Oct 24, 2017 City Council on 2017-10-24 1:00 PM

Good afternoon. Welcome everybody to this meeting of the Denton City Council. On Tuesday, October the 24th, we do have a quorum. I'll call the meeting to order at 1.03 p.m. Moving down our agenda. We've got first item on the agenda is citizen comments on consent agenda items. We do have one. Margaret Neal, if you would come and take your place at the podium and state your name and address and your time will begin. Hello my name is Margaret Neal and I live at 731 Hillcrest in Denton. And I would like to request that you hold off on contracting out for the gas inspection services and look at other options and take other bids as straightforward as that. Okay. All right. Thank you. Thank you. Thank you. Okay. Okay. I would like to request that we pull item B off the consent agenda for an individual vote please. Okay. And presentation. All right. So you want a full presentation on that? We're going to have one during the work session, but I would like for it to, I guess not necessarily the full presentation just as a separate as a separate vote with discussion. Okay. All right. And I believe anybody else and we're going to need to pull consent agenda item right this dope one. Yeah. Yeah, we're going to go ahead and pull also off of the consent agenda item A so we won't we're not going to have a consent agenda. So what those are all be in the items for individual consideration. All right. And on that, I don't know if that's necessarily a presentation is going to go over that pretty extensively in the work session but needed to have it available on a separate vote. Any other questions of clarification. Councilmember Gregory went ahead and pulled a consent agenda item A for item for individual consideration. Thanks. And B. So yeah, we don't have a consent agenda item A and B . Yeah. All right. Seeing none, we'll move on to our work session reports work session three a receiver porthole discussion give staff direction regarding tax increment reinvestment zone number one, which is the downtown TIF city. Good afternoon, Mayor and council members. I'm here to give you an update on the downtown TIF. And what I'm going to do is present information that was requested during the June 10. Sorry, June 20 courtesy public hearing on the subject and also seek direction from you on options regarding how to move forward regarding the downtown TIF fund. During that June 20 meeting council directed staff to gather information on capital improvement projects within the downtown TIF zone. And so economic development staff worked with several different city departments to compile information on planned capital improvement projects for the next five years within the specific downtown TIF zone. Now these are projects that these departments already had in their plan and already in the majority of cases identified funding sources for that did not involve funding from the downtown TIF fund. So we're just talking about projects that are planned within the TIF zone for the next five years. So we accumulated that information and then decided to expand that request to the departments to develop a second list of additional proposed capital improvement projects, kind of a wish list. If money were no object, what would you do to develop a full capital improvement plan for the downtown TIF area? So that was the second list. And together those two lists of planned and proposed projects represent that concept of a full capital improvement plan. And you have those lists in your backup materials. The total estimated costs for the planned projects, those that are already on the books, are $11.9 million. And the total estimated costs for the proposed projects or the wish list are about $35 million. We presented the information on the planned projects to three stakeholder groups, including the Economic Development Partnership Board, the Downtown Task Force, and the Denton Main Street Association Board in order to solicit their input on project prioritization, answer some questions. And then because the proposed list was developed later, we did share that with them via email later on. I know that Councilmember Hudspeth also took a group of constituents on a driving tour of the downtown TIF area and solicited some information from them about how they would like to see things prioritized and addressed. And the feedback between all of those groups was pretty consistent in placing parking projects first, sidewalk projects second, and street light projects third, just in general categories of projects that people thought would improve the appearance and the safety within the downtown TIF zone. There were also some pretty strong opinions about finishing the Industrial Street Park to one degree or another, and a few folks were interested in completing the drainage projects and things like that. So just general feedback from the groups. Councilmember Briggs has a question. Yes, ma'am. So can you, what kind of parking projects, do you have any specifics that you can state here? And for me, I would prefer to see sidewalk projects. I mean, we're moving in the city. We're kind of making it a priority to make sure that our sidewalks are up to date and are not dangerous. So can you just? Sure. So one of the projects that is on the planned list, or those things that are already on the books and budgeted for, is the parking lot where the old central fire station was. So that's something that's in process right now. Something that was on the proposed projects list is the parking lot across the street on McKinney. A couple of different options there, either for surface parking or structured parking. As far as the sidewalks, there are a number of different planned and proposed sidewalk connectivity projects, filling in the gaps, reconstructing sidewalks, expanding them. So there's a range of things on both lists. Okay. So my question is, so if the parking projects are first, does that mean that any of the sidewalks, does that mean that everything else is going to be turned away if it's not, say? Oh, no. This is just feedback from citizen groups in general. This is just me communicating to you guys what the majority of the comments involved when we presented the information to the citizens. So it's not necessarily the TIF board saying these things? Not at all. Thank you. One of the other items that we were asked to look into during the June 20th public hearing was whether the downtown reinvestment grant program could be funded using the TIF funds. I think everybody's probably familiar, but just a quick refresher that the downtown reinvestment program reimburses capital expenditures up to $25,000 for redevelopment, improvement, or historic preservation within the DTIP area, which is not quite the same area as the downtown TIF zone. The opinion from the legal department is that TIF funds may be used to fund this grant program, but only within the downtown TIF zone as opposed to the current program boundary of the DTIP area. And I'll show you the quick difference. You'll see the TIF district or area outlined in blue and the DTIP area is outlined in red. So there is a slight difference. Go ahead, Councilmember Gregory. Thank you, Mayor. As you look back at a request for the downtown reinvestment grants, how many of those have been submitted in the areas that the TIF boundary does not cover? I'm looking over at Julie Glover. Just come up real quick and answer that question. Actually people don't submit those grants. They check first to see if they're in within the map and the area. So I probably in the last two years have had seven to ten that we looked at the map and they were just out or pretty far out of the area. Now, what my question is, is how many of those that submitted a grant were out of the TIF boundary? They were in the DTIP boundary, but they were out of the T IF boundary. I would say not many, maybe one, two. Maybe one or two. Yeah, I'd have to look at the list, but maybe one or two. Okay, thank you. Thank you. Councilmember Briggs. Can you help me orient myself? What is that the big section of the red there that is? This right here where the arrow is. That's the park. The park. Right. So that's necessarily the part that won't be counted. Right. A big section of it. Right. But it actually extends the borders. Right. In a certain way. Okay. Yeah. Thank you. You're welcome. Okay. So brief look at the fiscal information regarding the TIF fund. As of the end of last fiscal year, the revenue that had gone into the downtown TIF fund was about $1.3 million, and the estimated fund balance is $1.1 million. So we worked with the finance department to develop a couple of forecast scenarios for the downtown TIF fund. Again, the detail of this is in your backup, but quickly, scenario A assumes the current contribution rate and shows the use of funds for the 380 agreement, which is the only expenditure of funds out of the TIF fund to date, anticipates annual funding of the downtown reinvestment grant program out of the TIF fund, and then also leaves $16 .4 million available for capital improvement projects. Yes, sir. A couple of questions. Refresh my memory. Is the TIF policy, how many years was that? The fund, it's a 30-year TIF. All right. 30-year from 2011? I think 2011. 2011, yes. Yes. So I want to make sure I understand these numbers. Because I think based upon the project plan back in 2011 and all the assumptions, it was $24 million and some odd change is what would have been accumulated. So what you're saying here is if we kept everything the way it is according to that project plan, given the expenditures we already have, including funding the downtown reinvestment grant. And then the STOKE, I believe, or that incentive, which is how much per year? The rail yard. Rail yard. How much is that? $76,000. And there are three years remaining of the five-year grant. So that 16,400,000 includes those three years, but then it puts back in the fund that $76,000 or something like that. Okay. And so then scenario B is you just do a different adjustment. Correct. The length of the contributions to the fund would remain the same at 30 years, but the rate would be reduced. The current contribution rate, it was 100% of the increment for the first five years. We're in the sixth year now, so it's dropped to 95, and then by the end of the term, it goes down to 85% at the current structure. Okay. I see what you're saying. Okay. All right. Yes, I'm sorry. May I pretend? A little bit off your presentation slide, but I was looking in the backup and it said that their quiet zones were in the wish list, but the quiet zones are a part of the actual CIP program, I thought. So I noticed that too when I was reviewing this morning, and we can find out how that's ended up being in there at two different prices, but the description is the same. So we'll check in with the appropriate department and let everybody know what the story with that is. Yeah. And it also has different numbers that I'm familiar with because it has a year one number and a year two number of three-quarters of a million, and then a year three of 7.5, which I don't remember that from the quiet zones bond issuance, but if someone can help me understand the difference. We'll find out for you. I'm not familiar with that project. I know it was a left field question. No, it's okay. I noticed the same thing this morning. So we'll find out. Okay, so two scenarios, assuming current contributions and reduced contributions. To reiterate what I pointed out earlier, the planned capital improvement projects for the next five years within the zone come in at about $11.9 million. The proposed projects come in at around $35 million. We have the two scenarios estimating different contribution rates and that $9 million of debt could proceeds could be funded in 2020 under scenario a scenario B would allow for $7 million in debt proceeds to be funded in 2020. Question on that. Yes. If you go back to that slide. Yeah, the top number 11.9 million that is being funded or projected to be funded from already bought bonds that have been issued, which is basically general fund debt service. Is that is that correct? The majority of the projects. Yes, the 11.9 million. Yes. Okay. But the 35 million is the 11.9 part of the 35 million. No. Okay, so that's in addition to. Yes, sir. Okay. But right now, and we looked at the when you made your presentation last time, we took from the time the TIF was implemented in 2011 to now and it was about a $12 million investment from the city take out the public safety renovation and some of these other things, but there were probably five or six or seven million or eight million that were actual downtown projects. And so this is saying in another five years, you'll have another basically 12 million. So the notion that the city somehow that the TIF is in existence simply because the city is forgetting about downtown. The numbers seem to not. I mean, this 11.9 million in the next five years funded by the general fund debt service is more in that five year period than your scenario a keeping everything the same and using $9 million to fund projects and so of that 16 million , we only get $9 million for the projects because of the additional interest. Okay. Yes, mayor. So I'm sorry, I can't place when I've heard this discussion , but I know that there have been some requests to close Walnut Street and to improve the refuse collection. I mean, it's basically a street of dumpsters and parking. Yes, it could be a lot more than that. I'm surprised it wasn't in the requests from the three different groups because I thought that one at least one of those groups had requested the Wal nut Street closure. I think that that is something that has what has come up and was discussed in years past. I mean, maybe three, four or five years ago in talking with some of the departments that was not something that came up specifically from the groups this time, though you might have noticed that underground refuse containers on all of the new streets were on the proposed projects list. We just didn't hear that specifically. Okay, thank you. Councilman Ryan. Thank you, Mayor. There's some projects on here like the parking lot across the street over here that are actually listed twice with different options. Yes, sir. Did you skip the lower priced option when coming up with the 35 or both of those included in that 35 million? That's a good question and I am not entirely sure. I have a sneaking suspicion we might have just totaled it, but I'll find out. Thank you for asking. The other one I kind of wonder about is on the City Hall West, we've talked about other ways to get grants to pay for that. That's in here for six and a quarter million. I'm pretty sure that any anticipated grant reductions or offsets would not be it wouldn't have been taken into account there just the full cost on that one. But I'll double check about the two options for the McKin ney Street parking lot. Okay, thank you. So a few options to present to you. The first option being to terminate the downtown TIF and allow the fund balance to revert to the general fund, which was something that was discussed in earlier sessions. Changing the downtown TIF under the existing project and finance and feasibility plans, which means that the term and the contributions would stay the same. Identifying eligible projects for immediate use of funds and either cash or debt funding for projects and that would be your scenario A, which would get you about $9 million in debt funding. Changing the terms of the downtown TIF would be the third option to alter either the length or the percentage of the tax increment that's dedicated to the fund. Identifying eligible projects for use of the funds and then same thing cash or debt funding for projects under scenario B. So the direction that I'm seeking from you all today is on the preferred option to move forward regarding the downtown TIF fund. And I know I presented information to you about projects, but the direction that we're hoping to get from you today is about how you would like us to move forward with the funds. And then depending on that, there could be further conversation with the TIF board as appropriate with this body as appropriate to decide which projects to move forward with. I like Councilmember Briggs think there's some sidewalk issues that can be fixed. The group that we went out with identified a few and I just didn't have time to take the pictures and get them to you, but I'll do that. But I think there's some small actions we can take that can make a large impact throughout this district. And so for me, twofold. I know I have a question, when can we bring this back? Let me put the foundation for that. I'm outside in on the downtown TIF. I understand that I have no support with that, but I think it's that important that after the May election, can we come back? What is the quickest we can come back after May? You don't have to answer that question now, but I'd like an email that explains when we can come back and revisit that, assuming there's a structural change in May. I'm hoping I can get some more support for that. Okay, I'm not entirely sure I'm understanding the question. The question is how quickly can it do we have to wait for the next budget cycle to discuss the TIF, downtown TIF, assuming that three people don't change their mind and it's either gone away or funded through the TIF. You mean the downtown reinvestment grant? Yes. Oh, okay. Sorry. The downtown reinvestment grant. Right. As of right now, we have a fund balance that's available to spend down in this fiscal year, and I believe that fund balance is about $106,000. So we have another year's worth of program funding, or perhaps more, depending on the applications that come in and are approved. But if there were not a decision made to fund that grant program through the TIF right now, I believe that if there were other funding options to be explored, it would have to wait till the next budget cycle. Okay. Okay. That answers my question. And then so to follow up, I'll send you, I would suggest leaving the mechanisms as is and moving the funding for the downtown reinvestment under the TIF just for this year until, and then building a list of smaller projects to take to the TIF board that are actionable, kind of shovel-ready projects. I think I can give you about 10 based on our walking the area. Thank you. Okay. Councilmember Briggs and then Councilmember Ryan. Can you speak a little bit to the residential requirement? Isn't there something within the TIF? There's a restricted amount of people that can, or homes that can be built there? Or live, I mean... Yes. Give me just one second because I want to make sure that I have the number right. And are we keeping up with that? I mean... Right. So that's only, that only deals with the percentages at the time of creation of the district. If it changes over time after it's been created, that's not an issue. But I did find it here at the time that this was created, there couldn't be more than 10% residential and that's defined very specifically in the statute. But that subsequently has been raised to 30% residential for new districts that are being created going forward. But we don't have to change that. If nothing changes with the boundaries of the district, it was 10% when it was formed and it can stay that way. And we're okay with that. Okay. Well, in regards to this, I am... In the beginning, I had some issues with the TIF because of the way the board was with the funds that were there and the money was not being spent and projects were getting overlooked and... But with this going forward and the projects in place, I'm more comfortable with it. And I would like to see the reinvestment grants come out of this fund. And so that's where I am. I could either be for changing the terms or not changing the terms, whatever my fellow council members are in favor of. Okay. That's my run. Thank you. On the downtown reinvestment grant program. Yes, sir. What are our limits by ordinance? I know it's 25,000 on the project, but do we have an annual limit or is it just based on what's budgeted? There's not an annual limit. It has been based on what's been available in the fund. Typically we see four... Between three and five projects a year seems to be typical on that. And not every project is funded for the full $25,000 either . Okay. And another question is, I might have missed it in the backup, but do we have a comparison of pro forma versus actual of what the TIF has done? It's not in this backup, but I believe it might've been in the June backup. I can resend to you. It's pretty close. Okay. Yeah. I guess I'm for funding the reinvestment through the TIF, in which case that also means I'm for keeping the TIF around. Option A or B? Scenario A or B? Well I will say I'm also not for debt funding. I would prefer... I mean, we do the debt funding through bond packages that are sent to the citizens for a separate vote. So I think we get a whole lot more bang for our buck on cash funding. As far as changing the terms, I'd like to go back and look at that pro forma again, even if it is close, just to get a better feel for it. Sure. And how much of a jump was when? What's almost a secondary pro forma moving forward from this point would be good information to have. All right. Thank you, Councilman Ryan. Councilman Gregory. Thank you, Mayor. Well, a couple of questions. One, since we've had some discussion in the parking has been a top issue among the focus groups that you visited with, I guess the stakeholder groups. And I've read in the newspaper the plans about an NCTC parking garage. What do we know about that? What kind of facts do we have regarding that that can be shared in terms of will that parking fully accommodate all of those NCTC students so that there would be some left over? Will it not accommodate those students and will they need to park at the Med Park station or are they going to likely put more pressure on downtown during the day? What do we know? So I've had a couple of preliminary conversations about that. Not really anything that I'm able to share at this time, but we are in touch with folks that are involved with that project and that deal. And I hope we'll be able to bring you back some more information and specifics soon. That's about all I can say about it right now. Okay. What do we know about funds available through the parks dedication program for real estate, new construction of apartments and things like that? Are there any funds available to help do what we need to do for the industrial street park? I cannot speak to that, but I will find out for you. Or maybe Brian can speak to that. It's like he had a spring in his seat. I mean, he just flew up. I was just waiting to jump up. We do think we're going to have some funds potentially for that project. We're planning to come back to the council for a discussion about the park dedication development funds and potentially restructuring how we run those in November. I think it's November 14th. We're tentatively planning to come back to you so we can have that discussion and give you some options. Well, I would, if I may. Oh, sure. I would definitely want to go ahead and fund the downtown reinvestment program through the TIP since we decided a couple of weeks ago to not fund it through our regular budgetary process. I think that's an important fund to keep in place. It's so much more expensive to redevelop anything downtown because of the aging infrastructure, the aging of the buildings. And to have that available, I think, continues to be an important thing. I think, you know, I'm not sure about scenario A or B. I certainly want to keep the TIP program in place. I'm not completely opposed to the idea of using anticipated revenue from it to pay debt for a project if we need that project right away. But I'm also very much in favor of sending the list that you collected to the TIF board and let them come back with some recommendations on other spending, especially if there's some projects that can make the area more pedestrian friendly and continue to address the ongoing concerns for parking. Mayor Putnam. Well, I definitely agree with Councilmember Gregory that some of the infrastructure in downtown makes it more expensive to retrofit buildings down there, which is why I think we probably should be directing funds to infrastructure. So that would be my preference is that we look at some of these projects in the proposed list and see which ones can give us the greatest return in terms of increased values on the property tax rules. I guess that would be the major part of the return is can we improve the property tax rules with some of our infrastructure improvements, like drainage or sidewalks or whatever the case may be. I'm a little bit perplexed because I know that having read the TIF board meeting minutes, the direction from TIF board was very much we want parking garage, we want parking. And so the direction from these focus groups was also we want parking. But I'm not getting that direction from Council. At least I'm not hearing it. So is this a scenario where we need to maybe change the parameters if we're going to keep the TIF, which I'm not in favor of, but if we're going to keep it, then do we need to narrow what it is the TIF can be used for, what we're directing these funds to be used for, because I think we're going to constantly come up against the money should be for a parking garage when I think what I'm hearing is that people would rather spend it on immediate projects that we can actually improve the area with. Anybody else? Well, thank you so much for your presentation. A couple of comments. It's an interesting -- this is an interesting discussion. And interesting in the way that especially after the public meeting that we had where we heard what the concerns were of the constituents in the downtown area. And it seemed to be very different than what we've been hearing since the TIF was implemented. So let's go back and just review a little bit of history. I'm not going to be a filibuster, but I want everybody to understand where I'm coming from. When this was created, it was on the heels of the worst economic downturn in the nation's history outside of the Great Depression. It got created in 2011. The recession, the prime part of the recession was about 2008, 2009. Things were just beginning to climb out. So all real estate values were depressed. All of them. So when we created this base value for the TIF, it's pretty low. And when you look at the project plan -- and the reason I'm saying this, I want to lay the foundation for why moving forward -- we're being asked today and in the next meeting if we were going to create this TIF today, we have an opportunity to do it differently based upon different scenario, different environment. Because when you look at the values back in 2011, they were down. Look at the values now. Go back. And the June backup had some great information. And it's about the same. But I pointed out last time the difference is the original project plan was heavily weighted for catalyst projects. Those are new construction projects tolling $5 million to $ 10 million each, if not more than that. And when you look at the locations of those -- not to say that they were specific, but those were the locations that were more suitable for large- scale redevelopment. And so most of the TIF increment in the original project plan was based upon catalyst projects. Now what's happened is we haven't had the catalyst projects . You've had some. You've had a couple of apartment buildings. Never have I seen apartment buildings solely being defined as a catalyst project in the original project plan. They were usually associated with some type of parking structure or some type of retail or office. So when you look at what's happening today, last year we had a lot of new construction, but that's because the rail yard came in. The year before that we had $300,000 of new construction or something like that. This year, when we get the project update or whatever it's called at the end of the year, whenever we get that -- we will probably have virtually no new construction. I mean, truly new construction. You've got a lot of remodel. So we have to be very careful because I think you're going to -- prices aren't going to keep going up. Assessed values aren't going to keep going up. We passed a tax rate that was the effective tax rate, which means we're basically collecting the same taxes we were last year, given appraisals are going to go up more than 10 percent. Some will pay more. Some will pay less. So it's very, very possible moving forward we will not get those same projections. So from a debt funding perspective, I'm very, very leery of -- I mean, my option would be option one. I don't think we need the TIF. I think we can do exactly what we need to do with it without it, and I think we can have more flexibility, but if it's the will of this council to do so, that's fine. But if that's what I'm going to agree to, then yes, the downtown reinvestment grant needs to come out of there. My whole point is I don't want to continue to spend general fund dollars in the TIF boundary, which therefore is paid for out of general fund revenue or general fund debt service, but any increase in value -- I sound like a broken record, but I'm going to say it again. Any increased value in the TIF boundary stays within the T IF. Therefore it doesn't contribute to that debt service payment. If we want more police officers patrolling downtown, I think that needs to come from the TIF. So the difference between scenario A and B is pretty minimal. I mean, it's $2 million, which -- I mean, $2 million is not minimal, but in the grand scheme of things where you're saying in the next five years there could be $40 million worth of projects, I'm not for spending $40 million or $35 million or $20 million in general fund debt revenue to put into downtown so that all that tax increment can go to the TIF and not have to contribute back. So if you really want to do the thing that maximizes property tax increase, you pull the property out of the floodplain. That's what you do. And you'll go from having zero value almost to an incredible amount of value. So as far as I'm concerned, I'm not going to get what I want. That's fine. You know, I don't think we need -- I think if we were here deciding brand new, do we need this? I don't think this council would agree to it. I honestly don't. I don't think -- I mean, based upon the numbers, based upon how well downtown is doing, we'd say gosh, there's other parts of town that need it. Back in 2011, everybody was depressed. Everybody. So I don't think we're going to see the values growing that we have been in the past. So that's my concern is that, you know, we're using the same projections moving forward that we did in the original plan. It wasn't robust in the sense of the assessed value, pre existing assessed value increase. I think it's 2% assumption on the growth. But it was really robust on 10 or 20 or 25 million dollars worth of new construction value. It's not happening. It's just not happening. So debt funding, have to be very, very careful or we're going to wind up having to pay for it ourselves, which again, it's all our own money anyway, so why do we even have this bureaucracy? So I'm okay. I'm not -- my preference is the first option. I can settle with the second option. We're funding the TIF, the downtown reinvestment grant, out of that. But as far as projects, I think we need to really look at that. I think what we've been hearing is in our first public meeting was what we thought we wanted it for. Oh, and now we're complaining about parking lots not being paved. Folks were fixing to spend $800,000 to pay the parking lot on McKinney Street, and that's coming out of the general fund. All right. And it's parking that is directly related to the TIF. So that's fine. We want to do it this way, but we have to be careful. And I would just assume cash fund more than debt service fund because, you know, you issue -- Brian, what's a -- you know, a million dollars for debt service, what does that buy you? $10 million worth of projects about something like that? 12? So -- [ Inaudible ] Yeah. So, you know, you're already up to your $11 million. So you could find a $12 million project, do it, and that takes care of the TIF funds. I mean, they're all accounted for. Now, question, though. So we put a cap on the amount of TIF funds. They can only go -- I think it's 24 something million. $24.8 million. So once it gets to that, what happens? At that point, no more money goes directly into that fund. It goes back into the general fund. Right. Is that correct? God, yes. Okay. All right. But I agree with Councilmember Hussbuth and Briggs that there's a lot of things you could do in downtown, not on the square proper. You could do sidewalks on the square proper if we never figure out, you know, who owns what. But on the perimeter streets, there's so much work to do. And a parking garage is going to eat up every bit of that. And so then what do we do? So I'm okay with the second one. I think we're going to find that it's not going to be the panacea that everybody thinks it is, but time will tell. I think time has already told that we've got a million dollars sitting there and we're still struggling with what to do down there. So that's where I am. It sounds like the consensus is -- we haven't necessarily come to a consensus on scenario A or B, but I think you probably needed to know first and foremost that it was still going to be in some kind of configuration. That's correct because we've been holding off on having a meeting with the downtown TIF board until we knew whether the direction was to continue with the fund. So we have that direction at least. And then there's the possibility of, you know, I think we should pull that group together, brief them on these discussions. And then it sounds like as of right now, I don't know if you guys would like us to come back again with more detailed on scenario A or scenario B. Of course. And I mean, I don't think we need to wait until after May. I mean, that seems like a long time. That's been my big concern is every time around election time, it's almost like we shut everything down trying to figure out what's going to happen. That's craziness. We just need to keep moving forward. Okay. So you were talking about the downtown reinvestment grant getting that. So we're funding it from here at least this year. And I know you wanted to talk about that later for a different budget cycle. But as far as the projects have meeting with the TIF board and so that the council can give you a little bit more direction on scenario A or B because based upon what comes out of those meetings, you might get a little bit more clear direction. Okay. Council member Husband. Thank you. I have a question, was there not a bond election that was passed to bring the, to affect the flood zone? Is that not? I'm going to ask Brian to come assist with that or Todd Est es. We have him coming from both directions. Because I think Mayor Watt's point is valid, but I think that's been acted on. But correct me. We do have a project in place that does have bond dollars tied to it to bring parts of downtown out of the floodplain. The first phase of that will be going to construction and we'll be letting it for construction this coming spring. That project brings us only so far and doesn't actually get into this zone proper, but it has to be done first. Then we carry on with the next phase of the project, which is currently unfunded, to bring it all the way through downtown and on west of downtown area. So if I may. Sure. Can you give me that initial, sort of, let me back up. I still want to know if there's a, was there bond passed that should have covered the entire thing that sat dormant and didn't get funded? That's a longer question. The shorter question is what is the initial, give me the borders of the initial phase that you, that you referenced. I can give you that. I don't have it with me right now. Please. Pull it out of my pocket, but I can definitely get that for you. All right. And then the longer question is someone. I'm sorry. I just wanted to clarify. The project that, we'll get you an answer on the bond funding, but the project as it stands right now, there was four phases of that downtown drainage project. The original project that's been funded and has been, it was only about half of it. So there's two final phases, which we'll roughly cover from , I want to say around Elm to Carroll. That is in design right now. I've asked staff to expedite the design so we can get you the answer on the full cost of the project in what we're shorted. I think it's around 7 million. It's a preliminary estimates, but we'll be back to you shortly with a bigger picture. Look at that. Okay. Thank you. And then, I think to answer, so to clarify, I'm not saying wait on the projects till May. I'm saying I want to get it back in front of whatever the council looks like after May. That's my point. Yes. But also, I agree with you that, yeah, we can, I think we do need to put something in front of the board. And because I just think it enhances the area and there's some small little things that would really be great and benefit a lot of different groups . But again, I've said it before, I'll direct anyone to Mayor Pro Tem's point. If anyone wants to see some direction and clarity, use the downtown reinvestment grant as a template. I direct you to that document regularly because it is an outstanding document. It has policies, procedures, clear direction in place, and the TIF would do well to mirror it. And so, I think, yes, it needs to be, if that is part of the TIF board duty, I think or if that's an option, I don't know if that's an option. Whoever created it is, it's pretty ambiguous. So I don't know how to change that. But again, the reinvestment grant document is very clear, very concise, and is a great template. Thank you. Thank you. Mayor Pro Tem, did you have a comment? Oh, I thought you did. I was just going to clarify that because you mentioned that we were going to fund this year's DTIP out of the TIF, but this year's DTIP is already funded. Yeah, I mean, no. Going forward is what we're talking about? Sure. Absolutely, yes, ma'am. Okay. Just clarifying. Yes. That's correct. Anything else? I just wanted to get some clarity on what I asked for earlier because I'm looking back through the June or the 20th backup, and what I'm looking for is what we've actually collected to date side by side with what was projected. I'm not seeing that in the backup at that time. It may have been sent out as a separate attachment at that time. It's just not in online. We have both those things, so I should be able to get it to you, if not this afternoon, then tomorrow. Okay. All right. Any other questions? Division of Direction? Yes, sir. Thank you. Fantastic. Thank you. I wonder if we ought to take a break first before we get into the next one. How long is that going to be? About an hour? Is that about an hour, hour and a half? What do you think? Two hours. Two hours? Well, we might take a break in the middle of it. I think we can shorten it. No, you're good. I'm not pressing you. I just want to make sure. Yeah, so we might call a break in the middle because it's probably a little early. All right. Receive report, hold discussion, agenda item 3B, receive report, hold discussion, give staff direction regarding the initial report from Enterprise Risk Consulting regarding the resource planning and power supply strategy for Denton Municipal Electric. Mayor and Council, today we wanted to have Enterprise Risk Consulting come forward and talk to you about the energy resource plan and the power supply strategy that they've developed for the city. We have with us Neil McAndries and Larry Lawrence. I'm going to turn it over to Larry to begin that presentation. Good afternoon, Mayor and Council Members. We're happy to be back. Let me get the presentation up. The beauty of doing this the day before for the Public Ut ility Board is that we can perfect the presentation and we'll try to make it more concise. So we're here today to present the results of our resource plan to meet your renewable goals. We ideally could skip to the conclusion and tell you what our recommendations are, but there are a couple of factors in terms of one of our scope items was the role of the deck in that renewable portfolio. So we want to present some of the evaluation factors and some of the conclusions around that. Also it's important to give you an understanding of the evaluation factors that we went through to determine the best fit, the best amount, and types of renewable resources as well. So we're going to step through that very quickly before we get to the... Larry, before you get into the meat of it, Council Members, this is going to be a fairly long presentation, so I think holding the questions to the end would be difficult because, number one, I won't remember the ones I want to ask. But if, but please, if somebody asks a question that you will address in a different slide, simply say that and so we can move on through because I know sometimes you want to answer it because somebody's asked it, but if there's something that are directly answered later in the presentation, we'll go ahead and wait. All right. We'll keep that in mind. Thank you. So the presentation outline, we're going to briefly cover the planning goals, what the goals were in developing the resource plan, look at the data sources that we use and the evaluation factors involved in developing the resource recommendations, very briefly look at the factors involved in the modeling of the portfolio. We're going to come up with several interesting conclusions from the analysis and then the specific recommendations for the resource plan. So our objectives here for the planning goals, we want to develop a resource supply portfolio that gives you a least cost supply. We'll specifically define that and give you some examples of that in a moment. We also have a goal of uncertainty or risk reduction. This is really focused in two areas. One is we want to most effectively match supply to Denton's load so that we don't have, we have a good match so that that's a good risk offset and also to provide as efficient as possible from a cost standpoint so we have the least cost variability so that you have a very stable supply portfolio going forward. So that's also an objective of the resource plan. Sustainability, there are really two areas there that are being covered. One is clearly environmental sustainability. Renewable resources definitely contributed to that. One of the overlooked factors is renewable resources don't consume water like other fossil fuel generators do so this is also a benefit in terms of reduction in water usage. Also sustainability involves just the reliability or the durability of the generation assets over time and these tend to have less moving parts, they don't break as much. So there's a sustainability benefit from a production durability and from an environmental aspect as well with renewables. Competitiveness is another goal. Even though you're a non-opt-in entity so you're not subject directly to competitiveness, you do have rate payers moving in and out of the territory so to avoid pressure in the future on you to open yourself up to competition, which we clearly don't support, I think it's a good idea to try to maintain your rates in as competitive a manner as possible to avoid that sort of pressure. So that's another goal we had in this resource plan. Also lastly, we want to make sure that the resource plan can be efficiently managed, take into account the management responsibilities of your power supply operators to make sure that that power supply portfolio is managed in the most efficient manner. So let's look very briefly at the data sources and then we 'll get into the evaluation factor. So clearly we looked at your load, your current supply resources, and the deck performance data. We used a lot of data from ERCOT, price histories, how they dispatch generation plants in the marketplace. We looked at the resource adequacy studies to understand what is ERCOT thinking is coming in the future. And most importantly, we looked at historical heat rates. We're going to look at that in a little more depth very shortly. We use some other sources of information primarily for prices and so forth. I won't drill down into those. I just wanted to give you an understanding of the various sources that we looked at and relied on for developing the plan. Now pardon me for inserting two slides here at the last minute because I know these presentations were delivered to you previously. But yesterday's presentation to the Public Utility Board, it seemed like there was not a clear understanding in certain cases of what a heat rate is because this is crucial to understanding the deck. Because with the deck and its role in your portfolio, what you essentially bought is a machine that is at a heat rate. It's a machine to convert natural gas into power. So it's really important in the evaluation and the understanding both in terms of the specific economics and just the role of the deck of what a heat rate is. So just pardon me for a moment to switch over into an educator's role and go through just two quick slides here. So electricity is not, as opposed to other energy commodities, electricity is not found in a natural state. It's not like crude oil or natural gas that can come out of a well. Electricity has to be made. We have to take one form of energy and convert it into electricity. Frequently that involves heat. So some type of fuel is burned to generate heat, which then goes into process to make electricity. So a heat rate measures the efficiency of that burn to turn it into electricity. We want efficiency. We want to get a lot of electricity out for very little fuel going in. So the heat rate measures how efficient a generator is at that conversion. You want a low heat rate. That means you're not using a lot of fuel relative to the power output. So low heat rates are good. Higher heat rates are not as good. So this means that we can take electricity or power and break it apart into two components. We can take the heat rate, which is the thermal efficiency of the generator, and we multiply that by the fuel price, and that gives us the effective cost of that particular generator's power. So this will become involved later when we start talking about the deck, the cost of the deck, the value of the deck, and its role that it's going to play. So another aspect of this is what is known as the implied heat rate, or some people might call this the market heat rate. We can look at the market. We can look at the price of power in the market, and we can look at the price of gas, and that tells us what type of gas generation unit is producing power in that environment. So we can simply just take as an example here. We can take a $30 per megawatt hour power price, divide into that the price of natural gas. If the natural gas price is three, that gives us a 10 implied heat rate. And this is around where we are estimating the deck would be. The deck is at an 8.5 heat rate, but you then have to add variable costs, operating costs on top of that, to get the effective cost for the deck. So this is simply just to give you definitions of heat rates, because this will come up again in the discussion, and it will come up again immediately on this slide. So we just wanted to show you where the deck sort of stacks up, no pun intended, in the resource stack for ERCOT. And one of the messages that you're going to hear us talk about repeatedly today is that the projection of what the deck is going to do is completely dependent upon the expectation of natural gas prices and the market heat rate. That's something that involves projections. You're going to see our projections in a moment, some of our assumptions here. But the deck is just a heat rate. It's just a machine to convert gas into power. And we don't really know the cost until we know the specific cost of natural gas. So we have two graphs here. This was from a very recent study that ERCOT produced. I think this was published just like in August, I believe. So it shows two different graphs here. This is the ERCOT bid stack. This is the preference, the way that ERCOT would dispatch on a cost efficiency basis in two different gas price environments. On the left is if natural gas is at $250 per M&B to you. On the right is if gas is at $450. So the horizontal scale here is the cumulative capacity of ERCOT, the amount of power that ERCOT needs to meet its load. And then the vertical scale is the cost, the dispatch cost of those units. So the things to focus on here are the blue dots are natural gas units. The gray dots are coal units. In a 250 gas market, coal is not competitive. Gas units are going to be dispatched earlier. And we've sort of estimated where the deck would come into here. So in a 250 market, the deck is coming in around this point . It's not as efficient as the most efficient gas units. It does have an opportunity to earn a margin, but the margin is not that large. It will be dispatched earlier in a 250 market, but the opportunity for a margin is not that big. Yes. >> Did you just say that it's not as efficient as the most efficient units? Like our plant is not the most efficient? >> Well, there's a qualifier to that. Yes, and I'll explain that. The most efficient gas units, some of the most recent ones out now are what, six and a half coming into place, so six and a half heat rate, whereas the deck is around eight and a half, then you add costs on top of that. But here's the thing. Those units have to run for hours and hours and hours at a time to bring the heat rate down. >> Are those combined cycle? Are you referring to combined cycle? >> Yes, sir. >> Yes, all right. >> So the deck offers an advantage because it's a quick start. So you can't have a quick start unit that has a low heat rate. You get one or the other. So the deck has the advantage of a quick start. It has a higher heat rate, but it can be much more responsive. So in terms of a firming resource, the deck fits that role as a firming resource. You wouldn't take these super low heat rate efficient combined cycle plants as a firming resource because if you're using them that way, their heat rate wouldn't be that low. So that's why we make that statement there. >> Question on this slide. >> Yes. >> I see your legend. Solar wind, hydro nuclear, natural gas, coal. Did you not put, I mean, I'm having a hard time distingu ishing between the wind and the natural gas dot, or is the wind dots not on there? >> The wind dots are over here in the far left. Because there is no cost to that. So the wind and solar are coming first and then everything else goes up top. >> Okay. All right. Yes. Councilmember Gregory. >> Does that take into consideration the fact that there are some coal plants that are closing and it appears that there are going to be some more that are closing? >> I don't know if this is what was modeled specifically in this study. That is something that we're going to address though. That is an important part and that's where the DEC does provide an advantage to you theoretically. Because if coal price plants are retired, that could just raise the theories. That could raise the heat rate in the market and make the D EC more valuable. >> You're pretty connected with the market and some of the coal plants are 30, 40 years old, right? >> Right. >> What is your projection about retirement? >> Well, here's -- >> Are you going to be addressing this? >> We're going to be addressing that in a later slide. >> Okay. Well, wait. >> Yeah. >> I'm going to get into Urquhart's projections and if I don't address it, then please ask that question again. >> Okay. >> So the graph on the right shows the dispatch stack at a 450 gas price. So you can see that the DEC would dispatch later. It has more of a potential margin opportunity, but the frequency or the likelihood of that dispatch is a lot lower. So this is sort of the reality that the DEC is facing. So we just wanted to give you an understanding that the projections of the DEC and the value of it is highly dependent upon gas prices. And unless you can give a specific gas price and heat rate scenario, it's difficult to give a specific projection of that. >> So in this scenario -- and you'll answer the question as far as projections on coal plants that are closing. >> Yes. >> But so on that slide on the right side where it's the $4 .50 gas -- >> Yes. >> If there's a sizable reduction or decommissioning, like I think somebody's -- is it next year or somebody's going to close three coal plants? >> This season, yes. >> That's going to be -- >> Announcements recently. >> That's like 4,000 or 5,000 megawatts. I mean, it's huge. >> Yes. >> So if coal starts going away on this graph, then technically what you're -- tell me if this is right or not. Then that dispatch line, I'm going to say goes down or you 're not in as bad of a situation because the coal is not absorbing that low-cost energy because there's less of it. So it's going to move that graph. Am I correct? >> To an extent, but this -- my answer to your question will be the answer to your question earlier. We're now seeing more efficient combined cycle gas plants come in to substitute for the coal and more solar and wind. So you're seeing a displacement. >> Got you. >> And so that shifts it a bit. >> Okay. >> Yes. >> Okay. >> So speaking of this, this is where I was going to answer that other question, but we'll look at these -- the graph on the left is important. This is a graph of historical heat rates in ERCOT. So the horizontal scale is the low level of ERCOT and the vertical scale is the implied heat rate as we just described what that is. So the takeaway from this is that this shows -- excuse me, just to explain this further, this is three years of heat rates. The blue bar is 2014, green is 2015, and the red is 2016. The important takeaway from here is that the heat rates are relatively stable. That's a fairly stable curve. If we look year over year, heat rates don't vary that much. We've done studies going back to the beginning of ERCOT as a power pool and heat rates are very stable through time. The deck to really get a substantial amount of value needs high spiking heat rates sort of like you saw over here in 2015, but that's an outlier. So it's just you're in a marketplace that manages the generation portfolio very efficiently and the heat rates are very stable. That's the main message from this. We use these heat rates in our modeling and to just take away those heat rates going forward, we would expect them to be very stable, as stable as they 've been in the past. This picture on the right is really just to illustrate what ERCOT does. They continually will periodically conduct long-term system assessments. They're always looking to see what's necessary for ERCOT to improve in the future. And we were looking at one of their recent system assessments. The key findings here are that in most of their scenarios, they're expecting load to grow and that all the scenarios that they use showed a significant amount of solar generation additions, the retirement of coal, and natural gas. But we are seeing more efficient natural gas markets come in here. So these are the assumptions that we're operating off of. ERCOT is seeing more and more renewables coming in. Keely, I think. Just onto the side. The deck's heat rate is high and requires lower probability events to warrant dispatch. So the dispatch would come from ERCOT, right? Okay. So in the past, I'm just trying to... In the past, we were told that our unit would be called on because it's the most efficient as opposed to any of the other older units. Is that because of heat rate? Or is that how that fits together? Or is that just am I not making any sense? It is a very responsive plant. So it will be called on at times. I don't know if this is not a direct answer to your question, but it may help, which is that in our modeling, we found a pretty similar estimation of the amount of hours that the deck would run to what Brattle found. The main differences are in what the gas price and heat rate assumptions are. But in terms of the run time, we think that's very similar to what Brattle had projected. And we're going to go into those statistics in just a little bit. I don't know if that helps, but that's... It will all come together in the end. So again, takeaways here. Heat rates are very stable over time. They don't vary that much over time. And ERCOT is expecting a significant amount of renewable generation to be added to the portfolio. So we wanted to give you a sense of where we came from in terms of the natural gas price projections, which are crucial for two reasons. One is to get a sense of how the deck will perform. But also, we need to look at a cost comparative. We've told you a couple of times now that renewables are a least cost alternative. Well, we need to have a reference to measure how much of a least cost asset or resource those are. So these are just some of the data inputs we took into account in developing the price projections. In the upper left-hand corner, you just see annual averages from the markets themselves of natural gas prices going into the future and power prices going into the future. This is where the market is clearing for prices and transactions farther and farther in the future. So this is the best case today of what we'd expect for prices in the future. We are always of the opinion that the market is the market. We always want to depend on the market as a reference case. We developed another case, but we're depending upon the market as a reference case here. And you'll see the results of that in just a moment. But one other thing we wanted to take into account is you can't deny the fact that there are several interesting things going on in the natural gas market. Drilling rigs are down. The rig counts are down. Production has fallen off a bit. From a consumption standpoint, a lot of LNG plants are coming online. With coal generation retirements, more gas plants are coming online. So there seems to be an interesting storm coming where more gas demand is going to occur in the future and less gas production. So we then also modeled a case where gas might go up in response to these fundamental factors. But we took into account the history of natural gas, which you see on the right-hand chart, which is that in the past, natural gas can spike because of demand factors. What does it do? It always reverts back to the long-term mean. You can see this best fit trend line on there. So we took -- Neil is the one primarily responsible for the modeling in this. He essentially just took the doubling and trebling you see in prices that have actually historically occurred, and we just projected that again forward with an assumption that prices would move back to the long-term mean. So let's look at the results of this, and I think it will become more clear. So these are the four natural gas price projections we used in the analysis. Two of these are from the Brattle study. Two of these are from ours. Let's look at the two lower lines first. The Brattle low case is the purple line. Our low case is the red line. Both of those are essentially the NYMEX futures market forward curve. Ironically, we use the same thing as Brattle except that we 're about 18 months, roughly, year and a half after them, and the market has fallen. The market has simply just fallen -- the gas price has fallen since Brattle did their analysis. The green line is the high case, and this is the case that we couldn't come up with any particular logic why we should use this. It doesn't necessarily make sense to us, and a lot of the economics of some of what you saw before were based on that case. So the blue line with the peak and then the falloff here in the next few years, that is just that particular scenario we used that mimics the demand spike that gas saw about 15 years ago and then the falloff again. Another reason just to repeat this for the falloff is the world is different. When shale gas came around in 2008, 2009, the world changed . The world changed forever. There's tremendous amounts of shale gas around. It's cheaper to drill for it than it used to be. So if you do get a demand spike, we're very likely to see a huge increase in production to meet that. The gas is there for that production. So we couldn't come up with a logical reason why you could get a high gas case that would just go up forever. There's just too much gas around. So what you're saying is there's probably going to be, because of the demand for gas, at some point, whether it's 2022 or some other. But as we've seen in the past, the cost is going to go up. And once the cost goes up, that triggers a whole lot of new drilling and exploration. And then they get a whole lot more supply, and the cost drops right there. Right. Right. That's just a tip of the iceberg. So you're not sure when it'll happen, but it'll happen at some point. And at the same time, new units are put into ERCON. The same thing happens, especially the most efficient, 6.5 heat rate combined cycle units will come in. So these are just a summary. Any other questions? So what I'm hearing you say, if you go back to the previous slide, this was not – I mean, the Shell revolution was just beginning in the early 2000s, really didn't pick up momentum until mid-2005, 2010. It's really '08, '09. So those big – what I'm hearing you say is these big tall spikes were in a different context of a market. So if you go to the last slide you were on, that's why you 're not projecting out from 2025 to 2038, your blue line shows a fairly gradual incline . And so you're not saying – and that's because you just think that because of this new context, this new paradigm, you will not see – I mean, because if you look at those spikes, they're pretty severe. Yes. I mean, even if it's only a year or two, you're talking about millions of dollars it could be. But you're saying because of the industry now, it's probably not going to have that. It's not. And there are tremendous Shell reserves all around the world that haven't been exploited yet. I was talking to a major energy company I can't name that is doing exploratory fracking. First place I've heard of it outside of North America, they 're doing it in Argentina. So it will happen. And there are huge reserves worldwide, and that can dis place the export market where the LNG market is going to spin up for that. So we just couldn't come up with a credible case for the commodity to just keep going up endlessly because it really never happens. But we needed to have more than just a base case. We needed a high case to give a range of values. And this was the most logical high case that we could develop. These are average yearly? You can have spikes to $10, but they don't last long. These are the average. So a double or a quadrupling or – I don't know if a quadru ple is there, but doubling a price is certainly possible in the short term. All right, so let's move on to the evaluation factors. The two – two of the goals that we focused on for the evaluation of the – remember, the intent of this is twofold. One is to recommend the best quantities and types of renewable resources to add to your portfolio to meet the renewable goals and to understand the role the deck would play in that portfolio going forward. So again, we have an objective of least cost supply, and we also have an objective of uncertainty reduction, which means matching the production profiles of those renewable resources to best fit Denton's daily and seasonal load profiles. We want to balance the need for selling excess supply versus purchasing shortages because these renewable profiles are variable and they don't always fit your load. So we're going to review this as we saw it last time. There will be times of the year and times of day you won't have enough energy and you need to buy and supplement that for the market, or there may be times of day when you have excess supply and you need to sell that excess to gain revenue, which overall lowers your cost. Yes. >> Question. Mayor Pertam has a question. >> Do we know when the Brattle Report came out what their annual growth assumptions were at low, medium, and high? >> For load? >> Mm-hmm. >> Do you know what that was? >> I think they had a 2 percent load growth as -- >> For mean or just in general? >> The mean. The mean. And I don't know what the other ones were. >> Okay. Thank you. >> So as you can see on there, those are the growth load assumptions, the load growth assumptions that we used in the project. So the first thing we need to do is to figure out how much you need to meet your 70 to 100 percent goals. We need to figure out what you have now and then figure out what the gap is. So just to review, we already discussed this last time, but it's important to understand that when we define a percentage of renewables, we're saying we want to go into a -- we prefer using a year as a measurement period because we don't want to be influenced by seasonality. So if we take all of your load across a year, the total number of megawatt hours of your load for a year, then we want to have enough contracts in place for renewable output to match that to 70 or 100 percent. That's how we define that 70 or 100 percent goal. Yes, sir. >> So refresh my memory, because I remember we had this discussion early on in the last presentation. So in this example here, let's say you're saying our load is 1.5 million megawatts in 2019. >> Yes. >> And of what you have up there, excluding whitetail, you know, but let's throw that in there just so we'll have a -- >> Yeah, it's -- >> Then you've got -- but this is the capacity. You're not applying any kind of factor as far as, you know, like most wind contracts, if you're at 150 megawatt, they're going to actually deliver only X amount. >> No, we've made adjustments for that. >> In this chart here? >> Correct. >> Okay. >> That's right. Further, we've made -- yes, further, Santa Rita has been reduced a bit further, because when a developer tells you what the unit is going to produce, you don't always get that. We used the analogy yesterday. It's like when you go to the showroom and buy a car and you see the miles per gallon sticker on the car, you drive it off the showroom. You never get quite that amount of miles per gallon. So there are historical measurements that we use from ERCOT data to then essentially adjust for what we think the planned output is. So that's what we've done here. So these are the four resources. You've got a little bit from Landfill. You've got Whitetail coming on in 2019. Bluebell is a small solar resource. And Santa Rita, which is a large West Texas resource, and those are the annual production estimates we've had from that. >> Yes, go ahead. >> Oh, no, I'm sorry. Yes. Thank you. >> I don't recall seeing a slide between here and the very end. But at the end, you asked the same question about whether or not we're counting Whitetail as renewable. >> Yes. >> I don't understand why that's a question. Can you help me understand? >> Absolutely. >> Or is that going to be covered later? >> Not exactly. At some point, we need to discuss it. >> Okay. >> So from our understanding, at one point, you had a win deal from NextEra for Whitetail. I believe it was 60 megawatts was the capacity correct. After that deal was started, at some point, it was converted into a 30 megawatt, round-the-clock firm deal. So you can buy that from anybody. That doesn't necessarily mean it's wind. So from originally, it was directly from a specified wind farm. Now it just became a generic 30 megawatt purchase. And then they added RECs to it to call it a renewable resource. Now that's where it gets controversial. How do you value those RECs? We're on record, I discussed this yesterday at the utility board. We're on record, we wrote a paper for the Mitchell Foundation in 2011 advocating a new type of power product, which was the combination of standard contracts with RECs. But at that time, the RECs had value. At that time, the RECs served as an incentive to build additional generation because you could get money from those RECs. It was a way to incentivize people to develop more renewable resources. Excuse me. Probably you need to, for folks that have just tuned in to this conversation, describe RECs again. Yeah. I'll let you describe the renewable energy credit. So a REC is a renewable energy credit. It was designed for the competitive market under the renewable portfolio standard for the market when the market decided to change to a competitive market in 2000. And so what happens is that ERCOT or the state set a level that all the competitive folks had to meet in terms of renewables. And to do that, they also use these renewable energy credits that you can use to count it with. So it's really a tagging and counting of those renewables. And in the competitive markets, you could trade those for if you couldn't buy the physical power, you could buy those and it represented a renewable resource. And so that's gone on. NOEs, co-ops and municipals, were exempt from that rule, from that law. And so that's what when we're talking about RECs, it's this tagging things to physical wind. And it says if you produced so much, you get so many tags. And that's what a REC is. All right. For someone like me who doesn't know much, it might sound like that you're double dipping and selling the renewable energy twice, the real renewable physical energy and then a credit. But that's not it or is it? No. If it's closely matched to the renewable, if you can't take the actual physical delivery, then you can use a REC as long as it represents the value of the environmental credits in there. So it is an abstract thing. You're right. It's kind of -- but you can't sell it twice. Only one -- if you make a megawatt, that megawatt is tied -- that can be represented as renewable with that tag. Without it, it becomes conventional energy. And this is the problem that we have with Whitetail. We believe that's conventional energy. And then they've stacked RECs on top of it. And there's not a direct connection to your production and load with a physical wind resource. It's been severed. If I can go one more question. But they do have a wind farm, right? There is a wind farm, sure. But you don't take any power from it, though. Yes, sorry. They're only obligated -- I didn't mean to knock you out of the way there. They're only obligated to deliver the 30 megawatts to you. That's it. And they can stick any RECs on it they happen to have. So there's no -- let me phrase this in another way. From a reputation risk standpoint, in terms of not having this to be a potential issue at all, we just recommend doing deals where you know the power is coming from a renewable resource. And then it's not a question. Well, I think that that's probably what most of our citizens are thinking when they hear 60% renewable. They're thinking of 60% physical renewable. Directly coming out of a resource, yes. And that's our recommendation to go that way because then that puts that to rest. Because I think that down the road when we're doing this, finally, we're going to need to make sure that we're clear in our definitions. Yes. So that folks know what we're really talking about. So that's an assumption that we've made here. This is one of the factors to take into account, though, in terms of how you're going to choose the path. You'll see some slides on our recommendations on how to choose the path to get to your goals. One of those decisions is how do you count whitetail. Whitetail goes away at the end of 2023, so it's not a big problem years and years and years and out. It's just a few years compared to the duration of some of these other potential contracts. I'm sorry for interrupting you. Oh, no. No, you're fine. Yes. Zoom. So while we're talking about whitetail, I am in favor of not counting it. I think recs are misleading, and I'm all for physical renewable energy. But to that point, and misleading the public and just confusion of recs and physical energy, going back to the renewable dent in plan and what I'm seeing now, I'm just trying to--all the questions I'm asking are trying to correlate these two. I'm trying to--so down here, you're saying we still need additional 9% or, let's see, 6% to meet our 70% renewable goal that was stated in the renewable dent in plan. Yes. And what has been communicated to us, your 70 to 100% goals . That's correct. Right. But for just--the renewable dent in plan's sake was for the 70%? Yes. Yes. Okay. So was our department counting whitetail in that goal to get to that 70%? I couldn't answer that, and that's something that we've just presented you the option. So I don't know if you were or not. Maybe someone else could answer that. Well, I will say, in the past, I asked Mr. Williams if we were talking about 70% physical renewable energy, and he answered my question yes several times. So that's why I'm just trying to--were there other plans for us to purchase more renewable energy into this? I don't know. Okay. We're really not that informed on what the plans were prior to us coming on board and being asked to develop a plan to meet your goals. This is just what we have now? Yes. Okay. So the value of RECs has changed over time. We were advocating their use years ago when there was a value to them. And then you go to other states where they haven't met their renewable portfolio standards yet, there is a true value to those. But because Texas is an ideal place for wind, it's an ideal place for solar, it was a natural place to have a tremendous amount of renewable resources added to the state, that the state's goals were far past just for economic reasons. So then there was no longer a need to incentivize new renew ables, so the RECs then came to where they're essentially not exactly valueless, but there's really little value in them. So that's what has changed over time. If you asked us six or seven years ago, we would have had a different opinion of the RECs than we do today because there is no more value. The reason they were created and the need has been met, that's the values there. So that's why it's a little bit of a complicated answer. Six years ago we might have said this is a more viable path , but not now. That's why we've reached that conclusion. But we'd always would say the RECs that, whatever they represent, have to be tied to the exact physical in a contemporaneous timeframe that you use them for or you can't really count them. They have to be tied to the physical wind or solar. They have to be. So just in conclusion on this slide then, depending upon how you count whitetail, you need between 9 and 26 percent and additional resources to meet the 70 percent goal or between 39 percent and 56 percent to meet the 100 percent. Council Member Duff has a question. Yes. I want to go back to that slide. Yeah, go back to the last slide. You know, one of the things you notice on there is how small the solar is and I think that's probably pretty close to where it is in the state at the moment. But what I see in the future is that solar is going to come on probably a whole lot faster than you can imagine. And that's going to change the whole mix. ERCOT thinks that as well. Oh, I don't think there's any question about it. It's a semiconductor. I don't know what happens to semiconductors. The price, even with that rapid acceptance, the price is very compelling now and you'll see that here very shortly. I'm not going to spend too much time on this slide mainly because this was done in an earlier version of the presentation and we now have some more specific offers that we're using in our recommendation slide, but this just gives you a general sense of the prices that have been offered to you. You had an RFP out for renewable energy. The results came back in early October. We got some of those results a couple of days, actually last Thursday, Wednesday, I think it is, so we incorporated those into the analysis here at the last minute. But the pricing here at these different types of renewable resources and the locations are very compelling and we'll do a little more financial analysis on this slide to show you how compelling they are. So let's focus on the top table first. The left-hand column, these are approximate annual prices for energy today. If you just went out into the marketplace and purchased energy on peak, you'd pay about $31 per megawatt hour. If you purchased around-the-clock energy, you'd pay about $ 27. So this is our market reference price for looking at comparing the cost of renewables versus just buying the power from the market. So we have a renewable equivalent price in terms of--these are just representative from the offers that you've had in the RFP of around $23 a megaw att hour for solar and what is an effective price of $21.50 for wind. That's an adjusted price because the wind doesn't blow all the time. Thus, you need to pay a little more to get more wind relative to a block of power. So that's an adjusted price for that. So the key here are the differences. The solar is giving you a savings about $8 over a market purchase of on-peak power. The wind is giving you a savings about $5.50 versus buying around-the-clock power. And remember our heat rate definition. If we want to look at what the gas price equivalent is, we need to look at what the implied heat rate is and the implied gas price using these savings prices. So if we look at the $23 price for power and divide that by the 10.5 heat rate, we get an equivalent approximate gas price of $2.20. So the solar is as if you could buy gas right now at $2.20. The wind is if you could buy gas now at $2.20. Well, gas is around $2.90. So that gives you a general sense of how much of a discount these renewable resources are relative to just going out and buying output from a gas plant. So, Council Member Briggs has a question. Yes. So really just a statement for our rate payers and our viewers because when we talk about going renewable and upping our percentage, you hear feedback from citizens that say renewable energy is more expensive. But from what I am seeing is that it is less expensive and it's very competitive right now. So by the Council talking about going more renewable, we are not putting any more pressure on our rate payers by choosing this option. That is correct. Okay. So one of our recommendations is to go faster because of the process. And there are maybe some compelling reasons why now is a pretty good time. And we will get into that in some other slides. Okay. Thank you. Just I am not going to spend much time in the lower table. All this shows you is how sensitive the market price here, which is in the left-hand column, is to the price of gas, which is in the second to left-hand column. So if you think about buying renewables at an equivalency of around $2.20, you can see that if gas prices, for example, the lower row, goes up to $5, the market price of power be around $47. So your effective savings would be around $26. That's if gas goes up. But if gas goes down, you might end up having a value that 's above where you could have purchased a cheaper gas resource in the future. That's the top line here. So again, where gas price is going, that's the outcome. That's the key driver of how your benefits accrue here. Yes. Yes. Mayor Pro Tem. Why does the heat rate change with the price of gas? Well, heat rates are always inversely related to the price of gas. Gas prices go up, heat rates go down. And why is that? Well, think about it this way. It's a simple – this is simplistic. Let's say if power prices go up, what will happen? New units will come in. There'll be new units. There'll be six and a half heat rate combined cycle units. There'll be solar. There'll be wind. There'll be all these things to meet this. All these have very low heat rates. So the curve turns into a very low heat rate curve. You just add more – you substitute the older higher heat rates with newer lower heat rates. That's under high gas prices. And it's because if you look at the – like these power prices, if you buy a new heat rate that's at six and a half, the nine and a half is what you could sell it at. That's a huge margin. That's why they would do it. It would compel newer lower heat rate units in. So does that – the heat rate that you have on there, is that the northern hub heat rate? Yeah. Okay. And you're talking about implied heat rates. Implied heat rates. Yeah. I think that's where – that's some of the confusion is the deck or any other physical plant has its own heat rate. It's static. That's right. So the implied heat rate is sort of backing into the heat rate by taking the power price – That's right. – divided by the fuel price. That's right. So that's why it's going down. Yes. That's the effective heat rate of the entire market. That's right. Council Member Duff. Isn't it possible to kind of hedge your bets on the natural gas? Can't you buy futures on that? Yes. Is that something you can do to – you know, just to – so that if it gets crazy, you've got it. Yeah. Yes, but why would you buy natural gas at $3 when you can buy renewables at $2.20? I understand. This is – in some ways, this is buying natural gas, but you 're buying it at a 25 or 30 percent reduction in the price. And then it also isn't natural gas. It's already converted into power. You can use it straight in. Right. That is a potential consideration. I wouldn't say that's going to be a recommendation yet. We have a next scope of work is to develop a strategy and implementation for the management of this portfolio. And there is a projection of how many hours a year the deck would run. So it's possible to buy that gas in advance and lock in the cost. But that's something that we need to give some consideration to. So that's entirely possible. We will consider that. But I don't know if that will be part of the strategy or not. But it is a possible element of that. When you get into – about the next 10 or 15 minutes, we're going to take a break. So as you get to a place where you think there's a – Okay. Is a – Council Member Duff had a question or comment. Yeah. And I guess you can also kind of hedge your bets a bit if you're – like you're buying solar and you're buying wind at a future date. Yes. And that's got to be really tricky because actually what I think is that the solar is going to be driving the boat. Well, at a future date it's clear in the RFP that you have, you have staggered terms. And we think that's something that you really – it's going to be tricky, but you want to figure that out. And so you may want to shorten some of these acquisitions and some you'll be longer, depending on things like market views like you were talking about with solar. There is a solar tariff that is being discussed right now. The hearing is on, yes, and the solar tariff will increase the price significantly. However, you talked about semiconductors. Remember, there is a tariff on those too. In the long run, those – the tariffs come up. There's quotas. There's price impacts. But then it's rationalized eventually in the market. Council Member Gregory. Well, I got very anxious when I read in the presentation about the solar tariffs. So I asked the Google what that was. And – Did you get a straight answer? Well, I'm going to tell you what it said. You can tell me at the Google's, right. It said that this has to do with a tariff on Chinese solar panels that are coming into the country. There's a mood of protectionism and that – wanting to not have as much free trade. So in a case like that, the tariff is actually on – when somebody is purchasing those solar panels that are coming here, one-time cost. Is that correct? Well, part of the factoring is some of the producers have stockpiled panels to try to get in ahead of that, but there is some discussion that the tariff might be made retroactive. So these are some of the uncertainties, and there's no clarity there. So you might get a backwards-looking tariff even on something that was already – That's what I was going to, because we already have a contract with Santa Rita Wind. Yes. And my guess is it's already under construction or those – That's a wind farm, not a solar farm. This would be a consideration for future solar purchases here. Don't we have a – You have Blue Bell. Blue Bell. Blue Bell. Okay, I should have written down Blue Bell. Is that already there? But even if it's already constructed, they can go back and do a retroactive – To an extent, but that depends on what they decide. That's an excellent question. That's just an excellent question. And the – Hey, hey, make a note. I want to hear the answer. I love that when I can – So – That's one thing. So my sense that they have already bought and they bought before any kind of tariff considerations, that's my sense, but I do not know that for a fact. So that's an excellent question. I have noted that every time I ask what the consultants consider an excellent question is because they have the answer. Or it's a question we can't answer at all. It is a habit, yeah. All right, just a couple more slides. We're going to get into an assessment of what we think the role the debt can play, and so probably it's good to take a break before we get into that because that will take a while. Yeah, we'll do that. Sure. So you've seen this slide last time we were here just as a brief refresher. This is from ERCOT. This just shows you the production profiles across the day of various resources. So you have a substantial West Texas wind resource, which is kind of like the blue line with the triangles on it, coming in from Santa Rita. So unless the price was super, super, super cheap, you don 't really need more of that. You need a natural offset to diversify the portfolio of things to fill in the gaps when the wind isn't blowing, and that would be solar and coastal . So the real takeaway from this slide is that we feel from where the portfolio is now, from when you need to add, that solar and coastal would be the best fits to help fill in those gaps across the load profile. And just as a refresher, you saw these two slides that we 're about to go over last time as well, but this just illustrates in different seasons what the portfolio mix is likely to be and what you're going to have to do for balancing because remember, your load, your dentin's load is the wave-shaped blue line that curves down and then up across the graph. That is a variable load. If you buy a block of power, it's a block against a variable load. If you buy a production profile from solar or coastal or wind, that profile varies across time. So there's always potentially a mismatch between the amount you can produce in any given hour and the amount of load that you have. So just to review here, the horizontal scale or the 24 hours of a day, the vertical scale is in megawatts, the blue wave line is your load, and then we have various assets added into here. So wind, like a West Texas wind output or profile is in the red bars. The solar output would be the green bars and then the vertical blue bars are the deck. So as you can see here, that in the early morning hours, there's not enough wind blowing, the sun isn't shining, you're not getting any solar production, the market cost is super low so the deck wouldn't be running because it'd be running at a loss. So what are you doing? You're going to fill in the balance with purchases from the market. But then we get into the on-peak period where the sun is shining, you're getting a lot of production from your solar resource, and the deck, when you turn the deck on, there's a – I don't want to get too deep into this, but there's a theoretical concept called ruthless exercise, which is when you have a value, you do it all the way. When you turn the deck on, you want to maximize the benefits of the value of the deck. So during those hours when the deck would have a positive margin to run, you're going to run all of it, but you're going to have more production than your load, so those would be hours where you would anticipate selling that excess power to produce revenue, which then lowers your overall costs. That's what it would look like in the summer. If we look at another season like the spring – - Council Member Bray, you had a question. - That's regardless of gas price, right? - We would anticipate that an August day on peak is probably most likely to be the best time for the deck. So that's when the heat rates for a few hours would be so high that the deck would likely run, but the gas price is a factor in that. - Okay. - Yes. So there is uncertainty around that because of the gas price. - Okay. Thank you. - So the peak is 71% renewable? I mean, if I'm adding up the percentages. - Yes, I believe so. - So, yeah. Okay. - Then the spring profile. Here this is the high season for wind, so you would have lots of wind at hours of the day. So in those early morning hours, you'd have more wind production than your load, so you'd be selling excess wind production in those hours. The deck would not run because it wouldn't be economical to run. You wouldn't get as much output of solar. So the solar is making a contribution, but not nearly to the extent it was during the August period of time, and thus you're gonna be making some market purchases in some of those peak hours to meet your peak load, but it would be much cheaper to buy from the market than it's going to be to run the deck in those hours. I think two more slides. Let me just look peak ahead. - Okay, yeah. - We'll do three quick slides. These won't take very long, and then we'll get into the deck. Wind location. There's several factors into account in what are the optimal locations for the assets that we're recommending. The main takeaway from this is the following. You're seeing dispersion graphs here. The bottom bullet says that the capacity factors are often overestimated because it's difficult to include site-specific losses due to wind shift, turbulence, and topographic effects. While coastal is superior in that regard. The wind's typically blowing from one direction. It's more consistent. So if you looked at what do you want to add into your portfolio, coastal is a much more sort of pure source of wind, and it happens to match for other reasons as well. So that's one of the reasons that we recommend coastal as a wind resource. Solar. The sun is not shining on the slide here. - I didn't know what happened to that. - It just disappeared. - Whatever. - That's... - Total eclipse. - There we go. It just took... - That's pretty good. - It was short. - That's pretty good. - So, irregularity. - Yeah. - Yeah. - So, irradiance is important in terms of maximizing the output from a solar farm. So as you can see on the map here, an optimal location for solar irradiance for the location of a solar farm would be all the way out in Texas out to El Paso. But El Paso isn't in ERCOT. So you naturally want to get as far west as you can in ERC OT. But there's another consideration, which is if you go too far west, you get into a congestion zone where there's too much power and not enough load, and there's a real penalty on the production value of that. So the optimal location is as far west as you can get to maximize the irradiance, but be within the congestion zone. So it's going to be around just roughly the middle in the area, a little east of that, would be the blend of those two optimal locations. Other location considerations that we take into account, the left-hand graph with the dots, color dots, that is from a recent ERCOT study. This is their projections of generation additions and retirements in ERCOT. The generation additions are the yellow and orange dots, the retirements are the blue dots. So I think you can see a pretty consistent pattern here. More and more generations coming into the west and northwest, the retirements are coming into the east. This is only going to exacerbate the west to east congestion from the flows. So naturally, if you're going to add a resource, you want to add a resource into an optimal congestion zone, and coastal fits that as well. That's another benefit to coastal wind because you'd be adding it into an area with load growth and coal retirements, and that's a really good fit and could reduce the congestion costs that you might face with these renewable resources. You can't really optimally locate a solar over there. You can, but the output wouldn't be nearly as good. But coastal with the wind resource, you can try to do it for that purpose. And then lastly, there are connection points with transmission interconnects that exist for various resources. You just don't want to put something out in the middle of nowhere where it's going to be more expensive. So there's just a congestion optimal spot that we've taken into account as well. Council Member Briggs. So on the retiring conventional generation, that is coal and gas, like older gas? Yes, just like Spencer Road plants going away too. That's a very high heat rate gas plant. Yeah. Thank you. Yeah. I think this is probably- It's a good break. Time for a break. Okay. Yep. Let's take a break. All right. Welcome everybody back to this meeting of the Denton City Council. We are still on work session item 3B, and we're going to resume. Yes. We didn't put a specific slide in here, but I just want to briefly address demand resources, demand response, and demand side resources. We're generally in favor of all of those types of resources . We didn't stress their inclusion in this immediate resource plan because you've got some critical path goals. You've got some things coming online early next year that need to be addressed immediately. And there are some factors we're going to talk about in a moment, some opportunities in terms of market factors that make solar resources at a utility scale very compelling. We're very excited about the advances in storage technology . That's going to revolutionize the business. But you're just on the cusp of those being commercially viable. The price is nowhere near where it would really make a lot of sense to do it at scale. We've talked, I think, in our last presentation about Austin being an early mover, and they've got solar plants at the $160 level where you could buy them for $23. So our recommendation is those types of things, demand side resources and demand response, are very useful. That takes a longer planning period. You need to incorporate how you want to incentivize those things in rates, how you want to control the penetration of, say, rooftop solar in certain neighborhoods. These are things you have to be very well thought out. We're very much in favor of them, but we think that would be a longer term path that would require more planning. We're trying to take the big cuts to get you very quickly to what we can do in the utility scale. So that was the focus here. So we didn't want to ignore that, but for taking big chunks of what a solution can be for you, we focused here on the utility scale. Very quickly, supply portfolio modeling. We're not going to spend much time at all. I don't know if this will make you feel better, but we're going faster than we did with the utility board. No, we're good. We're being thorough. That's what's important. Yes. So not to exhaust on this slide, but just to give you a sense, if you're curious, the different factors we took into account in the qualitative and the quantitative modeling of the portfolio, clearly gas prices, power prices, heat rates, those are all important. So I won't go down the list exhaustively, but that just gives you a sense of the various factors we considered in the modeling of the portfolio. So let's talk about some of the conclusions here. First though, I want to address something that's really important. Using a specific power plant to firm intermittent resources , and when we're talking about that is the intermittent resources, because of the uncertain nature of their production, you have to have something to back up the ability to fill in the gaps in your load requirements when those resources aren't producing. That sort of thing to use a specific power plant is necessary in a bilateral market where utility is responsible for its own control area. This is the way it is in certain parts of, say, the southern United States. This is the way it was in Texas a couple of decades ago. When you had your own control area, when you were using your own power to generate power to load within your control area, this is when solutions like adding power plants to your own portfolio made sense. But ERCOT's a different structure. When the ERCOT Power Pool came into being, ERCOT is not a bilateral market. It's an energy-only power pool that's managed as a single control area. So the ERCOT market is designed for firming to be done from the market, not necessarily any individual power plant that any one party owns. So it's designed to use the day ahead market. That's what DAM means on this slide, including the firming of intermittent resources in the real-time market for demand to real-time imbalances. So what does this mean? This means that if you're using the market to firm, the main issue is cost. How do you manage in a least-cost way the firming requirements of an intermittent resource? So this is where the DEC will certainly play a role. But a lot of the time, the firming you're going to need around the renewable resources, it'll be cheaper just to use market purchases to firm rather than to use the DEC. So we'll talk more about that. Got a couple questions. Mayor Pro Tem and then Council Member Goertz. So okay. We don't have the firming requirement because we're in an energy-only power pool in ERCOT. However, don't we have some load balancing requirements because we have an in-house QSE operation? You have to show what you've purchased and bought in the market and schedule those in. But as for a load serving entity having a balance, there is no requirement for that in ERCOT. Okay. And ERCOT will fill in the balance for you just a matter of what cost. Economically you don't want to be on one side or the other, but there's an economic issue there, but it's not this firm you have to provide for all your load kind of thing. Council Member Briggs. So I just want to kind of reiterate what I think you heard is that since we are backed by the ERCOT market, it's not necessary to build our own generation to firm the renewables. That's correct. Yeah. Okay. Now, I will say this. There are people that feel more comfortable doing that, and this is really a function of what we usually call risk tolerance. This is a risk preference. So some people prefer to be more conservative, some people don't feel like they need to be that conservative in the design of their portfolio. Some people feel more comfortable with the specific power plant that dispatches, others rely more on market purchases. We have a variety of clients that have different preferences in terms of what makes them comfortable as an organization that they are meeting their own needs for risk reduction. Okay. But it's not a requirement, but some people prefer it. Is this why you hear... I'm sorry, can you hear me? No, go ahead, sure. Is this why you hear the deck referred to as a hedge? Well, the deck is a partial hedge. The deck hedges you against market heat rates rising. Now, remember the deck, unless the price of gas is fixed, there's no certainty of cost. So it's a partial hedge. Until you pair the deck with a fixed gas price, then we don 't know the exact production cost of the deck. Those two things. We went through the heat rate discussion. A lot of times a hedge is at a loss. Well, a hedge... Our perspective is that hedges always have a cost. Risk reduction always has a cost. It's just about managing that in a cost efficient way. Because you are benefiting from the reduced risk, thus you are gonna pay a cost for that, just like an insurance premium. You need insurance, how much is it worth it to pay? And that's an individual decision in terms of the risk preference for that. Thanks. You're welcome. I have a follow up to the QSE question. And I'll just apologize ahead of time because it's... When you learn something a certain way and it turns out to be wrong, it's very hard to back out of it and try to learn it another way. So this is what I understood the relationship between the firming and QSE to be. And I think it summarized well in the Brattle Report. It says, "To maintain its QSE status, DME must follow strict operational guidelines set by ERCOT and the PUCT. DME must maintain the supply and demand balance schedule at all times and manage the supply uncertainty associated with its intermittent renewable PPAs . Expanding DME's renewable energy portfolio is called for under the RDP will create new operational challenges for the EMO," which is our QSE. "As discussed later in this report, the Denton Energy Center will help the EMO address the operational challenges created by the new renewable portfolio." So in my mind, the DEC is related to the operation of the Q SE with a high renewables portfolio penetration. And I want to mention something else just before I get off track. In Brattle's low gas scenario, which is year market rate based scenario, there were years where the DEC was not profitable, but for the ancillary services provided by the QSE. So I'm trying to understand correctly what the relationship is between what we used to call the low gas scenario and now we call reality and what the QSE is, what the role of the QSE is when we're now being told that farming is not a requirement, at least not a legal requirement, it might be a financial optimization, but anyway, go ahead, thank you. That's right. So let's say you have a load and you just need to stack energy supplies, let's say the renewables, enough that you cover your load. And that's all that ERCOT will do, but they don't have a specific immediate penalty, they have a scoring mechanism. And what it does is it does something with collateral. So you get a small penalty basically. That's the whole one for one match up on the physical sense . So the other thing is you have to, as a QSE, you have to show all your resources and all your loads and just make sure you put them in there. And what ERCOT does is if you're short, they charge you the real time price. If you're long, they pay you the real time price. That's what it does. It clears it. It's just a clearing mechanism. And so in terms of having a deck to help you firm, it does help you firm some parts of the time, maybe 15% of the year. And it doesn't allow you to do it 100% of the year. It's only those times where you have really high heat rates in the middle of the day, on peak, that's when the deck will actually come and help you. And it only helps you to the extent that you don't have enough supply during that time and there might be a price spike. We have a slide that will illustrate this a little better. So with the ancillary services then, are you going to be discussing the potential profit making capacity of ancillary services? Because that was a part of our pitch, if you will. Yes. Ancillary services, if you saw in the Brattle report, they said what if you have zero responsive? What if you have 20% responsive? What if you have 100% responsive? The 100% responsive, that's a tiny, tiny market in our cot. And it's so tiny that the deck would make up something like a third of it at 100%. So that's unrealistic. You might be able to get some return or some margin from selling ancillary services, but you can also just buy them in the market. They're not expensive. There's an automatic market mechanism for that. They're sold every day. Everybody competes for them. They're like $1, $1.50 for your load for the entire year. And so will the deck capture, it may capture some of that, some of the renewable, or no, I'm sorry, some of the ancillary services, but it's not a big part of the economics of the deck. It isn't. Okay. Thank you. And things may change in the future. You know, ERCOT's studying the effect of demand response programs. There may be other reasons because of curtailments to have more resources in certain areas. So I don't know if you need to. There's been a discussion of new ancillary services because of a lot of renewables coming in, but at the same time we're also putting in fast, more, we're one of the markets in the United States that has more fast response units than anybody else. We have all these combined cycles and they move very quickly, and therefore the prospects of the deck being able to move and that sort of thing are very low. The other thing about the deck, the way ERCOT would probably dispatch it 99% of the time, they turn it on at full blast and then they turn it off. And part of those are 15-minute intervals. So they get the signal, they start going up, and then they turn off. The problem is that's not an 8-3 heat rate. It loses heat rate efficiency in those 15 minutes. And we think a lot of the intervals would be 15, 30 minutes , and so the heat rate of that goes up higher than 8-3. It's maybe 10. Sorry, so the heat rate when ERCOT dispatches the deck would be around 10,000? It could be in 15-minute intervals. So price-wise sometimes-- That's the heat rate of our coal plant. Yeah, but those, remember they're two different fuels. I know. I know. Price-wise is what I'm thinking. But it can move much faster than the coal. So you can turn it on at 15-minute and you can turn it off. It's just that the heat rate gets degraded over that short period. You want it up and then a long time, you know, run for a long time, an hour or two or something like that. Unfortunately, that's probably not how it's going to be used. Thank you. So let's talk about the deck and its role in firming. That's why we prepared this slide here. So using the deck as the sole hedge or source for firming is not the least cost and lowest risk option, according to our projections, for over 75% of the hours in the year. And this aligns with what Brattle found in terms of their projection of the number of the hours that the deck would run. So just to reaffirm what firming is, because of your renewable portfolio and the more renewables you add, the more variable the production output hour to hour, day to day is, you'll have a greater need to have an internal operation that is performing that supply balancing operation. So the question is, during those hours where you don't have enough output from your renewable production portfolio, but you have load, how do you make up the difference? That's what the firming is. It's just a supply balancing function. And most of the time, it's going to be cheaper to buy it from the market. So we've used an August day example when the deck is more likely to run. What you're seeing here is the 24 hours across the day, you 're seeing the market price in terms of dollars per megawatt on the vertical scale. The green shaded area is when it would be cheaper to buy your firming supplies from the market rather than run the deck. During the unshaded part, when you see the dam price spike in the real time going up, that's when the deck would be valuable because it would be cheaper to run the deck than to buy the supplies from the market. Furthermore, if the deck capacity then exceeds your load at that time, that's an opportunity where you're selling that excess power into the market and getting a higher revenue off the deck, which can be used to pay your other costs there. So this is the scenario when the deck is most likely to be run. On August day when the market heat rate's higher. But you notice in the overnight hours, the late night hours and the early morning hours, the dam price in the real time is about the same. It's a lot cheaper to do your firming simply just purchase that much cheaper energy from the market rather than run the deck. It's during those high heat rate, high load times like August, that's when the deck is really going to shine and give you a lower cost alternative for the supply balancing versus the market purchases. So on this illustration, you're saying that if we use this example, the deck would be running 11 hours if it's the non-shaded area. Am I right on that? Yes. Okay. No. The deck would be running about four hours I think. Oh, those are the intermittent portions. From what he was talking about with the 15 minute intervals , you might have certain hours where there are 15 minute intervals but not the full hour. Okay. So you can see that with a little bit of the slice in the right hand side there. Right. Okay. Yep. All right. Did you have a question? I did. You may be talking about market purchases a little bit later which I could ask but we've been referring to the Brattle Report and I'm wondering, I'm trying to remember or recall if they did the comparison for market purchases on the deck . I don't know that they did. So I'm just wondering- I don't recall that. Okay. That's a good one. Microphone. Microphone. Yeah. I think they, no, they didn't. They didn't. What they assumed is they said they had a real time and day ahead thing and so they left this out and this is one of the things that we think is very important to put in and what happens is they said you get a huge advantage for, not a huge, I think it was like $8 million, if you use the deck to participate in the real time. Well you won't do this. If you can see in the hours one through seven, the prices are exactly the same. The difference is if you buy the day ahead price, you are, it's fixed, it's no risk, it has no congestion cost, it has no ruck cost, it avoids all this liability and it's the same price. If you go into the real time, you can have slippage. The price can go up but the deck's not on. So which one would you choose? Well you'll always choose the day ahead, the hedged price that has no risk versus potentially at the same price something that has a lot of risk and they left that out. So that was an assumption that the real time would be leaned on for that and that's something we would not. Council Member Hussbuth and then Council Member Gregory. Thank you and only by staff's greatness do I understand what day ahead market is. Yes sir. Dominant. Okay so my question is this, can you help me just briefly get my head around the functionality of supply/demand, right? So are you supplying, I'm assuming you're guessing how much supply you need and then you're providing that some amount above what you need and if those two worlds, how does that mechanism work that'll help me understand the slide you're on? This is, yeah. Do you send, I say send, do you generate, do you understand where I'm trying to get my head around? I do. This is highly dependent on forecasting. You need to forecast what your load is going to be, you're going to forecast what the output it is of your various renewable resources so then you match those up and you determine whether you have a gap or not or you have an excess. So it's that forecasting and it's the imbalance between what your forecasted production is and your forecasted load that you then need to take some kind of action to close that gap. Yes, I made this chart and I exaggerated a little bit. You see the blue line up there? You will get close, we'll be always over or under that blue line, always over and under and so at the bottom you'll have purchases and sales in the real time. So it's an approximation but you get close to it, you want to get as close to the blue line as possible. I assumed in this chart that I'd be exactly or whoever did this would be exactly right in forecasting exactly at the hour. That's true to some extent. Usually there's a 1 or 2 percent difference. If I may? Sure. So is, but help me understand, is there an individual that hits the green button and says send this much? You know what I mean? That's what I'm trying to, I'm trying to understand the mechanism by which it is sent down the line and utilized and who, how is that managed? Well most of these units are robots. They just are turned on and they are smart and they just do what ERCOT tells them to do. That's on the unit side. But on the load side, you purchase or sell, you forecast your purchase and sales and if you need to purchase something then you have to go in and submit a bid for it and the amount, that's shown in the purple line here. We'd have to go out and forecast that amount and say I'm going to buy 20 megawatts or 75 megawatts at hour 3 for $15. And so that's where all the active management is. And then I'm going to be long, let's say on peak where all those blue lines are. I can actually sell that in the day ahead to the real time and maybe make a little bit more money from that if I can forecast that correctly. And then one last thing. Thank you. So how responsive is real time? What's the turnaround time from let's say purchase to going down the line? What is that response time? The real time market is a make up market by ERCOT. You will have done these purchases and all this planning in advance of that. So then it's just the real time is trimming where the actuals are not quite exactly how you forecast it and then act it in the day ahead. And so what is that? Is it instant? If I'm long, let's say, to use your term, and I need to sell it, is it? All these plans are done in the day ahead market. And what the day ahead, we should have explained this. That's in the morning before 10 a.m. So this morning I purchased so many megawatts. And that starts at midnight tonight and it goes to midnight tomorrow night. You know, and 24 hours. That's what you're planning for. So it's about, you know, you start 12 hours before basically. I guess it's more than that. 16 hours before. And that's when you do it. And that's the only time you really can buy or sell. And then you're kind of locked out. And the real time is all automatic by ERCOT. So this is the way the market's designed. Generators offer their generation to ERCOT. Load forecasts are submitted to ERCOT and they match all those up. And then they determine, that's their planning process to determine what units are going to be necessary in certain hours to come on. And that's sort of like that resource stack you saw in that earlier graph. So that's a day ahead planning process. And then during the day, when there's little variations to the forecast, that's the makeup market in the real time. Okay. Councilman Gregory, you have a question? Thank you. Yeah, you bet. Thanks. Could you go to the last slide that you had up there? Yes. So we have purchase power agreements for renewables. And sometimes bundled in with those, there's also a purchase power agreement for that entity to firm it up if the renewables are not available. And at other times, we do our own purchase power. No. I never do that. You can. They charge you on arm and leg. You can do it yourself for just a fraction of the cost. You don't firm it hardly. Almost no one buys the firm products in the market. Right. So you would all -- so the question I was getting at is, would you ever do a purchase power agreement for some of that green block from zero to eight? Or would you just be doing the day ahead market? Well, it's every day. That changes, and so -- We have clients that are not nearly as renewable who then plan on that, and they may buy chunks of that green part 18 months in advance, 24 months in advance in some quantity, and then they use the day ahead to balance that out. That's a more conventional approach. With you going 100% renewable, we're hoping that in an ideal world, most of that production matches your load, and then you're doing the supply/demand balancing in the day ahead. What I'm understanding even when we're talking about 100% renewable is because renewable is not dispatchable. There are going to be times when there's the gap, and the gap is either going to be filled by the deck or it's going to be filled by purchases in the market. That's correct. And that's the main activity of your EMO to manage the portfolio is that forecasting and all those transactions to achieve that balancing. And then it's an economic decision. Is it cheaper to balance it with market purchases, or is it cheaper for the deck? All right. Council Member Briggs? So the deck will serve air-cot and not denton per se, but so is it possible that we will be creating energy or heat from the Dent Energy Center that will not be bought -- would just be created but not sold? Is that possible? You would be -- if it's not matching your load, then that excess would be sold. Okay. So it would be. Yes. So is there a possibility, though, in air-cot that we would submit that we wanted to turn our engines on, but they would not be chosen because other units would be chosen? Yes. Okay. All right. Thanks. Most of the time. Yeah. Most of the time? Most of the time. Over 75% of the time, that is the case. That would know the economics of dispatching the deck and they wouldn't turn it on at a loss. They're going to turn on something more efficient. So 75% of the time, we will not be picked to turn our -- The deck would not be running. Okay. Thank you. Any more questions? So just to sort of summarize the discussion about the deck, this slide has a lot of information on it. We've got advantages and disadvantages on the left-hand side of the scale. So the deck is a heat rate hedge. It's a partial hedge. It hedges you against rising heat rates in the market. But remember, the actual cost of the deck is not known until you pair that with a fixed gas price. It will reduce the cost risk for Denton because at certain times it will be dispatched during price spikes. It also provides a long-term hedge benefit in the event of accelerated retirement of conventional fossil fuel generation. The disadvantages are that as a higher heat rate generator, it doesn't offer any pricing power and offers no competitive advantage. ERCOP manages the system so that the heat rates don't vary much, as we saw in that graph earlier. So its value to Denton requires that natural gas prices go up substantially in the future. And what we should add to that is heat rates go up substantially in the future. So again, the theme that we've repeated again and again and again is the value of the deck in the future all depends on where heat rates go and prices go. If you give a price scenario, you get a sense of the value of the deck. In terms of the runtime estimation, we've already addressed this. This pretty much matches how Brattle had modeled it as well , approximately 12 to 20 percent of the time based on the various models that we've used in the scenarios, I should say. That's how often the deck would run. That's an equivalent to about 1300 to 1700 hours per year. So then there are additional ways to get value from the deck, and we've listed those in the right-hand box. Denton should be prepared to sell deck output forward in winter if there's a spike in natural gas prices and a concomitant spike in heat rates. So remember our discussion about the market implied heat rate. We can look at the implied heat rate next month, two months out, next summer, two summers from now. We can look into the forward market, and that's changing all the time. So there may be times when the forward market offers more opportunity than the current market, and that's where you may want to sell some of that output forward. So you may be able to produce revenue from the deck without it even running just because of what you can do in the marketplace. Go ahead. Yeah, that day ahead, real-time thing, that's the first forward market. That's just one day ahead. But you could have gotten a lot more revenue from the deck if you had sold it in the day ahead. So if Denton has an excess of supply, the deck can be sold in the dam, as we're talking about, during high-priced hours. It could also be used to sell firming services to other entities. We have other municipal clients that are interested in adding renewable supplies to their portfolio as well. They have a similar need to firming, so it's possible for you to sell firming services to them. And remember, you're then obligated to firm. You're not obligated to run the deck. It may be cheaper for you to buy market energy to provide the firming than to run the deck, but that's an additional service that the deck backs up where you could get additional value out of that asset to provide firming services. And then that can enable other municipalities to increase their renewable portfolio. So it does increase the net benefit to the pool of renew ables. Well, I actually have a question for our legal staff on that point, because our charter restricts the electricity that we provide to our area. So I'm wondering how it is that we could provide or sell firming services and still be in compliance with the charter. We can certainly take an issue with that and provide you with a legal status report this Friday answering that question. I would say this. You reviewed your energy risk management policy, and there is a reference in your transaction authorization section of covered sales. And this would sort of fall into that category. So I'm just suggesting that may have already been-- What is that document? Yeah. The energy risk management policy document. The energy risk management policy document. This is a good point. Often munis have some provision like this. And it depends on what kind of energy it is and if it's tied up with bonds and that sort of thing. So it may be restricted for your area. Then it becomes-- if you're using the ISO, is that part of -- and I think it is. You may be restricted to the load zone north. That's really where your delivery point is. And so DINN isn't DINN. DINN is in the load zone north. Thank you. Yes, Senator Briggs. My question is about the top box there and the runtime and the equivalent between 1300 and 1700 hours per year, which you said was similar to what Brattle said. How does the runtime percentage compare to the actual percent of power we're getting from the deck? Because I'm going back to the slide that we had with the pie chart. And it said we get 70% from renewable and so much percent from our gas plant. Does that equal the same-- the division of the power that we're buying market purchases and-- No, no. In many ways, we didn't really count the deck because it's a heat rate. So it doesn't have any energy. It could be zero. So we have an estimate of it. So that runs this 12 to 20 percent of the time. How much does that really cover your load under load? Somebody else asked us this in the utility board. And my sense is it's a third of that or something like that . That actually goes to cover your actual load. The rest of it's above your load. And it's just sales into the market. Is it because of how many megawatts the plant is? I mean, is it the size of it? Or why is that it's going to be so much above our load? It has to do with meeting your goals so that if you're trying to achieve a certain percentage of your load as being renewable, then anything else that's not renewable is on top of that. Right. OK. It's also a ruthless exercise. Yeah, as we said, it's also a ruthless exercise. So when there is an economic advantage, you want to take full advantage of that. So you'd want to run the full output. If you can get a revenue on it, you want to get a revenue for the full capacity. And there's no other option. And this is just for staff and finance department. If we can see a new, I guess, finance plan for the deck based on the runtime. We will be working on that probably the first couple quarters of 2018. We really need to have the bids awarded in order to help continue to fix more of our loads so we can forecast our financials better once that's done. Because two things have happened since in the last couple of years. Renewable prices have fallen considerably, which has changed our pro forma. There was assumptions in the five and 10 year plans as far as what we would be paying for renewables. That's much less. And then the runtime may be arguably less than had initially been factored as well. So once we have the fixed pricing in the contracts actually awarded and approved by council, we'll be able to back into the rest of it pretty simply. But until that's done, it's very hypothetical. And I'd rather wait until you approve real contracts with real costs behind them. Thanks. All right. So we're going to move on into the meat of the recommendations for your renewable portfolio. We'll just summarize here that the deck will provide an advantage to you for certain hours. It will be cheaper as a resource than market purchases in certain hours. In other hours when you need to firm, it will be cheaper from the market. And that's just the bottom line of how it would be operated . This slide is repeated only because this is the basis for the next slide so we can go back and forth. Remember our low and base cases here, the Brattle high case , our high case, and then the two low cases for gas are going to feed into these projections of the benefits of the renewable portfolio. So this assumes that your 70% goal is reached by 2023 and then additional wind and solar purchases are added to that to reach 100%. The positive benefits result from avoided additional costs if prices rise in the future. The negative values result from low price outcomes. Remember, the benefits of the portfolio are all a function of where gas price is going to be. Are the prices you pay for the renewables cheaper than gas based generation in the future or are they more expensive if gas prices fall? That's the swing on the negative and positive results here are simply just these different projections of natural gas. So you can't avoid having an opinion of gas if you want to project what the benefits are. You have to base it on a gas price scenario and they're quite variable there as you can see. The R results and the brattle results for the deck really aren't that different because of the gas price scenarios. The system benefits between R projection and brattle, it's really dependent upon the differences in the high case of the gas, of our high case versus their high case. That's the real difference in those. Didn't I see in the presentation, the backup, that if you had a high gas scenario, I thought I read where it said you could have a difference of about almost a half a billion dollars or something like that difference of benefit if you have a high gas scenario compared to the low gas scenario base. I don't need all the detail on it but that's what I read I thought. You can see this blue line here and it's $75 million. This line here is I think $275 million. And actually that's only $325 million. It's that difference I think. No, I'm saying, yeah it's the high case, I'm sorry. It's $675 million is this number here and then $500 million must be $175 or something like that. No, that's good. I just wanted to make sure I understood that. It's harder to be actually better on the table. So considerations for your selecting renewable resources. So we think you can reach a 70% renewable goal with additional renewable resources from the current RFP submissions. They're very attractive offers. These need to be analyzed to determine where the devils are in the details to determine what those net effective costs are. But the initial indications are these are attractive prices . The additional energy to reach the goal ranges from approximately 9% to 27% as we've discussed earlier. That range depends on whether or not Whitetail is designated as a renewable resource. The current energy supply portfolio falls far short of a balanced and diversified portfolio because solar is only at 30 megawatts. So we're going to recommend a substantial solar purchase. The portfolio is also unbalanced because of a large amount of renewable energies coming online from Santa Rita. That's a west Texas wind profile. That doesn't give you a lot of wind output during the day. That's a lot of wind output and off peak. Plus blue bell helps but there's going to be some of our recommendations for adding some production during those times when Santa Rita is not producing. Back on the side talking about wind, when you look at our renewable profile everything seems to be focused in the west right now. And you mentioned coastal wind as opposed to just west Texas. And is that to cover more of our peak time? Yes, that's part of it. Also it should be more favorable from a congestion standpoint and also just from the consistency of the output. So all three of those factors are superior. Coastal will be a lot more expensive but it's still very attractively priced for the benefits that you get. The deck is a heat rate resource and therefore doesn't contribute an energy hedge during peak hours. That's one of the findings, we've already talked about that . This leaves Denton with an on peak energy supply gap. So a minimum of 90 to 120 megawatts of solar would help balance the portfolio. To reach the 70% goal at a minimum another 70 megawatts should be considered as an addition. If Whitetail is not counted that would bump it up to 120 megawatts of solar should be considered with the wind representing the balance of energy needed to reach the 70% level. And I will just say this, we were recently approached by another municipality that is also interested in solar. They're interested in going in with you on solar and if you scale up the cost comes down even more than this. So you do have an opportunity to partner with somebody that could be an additional cost advantage. When you say partner do you mean actually build the solar or? No the PPAs will say if you buy 75 megawatts we'll give it to you at 22. If you buy 100 we'll give it to you at 20 as you go up. And so what you can do is you can partner and Georgetown did this. You can partner with another entity and you can take the full amount and get the lowest rate but you only buy exactly what you need and so do they. And so that creates economy of scale and lowers the cost for everybody. It's just a simultaneous contractual commitment but you're independent on that. Mayor Pro Tem has a question. Why did we purchase so much West Texas wind when it offers the worst match against our load? That's a question that I have too. Well we were told that we had professionals who had like degrees from Texas Tech University from 2015 and they were very smart. So I'm just really perplexed as to why our load doesn't match our portfolio. Well it does. It's large. This is what we would say. But it was very cheap. So that's one of the things. Cheap is good and so that's one of the things. But we would have said it's too large. Maybe half of that would have been better. It's not a terrible wind thing. It's just a lot. We'll just end up having to sell it as my guess. That's kind of what you're saying, no? No, no, no. It just means that when you buy other things you can't get the portfolio diversification you'd like because that kind of controls how much you've already bought. So we just will just need to fit those other assets around. I thought we could sell our excess capacity if we had excess renewables. You can and there may be certain times of year for example in the spring where for certain periods of time you would project that and you could sell that. But that's what you're saying as far as not matching the load that's required. Right. And as Neil is also saying, if it is cheap enough you can tolerate more of an inefficient profile if you got it at such a discount. Council Member Gregory. Well what I'm hearing you say is that at the current moment the portfolio is not balanced. Correct. But at the current moment we are not in the position that we anticipate being in in 2019. Correct. And what I remember hearing is that we're planning to buy to diversify the portfolio, that we've been holding off on pulling the trigger on several more of the solar contracts and of diversifying the wind and getting wind from the coast because I've heard all along that we're that we're looking for contracts for wind from the coast to balance out the portfolio. So what I think I'm hearing if my memory is correct is that your recommendations are pretty much in line with what we've heard in order to reach the 70 % physical renewable by 2019. You had one slide that said 2023 but I bet that was just a miscalculation. That's when White Tail rolls off. Okay, I got it. So we were hired to give you our best recommendations on a good fit and we were not aware of what some of those internal discussions were. If those discussions were along those lines that's great. That was good thinking and that's that's along the lines of what our recommendations are going to be. So there are some risks. Oh, question on that. What's the part where we have a ton of West Texas wind? Like that's the main difference that I'm drawing here is that if we didn't have such a large presence of West Texas wind we would have more room for coastal which is our peak requirement more room for solar but because of those decisions we're not able to hedge our peak demand. It just limits to an extent the selection and the amount of the additional resources. I just wanted to clarify because Councilmember Gregory seemed to be indicating that this is in line with the recommendations that were made but the recommendations to bring on solar and coastal wind you're correct that we had those discussions but the amount that we can bring on is hemmed in by the decision to bring on so much West Texas wind. Yes, that's correct but we would say this. One of the things you don't forget about North Texas wind. Wind that's really close to you. Okay. The reason why you want close is because of proposed marginal losses potential out there and also just the cost. If the cost is cheap enough then that in a portfolio analysis thing if the cost or the return is high enough then that kind of overrides some of the risk. But it does that West Texas wind is sort of out in a remote area close to a congested area and we're concerned that that is too large. That's all we're saying but we can work around that but you are hemmed in. That was a good description. Yeah. Go ahead. Any more questions on this slide? So some risk considerations. We've already talked a bit about the potential solar tariff . There are other things coming in. The retirement of conventional fossil fuel generation that can change the mix in the market. The reduction of eventual elimination of tax credits that are incentivizing these types of assets, resources and then the current low natural gas prices which might change. So all of these factors in potentially changing could then change the prices of what you're offered here. So there are several things that you could do about this. One is for example you just might in your contracting for solar resources just not accept the tariff risk. If you have a supplier that's stockpiled that might just be a contractual consideration you would want to put in there. If you chose to wait on solar for example there's a path you could get to to get to 70% adding more coastal. Wait to see the outcome of the solar tariff and then add more solar as you went from 70% to 100%. So there are alternatives here to work around if that is a potential risk that you would want to work around. Some of these risks that I already mentioned the potential purchase accelerators the fact that for example the producer tax credit is going away to qualify and under the current rates you need to get the project started. So right now there is a substantial rush from suppliers to get these projects started to qualify for the credits. Thus you may be in the best time where there is a buyer's market of wind and as those credits go away the buyer's market may go away. So this would maybe give you an idea. This is one of the reasons we think it might be good to go reach for your goals faster because of this. And things like natural gas prices because if natural gas prices rise then there's less competition against the renewable sources and those prices might rise concomitantly and you might be facing higher prices. The wind production tax credit is being phased out correct? Yes. And it's already started or is it starting next year? It's already started. So and it will be fully expired at least with no changes in the legislation at what year? What year will the wind PTC go? 2019 is the last year. So for the project to be started. Right. And then on solar it was just renewed for five years? Yes. It goes out to 22 and it's reduced from 30 to 26 percent I think it is or 22 percent right in there. It still has some. I would also say that the PTC I think it's only 20 percent in 19 of the original amount. So it's been scaled down. Right. Yes. Okay. Thank you. One other consideration to take into account here is that when you are sizing the amount that you want to buy these resources year over year have varying production. The amount of wind production from a resource can vary as much as 15 percent on a year over year basis. So the question is this. If you aim for a 70 percent goal and reach that are you reaching that on average or are you reaching that at the minimum projected production? Because if you reach it on average then some years you might have less than 70 percent and some years you might have more. But if you want to ensure that you never fell below 70 percent you might have to buy a bit more. So this is just something we're putting on the table here as a decision that needs to be made by the organization. Do you want to buy meet your 70 percent on average or do you want to meet it as a floor? Then we've modeled several adoption paths here. This is what we've named the gradual adoption path. What you're looking at on the graph the vertical red bars are the purchases of renewable assets. The blue shaded area that goes up to the right is your load growth. The green amount is the proportion of renewables in the portfolio and the purple line is the proportion of fixed price exposure you have. Because this would be for example if you don't count whitet ails as renewable then if you get to a 70 to 100 percent goal you've got to add 18 percent on top of that for the whitetail exposure that you have as a resource. So if you execute now on low cost alternatives in the current RFP to get to 70 percent this is the path that you would have. Then you could do additional renewable purchases to reach 100 percent by 2024 which is the first year without whitetail. In this example whitetail is not included as a renewable resource thus the gap between the purple line and the green line there. As an alternative to this there's the early adoption path and this is something that we like and this is a recommended path. This is where you get to the renewable goal faster. Because in light of the PTC reduction it may be advantage ous to go ahead and accelerate and get more wind assets now because of the producer tax credit going away. So this would result in excess power supply of about 18 percent between 2022 and 2023 because of whitetail. Fortunately that excess production a lot of that would be during on peak hours when there's a high price market to sell that excess into. So that would be a risk consideration to take. And then there is the early adoption counting whitetail where if you counted as a renewable resource you wouldn't buy as much to reach your 100 percent goal. The principal advantage here is it doesn't produce that additional fixed price supply of 18 percent. So the takeaway here is prices are attractive. We think there's some compelling reasons to do it. You've got a lot of offers out there for the renewable energy. There's no reason in our book to wait over a long time frame to get to 70 percent to 100 percent. Things look very attractive now and that's why we would recommend just going with this early adoption path. When did they change, when did they start phasing out the P TCs? Was it last year, 2015? Was it last year? I think it was 2018. No, I mean when did they pass the law to start phasing it out? Was it last year, 2016? I think it was the year before that. It was 2016, 2017. Somewhere in there. Okay. And my reason for asking that is because it seems like from a regulatory perspective, in other words, if that wasn't there, we wouldn't have this rush to get projects started. These recommendations would look probably very different in the sense of time frame because they would have the motivation wouldn't be there so much to get the project started from the seller's perspective to build the plants. That's true. The other thing is this, is that it's gas prices. Gas prices are really low. They're still low. And so the projects, the relation to that are even lower. So that's one of the considerations for leases. Yeah, they both work in tandem to sort of create this environment at this particular time. That's correct. That's correct. All right. Other considerations, we've spent a lot of time here. I won't spend much time on this. This just shows some alternative configurations. You could have different balances of solar and coastal to meet an overall goal here, just to give you an illustration of that. So let's go on to the last, well, not the last slide, but this is the main recommendation slide here. Because of the confidential nature of the RFPs, we've just labeled some of these people bidders one, two, and three. These are very large, very reputable offers, suppliers. Again, the specific net cost evaluation has not been conducted yet. Like I said, sometimes there's some devils in the details, but this gives you a really strong indication of what is specifically available to you now for adding to the renewable portfolio. So our preference would be 200 megawatts of west Texas solar and 150 of wind, which could be split between a couple of different locations, depending upon cost equivalency. Something we really want to point out here, notice there's a price at the bus bar and a price at the North Hub. This would factor in potential congestion costs. Notice the difference here, for example, between the next to bottom line, bidder three for solar, where there's only a $1.50 difference to bring it to the North Hub, versus bidder number two with a second line, when the cost of congestion is more than the cost of the energy. So this is another factor here. We would strongly suggest that you can manage those congestion costs through your EMO operation, something that we've actually been hired in a second phase to help you design those strategies and those operational processes. You can manage that congestion more cheaply than paying for it at the Hub, with some exceptions, such as the next to last line. I don't know if $1.50 is worth not paying that to get that congestion risk shed. So these are just some factors just to let you know in the evaluation of what those resources would be here. So again, we talked about the optimal solar location. Coastal wind is attractive, as Neil has made the point. North Texas wind might be attractive if the price differential is substantial enough to warrant that as opposed to some coastal. You might want a mix of coastal and North Texas as well. And in terms of our project process for you all, you're going to see a slide in just a second which are some decisions that you need to make to help us best fit this with. And then once the RFP evaluation has taken place, we'll come back with a final recommended resource plan with specific quantities, with specific offers here as a recommendation for you to proceed forward. When you've talked about the deck, because it's a variable price gas, you can't really fix. But what I'm understanding, what I think I hear you saying is that if, which I don't think you're going to be able to do, if you could find somebody to lock in a gas supply to the deck for a fixed rate, like I don't know what, $3, that gives you a little bit better opportunity to analyze it financially with a little bit more certainty. It's that variable cost that provides this sort of uncertainty and inability to try to get a sure fit. Am I understanding that? Yes, and thus the price projections we've had, those model as if you did that and then give you the economics in those scenarios. We did that in our model. We assumed that the prices of the cost of the deck was fixed at a reasonable rate. But I don't think that gets you much. And the reason why, the least costs are all these renew ables. They're at $2.20. Why would you want to buy any $3 gas? Let's say you gave an example. I know you're just giving an example. But that, again, if it's a heat rate, let it hedge the heat rates, leave it alone. This is what I'm saying. It seems like based upon the discussion here, there's been a lot of talk about the Brattle Group and we didn't have really specifics necessarily. I mean line item. You take this wind resource, this is what it's going to cost you on this projection year. And from all these calculations behind the scene on these slides, I have no idea how that's come about. I'm not saying I don't trust you. I'm just saying I like to see the, what am I, I like the detail. So at some point, I'm going to want to see over a five-year projection, okay, here's our, here's what it would have been if we did this. If we didn't do that, here's what, because we sort of, I at least had that present. We're preparing that for you. Okay, good. We're preparing that. All right. You bet. Thank you. Yes. I'm sorry, Council Member Griggs. I was looking right at her. I apologize. Council Member Griggs. Thank you. I think. The, on that, on the chart, price at bus bar. Now price at North Hub, I'm assuming that we're in the North Hub. Yes. So that's the price. Well, you're in the North Load Zone. This would be, this would be a price to a local hub. Yeah. The deck is at the hub. You're at the Load Zone. There are different places, different networks. Well, where's the bus bar? The bus bar is - And it seems like inappropriate to have a bar in the bus. It's where the location of the unit is. Oh, that's where the - That's where the actual unit ties into the grid. It could be in West Texas. So it could be - West Hub. It could be Wolf Ridge Wind Farm up there in Munster. Yeah. Yeah, exactly. Okay. Yes. Yeah. Okay. Yeah, so we're not going to pay the price at the bus bar. You're only giving us that to show the difference between that and the North Hub to look at mitigating the risk for congestion. Is that the purpose of that? Yes. There would be an additional insurance cost to move it for the bus bar, but in almost all cases we would not expect them to be anywhere near these gaps except for maybe the next hill bottom line. That may be much more realistic in terms of that. Okay. Yes. Just so I understand - thank you, Mayor - the difference, the congestion cost for West Texas and Panhandle, is that because there's just not a lot of transmission lines? Yes, a lot of resources pushing with not enough transmission to bring them through. Okay. Thank you. You have not enough load locally either to absorb that. Yes. Good point. All right. Just to wrap this up, then there are several decisions that Denton needs to make to then get a more specific fit in the recommendations. Do you count whitetails as a renewable resource? Would you delay solar purchases because of the potential federal tariff or proceed now? Should you accelerate renewable purchases, especially wind resources, for example, because of the elimination of the PTC or the reduction in the PTC? And should you move forward the date of the 100% renewable goal? These are just all questions that once we get answers to that, then we can give you a very specific set of recommendations. We're going to go take these one at a time and see if we can't give you direction. And you don't need to answer them now. These are just - No, if we can answer some of them now, we'll answer some of them. Great. Count whitetails as a renewable resource? No. We'll answer that one. Will Denton choose to delay solar purchases because of potential federal solar tariff? Now, before we answer that, you're saying we have to understand that if we move forward with that to somehow place in our contracting some type of mitigation, if there's some type of retroactive - And if you can, and if the counterparty would be willing. That probably will affect the price. I mean, whether - Yes. You can do it this way. You can say, look, if I'm responsible for a tariff which I don't know about, we're not going to do the deal. Because you don't know what the price is. The best guess right now is, let's say if the price is $25, it will move it up to $41. Well then that becomes higher than gas. Well, yeah, that's - So the other alternative, though, is to guarantee some of these folks may have stockpiled and they will guarantee the price on it. And you have to get legal folks to make sure that's hard and fast. But then we'd say, definitely do it. Well, I'm going to start with the last question first. Because that's really going to give - I mean, we can talk about solar tariffs and renewable purchases, but we're only going to talk about them in the context of either 70% or 100%. So we're just going to start with that one first. So council, on - should Dent move forward the date of the 100% renewable goal? And if so, yes. So again, I'm sorry to keep going back to the Brattle Report, but that's how I learned kind of what we're doing here, unfortunately. There is a term called an adverse renewables environment. And if there was to be an adverse renewables environment, that would decrease our cash flow to the deck. So my question is, if we move towards the 100% renewable goal, are we accelerating the adverse renewables environment and somehow pushing our own investment into the deck more into the red? I would say no. The market conditions are compelling. ERCOT's projecting more renewables, regardless of whether you buy them or not. They're going to come. And so I don't think that - you're not necessarily endang ering your own ability to monetize the deck through your own purchases. Okay. Thank you. Good question. Yes, Council Member Frederick. Well, on that last point, the original goal of 2035 was dependent on achieving the other goals of reliability and competitive prices. But the goal said 2035 or sooner. So you know, you don't even have to change the goal because the goal was 2035 or sooner, but - and I think everybody was on board with the notion of sooner. If you say move forward to another date that seems to be fairly achievable, I think you would want to have those same caveats in the goal that it's still - you're using a different term, least cost. But you also had in your goals in one of those early sides sustainability and renewability or reliability. So what is your recommendation for a reasonable, achievable date to move it forward to? 2025? We modeled that with the early adoption as 2020. So in other words, you could fill the bucket with what you 've already got right now in terms of those offers for renewable resources. You can just immediately go to that goal. Well, I wouldn't want to do that if we decided then that we needed to delay solar purchase because - That's one of the reasons for that question. I think you have to compare those two. So just as an example, an alternative might be if you chose to delay because of solar, you could do more coastal now, get up to the 70 percent with more coastal, and then once the solar picture was less cloudy, no pun intended there, you could then add solar as that additional piece to get from 71 percent. That's an alternative path if that was a consideration. One of the reasons we asked that question. Well, I'm all for moving it up but to a reasonable timeframe with the caveat of still keeping all of our goals in mind. Well, and I would say one of the reasons we asked that question is that prices are compelling compared to, say, natural gas right now. There's no real reason to wait. So if you wanted to go 100 percent, you could just do it now through purchases. Well, I'm ready to do that, and I'm ready to do - number two, I think that we need to go ahead with the solar purchases if we put in the provision and the contracts about the tariffs. We would recommend that you - the first thing in the RFP is to look at the solar and try to capture if someone has stockpiled them, it will give you a guarantee. And that's - that would - that will set the table for everything else you do. Council Member Briggs? So this may be kind of going back to Mayor Pro Tem's comment about the renewables. If we were to move forward with 100 percent renewable, would we still be able to pay off the $265 million debt? I mean, will that get in the way? Are they connected or are they separate? That's essentially separate. Okay. So you have a need to buy energy. You want to buy it in the least cost way. You need to match your load. This is a cost decision. The only time this might hurt you a bit is if gas prices fall, as we said, but that's just maybe a bit of buyer's remorse. But the deck is going to run when the deck is going to run according to market conditions. And so that would be independent of this accelerated goal. Okay. So is it - can I - Sure. Okay. So I am in favor, of course, of moving forward. But I do think, though, that since we committed to the 70 percent physical renewable goal, when the previous council approved the gas plant, that was part of it, that the 70 percent - we need to get on that and move as quick as possible so that goal is met as well as we're moving to this 100 percent renewable because that was promised and it should be delivered. My next question or comment really is that in the PUB meeting, it was mentioned that the deck is pretty much - it's overbuilt, basically, for what we need. And is it possible in this market that there may be someone willing to purchase engines because we have a lot of them? We would say that you're committed to the deck and any and all methods to maximize the revenue off the deck should be considered. I don't know what that would likely be. I think it's more likely to be selling output of the deck from those engines as opposed to sell the engines. And that's what we've put in here in the report is those recommendations. Okay. So it sounds like - and of course, a lot of this is going to be - I don't want to say contingent upon, but you're all still going to do a pretty detailed financial analysis of all the different renewable RFPs. This is how the financial picture - this was just sort of the high elevation. You're able to give us a little bit more detailed analysis and how that impacts rates. We can - our DME people can look at that and see how that impacts rates. So if I had to summarize, 70 percent - we've said we want 70 percent by 2019. Sounds like we can achieve that regardless of the potential federal solar tariff with coastal wind. Correct. So that - we'll set that aside. That sounds like everybody's on board with that and we can do that with minimal risk from a regulatory perspective. On the 100 percent, we have - sounds like primarily the main caveat of the solar tariff. My hunch is, depending on RFPs and things - you can get - that answer can be had probably within 60 to 90 days based upon people's responses. So it's not like we're waiting six months or a year or anything like that. And I would surmise that the 100 percent is something we want to do by 2020 as early as possible contingent upon because if we have to bear the risk of the solar tariff, we're not going to get to 100 percent. I mean, it's not going to be a decision we necessarily have to make because it won't be financially feasible. But if we get that question answered in the affirmative, then we can move forward in doing that based upon the specific financial analysis that's moving forward. Is that a good summary of what I'm hearing at least? That makes sense to me, yes. Okay. All right. Okay. All right. Fantastic. Thank you very much. Thank you very much. All right. We'll go ahead and take another break. Take about a five minute break before we call it. Okay. Welcome back. We're reconvening our meeting of the Denton City Council on Tuesday, October the 24th, 2017. The next item on the agenda is item 3C, receive report, hold discussion, give staff direction regarding an overview and option for gas well inspections performed under the city regulatory authority. Good afternoon, Mayor Watts and council members. Staff has two objectives for this presentation today on gas well inspections. The first objective is to provide just a high level overview of the regulatory agencies involved with gas well drilling and production and then review what the city of Denton's regulatory authority is. I'm going to try to go through that very fast. It's really to set the parameters and the context in terms of what the city can do and that will lead into our second objective where we want to spend the most time in terms of a recommended service provision option to provide assistance with our gas well inspections that are performed by the city. And so I'm going to handle the first few slides and then I 'm going to turn it over to Dr. Banks to go over the second objective. So first, there are various regulatory bodies that are involved in influence gas well drilling and production activities within the city's limits and the ETJ. I do want to mention two main state agencies that will be referenced. The Railroad Commission, they are the main regulating entity with jurisdiction over gas well permitting and inspections. And then the second is the Texas Commission on Environmental Quality. And they have jurisdiction over environmental concerns such as the regulation of air emissions. And so again, just by way of background, the state legislature in May of 2015 approved HB 40 and that provided the state with exclusive jurisdiction over gas well drilling and production activities and it expressly preempted municipalities from having any jurisdiction over gas well drilling and production except for a few elements of above ground service activities that local governments can continue to regulate. And so this chart here shows on the left what is underneath the state's jurisdiction and then on the right what is underneath local government's jurisdiction, what can be regulated. So what's fire and emergency response, traffic, access to the site, lights on the site, noise, noise mitigation, imposing notice, what type of notice the operators must give adjacent property owners. So we can require reasonable setback requirements and then some other above ground activities such as inspecting for air and water emissions. However, any concerns, irregularities of air and water emissions must be reported to the appropriate state agency to handle. So those six or seven elements that I just went over that local governments can regulate is shown in point number one. However, it must meet four factors. So even though you can regulate those six or seven elements , it also has to meet, it must be commercially reasonable as well. It cannot effectively prohibit an oil and gas operation conducted by a reasonably prudent operator and it must not otherwise be preempted by state or federal law. So it's kind of that four factor criteria test that any regulations by local government must meet. And so after HB40 was passed in May of 2015, the city went through an extensive review process of the gas well ordinance, went through a number of public hearings through planning and zoning and through city council. And after careful consideration and all that extensive public hearings, the Denton City Council adopted the current gas well ordinance in August of 2015 to reconcile municipal ordinance with state law. And so what I put together here is kind of a visual of what are the regulatory areas for the city of Denton. So kind of breaking it down into three main areas here. The first is land use compatibility. And so site plans are required for all new gas well pad sites as well as for the expansion or modification of existing sites. During the site plan review process, which staff conducts, they're looking at various items that are contained in the gas well ordinance such as setbacks, placement of equipment and well heads, access and transportation routes, erosion control measures, landscaping and tree preservation, and noise mitigation. And the operators are also required to provide notice to surrounding properties during that site plan review process. So that's kind of that first main area. The second main area which we're going to be discussing later here today is the gas well inspections for the above ground elements that we are permitted to inspect through our gas well ordinance and development code. So a series of initial inspections are conducted for gas well development. It's a series of six inspections that are performed. And then as well as after initial inspections, there are ongoing inspections that are done semi-annually by our gas well inspector. And during those semi-annual inspections, it's primarily checking for code compliance, so looking for the signs in the right place, the equipment placement, the fencing, trash, lighting, landscaping, all those various code requirements. And then some leak detection and observance for environmental concerns is performed as well. And again, this is kind of what we want to talk to you today about is a recommended contract assistance option here that would help us to enhance the frequency of those inspections that are conducted as well as increase the service level and have more of the elements done towards leak detection. And then the third area is our fire and emergency response. And this is different than the first two areas in that the requirements here are done, they're regulated by the fire code. So that's one key difference for this area. After a site plan is approved, the operator must obtain construction and operational permits from the fire department. And then the fire department conducts a series of initial inspections during that permitting process as well as they conduct their own annual inspections once a well is operational. And they're looking for compliance with their fire code requirements, so kind of along the same requirements but slightly different. A few, just to name a few, they're looking for proper sign age, road access for emergency vehicles, fencing with the secured entrance gate, a system, equipment required by fire code including lightning protection systems, remote foam line and so forth. And they must also keep on record with the fire department and hazardous materials management plan and emergency response plan. So that's kind of a high level overview of the current state of the city's regulations of Gaswell. Gaswells, any questions? Any questions? Yes, Mayor Pro Tem. Sorry. So you said that the city inspects for some type of leaks. What type of leaks do we inspect for? And if we detect leaks, then where are those detections sent to? So I'm going to let Dr. Banks answer that and he's going to go into a little bit more detail in terms of the current level of inspection and then the enhanced service level of inspection. Does anybody have a question for Sarah before she? There's one quick thing that I just wanted to show for the public. We do have two resources that are available on our website that I just wanted to go through really quickly. And we're going to be doing some work here to really improve this page. But at the top of the Gaswell inspections page, there's a button called the Gaswell Locator. So if you click on this and it brings up a map and you kind of have to zoom in to find the well that you may be looking for, but I'm just going to pick this one here. It's in green. A little bit further in. If you click on the well, if you click on that green dot, it'll come up with a track it ID number. And if you click on that track it ID number, it'll bring you into our system. And so you can actually see short descriptions, some other site info, contacts. But this inspections tab will show you all the dates of when the inspections were previously performed of an annual inspection, a spot check. And then there is some notes that will be on the side from our Gaswell inspector about was the inspection passed? Is this a follow up? So it's just good information to have. And then the second button that I wanted to show is right underneath. It's called the notification of Gaswell activity. So if an operator is going to be doing certain activities, they have to file notification with us. And that's all posted here in chart form. And the one new feature that I learned is if you go to view map at the top, it'll bring you to a map and it'll actually start kind of time sequencing through. You'll see at the top here, here's March to April. And it'll show up in the map about when it was taking place . So let's say I want to pause from June 21st to July 21st, what activity was happening in terms of Gaswell operations. You can see the dots that appear on the map, so there was rework activities being done at this well during that time period. So just more public education, awareness of resources that are out there. Councilmember Gregory. I'm impressed with that. I'm wondering, go back to the one Gaswell locator where you were showing the inspections. When you did that, one of the inspections said annual and another one said spot check. Do we have a definition for what a spot check inspection is ? I can verify that. I'm assuming it might be a complaint or a question or a concern or they're just going out to check on that well. Okay. It would be interesting. Oh, well, there's more information over to the right, so maybe there's something over there that tells more about it. Well, I'll ask Dr. Banks to address that as well. Any other questions for sir? All right. Dr. Banks, are you up? Good afternoon, council. Good afternoon. I want to start this by introducing a couple of people that are here. We've got Rod Weatherby, who is our current Gaswell inspector. Thanks Rod. I've also asked Kenneth Tram from Modern Geosciences to be here, so he's here as well. If there are some detailed questions that I can't address, I may look for some nods or support from those folks. Do we want to address the questions that were asked before we go into the presentation, or would you like me to just go ahead and move on with the presentation? Go ahead. Yeah. What was your question again, Councilman? My question was about the types of leaks that we detect on our end of things versus what other leaks might be detected, maybe on RRC, and also what happens if we identify a leak. Okay. Rod can bail me out if I get out of my skis on this. Essentially, the leak detection that is done is associated with using a handheld methane meter. It's a relatively coarse type of meter, catalytic based, and so basically it's near equipment measurements of methane concentration. So if a piece of equipment is emitting methane and doing so in a manner that is not in keeping with the standard operation of that equipment, then that equipment will be identified by the gas fuel inspector and will be issued as basically a non-compliance. Once that non-compliance is issued, basically the operator is asked to correct that, and then there is a follow-up inspection to verify that the issue has been resolved. So that's the type of leak detection that is actually done on the side spire, current gas fuel inspection program. So did that address your questions? Okay. Was there another question? Is this? Go ahead. Yes, sir. What kind of on-site detecting equipment is installed on the website, on the sites? Are you talking about by the operator? I'm talking about something that's monitored constantly. Most sites are going to have a pressure monitor that's installed by the operator, and so that pressure monitor is in most cases actually going to be wired in so that it can send a signal to the operator. So if there's a pressure deviation that is outside of the normal, then they'll be notified and they can come out and check out the site. So that is on the operator's side. That is not in and of itself a requirement of our regulation, at least subchapter 22 regulation. Okay, there's not anything like a methane detector that's there all the time? No. Okay. Okay. Onward and upward. Okay. So I want to give just a very brief background. Right now, Sarah mentioned that the current gas well program has a semi-annual inspection. That is for both wells in the ETJ as well as wells that are in the city limit. And so right now, Rod will go out, look at a number of different items on a site that's done, as I said, twice a year. That results in 501 inspection events at each semi-annual for a total of 1,002 inspections that are done. There are 294 wells in the city, and those 294 wells are inspected twice a year under that program. And as I already alluded to, any non-compliance issues are noted, and then those non-compliant issues are dealt with by Rod and follow-up inspections and communications with the operators. Go ahead, Council Member Briggs. Yes, ma'am. You may address this later, but when you say inspections, can you give an overview of what those entail that Mr. Weatherby can do? Yes. There's a checklist that basically has elements of the code in it, so it's everything from the landscaping, whether there's trash on the site, the painting of the tanks. He will do some kind of first-pass inspections for the fire department. Basically will use the handheld methane meter. He also has some capabilities through his instrumentation to do near equipment assessments for naturally occurring radioactive material or NORM. So those are the kinds of things that he's looking at. I know there was an individual movement of the consent agenda item to individual consideration. I have a presentation for that. It's not a part of this one that I actually have the inspection checklist. So if you really want to see all the elements that are on it, I can move out of this one and actually pull that presentation up if you'd like. Or we can address it later, whichever you prefer. So in the inspections, is that out of the fence? Is that everything or is that inside? That would be what we would consider to be an -- I mean, there are going to be inspections that are visual and olfactory and auditory outside of the fence area, but the predominant amount of inspections that he's doing is inside the fence. They would technically be referred to as near equipment inspections. So -- Thanks. Any other questions? I think that's it. Yeah. Okay. So what we had looked at is right now we have a single gas well inspector in the city. We have three vacancies within the -- in the department. We wanted to try to think about a way in which we could increase the frequency of the monitoring that occurs within the city as well as to really increase the amount of instrumentation and expertise that's being brought to bear on this issue. And so we worked through a prioritization that basically looks at three levels of wells that are out there. And that prioritization framework is based on the idea of proximity to sensitive uses. So we considered those wells that are 300 feet or closer to be those that are of high priority, those that are 300 feet to 1,000 feet to be of moderate priority, and those that are greater than 1,000 feet to be of low priority. And we'll go through some details of what that looks like in terms of number of wells and the frequency of monitoring here in a few slides. We wanted to take a look at some instrumentation that could identify leaks and potential environmental concerns and not only address those that were of near equipment nature, as we mentioned earlier, but also do some fence line monitoring for those low and moderate priority -- I'm sorry, those high and moderate priority wells. So one of the things that the consultant brings to bear on this is a large number of very sophisticated instruments. So we've got forward-looking infrared technology, FLIR, basically looking at optical gas imaging components of that, radiation meters, high-level methane meters, hydrogen sulfide analyses, photoionization or PID detectors for volatile organic compounds, noise meters, particulate elements of particles of a variety of different size in real time. So there's a lot of different types of technologies that are brought to bear within this framework in addition to being able to do both the fence line monitoring and then the near equipment monitoring. And so the city does not own any of these instruments? No. Okay. We have the ability to measure norm, but that is it. We have the ability to measure methane, but the type of instrumentation is not at the level of this instrumentation. So in the presentation later on, if you could give me an estimate of how much these things would cost if the city were to purchase them for our department. Okay. Do you want a total for the entire amount to equip our program, or are you looking at an individual item basis? The ones that are listed here that you're saying we don't have, that would be good for us to use or to have. Just an estimate. You can itemize it or you can generalize it. I'm just looking for a dollar figure. To get this capability for single instruments and cover all of these areas, I anticipate would cost around $350,000. So you've got to keep in mind, too, that there would be training. There would be needs for calibration and maintenance. The instruments would need to be cycled out. The life cycle is a little bit difficult to peg, but I would say probably on the order of five years or so. So I think that would get us to the point of basically being able to cover this level of instrumentation, just the instruments themselves. So the instruments listed here would be about $350,000? That's correct, for one instrument per type of analysis. That's correct. Councilmember Gregory. Thank you, Mayor. In the past, we've had some issues with some of the well operators saying that they would not allow our city inspectors on the site because they questioned whether they had the proper training to be allowed to be on that site. I don't know what kind of training, I don't recall what kind of training they thought that they needed to have. So does our contract, or the proposed contract with modern geosciences, call for a requirement that their inspectors have some type of training that would make it safe for them to go on the site and would remove any objections from the operators for them to go on the site? Right. The staff that works for modern geosciences is trained to be on these sites. They have a number of different safety equipment requirements. They have Haswapper training and things of that nature, so they're familiar with being exposed to the compounds that are out there potentially. The other issue, too, is that you've got to have safety training for explosivity. So if you're going on to the site, you need to be sure that you're trained in being able to be aware of those issues. They perform these inspections for several local municipalities on these gas well path sites. So I don't believe there'll be any problem. We're dealing with the same operators, we're dealing with the same type of sites. That's good to know, but does our contract require that? The requirement is for them to have the basic training necessary to do the job. I can't speak to what an individual operator might consider to be adequate training on a given site. I can tell you that we have very good relationships with the operators that we have in the city with our current gas well inspector. And although there are some operators that require their personnel to be on site at all times that we're on site, we have not been denied access to inspect. Another question or two questions regarding the contract with modern geosciences. Are we requiring that their operators are certified to operate those machines listed, and do we call for those machine, those types of instruments in our contract? The instrumentation itself is called for in the contract. The requirement is that methodologies are followed, and so that methodology is what sets the protocol, so to speak, on how the instrument is put into practice. Okay, so the methodology would include calibrating the machines and operator certifications. Yes, absolutely. Thank you. Council Member Briggs. So back to the training, we had several employees under the gas well inspections department previously. Were they all trained? I mean, they were capable of doing this. I have been over the gas well inspections department for two and a half weeks. I had the program prior to 2006, from about 2002 to 2006. During that time frame, we had the training for the single gas well inspector that we had to be safe and be able to operate inspections on that site. I would assume, but I do not know what the training was for the previous inspectors. I imagine that they had similar training protocols, but I was not over that department, so I cannot verify that. Okay, so, all right, I think we ended on the second bullet. Inspection reports, this is one of the enhancements associated with the first task in the actual proposal that was put together by modern geosciences. So they are going to take the GIS information that we have and basically enhance it. Not only will we have locations, but we will also have information on individual components associated with each of the sites. So not only the site itself, but the individual major components of the site. And that will allow them to basically generate inspection reports with site photos, instrument images through some of their instruments that are capable of producing those images. And then basically giving that enhanced GIS information that includes that on-site equipment. Our intention is to be able to get those reports and basically be able to get those uploaded onto our website in a similar fashion to the current reports that we have. So when you say a current proposal, does that mean did we issue an RFP? Did we ask for more than -- what is the process in which this came to us? This came through a professional services agreement. Basically it is an individually negotiated contract between a qualified individual capable of performing the job and basically performing that job in a cost-effective manner. Is there any objection to an RFP for this service? I believe we would have to go through an RFQ. But if that is the direction of counsel, we can certainly take a look at that. Thank you. One of the reasons that modern geosciences was looked at is that they have a lot of local experience serving municipalities. They have been performing the gas well inspection services for the town of Flower Mound since 2011. They have done a lot of work in Colleyville, Grand Prairie, Kennendale. If you take a look at the proposal that is included as part of your backup, you will see a list of the city and the years that they performed those services. Through these activities, they do have an established relationship with the gas well operators. And as a result, that is a helpful thing with regards to things like site access and relationship with operators who are getting problems fixed. One of the big benefits of this program as well is the flexibility to provide additional inspection services. So task four is kind of a cafeteria plan of services that they can provide so that if the gas well, our current gas well inspector requires any additional support through instrumentation or technical expertise, he can call on them through that cafeteria plan. It is somewhat limited in terms of the dollar amount, but it is available for us if we run into those issues. So if we look at an inspection activity comparison, right now as I mentioned earlier, currently there are two inspections that occur per year inside the city and within the ETJ. We deal with those coal compliance issues that Sarah mentioned earlier, science equipment, fencing, trash, lighting, landscaping, pipeline marking, erosion control, et cetera. We do some naturally occurring radioactive material and we do some leak detection. So the service enhancement through the proposal is the current inspections continue and they will be unchanged. So you're basically still getting the same two inspections per year that you're getting now. The contractor will perform additional inspections within the city limits based upon the priority established by the proximity of that pad site to a protected use. So for those that are of high priority, there will be two inspections by the outside contractor on a yearly basis. For moderate priority, there will be one time per year and for low priority, it will be one time every two years. Now keeping in mind that we have the option for the gas well inspector to also be able to call on these services if needed. Fence line inspections will be done for high priority. Those will include meteorological data, upwind and downwind , total volatile organic carbons through the photo ionization detector, naturally occurring radioactive material, hydrogen sulfide, methane with a DP infrared technology, particulate matter of a variety of different size categories in real time and then noise. Moderate would be the same except we would do no partic ulate matter and noise. And then low would be no fence line in base inspections, just near equipment inspections only. They will also be looking at all of the standard items that the gas well inspector would be looking at when they visit the site. The near equipment inspections would use the FLIR camera with optical gas imaging to check for leaks, naturally occurring radioactive material and then all of the fence line instrumentations if needed based on what they are seeing. And then basically we would get a report that would include , be generated out of the GIS database that would have the location and the infrastructure, any leak tagging, any photos from the imaging, etc. They also have some interesting real time continuous sampling if needed for things like volatile organic carbons that's in that cafeteria plan associated with task four. And then again they could provide those services to our current inspections as needed. This gives you a better sense, Councilwoman Briggs, that may get to some of the issues that you were asking about earlier in terms of what we do now versus what would be done under the proposal. So I know it's a busy graph, or busy table, but generally what we've got here is we've got this column indicating what we're doing currently. So we've got all of these things that are looked at with the city approved checklist. We've got those items that are currently lacking that would be able to be picked up by this contract as we propose. So you can see kind of the level of additional services that you'll be able to get under this proposal. We've got the tracking tool to allow tracking of the GIS information and use across departments. Annual inspection summary is a component of it which will include statistics from each of the annual inspection efforts as well as a comprehensive report. As I mentioned, we're doing some inspections right now with near equipment naturally occurring radioactivity and then making sure that signage is there for those areas that require it. The additional near equipment inspection would be the leak inspections at wells, separators, above ground storage tanks, compressors, and ancillary piping basically through the use of this optical gas imaging and per what's referred to as the quad OA method, which is a EPA method for new sources that has been recently added to the Code of Federal Regulations. So fence line inspections both upwind and downwind right now don't have much in the way of that with our current program. Basically for the noise, we're looking on the high priority size of a Class 1 microphone with three octave bands, meteorological data that looks at wind direction speed, barometric pressure, et cetera, the use of photoionization which is at a part per billion resolution, the radiation using a higher level radiation meter that we currently have, the H2S measurements through a higher level instrumentation that basically is a part per billion range, methane using that IR meter that I mentioned earlier, and then particulate matter for those high priority sites at 2.5 micron and 10 micron. Yes? So all this tells me really is that the city has not been doing enough in the past in regards to the inspections that we are allowed to do around the gas wells. We have currently 89 public schools, 89 within a mile of gas wells. Yes, I'm aware. And I mean, I'm not particularly in favor of this contract, but we have got to do more. I mean, this is, it's really upsetting. Thank you. Working through the list here really quickly, basically we 've got some additional reporting. Again, we have a written report of each inspection of it now, but we'll have the ability to have a greater degree of photos on site because of the GIS capabilities that we have and the ability to link those up to actual on the ground areas. Tabulated results, photos of leaks through the optical gas imaging, the tagging, the summary of norm at seed and says we're doing that now, the instrumentation would be a little bit better under the proposal. We've got fence line inspection summary, summary of correct ive actions, and basically figures with equipment identified to be addressed. So we also have these other points that we have through that additional monitoring support where we can do several different types of monitoring events on a little bit better resolution. Yes, ma'am. Well, actually, it was about the real time continuous air monitoring. So finish that thought and then I'll ask you. Okay. Yeah, they have those capabilities. You know, that is a relatively expensive thing to do, but it's something that we can get through that cafeteria plan under task four. Okay. So it's available. It's just an addition to this proposal. That's correct. The proposal, as you'll see, is a dot to exceed 250,000. These services that are being proposed here with the exception of the additional monitoring comes in at about 233. I've got exact numbers that we can go over in the individual consideration item. So that leaves us a little bit of room for these additional services. So could we get those two services as a part of our deal or no? They're a part of it now. They're just not a, they're on request. They're not as a component of all of these. All of these will happen as a part of the proposed activity . The other ones are on request. So the continuous air monitoring is on request? We could get that, sure. And how much would that be? I'd have to defer to Dr. Tram to get that. It says continuous. Yeah, we need to go to, you need to go to the, let's get on with, yeah, let's get through this presentation. If we want to go through specific numbers, we'll have an opportunity to do that at the item for individual consideration. Correct. Okay. Yeah. Okay. In terms of inspection frequency, basically, I've addressed this a little bit, but currently we're doing two times per year within the city limits in each EJ. There's 294 wells in the city, 207 in the EJ that we inspect. The EJ inspections are really about platting conditions. So they're basically just a locational in nature. The service enhancement within city limits, basically that high priority 300 feet or less, that's about 18% of the wells that we have in the city. There'd be two inspections by the city and two times by the contractor. That's double what we currently have. That represents about 54 wells within the city. The moderate priority would be 301 feet to 1,000 feet. That's about 45% of the wells that we have out there in the city limits. Two inspections done by the city, one inspection done by the contractor. That's one and a half times what we're currently doing. That's about 131 wells. The low priority is greater than 1,000 feet. That's about 37% of our wells that we have right now are about 109. Two inspections would be done by the city and one inspection would be done by the contractor every other year. That's one and a quarter times what we have right now. Yes, sir. - Council Member Briggs had brought up a fact about how many wells are within certain footage distance setback of schools. - Right. - Do we know in this high moderate priority, how many of those, I mean, are most of them within 1,000 feet, 300 feet? - I did not subset the data out that way. I've seen the statistics on a mile radius and a half mile radius, but those are different numbers of what you're asking. We've got the ability to find that out. I know there are certainly a few. I just couldn't tell you exact-- - No, that's fine. Yeah, we can find that out. Okay. - Right. - Yeah, you bet. All right. So, the proposal is not, as I've alluded to, is to not exceed $250,000 over a 12-month period. What we did in putting together this prioritization was we wanted to enhance the service level. We wanted to do it in a way that we could prioritize the wells according to their proximity, and we wanted to do it in a way that we could cover the expenses associated with that contract by the salary savings of the three unfilled positions that we currently have. And so, basically, we're able to cover this contract plus a little bit of a contingency to be able to use some of that cafeteria plan task four that I talked about a little bit earlier, but it would result in no increase in fees to the gas well operators, basically because we're recuperating the salary savings associated with those three unfilled positions. - Okay. Council Member Briggs. - So, why are we outsourcing the gas well inspections rather than bringing in and building up our own division with staffing and technology? - It would be very expensive on the upfront cost to get the instrumentation that's necessary to be able to do this. It's well in excess of what the budget would support on an annual basis. The professional services agreement allows scale up or scale down according to the needs of the facilities. For example, they would have two inspectors on site at all times being able to efficiently be able to work through those issues. The training issue is an important thing. The calibration of the instruments is an important thing. From my perspective, basically, what we're doing is we're cost sharing with other municipalities that are using this firm that are doing that same kind of monitoring and work, and so we get some benefits. Right now, the cost associated with doing this as proposed is a little over $800 a well. So, that is well within keeping of our current fees and would allow us to basically perpetuate that activity uninterrupted without having to worry about maintaining that instrumentation, that expertise, staff turnover, et cetera. - Any other questions? - No, I have thoughts, but I'll wait. - Okay. All right. Okay. - So, right now, we're requesting direction regarding the recommended provision. We have the consent agenda item that is now been pulled and will be an individual consideration. Staff is prepared to be able to give a presentation on that . We can go into a little bit more detail. I've tried to not repeat the information here, so a little bit deeper dive on the budget component. Basically, we do have the representative here from modern geosciences if we want to get into some more of the instrumentation discussions as well. - Yeah. Mayor Pro Tem, I guess, because if you're wanting a cost for the additional continuous air monitoring, that they can provide that at the individual item briefing, what do you - I mean, they need to have some parameters for that. What are you talking about? - Well, okay. I have questions about two things. So, one would be that continuous air monitoring, and then there's the VOC underneath that as well. Hold on. - I'm sorry. Did you say VOCs? - Yeah. You said that there is VOC sampling as another option? - Yes. The continuous air monitoring would encompass VOCs. - Oh, it's two separate line items on the chart, so I wasn 't sure if it was one thing or two. - Right. There's a variety of ways to test for VOCs, and so we can do that as a component of the continuous air monitoring. Also, there's other methodologies that are more discreet in nature to be able to do that. - So I would want to know how much that costs for our high priority wells. And then with respect to the different priority wells, my question is, so it seems like at the city level, we're doing some follow-up, but for instance, we don't send a summary of corrective actions, et cetera. So my question is with respect to when the contractor goes out there, if he sees something that needs to be remedied and he has to do an additional site visit, is that included in the two times per year, or is that a separate visit? - No. We've got two methods to be able to address that. The first method is to use our own inspector with the information in hand to verify that the correction has been made. The second way to address that is we have a resampling or reinspection that is a contingency as a part of that task four. So our hope is to be able to address most, if not all of those with our current inspector to verify that what was asked to be done has been done. But there will probably be some instances where we need additional instrumentation that we will rely on outside contracts. - Okay, so that doesn't include follow-ups. So if I understand this correctly, there are 53 wells that are high priority? - 54. - 54, thank you. - Sure. - 54 wells that are high priority, so there would be 108 inspections by the contractor? - That's right, on an annual basis. - Okay, and then I guess where I'm kind of getting caught is there's low priority inspections that are every other year. Would there be one this year included in the 250,000 contract or would it be for next year? One is the decision made to inspect the low priority gas well? - Yeah, my vision of doing that would be just random number generating, do one year, half the next. - Okay, so then how many moderate priority wells are there? - There are 131. - So really we're talking about 239 inspections that we're paying for? Did I get that right? - Yes. - And all the follow-ups would be in-house? - I wouldn't say all the intention is to try to do as many of those in-houses as possible. I anticipate that there may be some requirements where we would need the additional services to do a re-inspection. - Okay, and so currently we have two inspectors. How many inspectors do we have? - We have one inspector. - And that one inspector is doing two inspections of high priority, two inspections of moderate priority, so two inspections of every well annually? - That's correct. - Okay, all right. Okay, thank you. - Follow-up, you'd mentioned continuous air monitoring, but you didn't delineate some parameters like six months, a year, continuous you mean infinity, what are you, I mean it's not just like one. - I would imagine one of the wells in operation that there would be air monitoring. - Okay, so from whichever well you choose. - Yeah, the high priority. - Does that help you on cost? I mean, just yeah, 'cause I think, yeah. Right, okay, yeah. Council Member Briggs. - So on direction, I would like to see us issue an RFQ so that we can add the things in and that we have options. - For other, yeah, that's my direction and I guess that we 'll discuss that later tonight. - Okay. - From now that's where I stand. - Any other questions? Yes, Council Member Hesbeth. - I have a question. Does the law allow the city to recoup cost if we have to go back and re-inspect? - We have a fee schedule that includes a re-inspection fee. - So that could be a pass-through. - That's correct. I don't know, Aaron, if you want to weigh in on that. - What we do is we, every couple of years we will have a outside consultant who will do a detailed cost of service analysis and she will interview everybody who's involved in the actual gas well ordinance activity and then she will compute exactly what that amount for each inspection activity will come out to because the reason we do that is to make sure that we are only charging for the cost of service and not going above and beyond, which could be an illegal occupation tax under the Texas Constitution. - So the answer to his question is, do we pass that through or is it built into this $800 fee and so we cannot quote unquote send them an invoice for if we have to re-inspect it it's $100? - We do have a re-inspection fee that is included as part of that cost of service, so yes, we are recouping that cost. It's predetermined already. - Right, but that's just part of that $800, but that $800 represents a lot of things. So the answer from what I understand is it's not necessarily a pass-through in the way you're thinking about it. Yeah, so. Yes, Council Member Gregory. - Thank you, Mayor. Hopefully when we outsource rather than do something in- house, it's because we have determined that it is less expensive or that we are able to have a higher level of expertise and hopefully when you make the presentation at our regular meeting, you could share some of that. Right now what I've seen is just a slide saying that we think that the three gas bill inspectors would cover the cost. So I'm not, maybe there's not any savings. So, you know, just to hear a little bit more of the argument for outsourcing rather than keeping the services in-house. - You're talking about in the other meeting, in an individual? - When we have this, when we're considering this for individual. - I didn't see it in the backup and I'm not sure that you had that available now. - Right. - But you might be able to put that together between now and then. - Okay. - Thanks. - Okay, any other questions? Council Member Ryan. - Thank you. I don't know that you can get this data put together by later today, but at some point I'd like to see the 89 that are in close proximity to schools, if we can see how many fall into that, those three categories of high, medium, and low. - Sure. Again, I don't know if I'll have it by this evening, but we can certainly get that information to you. - Okay, thank you. - Council Member, we're going to go with Council Member H ussbett and then Council Member Duff. - Yeah. I guess for me the main thing would be a, I understand the relationships as far as the other cities, but if there's some sort of peer review or something that can be researched or looked at to kind of see are there complaints, are there just some sort of research materials that led you to whatever you relied upon to kind of make that decision and select this particular vendor would be good for me. And then also, I don't know if it's proper, I'd like to have the doctor come up and speak to his relationships with the well operators because that cuts both ways, right? So if you're concerned about it, then you're concerned about it. If you see it as a plus and a motivating factor, you see it as a plus and a motivating factor, but there are two sides to that equation. So I don't know if that's an option, but that's my, I would like to hear that in advance to consider in this forum, but I don't know if that's an option. You mean this forum being right now or the item for individual consideration? This forum right now, because then I can have one really evaluated, because I can assume there's going to be speakers that are going to speak to or give an opportunity, that sort of thing. So I just kind of want to have that opportunity and just to that specific to that, so it doesn't have to be a soliloquy, but I just want to, that's a concern. Any other questions for Dr. Banks, at least on this work session? Yes, I'm sorry, Council Member Duff, I'm sorry. I have to assume the operators are probably inspecting these places fairly often themselves, but I guess they have no requirement to. They certainly have requirements for inspections and filing information with the Railroad Commission. And so there's a number of different inspection activities that occur. Depending on the permit itself, there will also be some operational components that have to be recorded with regards to air emissions. So they do have a number of things that they have to file with the state regulatory agencies. Yes, and they don't have any room for problems either. They can't afford it. Well, they definitely have permitting conditions to be on site. I mean, that doesn't eliminate the fact that we need to have the inspections. Any other questions? All right, thanks, thank you. If you would like to come up just for just briefly to answer Council Member Hussbett's question and Council Member Hussbett, if you'd go ahead and pose that again. When you're stating before you start to state your name and address and all those good stuff. So obviously there's going to be concern. They have relationships with the well operators, and that's good, and that can cut bad. So I'd just like you to- Sure, I saw that on there. I've been asked the question before, hey, do you work for oil and gas operators? And the answer is only in cities where the cities have a requirement of the operator, and they said, operator, you need to pay for us to perform this work. In answering that question, because I've been forwarded something that said, hey, this is a question that may come up. I actually had the administrative staff pull off all money that Modern Geosciences was founded in 2011. So we're able to get, you know, here's everything that's ever come in the door. And so the total amount that's related to oil and gas is 1. 7%. It's probably actually on a slide here for you. And of that 1.7%, right, so we developed a leak detection guidance program requirements in the city of Grand Prairie. See, it's probably some of the most stringent because it actually has quarterly reporting requirements on all the operators. And so I helped the city actually develop that criteria, and we had to frame it so it fit within the legal requirements. But it also gave them enough information so they could turn around to the public and say, this is what we know, this is what we're being told. I needed some technical assistance there. And so anyway, in creating that guidance, there were a lot of operators that did not know how to comply with that guidance back in 2011. And so one of the operators, Beacon in particular, which is out of Colorado, which had already had guidance and stuff that was similar to this on them, said, can we use the same people who made the rules? And the city said, sure, as long as it's just here and we go out on some of the inspections, we're comfortable with that. So that's been our primary component. That contract actually then extended to GHA Barnett, which actually ends in this year. So as far as people saying, we work for operators, the answer is 100%. That's not our core business, and it's only been done when there's a compliance component. So I can even list for you, because they're so small. In Mansfield, the city required that an operator do air monitoring. We visited with the city and developed a scope for them. The city said, we like that scope. We'd like you to be engaged by the operator and perform that scope. So we did it for those purposes. Other than that, it's only in Grand Prairie. And so that's 100%. That's an easy one for me to answer. Now on the relationship side, I will say, I get more push back on the operator side than I do maybe in the blogosphere and things like that. I figure if they're both equally upset or love my stuff in between, some people take it and do different things with it. I can't control that. But the take home is, to get on each of these pad sites, different operators will make a different level of requirements to get on to those pad sites. For us, for example, in Haslett, to get on XTO sites, they required that eight members of my staff go and sit in a training program for a day and a half. We actually shared some of the things we knew about and learned, and they learned a little bit from us, and vice versa. So I guess there's a relationship there, but there's never been an exchange of money for our services. Only that we've gone through their training, shared what we knew, and the way we would approach different problems. Does that answer your question? Yes, sir. Thank you. Thank you, Dr. Appreciate it. Thank you. You bet. All right. Any other questions on this particular agenda item? All right. We'll move on to the next one. I receive a report. Hold discussion. Give staff direction regarding the city's membership and coalition related to Atmos Energy and Encore Electric Delivery. Mayor, members of the council, I wanted to come up here tonight or this afternoon and give you a little bit of background on the coalitions that the city of Denton is a party to when it comes to regulatory issues and rate increase issues coming from Atmos Energy, the gas utility, and also Encore Electric Del ivery. The other thing I'd like to present as well is back in May of this year, the council requested that staff go back and provide the council some options of what coalitions are there and bring you back some of those options to determine whether or not the city should stay with the existing coalitions or move to a different coalition based on the information presented. And then lastly, we will also have a recommendation that staff would like to make and then at the conclusion, seek your direction to see if you concur or go a different way. So from time to time, Encore and Atmos will ask for a rate increase. When they do so, they'll make a filing with the regulatory agency, whether it's the PUC or the Public Utility Commission of Texas or the Railroad Commission of Texas. They'll also make a copy of the rate filing to the respective city in which the utility resides in. So the city of Denton would also receive that filing. And so what cities have typically done around the state is that they have joined these coalitions to assist in number one, reviewing the rate studies because it requires consultants to be hired, attorney firms are involved as well. Also allows us to, to allows those cities to share the cost of that review. And so there's some economies of scale in that case. I will note that the city of Dallas is the only city in Texas that we're aware of from an Atmos perspective that does not join a coalition. They are part of a coalition for Encore on the electric side, but not for Atmos Gas. For the city of Denton, Atmos has just under 21,000 meters, gas meters within the city. And Encore also has about 1,252 meters within the city of Denton city limits. So here is the Atmos coalitions that the city of Denton is involved with on the left or excuse me, I guess, I guess you're right my left. We're with the Atmos Texas Municipality. So ATM that's the current coalition in which we're involved with for Atmos Gas. As you can see, it's 56 members, there's a 202,000 meters that are represented. It's represented by Herrera and Boyle PLLC. Mr Herrera has been before you in the past to make presentations about Atmos Gas. The fees that are charged are just a little under a little over $1,000. And then on the flip side, the other large coalition is the Atmos City Steering Committee. And it has 171 members. Primarily those members, those cities are located in North Texas area. And as you can see, it's a much larger coalition, well over a million meters that are being represented. And the attorney's firm that's represented with that group is Lord Gosling, Rochelle and Townsend. And as you can see, they've also provided a price point if the city of Denton wanted to join. And it would be approximately $2,600, so about twice as much as what it cost to stay with Herrera and Boyle. So that's the Atmos coalition, those are the two options on the Atmos side. On the Encore side, it's very similar. It's with Herrera and Boyle, we're with the Alliance of En core Cities. 25 members are within the, with our members of that coalition. Primarily those cities are located in the central Texas area of Texas. And we're with them, we've been with them for quite some time. As I said, we have approximately 1,252 meters, so it's a small number. And then on the flip side, the larger coalition has 156 members. Actually, the city of Dallas is within that coalition, so their meters are in the millions. I don't have an exact count, but I would imagine the fact that it's residential, commercial, and also street lights, they're meters within the millions. So they've also given us a price point of just under 15,000 if we were to join, because it's based on a per capita charge. But if you were to look into the fact of the number of meters that we have, the 1,200 or so that we have here in the city of Denton, it would actually have been about $11 per capita when it comes to just on the Encore side. So just from a recommendation, what we decided based on the scope of the number of Atmos meters that we have, as I mentioned before. We believe that going with the larger coalition of cities, again, it's more north Texas centric. We believe that would be more beneficial to our rate pairs to be a part of that group. And then conversely, the fact that we have such a small number of Encore meters here in the city of Denton, we believe we can stay with the smaller group that we've been with for quite some time. And then with that, I'll open it up for questions or comments. >> I'm okay with the recommendation. >> Yes. >> All right. >> Okay. Well, we'll come forward- >> Thank you, Mark. >> At a future meeting for the item to be presented and approved for council. Thank you. >> All right, we'll move on to our next item. Receive a report, hold a discussion, give your staff direction regarding options for management of Stoke Denton Enterprise Center. And Council Member Gregory will be, has completed the proper paperwork to recuse himself, so. You're up. >> All right. Y'all don't want to take your dinner break first? >> Well, I think we're going to, we may go into closed session so we can eat and then do our individual items. So if we can get through these pretty quick, we'll move through there. >> All right. >> We can move through these pretty quick, we'll be all. I'm just. >> Come on. >> I'm just trying to lighten it up a little bit. >> Okay. Moving quickly. I am here this evening, or this afternoon, Mayor and Council Members, to give you some information on management options for the Stoke Denton Entrepreneur Center. To begin with a bit of background, on August 22nd, the council decided not to renew the Stoke Management Contract with the Dallas Entrepreneur Center and directed staff to take over Stoke's operations and at the same time issue an RFP for new management options. On October 1st, the city did assume management of Stoke. The primary operations team for Stoke right now consists of four city staff members from different departments. With additional support on a regular basis from four other city folks and pulling in people as needed. In terms of the RFP, we issued that on September 12th. It was sent to four potential respondents directly as well as being posted online through the purchasing department's process and advertised in the newspaper. We held a pre-solicitation meeting on September 21st. Six attendees were at that meeting representing four potential respondents. The RFP closed on October 3rd. We did receive one response. And on October 10th, the evaluation committee met. The proposal that we did receive was from Hickory and Rail Ventures, LLC, which is a Denton company. Marshall Culpepper is the sole managing member of that entity. And Hickory and Rail Ventures does plan to hire Heather Gregory, who served as the Stoke director from January through September 2017. As Stoke's executive director if the contract is awarded. One of the first questions that we asked in the RFP was, what is the respondent's vision for Denton's startup community? And Hickory and Rail Ventures responded that their vision for Denton is that it is a thriving startup community where entrepreneurs have access to talent, education, capital, and a community of other entrepreneurs. And their philosophy behind the proposal is that the management company behind Stoke should lead by example and be a business teaching others how to start and grow businesses should itself be a growing and sustainable business. >> You have a question? Yes, Council Member Housbett has a question. >> Was that in their proposal? >> Yes, sir, it was. >> Okay, let me, okay. Thank you. >> You're welcome. So the business model that the respondent is proposing is built on decreasing the city's obligations by paying for staff directly from revenue generated from the space and remitting funds to the city in years two and three. The total estimated savings to the city over a three year contract period is over $241,000. They further want to increase the value that Stoke provides to its members resulting in increased revenue. And they want to continue Stoke's operations independently after the city's commercial lease ends in 2021. >> Are you going to go into, is there a slide that's going to go into more detail on, because it says we'll save the city this amount of money compared to what? In other words, was it compared to what we were spending, you got a slide on that? >> I do, I do, but I can quickly tell you. >> No, no, no. >> Okay. >> We'll just take it in order. >> Yes, ma'am. >> Okay, so Hickory and Real Ventures proposes to provide all the day to day operations, marketing, and programming, and events for Stoke. Their member recruitment is going to be focused on tech and tech enabled small businesses that support an average salary over $50,000 per year. Startups and entrepreneurs with highly impactful business models. For profit, vision driven organizations with the mix of high business and social impact. Remote workers of startups or tech and tech enabled companies. And accelerators, incubators, investors, mentors, and others that are vital to the startup ecosystem. Yes, sir. >> So I wonder if you could guess what my question is going to be. No, I'll tell you, you probably could. So I'm seeing tech, tech enabled, great. >> Mm-hm. >> Remote workers, tech, tech enabled companies. But there's mixed into that categories that we didn't, I mean, so if we go with this proposal, we're making a radical or we're modifying our policy from when we originally proposed this. And I know that people, I know somebody said that just because somebody uses tech in their business doesn't mean that that necessarily fit the criteria as far as I'm concerned. >> Right. >> From what we started. So I just want to make sure that this would be a shift from what we had talked about in the beginning. >> It would be a shift to some degree. I have some more information about that. And I also want to let you guys know that the respondent is here. If you all have questions for him directly, he's in the room. >> Okay. >> Where we sit right now with, we had gotten to the point of talking about percentages of tech and tech enabled versus other, right? >> And we don't have a definition of those anywhere. >> We do, actually. It was provided the last time we had a work session and it is included in the contract should you all choose to act on that tonight. >> Okay. >> So we're sitting at about 60% right now of tech or tech enabled businesses as part of the definition. We have 30 members right now. So the respondent in follow up questions after they turned in their response, agreed that they would work on the numbers of maintaining 60% for the first year of the contract, growing it to 65 and then 70 in the third year. So I knew that the question would come up and that is what they were comfortable with agreeing to under the contract. I'll have some questions for them but after you finish. >> Okay. Skipped ahead here. Okay, so Hickory and Rail Ventures brings exclusive partnerships with four Dent on organizations that will incubate fund and support Denton startups, starting with UNT. UNT has written a letter of support for the program and, or for the proposal and offering their sponsorship in terms of extended learning, entrepreneurship and digital design curriculum and certificates that will be offered inside Stoke. So they'll be teaching classes and doing certificate programs at the facility. Tech Mill, which is a non-profit group that has already been involved with Stoke, has pledged to organize increased programming and events in the facility under Hickory and Rail Ventures management. Brand Accelerant is an incubator, advisor and funding network for entrepreneurs that will have a membership at Stoke and offer its resources to all of the members. And finally Denton Angels, which is an angel investor network that's focused on investing in early stage Denton area startups. The executive director will have a membership there and the group will hold its monthly forum events in the facility. >> Question from Council Member Briggs. >> Yes. >> Is that similar to the Fort Worth, Angels? >> It probably is. Someone who knows is nodding yes, it is. >> Just like CalTown. >> It's he says it's just like CalTown Angels. >> Okay, thank you. >> Talking about performance, the draft contract that is included with the action item later includes metrics and deliverables in the following categories. Members, marketing, programming and events and partnerships , as well as monthly financial information. And then a comprehensive annual report at the end of the year to include outputs and outcomes. And the specifics of that, of all those metrics and deliverables are included in your backup materials. So here we have the fiscal information that the mayor was interested in, which you also have in a larger format in your backup. So what we're talking about is comparing the city's, the current city operations or what we anticipate the city 's operations to be over the course of a year versus what's proposed by Hickory and Rail Ventures. So we're not comparing the deck's management and that scenario to the Hickory and Rail Ventures. But we're comparing what we're doing now, city management to- >> Do you have that number? >> Do I have which? >> Well, the deck number. In other words, the savings are 241,529 based upon. But what would have been if we were comparing it to the deck contract? >> Well, under the deck contract, the city paid, let's see. I don't have that right in front of me, but I could probably get it between now and tonight. >> I appreciate that. >> So yes, we've- >> That'd be wonderful. You just went blank too. >> I noticed that. That's very strange. >> There you go. >> Okay, there we go. Okay, so that's what we're looking at here. So in year one, Hickory and Rail Ventures will begin paying the executive director's salary out of membership fees. So that is something that's different between, I am going to go back and mention the arrangement that we had with the deck, which included the city paying the deck a certain amount and the deck hiring and paying the executive director. So the city would immediately not be paying that money. Starting in year two, Hickory and Rail Ventures will pay $1,000 a month back to the city to decrease our costs. And then in year three, they will remit $2,000 a month back to the city. So if you follow, you can see my mouse here. If you follow along there at the bottom, you can see that the savings to the city from the HRV proposal, $69,000 the first year, $80,000 the second year, and over $90,000 the third year for a total of $241,000 in savings versus city operations of the facility. >> We've got several questions. >> Okay. >> Council member Briggs, then council member Hussbuth, and Mayor Potem-Pagani. >> So under expenditures, that's all still what the city is paying? Under? >> Yes. >> Yes, okay. >> Yes, here. >> And so as of now, there wouldn't be a director. We wouldn't be paying a director under the current, so. >> Right. >> Right, okay. And under this proposal, would we receive rent or no? >> So under the proposal in years two and three, we would receive in year two, $1,000 back every month, so $12,000 back from HRV in, I don't know if rent is the right term, but yes, in the rem ittance. In year two, they would remit $2,000 a month. I do want to point out here though on this personnel services line, right now, we have people from multiple different departments supporting the facility. I am people from tech services, people from customer service. But what we're anticipating is that we would need to hire the city, if we were to retain management, we'd need to hire an FTE to take over that. So that all of these eight or ten different people who are working on various parts of it now can go back to what they're doing. So when finance put together this analysis, the total compensation that they put in here on the personnel services line is for a program director, something comparable to the KDB director. >> So we would be paying for the executive director? >> This is if the city continued to do the management. >> Okay. >> Okay, that's all I'm talking about. The personnel services line up here, this is if the city retained the management, did not issue the contract, we would have to hire someone to be the executive director. >> For the 107,000? >> Yeah, and that's total compensation. We've actually estimated how much time the current staffing model or what the expenses are related to the current staffing model . And we will probably end the month of October with about $ 30,000 in staffing costs for just one month for all of us who are taking various parts of it. And over time that would likely decrease, but that's to give you an idea of what's happened the first month. All right, thanks. >> Yes, thank you. Help me with the, I have a math question. So if, again, Mayor Watts has a great point, the actual deck numbers will be very helpful because I'm trying to reconcile, we, before the membership dues came to the city? >> No, sir. >> Okay, so- >> They went straight to the deck. >> Okay, and then they gave us- >> 10% of membership fees only. >> Right, and so is that, yeah, I'll look at it side by side. That'll probably answer the question. Thank you. >> Mayor Codd, yeah? >> That actually segues into what my question was. So the deck gave us, they remitted 10%, and they had, what was it, 130,000 of fees that they had collected? >> They had 130,000 of total fees, but that includes things other than membership fees. >> Right, cuz they did rentals or- >> Right, but they were only remitting the membership fees. >> So what did they remit to us? >> It was about $9,000 total. >> Okay. >> I don't think Chuck is still in here, but I think it was like $888,000. >> All right, so what this is, this proposal is basically saying instead of remitting $8,000 or $9,000, they're gonna remit $12,000 in year two and then $24,000 in year three, but essentially everything else would remain the same because they're collecting the membership fees and they're paying for a staff out of their membership fees. >> Right, but the city isn't having to pay for the staff. >> Right, I'm actually comparing it more to DEC at this point than the city. I understand the city's costs, which are considerable, but I'm really comparing it to the position we're in with DEC versus what we might be in in year two or year three. >> Right, and under the agreement with the DEC, the city paid them to hire an employee. >> So, okay, that's right. So DEC got membership fees and we paid their staffing. >> Yes. >> Right. >> So it was really a 220,000 kind of around that number of what it was costing us to have that agreement. So, okay, question for you about the expenditures. >> Mm-hm. >> So the rent increases over time? >> Yes. >> Can you explain that? >> Under the lease agreement, the rent increases 3.5% per square foot per year of the contract, I mean per year of the lease agreement. And then included in that building rent is also the triple net, which fluctuates year to year as well. Triple net covers insurance and common area maintenance and taxes. >> And so we would still be covering triple net under this arrangement? >> Mm-hm. >> Okay, all right, thank you. >> Councilmember Ryan. >> Following up on that one, on utilities, there's a different set of numbers on what the city's got down and what's on the contract. Would that be just the city would pay whatever the utility was or is it just an estimate on the bottom? >> So right here, is this where you're looking, rental and utility? >> No, the next utility down, utilities paid by city. >> Okay. >> They're different. >> The 25,000 matches up in year one, but then you've got different numbers. >> The next two years. >> So 27,500. So this was an estimate, this was the respondent's estimate . And he might be able to speak better to the difference in those numbers. >> Yeah, not yet. >> Not yet. I'm not sure of the answer to that. >> Do you know if the contract says the city will pay the utilities or the city shall pay this much towards utilities? >> No, it says utilities. >> Okay. >> So those numbers should technically be the same, but we just need to use the same ones, whatever the projections are. >> Right. >> Yeah. >> Right. >> Which if you, depending on which one you used, you're still gonna have a few thousand dollars in savings if you, or less. Okay. >> Okay. >> Any other, go ahead, I'm sorry, Caroline, you got a few more slides up on. >> No, I mean, I've gone through everything that I was going to say on this particular slide, so. >> Councilmember Duff? >> Just as a question, other than paying the rent, what would it cost us if we just shut it down? >> Well, we would still have to pay the rent. >> Yes. That's it. >> Right. >> Okay. Okay, all right. Councilmember Briggs, question? >> Yeah, I realized now what I was doing earlier. I didn't see that the contract for the, their contract was right below. I, so now I see. >> I'm sorry, yeah, it's, it's kind of a little hard to see on the screen. >> Yes, so now I see the difference. >> Okay. >> And I appreciate that. >> Okay. So down here. >> I gotcha, yeah. >> Right. >> It makes a lot more sense now. >> Okay. >> I was like, what? >> I'm sorry about that. >> I appreciate it. >> Yes. >> Sure. Okay. So we have options. The first being to continue with the city's management of Stoke, adding an FTE to handle the operations. The pros there is that that gives the city maximum control over Stoke's operations, and there would be no need for another transition. The cons is that based on the comparison between city operations and the proposal from the respondent, that would be the more expensive option. And while city staff has done a really admirable job of getting us through this transition and trying to minimize the changes for the current members of Stoke, this is not city staff's area of expertise. The second option would be to award management the management contract to Hickory and Rail Ventures. The pros for this option are the fact that the respondent has expertise in coworking space management and tech and startup businesses. There is a savings versus the city management scenario of $ 241,000 over three years. There is a plan for sustainability after the city's lease ends in February 2021. And this was something that we were really curious to see what kind of options could be brought forward for that to continue to have this resource in the community for entrepreneurs. There's significant buy-in from the startup community and current members. The respondent's proposal was returned with ten letters of support from current members, as well as letters from two of the four exclusive partners that they're bringing along. I think the cons here is that there would be a second transition for the current members with a new manager in place. Based on the committee's review of the options, looking at the different financial pictures under the scenarios, the staff recommendation is to award management of the contract or management of Stoke to Hickory and Rail Ventures. And as you all know, there is an action item on the agenda later this evening. But we are seeking direction on the preferred option for St oke's management. And I will bring back information about the deck scenario prior to, or I can give it to you when we discuss the action item. >> Could you go back to the financial picture? >> Sure. >> So, So what I'm understanding is the deck had a hundred, what, sorry. >> He didn't put the light on. The deck had revenues of membership fees plus other. >> And you said last year it equated to about 130,000? >> Well, their revenues were right at 100,000, but then with the money that the city gave them to hire the position. That's, I think that's where you were getting to that number. >> Okay, so you're saying that's where. >> Yeah. >> Okay. All right. Okay. >> And so, just to remind everyone too that all of the things like materials, supplies, or some of materials and supplies, clearly maintenance and repair, rent, utilities, branding and marketing. Those things were paid for by the city under the Decks contract as well. >> Okay. Do we have a performer from the, the. >> From the respondent? >> Yes. Do we have a business performer in the presentation ? >> That was in their response, in their proposal. >> Yeah. >> The performer was. >> Right, I'll go back and re-familiarize myself before it. Yeah, I remember seeing that now. It's, oh yes, Mayor Pro Tem. >> So would, would the city continue paying for branding and marketing? >> Part of their part of the proposal is to take up and perform branding and marketing. >> I saw that in there, yeah. >> Right, so this, the top part of this is using the council's adopted budget for Stoke and what we would anticipate having to spend if we retained management. We would likely need some marketing assistance in order to get membership numbers up, so on and so forth, if the city were to retain its management. Now, all of this is, is just kind of our best estimate for what we would see over a year under city's management. So some of these things could decrease, some of them could increase. >> We're just doing our best job at projecting. >> I guess I just wanted to be clear because the contract states that they're gonna be paying for marketing expenses. >> Right. >> So the city is not agreeing to paying any marketing expenses if we went to this contract. >> Correct, that's correct. >> And we wouldn't be paying for things like training or, I don't know, I mean, materials, I don't really know what that is, but I'm assuming we wouldn't pay for that. >> No, we wouldn't pay for that. >> I'm thinking we would enter into a strictly landlord tenant type relationship or a sub tenant type relationship where we're only responsible for maintenance and repairs. >> And the rent. >> And the rent. >> Except for what they remit. Yes, and that's what's contemplated in the contract is that they would sign a sub lease with the city. >> And has that been approved by the Orion Holdings Group or whatever their name is, Brennan? >> Oh, a rail yard. >> Yeah. >> I am not sure I will check with legal. >> Okay. >> If I could clarify too, I just went back and found the August 2nd presentation on this. When you compare the financial chart that was presented then, and I take the one time costs out. For the build out 2016-17, the city spent a net $257,500 on this contract. So that's how it would have compared. Last year, there was a two, based on this, it was a $257, 000 loss of expenditure to the city. So year one, you're looking at a potential cost expenditure of $188,000. So it's about $70,000 less in year one of this agreement. And what was paid to the deck, just to answer that question . >> Yes, Councilmember Husserlund. >> If you could, I think it's fantastic. I think Morris was fantastic. I like the presentation. I'll tell you, absolutely on me, I gotta do better reading in the middle of the night, but I missed that. I need you to speak to me, if you would please, on the general manager. Here's my concern specifically. In that last presentation with the deck, there was an issue that really caught my ear, was that when Upventure moved here, the manager could not speak to why they were there. We're there once a week, she's there every day. And so you had to come up and answer that question, how they got here, the Genesis being the talent pool here and some others, that was your answer. And so for me, to get out of this cycle of debt, we need someone that is absolutely tenacious and sales oriented and sales by its very nature is building relationships. So I need, you've been there, I understand the relationship with the community, but that doesn't, relationship with the community won't necessarily get us out of this cycle. What gets us out of this cycle is someone that is tenacious about getting us out of this cycle. What is your take on that? Because I mean, again, the question's coming up either at annual reviews or next time tonight, it's coming up, so just to, if there's an elephant in the room, you might as well pet it. So I need you to speak to that so that I can understand. >> Okay, I think I understand why you would ask the question and I think that that was one specific example where I needed to step in in that instance, but I will tell you from spending time at Stoke, the entire time that it's been open, I don't think that judging the director's performance based on that one situation is quite the accurate way to do that. Just you asked for my opinion, I'm going to give you my opinion. I have seen her work very well in recruiting businesses and forming those kinds of ongoing working relationships with businesses that make them want to be there and make them want to talk positively about their experience to their peers, creating that kind of pipeline, peer to peer pipeline to bring folks in. That's been my personal experience and I think if you were inclined to put the same question to the respondent, they might like to have a chance to answer that, again, because this is something that was put forth in their proposal. So I hope that helps a little bit. >> Yes, and yeah, I assume they will speak to it and I assume I'll ask the question. But my very point is, when the contract was in question, right? So that is the instance where you, it is absolutely in question and you absolutely, I'm assuming, would put your best foot forward. In that instance, because there's a decision to be made if that contract's going to be renewed. And so I absolutely hold that experience paramount to day in, day out stuff because it has, in my mind, I would evaluate it to have a larger weight to it. And so that is, that's why I place that significant weight on it. >> I understand. >> And I appreciate the insight, it's helpful. And I'll consider it. Thank you. >> Okay, thank you. >> Before we, I think the city attorney had said that he needed to answer Mayor Pro Tem's question. He had a question. >> Yeah, you asked about whether or not we have contacted rail yard as far as the sublease. The original rail yard agreement with us and the rail yard already contemplated a sublease to be done. And so they had already signed off on that. So it's just fulfilling that term. >> Well, since I have you, I have another question. So I went through the contract and in the proposal, there is a section called projected city stoke revenue and expenditures with H and RB management. And that's where it has, it says the 2018 and 19 estimate of rental income to the city. So I'm trying to find, I might have missed it, but I didn't see anything in the contract that is hard and firm on this is the payment to the city. All I saw was this estimate language from the proposal. And then when you consider that the contract is renewed on a yearly basis, I just didn't see any payment section on the contract. I might have missed it, but I didn't see the part where they give us money. >> And we will certainly have an answer to that question in the items for individual consideration. Council Member Riggs, did you have a question? >> Well, really when you look at the contract, it's basically paying rent and we're going to have to do that anyway. I am in favor of this three year contract. I'm glad someone from the community stepped up and so that 's all I have to say. But I would like for something to be in the contract where it guarantees that in year two and three that we will be recouping some of that money back, not rent. >> Remittance. >> So my previous question was, is there a performa from the Hickory and Rail Ventures, not of the estimate of the city's performa, but their performa? >> Yes. >> And now, I've looked through the proposal five times and I don't, so if I'm missing it, please. I see what Mayor Pro Tem was talking about, which is the estimate. But, and so I'm looking under the, let me pull it up. Okay. >> I'm looking under exhibit two, which is the Hickory and Rail Ventures LLC contract and proposal. >> I've got a pro forma right here in my packet. >> Okay. >> So it sounds like maybe that didn't make it into the packet. And I'm saying that and I'm looking at- >> Yeah, if you could just make a copy of that just for me. >> Sure. >> Or for the council. >> Yeah. >> I just want to see it. >> Yeah, we'll have it. >> Okay. >> There are definitely, I mean, it's a very detailed- >> Yeah. >> Performa. >> Yeah, that's fine. Okay, any other questions? So the direction will be, we're going to take it in items for individual consideration, so we'll talk about it then. Yes, Mayor Pro Tem. >> I mean, I'm in favor of this, but the contract is lacking. I just, there needs to be more detail in the financial aspects of the contract. There's not even a recital section as to like the money changing hands. So I don't know if it's feasible to amend the contract with enough time. I don't know how much time we have to do that. So I'm in favor of the project, but we need a real contract , so. >> So what you're saying is, I mean, are we under a big time constraint here in the sense of, we're going to have to wait a bit for another couple weeks to get the contract squared away as far as some specific language. >> We were anticipating that if the contract were awarded, the new management would start on December 1st. I think we still have some time in that case, because you 'll have a couple more meetings before that. So if we need to make some adjustments to the contract, that there's time. >> Okay, so Mayor Pro Tem, would you want, because then the question becomes for the council in this work session instead of wasting everybody's time in the item for individual consideration. Would you want to make those modifications first to the contract, bring them back to the council in a couple weeks, and then do this all at once? Are you saying, if there's a consensus or if the vote is moving forward with the contract, we still need to make those provisions. I mean, I'd just soon try to get it all clean at once, but that's just me. >> Well, yeah, first I don't know if we have all the support. I mean, I didn't count four, but we've got to figure that out. But assuming we have the support, I can't agree to anything without that. >> Let's get the contract squared away where we've got the specific terms regarding the $12,000 utility and $12,000 rent. >> And I'll just be really specific here, so that just to give more guidance. For scope of services, it says that the contractor shall provide management services in accordance with the city's document for the RFP that they put out. And then it has the RFP attached to it as exhibit B, but there are only estimates in exhibit B. There's no exact obligation, so I don't read this as a binding obligation of the proposal. >> Okay, does that make sense? Mr. City Attorney, you got a question, Council Member Br iggs? >> Wait, did this contract come from our legal department or from the applicant? >> No, it came from our legal department. >> Okay, thanks. >> From the city? >> Yes. >> Or was this, okay, all right. Well, no matter what its origin, we'll get it corrected. And if you have any other questions about the contract, please direct it to the legal department as well. So as far as moving, that means we're probably going to pull that item. Yes. >> I was anticipating you going down that road. Can, Mr. Culpepper's here. Can he speak during this then, if we're not going to do it later? >> Sure, I mean, Council's indulgence. >> Well. >> And I'm assuming it's that question you asked. >> Yes, sir. And again, I'm in favor. >> Right. >> I just, it's $200,000 round numbers. >> Right. >> For the foreseeable three years, which gets us , that's real money. And I need to understand. >> All right, yeah, if he could come up and just speak briefly to that question. And you might want to repeat the question as well. >> Yes, sir, thank you. >> You bet. >> Appreciate it. >> And if you'd state your name and address when you come, that'd be great. Thank you, Marshall, appreciate it. >> Hey, pleasure to see you again. Thank you very much. Marshall Culpepper and my address? >> Address, yes. >> 3301 El Dorado Drive. >> Thank you, appreciate it. >> Yeah, so my question specifically is, I understand the relationship value for the director. My concern is the tenacious desire and ability to hardcore get us out of this cycle, right? I mean, like just. >> I understand what you're saying. >> And so if you could speak to that concern, because it's going to come up, your reviews, this, that, and the other. So I'd just rather have that conversation up front to coin a phrase, be clearly wrong in advance. So I think maybe an instructive thing to say is, we started TechMill, we had this award that we gave out every year. It was called the Denton Dewar Award. And the idea was that it showcased a person who was not just passionate and had good relationships, but was an incredible executor upon the community's behalf. And I think that Heather is the exact kind of person that exemplifies that. It's not just about her relationships and how amazing she is with the people in the members in the center. What we've all seen as members and as part of this community with Heather is that we've seen a real focus on execution. And really, honestly, the reason that Soak had any success whatsoever was due to her dedication. And we all knew that from day one, which is why I wanted to work with her. It wasn't just about her relationships with the members, it was about what she did while she was there. And if you ask any member of Soak today, they'll tell you the same thing. >> But so your experience, you have, and reason I value your input is because in your normal business, you have to scrap, claw, fight. >> Right. >> And so you understand that dynamic probably better than anyone. And so you just spoke to it. But so in that kind of that capacity of what you know you have to do day in, day out. You feel, because that's, I mean, you're talking, again, I 'm going to round up, $200,000, $600,000 of taxpayer dollars that we're trusting will come, not come back, but is a wise investment for the community. And I believe that. I believe that to be so, but I need to understand, I do have concerns about that one component. So just your everyday venture struggle versus not having to be in that world. I mean, she comes from a different path, my understanding of the resume. So just. >> Well, just to give you, I mean, as a startup entrepreneur who's been doing it for a long time, what you struggle with every day is hard work and having to do things you didn't expect that needed to get done. And I know just from talking to Heather over the last year, she does that all the time at Stoke, I know that for example, she's up late, letting people in just so that they can get in for their event. She's sponsoring people that wouldn't necessarily come into the space because they couldn't afford it, but letting them in because it's giving them a gateway into the community. It's not just about her passion for the project, it's about how hard she works to make sure that passion is fulfilled. And I've seen it from her, like I said, pretty much every day since the last year she's worked there. >> Very good, I appreciate that insight. Thank you. >> I do have one question for you, Waii, there. It goes to the heart of membership selection. >> Yep. >> Because as you know, starting out- >> Right. >> No matter what people, how you want to define it, whether it's arbitrary or not wise, that was what the vision was. And my understanding is you're willing to hold it at 60% of what our original intended vision was the first year, go up 5%, I think the second year. >> It's 5% a year every year for the third year. But I'm also reading where it's in the supplemental questionnaire, which I don't know if it is incorporated into the contract as a term. So we might want to talk about that. Where it talks about we will turn away members that don't fit the mold of, and then it goes into those listed things. As they, I think it says as they cycle out. >> Yeah, as we gain sort of capacity. We don't intend to do that until that's the case. >> Okay. >> The idea was don't turn people away until it's full, essentially. >> Don't turn anybody away? >> Until it's full, and then we can start looking at that. >> Notwithstanding of- >> We still have the percentages to go to for that as well. >> Yeah, okay. >> Assuming that we don't necessarily just say no based on- >> So help me understand. Let's say for instance, you get a just a straight old non- profit or a >> Sure. >> I gotta be honest with you. That's not really what I signed up for. >> Right. >> And to spend 800. And so I don't mind a little flexibility. But I need a little bit of help in what your vision is, not just to fill it up. Because if you just fill it up to gain revenue, that benefits you. I don't know if it really promotes what we were really trying to achieve out there. >> I understand. >> Yeah, so help me understand your approach to that. >> The thing you need to understand about this community is that it's growing extremely fast right now. >> And when you say this community, you mean- >> The startup community. >> Okay, all right. >> The general tech startup community that we've been working on. But there's also a little bit about density that we're trying to increase right now. So it's not that we can't just say no to anyone who doesn't fit a certain profile. But we also need a certain amount of buzz and sort of creative atmosphere in the space that doesn't exist today because we need to focus on bringing those people in the door. So it's not just about saying no to lawyers and doctors. It's also about do we say no to a nonprofit you mentioned. One reason I called that highly impacted companies, there are kinds of startups that are actually nonprofit driven. Where they can have a high impact on the world that don't necessarily relate directly to profits. And those things can actually be really helpful for anyone in an entrepreneurship community. Those people raise money the same way anyone that goes to venture capitalists do. And so there are a lot of learnings and a lot of networking that can take place that are really valuable. And so you have to be really careful when you start excluding. And it's not just because I need a sustainable business model. It's also because you're cutting off potential ties that could help the network of entrepreneurs within the space. So you mentioned, for example, lawyers. In fact, every startup needs a lawyer, go figure, because us entrepreneurs like to break things. And that's actually really important. In fact, it's actually really, really common. Even in the highest, most regarded accelerators and co- working spaces in the world, they have lawyers with law offices within their acceler ators. >> So then what I'm hearing you say is that the original purpose to try to make it more specific to a tech and tech enabled environment that you're describing. >> Bad in essence, I mean, we could say almost anybody moved in there could. Because now what I hear you say is anybody that is ancill ary to that type of. And not that I'm for or against, I just want to understand that by doing this, we're changing really the original scope. Good or bad, I'm not saying it's right or wrong, I'm just saying we are changing the original scope as was originally perceived. >> Yeah, I can't comment on what the original scope was, because honestly it was never clear to me, and that's why I 'm here with the vision. >> Okay, all right. Okay, yes? >> One follow up. So Ben spoke to us, and I think he makes a valid point, and I would be open to this change, and I'm curious if you are. He points out, Ben from Upventure, he points out the need for more office space in eliminating some of the open desk space. And that makes a lot of sense to me. Have you given that consideration? >> Yeah, there are a lot of things we would like to do to improve the space, and that's certainly one amongst them. There's some really simple low hanging fruit that need to be done just right off the top of the head, there's no sound dampening anywhere, so it's very echoey all throughout the space, we just need to put some sound dampening in the ceiling. We'd like to have some separation between the event space and the co-working space, for example. But to your point with private offices, yeah, you're absolutely right. There's not just a better revenue opportunity if we put more offices in there. There's a little bit of a largeness in kind of one big room size to that co-working space right now that we could break up a little bit if we had some smarter use of space. So that's also in this, and if you look at, I know the pro formas weren't in the actual attachments, but if you look at the proformas once you'll have them, you 'll see that we allocate quite a bit of money towards capital improvements to the space. So it's not just about getting butts in seats, but it's also about making it better and better over time and putting more money towards that. >> And is that something that's phased in, or is that something? Because I would, maybe Carolyn, if you could come back to us, I would be open to doing that sooner than later, if there's a way to. >> Because I think it does get us where I want to be faster if we have the ability to, but- >> Yeah, and let me, because I don't want to have him up here and then we're just, because first of all we gotta decide if there's direction to bring this back forward for a vote. because if there's four of us that don't want to do that, then we're sort of all spinning our wheels. So let me try to take the pulse of the council at this point as far as moving the direction forward. And then if we have further follow up questions, we can maybe get those to them offline to have a little bit more, because we need to keep this thing rolling. Okay. >> I'm forward as long as we can add language to clean up the contract. I think that we've done that many times, so I'm willing to go forward with it. >> I am too. I want something in the whereas is that this is a change of direction. I know it was said that we didn't really know what it was, but I think everybody that approved it at that time thought they knew what it was. And I hate to think that we're supplementing office space just in general. But that's what it seems like it's going to come down to if we're not careful. And I just want to make sure we're not doing that, because that is not something that I would want to do. But I will move forward with this, given that we can make these modifications and a little clarity, a little bit more clarity on how people were chosen, this density issue. I mean, I just, I mean, needs more density. That to me is saying, we're just going to put bodies in there who can pay the rent and who maybe have some connection. But, and I know that's not what you're thinking, but I'm going to trust the situation, because you guys have a good reputation. So, but I want to make it clear that this is a departure from what we originally had intended. So I'm okay with moving forward and making these changes. Okay, Mayor Kim. >> No likewise, but you know. >> Okay. I think, I'm sorry. >> Yeah, yeah, no likewise. Yeah, likewise. I'm good with it. >> Okay. >> I think this is a good way to. >> Okay. All right, so we've got the direction to tidy up the contract. >> Yes. >> Maybe if there's council members who have a few more questions or clarifications to submit those offline to either Caroline or city attorney, city manager, and we'll get the thing popped out as soon as we can so that we don't miss that December the first deadline. >> Sure, and would you like us to go ahead and email the group, the pro forma that was included? >> Sure, yeah, that'd be great. >> Okay. >> Yep. >> Okay, thank you. >> All right, thank you all. Appreciate it. Thank you for coming out. Appreciate it. You bet. All right, we're going to go on to our last item on the work session and then we'll go into closed session, receive report and hold discussion against staff direction on the city auditor recruitment process. >> Good afternoon, Mayor and members of the city council. As you know, city auditor Craig Hamnitor resigned effective October 16th. So I'm here today seeking direction from the council about how you'd like to proceed and trying to fill that position. And as I included in the backup, the waters contract included a two year guarantee so we could use their services without a professional service fee. We just have to pay out of pocket expenses. >> Okay, Council Member Briggs. >> Whatever we need to do to get the process started as quick as possible. I mean, I don't know that there was a, is there an item to choose from, like as far as the timeline? >> No, ma'am, just- >> We're just re-engaged. >> We're just in construction today. >> Yeah, we just re-engage them. >> Yeah. >> This will be real short and sweet. Everybody okay with re-engaging waters based upon their contractual provision of providing another recruit within 24 months if the placed one is no longer here? Okay. >> Are you wanting to use a similar process that you did last time where we had just a quick reception with the executive staff and council along to the executive staff and then you started interviews with the candidates day one and then followed up with additional candidates day two? >> Sure, I mean, I don't know if, yeah, sure. Yeah, everybody okay with that? Okay, yep. >> Okay, well we will resubmit the brochure via email. Make sure you don't have any changes to that and then we'll get going with them. >> All right, thank you very much, appreciate it. All right, that concludes our work sessions. We're gonna go ahead and go into closed session. >> I will convene the closed session at 6 or 2. We will consider calling items, consultation, attorney, and the executive committee on section 551.071. The deliberations are in effect no matter what case you're in on section 551.071. All right, welcome everyone. We are now going to, following the completion of the closed meeting, the city council will convene in a special call meeting at 7.32 PM. We do have a quorum. We did have a consent agenda, but we don't have a consent agenda anymore. Item B has been pulled from the, no, I'm sorry, A has been pulled. A has been pulled and will be considered at a different time. So we'll move on to item for individual consideration, which is item 1B. And I think we've got a blue card wishing to speak on that. So, we'll have staff presentations, so I'll go ahead and call the item. Consider adoption of ordinance authorizing the city manager to execute a professional service agreement for the inspection of oil and gas facilities within the city of Denton with the inspection to include signage, equipment maintenance, etc. And then after the staff presentation, we will take the public comment before we deliberate or discuss. >> Good evening, council. I wanted to give a brief presentation about this professional services agreement. And as I had mentioned during the work session as well, Kenneth Ram is here and can answer any specific questions that the council may have related to the proposed inspection activities. Again, just as a very brief overview, we are proposing a professional services agreement to increase monitoring frequency with regards to a prioritization scheme that we had put together with high priority being those wells that are 300 feet or less to a protected use. About 18% of the wells, 54 total in the city limits. We're proposing to double the inspection for those. Two inspections by the city, two inspections by the contractor under our proposal. Under our priority, 301 feet to 1,000 feet, that's 45% of the wells in the city. A total of 131 wells. Two inspections would be done by the city as is currently done. And then one inspection by a contractor, about one and a half times of the current rate. Low priority is greater than 1,000 feet, 37% of the wells in the city, 109 total wells. Two inspections would be done by the city. And inspection would be done by the contractor every other year, about 1.25 times the current monitoring. So we talked in the work session about the inspection types . And then I just wanted to go over very briefly since this is a separate item. The standard inspections that the city does would be done for all categories, the low, medium, and high. Fence line inspections would be done for high priority sites. That would include the entire fence line protocol, meteor ological data, upwind and downwind, total VOCs via photo ionization detector. Naturally acquiring radioactive material, hydrogen sulfide, methane with IR technology, infrared technology. Full real time particulate matter assessments and noise. The moderate fence line would be the same except no partic ulate matter and noise. And the low priority would be no fence line in the base inspections. Near equipment inspections would be the use of FLIR with optical gas imaging for leaks. Naturally occurring radioactive material and all of the available fence line instruments if needed. And then basically the other capabilities that we have through this professional services agreement is an enhancement of our current GIS capabilities. Reporting via GIS database that includes infrastructure, including leak tagging with photos of the site and from instrumentation. We talked a little bit last time about VOC including some real time continuous sampling if needed. And then there's an option through task four to provide additional services as needed upon request of the city. Couple of things about Modern Geosciences. One of the things, they are the consulting firm that staff chose to enter into a negotiation with through a professional service agreement. We learned a little bit about them in the information that was presented during the work session. But I wanted to add to that a little bit. They were founded in 2011. They do have a municipal focus. They have a number of cities in the DFW Metroplex that they have supported for gas well inspections and air assessments . I've put a listing of those out here. Colleyville, Flower Mound, Hazlitt, Southlake, Coppell, Grand Prairie, Kennendale, Mansfield, and Dallas. They have been involved in these activities for a number of years at several of these cities, Flower Mound for example, since 2011. You have a listing of these sites within the professional services agreement proposal that's included as your attachment. And it gives more details on the activities that they do and how long they've been doing it for each city. I did want council to know that I reached out personally to the cities that are highlighted on this list. And talked to the individuals there that had worked with modern geosciences, specifically about the inspection activities that they had done, gas well related activities that they had done. And also various types of air sampling and air monitoring that they had done. I can say categorically that I heard nothing but good things. The cities that I spoke with stated that they were very satisfied with the work. Many of them again had long term relationships that span many years. Very positive feedback. Did not hear a single negative comment in all of these interactions with the cities. We talked a little bit about the- >> Council member, I'm going to try to question and then Dalton has a question. >> Yes. >> You may cover it in one of your slides in the future. But do you know if their reports have a guarantee? >> A guarantee in what manner? >> On the information is correct? Like is there some sort of guarantee that the information on the reports that we are getting is 100% correct? >> I don't know that I would, I wouldn't characterize that as a guarantee in the sense of a statement of guarantee. As much as I would of the idea that they would be done under acceptable protocol. Meaning that if they had conducted this testing under the acceptable protocol, that is considered to be defensible scientific data. I don't know if that answers your question because that's generally how you do scientific data collection. You have a methodology. You have standards. You have calibration. You have procedures. And that data is considered to be valid when those protocols have been met. So I can say that the protocols would be met. I don't know if that addresses what you're asking in terms of a guarantee. Maybe, I hope it does, but that's the best I could say is that it's just like laboratory data, for example. You have a certain protocol standards and if your testing falls within the parameters of that, that is considered to be acceptable scientific data from a laboratory perspective. Same situation here. >> Councilmember Gregory. >> Thank you, Mayor. Dr. Banks. That's a number of cities. I'm wondering, are there other vendors that provide this kind of service that are working in this area? >> I think you could find inspection services in some regard. I think you would be hard pressed to find the breadth of inspection services that are offered. I also think that you're going to find, it would be hard to find a service that is provided by a vendor that is going to have as much demonstrable municipal focus as this particular vendor. >> Thank you. Okay, so we talked a little bit about this the last time I put up this slide. Sorry, it's been a long day. I put up this slide to basically show what the business composition of modern geosciences has been since their inception in 2011. Dr. Tram went over this in the work session, but essentially they're providing a vast majority of their services to municipalities and in retail. They do have a small percentage that they provided for oil and gas. That's been done in those cases where it was paid for by the oil and gas operation but at the request of the city. Dr. Tram had spoken earlier that he has only one right now oil and gas client currently, where they're assisting in Grand Prairie on pad site inspections and that contract is a very small percentage of their overall income, less than 10,000. And that runs out this year. So predominantly a municipal focus. So in terms of a professional services agreement, from my perspective as a staff member, it's somewhat similar to what you would go through in terms of looking at a process with a request for qualifications. So some things that kind of stood out in terms of looking at a group like modern geosciences was that municipal focus . The technical expertise, the trained professionals, the certifications and licenses that those professionals have. The scalability, the firm has the ability to scale up or scale down according to activity needs. They've got a good reputation in the DFW Metroplex with a proven track record. And basically again, a long history of working with some of our neighboring cities, in particular Flower Mound. I spoke with Flower Mound's representative today, just again asking perceptions on modern geosciences. And again, nothing but good things to say. Wanted to give a little bit deeper dive on the budget. I thought that might be an important component. Task one is the receptor screening, the GIS development. And basically that project is going to be something that I think if, after this first year, that product will be developed and then essentially we'll see that particular component of the price go down if we choose to continue this. If we choose to accept this PSA or if we choose to continue it for more than one year. This is some upfront work to get the pad sites fully mapped , get the equipment mapped, get the reporting structure together so that the data collected in the field can be populated very quickly to the reports and out the door. So I do anticipate that task going down over a multi-year monitoring or inspection contract. >> Got a question from Council Member Briggs. >> Yes. >> Well, my question was kind of on the other slide we were talking about, Mr. Tram. Is there, do you know, is there any other relationship with the city previously? >> Yes, Dr. Tram did our municipal setting designation. So we had a downtown municipal setting designation where we basically worked through the TCEQ to establish in areas that groundwater was prohibited from use that would allow for a remediation of property within that area. So not to get off on a tangent, but a lot of our downtown properties have some problems with metals contamination. And this is a way of being able to help those properties get through the voluntary cleanup program simply by taking the groundwater pathway out of that evaluation. So we have, it takes a lot of characterization work. It's a fairly extensive permit to work through. I think it took us about a year and a half to get through that permit completely. And it may have taken, now that I'm thinking about it, a little bit longer than that. But it was successful and we've actually had several other cities that have approached us, asking us about how that project went and wanting to do similar projects for their cities. And I'm pretty sure that there's been at least a few additional MSDs that Trans Group has worked with, or worked on. So yes, we have some direct experience, not related to this activity, but related to an environmental project. >> Okay. >> So I talked a little bit about task one. Task two and three are basically the components of the high , moderate, and low inspection categories. And you can see the relative cost associated with each one of those. Of course, it's proportional. So the high cost is not as much as the moderate, but there 's a lot fewer wells. So I just want to point that out. The comprehensive annual report of $10,000, and so the total is 238,333. We have a request to the PSA to not exceed 250. So for the optional component that we talked about a little bit in the work session, we've got about $11,600 to enact if we need it. So that's kind of a little bit deeper dive into the budget. >> Yeah, Councilman Riggs? >> Yes. >> So is this kind of thought more of a temporary one year type thing, or is the city planning on continuing this contract? >> That is up to the council. >> Well, the intention tonight is just for one year. >> That's correct. This is a single year contract. We were asked that, I'm sorry, was there? >> No, no, I thought nevermind. >> Okay. We were asked a couple of simple questions in the work session, so we thought we'd try to put together some info. One was, what would this cost look like compared to what we currently have within the gas well budget? Our current budget is for 16-17 is 368,430. That's one FTE, and under this proposal, it would also accommodate the full contract as proposed. If we looked at an in-house alternative, and keep in mind that we're doing this on scratch pieces of paper, and we didn't have a lot of time to put some hard numbers to this. So these are rough estimates. The initial equipment cost, we think, would be somewhere in the order of 280 to $320,000. That's an initial one time purchase. The equipment maintenance, replacement, and calibration vehicles, etc. Would be about 175,000 a year. That handles all the necessary equipment to be able to go onto the site. That basically handles all of the maintenance of the equipment. That also programs money in on a yearly basis to be able to replace that equipment on an expected lifespan. The labor, which would include the training, insurance, etc . We think would be around 200,000 to get the degree of coverage. Plus, we've got to consider that we have a current FTE in the program that salary plus the equipment and training and operational components of that position is roughly about 13 6,000. So this would not include any of the real time monitoring options that we talked about. The real time continuous monitoring, if we're looking at doing one site at a time, you really need three separate pieces of collection equipment at about 45,000 per unit. So upfront cost on that would be somewhere around $135,000. So you can kind of see the relative proportion of what this would take in house versus kind of what I alluded to a little bit earlier where this equipment's being used by more than one city. And therefore we get to cost share a little bit. Yes, sir. >> Council member Briggs. >> So I appreciate this, but part of my issue is that, depending on what we want to do as a council, if we really want to build up our in house department and have really great inspectors with good equipment, in house, under our roof, accountable to the citizens and in our city, then spending all of this excess money we have right now on an external contract leaves us back at zero instead of starting to build up and invest in that right now. So that's- >> I wouldn't say that it leaves us at zero because we're still retaining one on site inspector, right? That on site inspector has got a set number of duties which would include, keep in mind that we're just talking about ongoing monitoring here. We're not talking about the monitoring that would be done during a drilling operation or clean out operation or things of that nature. There will be inspection opportunities or inspection activities that will come about during those particular types of activities. So we really tried to mirror what Flower Mound does. They basically use this outside service, but they also retain an inside inspector. And that inside inspector has a set of responsibilities that include some elements of inspection. And also complaint, response, tracking, website maintenance , that kind of stuff. So we tried to balance within the existing budget to get us these additional capabilities. But at the same time, we're not proposing to remove our inspection capabilities. And I understand we only have one inspector, but we're not proposing to remove that inspector at all. We're just proposing to enhance with the additional services. >> Okay, all right. I think the only other question that was related, and again, this is a very, very rough sketch. So the statistic that was mentioned, I believe, was 88 Wells within one mile of the high schools that are, I'm sorry, of the schools that exist within the city of Denton. And I believe it was Councilman Ryan that asked about what categories would the wells that are in proximity to schools fall within under this inspection program. So for the high use, there were six total wells that are all associated with Geyer. So they are in that 300 foot or less range. For the medium use, the ones that are 300 feet to 1,000, three of those are going to be associated with a school. In this case, a state school. This is going off of a spreadsheet that had been put together by our Gaswell inspector. And so the measurements were done, it's not a GIS. And so we're kind of looking through a database. So I will qualify these statements with those details. All the rest appear to be, and again, it's dependent on this database. Right now, using the information that we have, the rest of them appear to be in that 1,000 foot or greater range. >> Councilman Gregory. >> Could you go to the last slide, slide number eight? >> Slide number eight, this one, yes. >> So as you're talking about in health alternative, we're seeing some money that would be associated with it. How long would it take to be up to speed so that we could do those inspections using that type of sophisticated equipment for the leak monitoring and things like that? How long would that take? >> That's, I'm going to take just a very broad guess on that. I would say getting the equipment in, getting all of the ancillary items necessary to maintain and calibrate training. >> And how do three additional FTs? >> Well, yes, I mean, the way that we had looked at it was, in our labor estimates here, we actually tried to divide that up. So we've got to have someone that's got GIS and mapping skills, database skills. We've got to have a senior project manager to be able to review all of this information. Gosh, it's going to be a tough one. Eight months? >> Yeah, I mean, just your rough guess, because there's no way to know that. I mean, eight months is a good answer for you? >> Six to eight months, I would guess. >> And one other question, and you may be able to answer this or we may need somebody else to answer it. If we went out for an RFQ, that was the direction, let's say. How long would it take? How long does that process usually take before something would come back to council? >> I would think we were probably looking at a two month time period. >> Two? >> Yeah, to get it out and get it back in. >> Any other questions? Yes. >> On your last line there, on the real time continuous monitoring. >> Sorry, this one. >> Yes, right there. >> Sorry, yeah, yeah. >> Is that 135,000, is that in house or is that- >> That's just to buy the pieces of equipment. >> So is that what they would charge us? Because I thought we talked about earlier in work session that there was a possibility to add on that continuous- >> That's correct. They would have this capability and so the cost for us to be able to do something like this would be substantially less. And Dr. Tran would have to give you exactly what that would look like. But this is, if we're doing it in house, we would basically have to buy three pieces of equipment. They cost about 45,000 each to be able to set them up on the site. >> Okay, thank you. >> Sure. >> Any other questions? Yeah, thank you. We have a blue card wishing to speak. Ed So, please come forward, state your name and address and your time will begin. How much time is it on individual? Four? Three? Three, okay. >> Last time I spoke here, the fire alarm went off. >> Well, what are you telling us? >> My name's Ed- >> Dr. So. >> Ed So, for 1620 Victoria Drive. Just a couple of concerns. Of the four cities, excuse me, lifted in the modern geosciences proposal, two of them have contracts that started in 2011 and two of them have continuing contracts that started in 2012. And that seems like a reasonable thing to do if an outfit's doing its job, which I'm sure they are. But the point I want to make here is, is sort of a middle ground, is to discuss or perhaps find a way where a definite contractual period is set. And along with that, a plan is devised where during the contracting of the outside contractor, a program is initiated to in some sort of tiered system build our department. In other words, instead of making it a huge expense right out front, using it over a time period. Year, two years, whatever one would think is best. Because this way, this city has a great water monitoring program and management program. And there's no reason why we can't do the same thing with our gas well. Has nothing to do with the outside contractor, it just has to do with the credibility of having your own in house top tier services. And I think there's some way that we can do that, just as we've done it. We did it with an urban forester, it took a grant to do it, if any of you were around however long ago that was. But where there's a will, there's a way. And everybody comes out happy. We would have concerns as is pointed out in the assumptions and limitations. And rightfully so, costs presented are above or based on the estimated number of wells and the services proposed. If that changes, so does the price. And we have to think about that. Has a projection been done on the city's gas well revenues? Has that been looked at, what are we going to be making five years from now, ten years from now? What's even going to happen in the Barnett Shale during that time? Barnett Shale's on the downside. So I mean there are a lot of factors here that I think should be considered in making this decision. But I feel very strongly about taking this as an opportunity to initiate our own department. So I think that's all I have to say. >> Okay. >> Thank you. >> Thank you. Yes, question? Council Member Houspeth. >> But to your point, and here's, I'm trying to, I'm sure I 'll have other questions later, but right now it's using an outside entity versus building up internally. To your point, if the gas well revenues drop or production drops, we're in a position where we have to fire someone or let them go or, it does limit your flexibility versus an outside entity that you can scale up or down. At the same time, maybe there's some opportunities to buy equipment, provide different things to manage that cost better. But could you just speak for, my question is, if you had your druthers, if you have understanding you would like to build up the department, but understanding it may drop off. And then that puts someone's job on the line. How do you reconcile those two where you're still okay with - >> I can't, I can't. I don't have the information to do that. Just like you folks don't really have the information to make your decision. And I don't say that in a bad way. I mean the decision's there to be gotten. What's it going to look like? What's the projection on this stuff? It's what you do with a good business decision. I think you've got to know what's coming down the pike. >> Agree. >> Yeah. >> Okay. >> Thank you. >> Thank you. >> Thank you. >> Thank you Dr. Stove. >> Mr. Ed. >> Someday. >> Okay, any other questions for staff? Council discussion? Yes. >> I want to move approval of item 1B simply because we've been understaffed. And that means that the community's been underserved. And as we've discussed, we have wells that are in very sensitive areas, very close to schools. And I have been bothered for a while that we have only one gas well inspector. They don't have the equipment that this contractor would bring to the table. You know, I want to get inspections going as soon as possible. I want them to be as good as possible. And I want those leak inspections to start as soon as possible. So I think if we do this, I'm moving approval of 1B as a contract for one year. We can have some more discussions about if we want to ramp up our own department internally at another time. But I'm really quite anxious that we have not been doing the high level of inspections that this contract gives us the ability to do. >> Councilmember Briggs. >> So my question is for the city manager. If we approve this contract, does that leave any room in the budget to start purchasing the equipment that our current inspector that will remain on staff will need? For when he goes to do his inspections or follow up inspections. Because if he doesn't have the instruments that this company did and he is required to go follow up, then how is he going to know if it's remedied? >> I guess I'll answer it this way. There's two ways we can handle it. We could either take a look at different business options for you and fund the one time request through supplementals next year. Or there's certainly savings in the budget to start acquiring equipment right now. But it wouldn't necessarily be paid out of the gas well revenues. Dr. Banks has been very careful to not exceed the personnel budget and the budget all in for the gas well inspectors. So if the council wanted to equip one of the inspectors with higher level of equipment, we can certainly find the money to do that. It's completely however you'd like to handle it. >> All right, any other discussion? We have a motion. Yes, Councilmember Ryan. >> Thank you, Mayor. I rarely say this, but I completely agree with Councilman Gregory. And therefore, I will be seconding the motion. And past the second of that, I would like us to get some pricing on that continuous monitoring, especially for those six wells near Guyer. Maybe that's something we can even work with DISD to split the cost on continuous monitoring. >> Okay, Councilmember Briggs. >> So on that point, if it does pass, I would like to get not just the wells near Guyer, but the wells near any of the schools moved up to, if they're not on the first or second priority list to get them on that so they are inspected more frequently. No matter if they're the distance to the schools. Is that possible? >> Well- >> I mean, I guess we could do that with our inspector. Can our inspector do that if he has the right equipment? >> Yes. >> Okay. >> I think though that's gonna be, that's a conversation I think for another time on count. Right now what we've got before is a motion based upon the contract submitted. So if we want to instruct staff to do something differently , I think we need to, cuz I don't know enough information on that to know. I mean, if something's three or 4,000 feet away, I mean, I just don't know the data on it. So I'd like to at least see the data on it before I make a decision on that. >> Well, it would depend on, I'm asking because whether I vote for this or not would depend on if we had our staff equipped with the equipment to do that, then I would more than likely vote for this contract for one year. If I knew that we had the instrument for our staff to do those inspections near the schools. >> I don't know how- >> And that's what I was asking. >> Yeah, I don't know how we answer that. >> Okay. >> Tonight in a definitive way. I mean, without having the data. I mean, that's just my thought on it. >> Okay. >> Councilmember Gregory. >> Well, I think that Dr. Banks started giving us some rough numbers, but he admitted that they were rough. I think that we probably want to submit some more questions to him about what that continuous monitoring looks like. How long the, how the data is transmitted, how often it's reviewed, things like that. And I just don't think we're ready to do that tonight. I think that we could do that soon. And I would be all in favor of pursuing that. >> Any other questions? >> Just a clear fact. How long, did we say a couple of weeks? Dr. Banks been in? >> Yes, yes. That division was moved over to him after Menal resigned. >> Yeah, so that's my comment. I think to empower him to manage a new department, I think this contract bridges that gap. So I mean, I think to a degree, we're all somewhere in agreement that we need to do better internally. Whatever that looks like. But I think in my short term here, Dr. Banks has done great things in other departments. And I think he'll do the same in this department. It's just a matter of allowing him to develop what that looks like. And so to make it his own. So that's kind of my thought as a one year approach, but really shorter than that. Fully utilize that year to plan and set up for year two. >> Sure, okay. All right, any more questions, comments? We have a motion and a second on the board. All in favor of agenda item 1B signified by raising your right hand. All opposed, like sign. Motion carries five to two. We'll move on to public hearings, agenda two. 2A, hold the second of two public hearings for voluntary annexation of approximately 73.47 acres. And so there's no action item on this, it's just a public hearing, correct? >> That's correct. >> So is this going to be basically the same information that we had at the first hearing? >> Exactly. >> So it's going to be pretty quick. >> Yes, it will. >> All right, good deal, thank you. >> Good evening, I'm Cindy Jackson. I'm senior planner with the planning division. And I'm here tonight to present to you public hearing number two for the annexation of A17-005, a request to annex approximately 73.47 acres of land. The site is located generally west of FM 428 and north of Long Avenue and the Water Works Park. The applicant is proposing to annex this property for development of a single family residential neighborhood. The site meets all of the requirements as noted in sub chapter 35, 314, criteria for annexation. This is the second public hearing as noted. And the next time you'll be seeing this will be on November 14th, which will be the first reading of the annexation ordinance . The last meeting will be sometime the first meeting in January, which hasn't been scheduled yet. The request complies with all of the minimum requirements for annexation to set forth in the Texas Local Government Code as well. That concludes my presentation. >> All right, I will now open the public hearing. This is a public hearing for agenda item 2A. Anyone wishing to speak, please come forward and state your name and address at the podium. Anybody else wishing to speak? Seeing a lot of movement over there, but none to come up front. So I will now close the public hearing on agenda item 2A. Thank you. Thank you Cindy. >> Thank you. >> Agenda item 2B, hold a public hearing, consider adoption of an ordinance of the city of Denton, Texas regarding amending the city's transportation design criteria manual. I'm just going to go ahead and open the public hearing so that I don't forget. The public hearing is now open. No, go ahead. Yeah. I was just opening it up just so that I forget to do. >> Thank you, Mr. Mayor and council members. Just quickly, this is a public hearing for the transportation criteria manual to amend it to include the perimeter street paving items there. Just brief history, you've approved, the council approved the roadway impact fees in mid 2016 with a fee of about $2,000 per year. That ordinance- >> Could you go back to that summary? >> Yes, sir, I can. >> Yeah, I'm sorry. The cost. Okay. >> It also included a discount of about 25% for commercial development there. That rate was approximately 20% of the maximum accessible fee there. >> Okay. All right. >> The impact fee study set five different areas with geographic areas within the city according to state law, which limits the areas to less than six square miles there. Our fees of $2,000 versus the average maximum accessible amount of $9634 compares with other cities who've implemented impact fees, roadway impact fees within our area here. This slide presents for you our $2,000 fee compared to other, a number of other cities, Texas cities who've implemented roadway impact fees. What does that mean to us? Well, basically an example would be the service area D, northeast area of the city there. It's estimated that a ten year requirement for roadway improvements in that area would cost $38.3 million. The fee of $2,000 per single family residence is approximately 25% of the maximum fee for that area there. The green slice of the pie here is the estimated impact fees that would be collected over that ten year period. The large portion of the entire pie is the $38.3 million need for improvements in that area there. So this green slice represents approximately 18% of the entire total amount. The yellow represents the other 75% of the required roadway improvements to address the development improvements requirements within that service area there. So this entire green and yellow represents the roadway improvements required to service that planned or that estimated development over that ten years. The red indicates the amount that would be required to address the current needs in that area without any development there. The city in the future will be required to, in that area D, would be required to fund or find funding for the red area and the yellow area here are about 82% of that total $38 million with our current $2,000 fee. The blue slice here indicates a credit for ad valorem taxes , a debt service that could be funded with the ad valorem, additional ad valorem taxes from this new development. That's not all of the ad valorem taxes, that's just the portion that would normally be dedicated to roadway services or roadway improvements in that area there. When is perimeter street paving required by the development code? It's been required for a number of years. The roadway impact fee did not eliminate the perimeter street paving. However, the impact fee ordinance does provide us with flexibility. It allows us to ask two questions. One question is, when does it make sense to build a perimeter street versus collecting the fee only? The second question is, does the city have impact fees available or other fees, funds available to partner with the developer to make those roadway improvements? The proposed, staff proposed perimeter street guidelines that you have before you tonight provide for three situations for perimeter street paving to be required. These proposed guidelines are changed since our workshop that we held about a month ago with you. They're shown in exhibit four. The changes are shown in red track changes format there and are easy for you to see for those changes and I'll highlight those as I go through the next couple of slides. The first situation is when the development traffic would reduce the level of service below level service D or when the level of service is D or below now. You asked before, I think Councilman Gregory asked, what's an example of level of service D? In the afternoon, peak afternoon hour, McKinney Street from Carroll Boulevard to Woodrow Avenue or Woodrow Lane. Woodrow Lane from McKinney South to Shady Oaks, Carroll Boulevard and Fort Worth Drive from I-95, I-35 North to Oak and Hickory. Locust Street from downtown North to University Drive. And the afternoon peak, that's level of service D currently . The second situation is for safety consideration. If the perimeter roadway is 22 feet or less, then the guidelines would require that it be widened to 25 feet. If it's less than 22 feet and the pavement is in very poor condition, then it would require that it be reconstructed at 25 feet there. The 25 feet is an ordinance requirement in the development code. The third situation is when the street segment across from the development are immediately adjacent to the development on either side has been improved, that it would be required to be improved. Since our last session with you, we've added pursuant to the request of the development community, and they made a good point with this, the flexibility for the city engineer to alter the required pavement section there, the width, the pavement thickness, and the type of pavement there based on scheduling and design factors there. We've also added the situation of when credits would be applied and how they would be applied, how they would be valued. For right away, it would be at the DCAD appraised value prior to the development process beginning. For the street improvements, it would be the cost of those street improvements based on competitive bids. The ordinance provides for credits, the basis of those credits, and the computations would be added to a development agreement there. Any development agreement that requires city participation or proposes city participation would come to you, the council, for approval there. And we set up an appeal process in accordance with the current development code there. And that basically is a quick overview of it. I apologize for keeping you later. >> Glad to attempt to answer any questions you might have. >> Any questions? Any questions for? Okay, thank you. >> Thank you. >> This is a public hearing. Anybody wishing to speak on this item, please come forward, state your name and address, and your time will begin. Anybody wishing to speak? And this is a action item. So, saying that I wish to speak, I will now close the public hearing. I do have a question. Please be. >> There's the light. Yeah, there's the light. I saw the light. So, this has been discussed with, I think it was the, that development committee? >> Yes, or the Denton Community Development Alliance. >> Right. >> The committee, our members, they're key members of it. We've just met with them three times, we corresponded with them. And this has been emailed, the notice of this public hearing and these proposed guidelines have been emailed to the development community through the eTracket system. Anybody who's applied for a permit through the eTracket system got an email announcing this. >> Okay, all right. And had- >> Those changes were posted to the web for them to see. >> And have we received feedback from that group or people or? >> Yes, sir. Mr. Lee Allison sent, he was planning on being here tonight , but had, it ran so late. He had some additional commitments he couldn't change and he has sent to all of you. >> Sure. >> An email. >> Right. >> I've got a copy of that email if you'd like to . >> No, that's good. No, that's fine. >> Okay, that's what I want to know just to make sure that we had gotten it out in the vote. Council Member Briggs? >> I was just going to recognize the email that you mentioned. >> Yeah, I remember getting that, sure. >> Yes. >> And I'll be glad to give a copy of it to the city secretary so she can put it in the record there. >> Okay, you bet. >> Only if he indicates on behalf, he expresses some concerns about the entire thing or some philosophical items . But he also indicates on behalf of the Denton Community Development Alliance, we recommend approval of the guidelines. >> All right. Okay, any other questions for staff? All right, Chair, would entertain, Council Member Begarry, Mayor Pro Tem Begarry? >> Move for approval. >> We have a motion. Do we have a second? Council Member Run? >> I'll second. >> All right, we have a motion and a second for agenda item 2B. All in favor, please signify by raising your right hand. Passes unanimously. Thank you. >> Thank you, John. >> Thank you, sir. >> Agenda item 2C. Is this you as well? Hold a public hearing and consider adoption of an ordinance of the city of Denton, Texas regarding amendment to the city's water and wastewater design criteria manual. >> Yes, sir. Just quickly, the manual was last updated in 2002. It's 16 years old now, or 15 plus, almost 16 years old. Our design criteria manual set the published guidelines and standards for our staff and for the development community consultants to follow in processing and applying for and designing there. Those standards help us operate on the same page there and help us to expedite the review and approval of development processes there, or development applications. This is the process we followed. We've prepared draft amendments based on internal comments. We presented those draft amendments to the Planning and Z oning Commission, published them for 30 days on the web, received comments. We revised those amendments. We published those again for seven days on the web and notified the development community via email. We received additional comments, not very many the last time, but a few more. And we received those comments, we revised them, and addressed all of those comments and concerns and offered to you the current proposed draft tonight. The email from Mr. Allison, I got one after the previous email, and he indicated that the DCDA recommends approval of the water and wastewater criteria manuals there. All right, any questions for staff before we open the public hearing? Seeing none, thank you. I'll now open the public hearing. Anybody wishing to speak on this item, please come forward, state your name and address, and your time will begin. Anybody wishing to speak? All right, seeing none, we will now close the public hearing. Any questions for staff? If not, Chair would entertain action. Mayor Pro Tem? >> Move for approval of this item. >> We have a motion. >> I'll second. >> And we have a second. All in favor, please signify by raising your right hand. Motion carries unanimously. Moves us to our last agenda item, concluding items. I don't recognize you, Councilmember Briggs. Go ahead, Councilmember Briggs. >> Okay, so last meeting, I cut my list short because we were late. So I have a few to add. >> Would you like to move? >> We're not that late. >> Okay, yeah. >> Okay, so I would like to request a map of all the city parks with a half mile buffer overlay on our streets network. So what I'm looking for is I'd like to reveal parts of our city not accessible or walkable to a park within ten minute walk. Just so we can see what areas of the city are lacking. Generally ten minutes is the time someone will take to get to somewhere. Okay, then I would like to see if there's any chance the city could partner with DCTA on discounted bus passes. Maybe start a program for those who need transportation to get to work. I'm not sure if there's something like that that exists or just to kind of explore that. Also, I would like to request a health impact study of the deck. We had talked about it before when the initial conversations of the energy center began and we were going to get one and then we didn't, so just to bring that conversation back up again with council. I'd also like an update on the downtown flood plain which was mentioned earlier. I'm not sure what that means, if that means tons of more concrete. I just kind of an update on what that entails the phase. And that's all I have. >> Anybody else? Yes, Mayor Pro Tem. >> I've received a significant number of letters requesting an increase in or the implementation of multifamily recycling which Keeley brought up, Councilwoman Briggs brought up at the last meeting for new business. But also part of those letters was a request for a compost ing program. So maybe if we could just get an informal staff report to start that surveys some municipal composting programs, costs, benefits, deterrents, just the usual. Appreciate it, thanks. >> Yeah, and I know we've looked at the multifamily recycling, so I'm sure there's quite a bit of information out there on that. Anybody else? Seeing none, all right. We will adjourn at 8 23 PM. Thank you very much. [BLANK_AUDIO]