like to ask for an inquiry into that is to ensure that we are not overly exposed with certain players in the marketplace in the event of a downturn. And then the third thing was to request to look into the expansion of the wildflower trail at North Lakes Park. So that would potentially take out some additional areas from mowing if we included a wildflower trail extension. And that's it. Okay. Yes. Councilmember Baguerre. Born in Denton two weeks and two days ago, Juanita June Thompson, one of the most beautiful babies that's ever been born. And if you need any proof, I have pictures. All right. Great. Anybody else? Councilmember Rudin. Well, just a reminder to my colleagues. Summer Lovin will be performed with the mayor representing. No, I never agreed to that. No, go ahead. I'm sorry. What's the guy's name in the movie? John Travolta. John Travolta. And Olivia Newton-John right here. Eight o'clock at Dan Silverleaf. The rest of us will be do-op in on stage. Fantastic. Any others? Maybe just a reminder about the air show. Yes. This Saturday. What time? I don't I think it's around noon, but I would definitely check. All right. I'm guessing. Fantastic. That it? Okay. We will stand adjourned at 830. Thank you.