Jul 09, 2018 Public Utilities Board on 2018-07-09 9:00 AM

Public utility board meeting to order. First we have on the agenda we have work session three items there so we'll start with item A which is to receive a report hold a discussion and give staff direction on on the proposed water wastewater and miscellaneous rates for fiscal year 2018- 2019. Good morning PEP members my name is Nick Vincent I'm the utility business manager for the city of Denton and I have two presentations for you the first one is the water rate presentation the second is the wastewater rate presentation. I have a little bit of history the 18-19 water and wastewater budgets and CIPs were presented to PUB on May 7th and May 21st the PUB gave staff direction to proceed with a 2% rate decrease for water and a 5% rate decrease for wastewater. Following that meeting in June staff received direction from City Council to proceed with a 0% rate increase or decrease for water and a 5% decrease for wastewater. Staff has taken the more conservative approach and recommending a 0% for water and a 5% decrease for wastewater so that's the way the presentation is set up today for you. As I stated there is no adjustments to the water residential or commercial rates staff is recommending a 3% increase to wholesale rates based on the cost of service model. This is the wholesale rate comparison here basically we have it broken into categories the first one being the wholesale raw water rate it has a facility charge the current charge is $280.31 is proposed to go to 288.72 the demand to charge per annual cost is 648,426 which is reposed to 667.879 the volume charge is based on thousand gallons volumes is 59 cents and proposed to go to 61 cents. The wholesale raw water has rate is 85% of the Dallas rate and this is set off of the Dallas rate it's 85% of that rate currently the 85% of that is 0.867 staff will update that when the Dallas rate becomes available it's not available right now. The wholesale wall raw water pass- through rate is based off the consumer price index of the month of June it is not published yet as soon as it's published we will update this rate it's currently it stands at 0.0266. This is the residential water rate comparison chart here it shows us compared to other cities as you can see here sorry it's a little bit out of focus but let me see if you can see my pointer you can see the current rate that's actually in yellow here this is where we're recommending that rates stay with no decrease or increase. This is the commercial water rate comparison chart on 50, 000 gallons based off a two-inch meter you can see the city of Denton yellow just about the middle of the group so there is no change to that proposed. This is the commercial water based on 200,000 gallons of the two-inch meter excuse me you can see us in the yellow just about the middle of the group also. If there's any questions please stop me anytime and I will answer them. That concludes the water presentation like I said there is no rate decrease or increase proposed for water just a 3% wholesale increase on the wholesale side. Anybody getting questions on the water? So on the versus the two cent decrease before where was where does that where does that show up in the budget as far as is that going to the capital's project side? So basically the way the water fund the budget was looking before is we were showing a 2% decrease in water basically is showing a drawdown in the fund balance and if we take that 2% out we're actually just proposing to drop the fund balance that much less so instead of taking out a fund balance yeah so it didn't reduce any capital projects and answer your question. Okay yeah. All right. Okay now we will proceed to wastewater it's a couple different options we need PUB to consider in wastewater. Okay so as I said PUB during the May 21st meeting gave staff direction to proceed with a 5% rate decrease for wastewater. Council in June actually gave the same direction to proceed with a 5% rate decrease. That's what we have in front of you today. There's two options to consider the 5% rate decrease. Option one is a modified cost of service option and option two is a 5% across the board reduction. I'll be happy to walk us through both of them here. Option one reduces the facility charge less and reduces the volume charge more. Option two does the exact opposite. Option one is based on consultants recommendations of keeping the facility charge somewhat level not adjusting it too much moving forward. So your facility charge for inside customers currently the current rate is $11.25 you can see right here and it is proposed in option one to go to $11.00 option two would take it to 1060. Outside customers currently is 1295 for the facility charge proposed to go to 1275 or 1230 based on your guidance. The residential volume charge currently is 405 for an inside customer which you can see here and is proposed to go to 380 and then 385 under option two. Outside customers 465 proposed to go to 440 under option one and 4 40 under option two. Next slide. This is an average residential monthly bill comparison. Staff is recommending decreasing the wastewater minimum charge from 6,000 gallons to 5,400 gallons. This is based off historical data that staff has been and did analysis on and these charges basically the current fee for residential bill to expect on the wastewater side to be $33 .12 under the option one scenario which is cost of service it would take it to 3152 and then option two take it to 3139 which is 5% across the board. So option one would be about a $1.60 decrease option two would be about $1.73. This is the residential wastewater rate comparison chart. It shows the city of Denton current rate here in the yellow where we currently are. This here would be under option one the 5% cost of service decrease option. It would take us here to the orange so it actually move us toward the first third of the graph. This is the commercial rate comparison same scenario as residential there's two different options for PB to consider. Option one is the modified cost of service option. Option two is the 5% across the board. The facility charge for a commercial customer currently is 2675 proposed to go to 2650 under option one or 2540 under option two. The outside facility charge would be 3075 currently proposed to go to 3050 under option one or 2920 under option two. Moving down the page here the commercial volume charge inside customers currently is 515 under option one the cost of service option is 485 proposed and then 490 into the 5% across the board. The outside city is 585 which is a little bit higher inside proposed to go to 550 and then 560 under option two. If anybody's any questions please feel free to stop me I'll keep moving along here. The commercial monthly bill comparison we we look at this on 50,000 gallons we also look at it on 200,000 gallons. Currently a 50,000 gallon customer can expect to pay $284.25 under option one it would go to 269 under option two it'd go to 270 40. 200,000 gallon customer currently would be 1056.75 cents. Option one would take it to $996.50. Option two would take it to $1,005.40. This is the commercial wastewater comparison based on 50, 000 gallons you can see the city of Denton currently is here in the yellow the race we just looked at and then the 5% decrease would take us to the orange so it'd move us to the left a little bit. This is a commercial wastewater rate comparison on 200,000 gallons you can see our current rate here in the yellow and then again it could be here in the orange would be but the proposed is a 5% decrease under option one. The on-site sanitary sewer facility permit fees these fees have not been updated since 2006 staff started doing analysis to look at the cost of service of these permit fees and it is recommended these actually increase instead of decrease. Like I said they have an increase since 2006 cost have increased so the aerobic treatment system is currently $410 we're proposing to take it to 500. The conventional treatment permit fee is 210 we're proposing to take it to 300. The repair alterations and extensions currently is 50 we're proposing to take it to 200 and the re-inspection fee is a flat fee currently based on the permit type of 100 or 200 and we're currently planning to take it to 50% of the permit fee. Those are the proposals what we have some graphs following this up that'll show us where we stand with other cities that way you you 'll kind of know where that aligns with those cities. So what causes what instance is a re-inspection fee is that after repairs? I probably would have to ask staff to maybe Deborah if you could come up here and answer that question for us. Good morning for I'm Deborah Vieira with environmental services. The re-inspection fees are if by any chance staff shows up to the to the site to conduct inspections but they are not being repaired accordingly or they have not the work done then we would have to go back before they can actually put all that on the ground so that that would be their inspection fee. All right then we'll go back or go forward here to the rate comparisons. So you can see currently here in the city of Denton they're both red but this is the current rate here for the aerobic treatment here. The proposal will take us over here to just above crossroads. The conventional permit fee comparison here you can see the city of Denton currently is right here towards the lower end. The proposal will take us right here just above crumb. The altar extend repair fee comparison you can see the city of Denton currently down here right now. The proposal will move us up a couple here just above crossroads. Any questions and I also want to mention that it's not in the presentation here but staff has made changes to the residential delinquent service fee. It is changed from 46 to 23 and then the residential reconnection charge has been reduced from 61 to 30 and those reductions were a result of the installation the smart meters through DMV. That was something that staff was you know given direction by PB and council to install and it result to reduce the cost of service of those things. That concludes water and wastewater. Any questions to be happy to answer? Do you have any projections for the amount of revenues total that will change how the revenues will change as far as collection goes total? So on the for the five percent reduction or for any of it okay so for mostly the reductions okay there you know while a few dollars off a residential bill is great it's not it's really not substantial and so I wonder if there's really if you're not you know if we're gonna lose a significant amount of revenue by offering a few dollars off the bill it may be that we can do more for our infrastructure by using that money instead of giving this five percent discount. Right good question. The five percent reduction in the wastewater rates is about 1.2 million dollars in revenue. That's what it equates to. Okay okay. Well we are looking for recommendations in the PB today too and that's one thing I did forget option one or option two on the wastewater side and I can back up to them. Option one again was the cost of service option. Option two was the five percent across the board. So if we could get recommendations in PB today to which which option to proceed with. We will come back to the PB on July 23rd to seek approval of the rate ordinances in the budgets. I have one more question about it's kind of off topic a little bit but for your on-site sanitary for those are septic tanks. Yes sir. Do we know like I know that we you know we annex property sometime and I think that's when we run into several of those. Do we have a good do we know how many we have in our city really? Let me ask Deborah to come back up here she would know that answer. I know that's a little bit off topic but it seems a little bit relevant. That is a very good question. We so far we have got around 700 new sanitary sewer facilities as a part of the annex ations. We don't have a we got all that information from the county. The county when those properties are in the county the county regulate the installation the permitting of those facilities. Unfortunately the county lost all the database years back and they didn't have any backup. So what we know so far is around 700 new I'm sorry additional facility that have been added into the city regulated system. They could be more we have been doing going over aerial photographs and trying to locate where houses are if they are not tied to the city system we assume that they are on sanitary and we have approached them. But that 700 number is a little bit fluid. If you sure okay okay do you do do you think that and you know again this is by raising those fees do you think you'll get more people who say hey I've got one let me pay $700 or do you think you'll get fewer people who are willing to let you know that they've got one. Well the those people would probably trigger the repair alteration if they ever do anything to their system it's not that they would be new new permits. So when they when they come to the city most of the time those alteration is because either small functioning or they're expanding their facility in a need larger capacity. So being already in the into the city limits require them to have some sort of permit through building inspections. So we will be able to catch those. The increases nobody likes the increases however we have been going over 12 years with no changes whatsoever and the red payers have been subsidized in the difference between what the permit actually cost to do and review versus what we're actually charging. So at this point even though the changes are minimal I think that we it would be to balance out that that imbalance that we currently has. Okay thank you. So what I'm hearing is let's say a property gets annexed into the city that doesn't trigger a permit. Correct. Yeah it is when they are ready to just when it gets repaired or power functions. Correct. Or if they put a new one. So the options we have really option one is more when you say modified cost of service I know that it's kind of like a facilities charge I guess if you will because it's or based upon really what it costs to deliver that although the increase or the decrease doesn't seem quite as much. Now I 'd like to get everybody's thoughts on this but it seems to me it's a more instead of just saying five across five percent across the board which certainly sounds better but it's more really more reflective of based upon what what our usage is or what our what it cost to deliver the water or take the wastewater away. Based on a lot of factors. Yeah based on the cost of service rate model. You mentioned that the consultant had a recommendation and could give us the basis for that. So my understanding in Dr. Banks I may have to point you up here is a past consultant did make a recommendation to the city that it was a good decision to keep the facility charge relatively stable because it's a pretty constant revenue stream. The volume charge of course with rainfall and unpredictable weather tends to go up and down and that 's my understanding of it. Is that pretty close to okay yeah does that answer your question or okay that's why option one it proposes to reduce the facility charge less option two is more we're trying to stick with those recommendations and option one. And it stays closer to what it actually costs us to deliver that service. That's correct that's correct. I'm always in favor of that. Yeah that's correct. If you go too far off of that then you could see higher rate increases down the road. Right right right. On the flip side if you're out of town and you don't use any water and you still have a water bill sometimes that's surprising you know I mean that they all have that base charge regardless if you 're actually using the service or not. Right. You know so if you have gas electricity and water and you're gone for a month you've got $80 worth of bills even though you haven't used anything at all. But that's because we had to build a system to get there. I'm with you. Okay yeah I don't know if either option is significantly enough different to really it's not but I would go in favor of option one. I would agree. All right looks like the consensus is option one is our preference or recommendation to base it on you know actual cost of service. Any other comments about that? No. Yeah and like I said we 'll come back on the 23rd with the actual rate ordinances based on 0% in water and then a 5% reduction in wastewater. Okay. So we'll proceed. All right thank you. Okay item B is to receive a report hold a discussion give staff direction regarding proposed electric rates for fiscal year 2018-2019 . Good morning George Morrow general manager of DME. Each year we come forward after the budget presentation and talk about the rate schedules themselves you know what changes need to be made in the rate schedules and really for this year they're going to be very minimal but we want to follow through with our typical process. So the key things we'll be talking through a few names ECA, RCA, TCRF. ECA is the energy cost adjustment. R CA is the renewable cost adjustment and the TCRF is the transmission cost recovery factor and that rate table I was talking about is in our ordinance 2017-256 which will have some very minor minor changes as a result of the budget process and so here's basically the rate change overview. The biggest one is we're going to zero out the TCRF for 2019. So that's going to save our customers an average of about three and a half percent. No changes to the ECA or RCA amounts so we're fixing that we're going to hang in there. Now the ECA is reviewed quarterly so the PUB has that in their charter their responsibility so you know we'd like to stay with that ECA for the rest of the budget year but we're going to look at the numbers and the things change significantly then general managers charged with coming back to you and updating you about the ECA so you might see me in three months or so if things have changed from the the budget expectations but we're hoping we can hang in there. We'll see. We got a little more explicit with the ECA definition when I reviewed that and I've been playing with ECA's over my career it didn't look like it was as precise and specific as I was hoping so we updated that definition and that's part of your packet today. One of the things that didn't really wasn't clear to me that it explicitly credited all of our power sales revenue you know so the ECA has the cost in there right of all of our power supplies but it should also credit of course the revenue and we were doing that it just didn't really say that clearly so we updated that. We talked to you about including the DEC so that's a big change we've never had a DEC before we never had a power plant or at least not for many many many years so we're putting those costs into the ECA but we're also putting the revenues from the DEC into the ECA so that's an offsetting and for the first few years if you remember the DEC pro forma there's a very positive balance from revenues versus cost and so the customers will benefit from that in the short run and we'll see what happens in the future you know nobody can really predict exactly and we'll take it a year at a time as we move forward with the DEC and there's some other very minor wording changes we eliminated what's called residential prepaid service where we were had a facility charge for three-phase service well we don't actually have that three-phase service they don't make meters that allow us to do that I think at one time we hope to do that so we just simply remove that but we didn't really change the usage charges for that and then we just we pointed out to customers if they're going to install distributed generation behind the meter you know we have a manual you know go look at the manual upfront and learn about the process and what you should consider when you're putting in distributed generation and there's one bit of language in there that says hey if you if your intention is to generate more electricity than you're actually using that sort of puts you in a different category then we may want to talk about how we treat that additional generation so so right now if you install behind the meter solar for instance you're gonna you can offset your bill pretty much one for one and a little bit of that discussion was mentioned earlier you're not going to be paying any of our system costs you're not gonna be paying the wires cost the T&D administration finance rates so up to a point that is an incentive right to encourage renewable generation but over that if you start going beyond that should you you know what what should we do how should we treat that you know maybe there's a point where an incentive is appropriate but maybe there's another point where it's not and that would be a dialogue for us to have at some time if we get another very large renewable installation our code says if it's over 50 KW we should at least think about how we treat that over 50 and I think that's over my pay grade so I obviously want to come back and have that dialogue with you as we go forward so this is a breakdown of what that reduction in the TCRF to zero means it was an average of three and a half percent but it just depends which particular rate class you're in how that falls out and so that's a summary if you look on the far right hand column there's the percentages the dollar sign column shows how much of a typical bill the savings would be so and there's a further breakdown in your packet today for each of those areas showing the different tiers and the different other components so I'm just going to zip through here because we just summarized it in that last slide these are the same numbers that you were just looking at so this is average small commercial average medium commercial again the bottom the only change really is that TCRF going to zero and all of these different tables and then large commercial same thing that TCRF going to zero so the savings is typically a thousand dollars or four point three one percent for large commercial so the process going forward will be will be coming back to you on July 23rd for today's just a work session we'll come back for formal approval of what we talked about here and then we'll go forward with the council on September 19th so open for any comments questions this on the TCRF rate going to zero it has a TCRF has that been a part of the ECA rate in the past no it I think at some point it was and then it was split then we had some new costs new transmission service costs that were beyond what we typically had put in the ECA so we created a new category called the TCRF several years ago and to collect those additional transmission costs so we've and staff talked about combining the two and that's possible down the road we may actually do that because transmission service costs could actually be part of energy cost adjustment right it does there's a nexus there so that if we are able to continue with this at zero for an extended period then likely we might come back as hey let's just do away with it if that's where you're going with that question so overall as a system our the TCRF that we pay into our cut right is offset by revenue that revenue credits if you will by of our transmission cost because we there's also a reimbursement side of that right so just to clarify that so on the cost side when we make transmission investments we submit those to the PUC and they make sure we get reimbursed for that and you've talked about that quite a bit in the past so that's our cost side on the expense side we have to pay our share of other electric utilities in Texas when we impact their system so that's the expense side so right now the and we had been netting those and one time they were very close but as we continued with our T and D program that the revenue side is much higher now than the expense side so we do account for those separately and I think back when that TCRF was established it was that part was separated out the expense part from a financial or business standpoint so is that clear yes it is I just want to make that clarification that there's so it's not a netting at the moment it's kind of that's our expense right for right and it's just actually part of our expenses kind of like an incremental piece that was over and above what we had been used to in the past but that's coming off the individual bills now the expense side is coming off right so we're recommending correct okay so this year we collected next year we're proposing not to collect it okay questions I'm glad to see the ECA rate it's more transparent when you put in the put everything in with the power cells and expenses and all that so that that should be very transparent going forward how that rate is calculated and if I understand that is what we were doing we're just making it more transparent right correct nothing yeah nothing new in reality with the exception of the clarifying that the deck is also a power supply and that would be included in there okay that has no way by that this year right all right any other comments questions is there a direction recommendations so we'll be coming back on the the 23rd for your formal approval of that what we talked about today okay I think everybody's no questions on it right thank you very much thanks George okay next we have item C which is to receive a report hold a discussion and give staff direction regarding the solid waste department's cost of service and right design study provided by new gen strategies and solutions LLC almost came to the podium for the wrong item earlier so excited about electric rates I wanted to do the presentation for George well good morning members of the PB my name is Ethan Cox I'm the director of solid waste for the city of Denton it's my pleasure to have new gen services here this morning mr. Dave Yankee is going to be coming to the podium in just a moment a few of the things that I wanted to kind of lay out before we get started is this is kind of kind of a continuation of a discussion we had with the pub in the council a few weeks ago we had our operational review in which we kind of came to the pub in the council we talked a little bit about how our programs were performing how our operations were performing this is kind of the financial side of that discussion in that we've really spent the last 13 to 14 months kind of pulling our budget apart making sure we understand where all of our costs are and put it back together and I'd be remiss if I didn't compliment our staff the financial staff particularly that has done some real yeoman's work to kind of get us to this point and so mr. Yankee is going to come up in just a moment and kind of walk us through new Jen's work on this so far and then I'll return to the podium afterward to have a brief management overview kind of management response fuel to their recommendations and findings and so without further ado I'll turn it over to mr. Dave Yankee great thank you well good morning for the record my name is Dave Yankee with new Jen's strategies and solutions just real quick I'm going to give you a little background on our firm we're a 35 person management consulting firm what we focus on is conducting financial economic cost-of-service studies for water wastewater solid waste and electric so this is what we do and I'm out of our Austin office real quick background I've been involved in the solid waste area for about 25 years again what I focus on is cost-of-service and rate design studies financial feasibility studies things like that so again just a little background I've been doing this for quite a while let me give you a real quick scope or synopsis of what our scope was the first thing was we were to conduct a cost service study that allocates all the cost to each specific solid waste service and I'll show those to you here in a little bit we're also also supposed to develop a five-year revenue requirement which is for fiscal year 19 through fiscal year 2023 with that then we were going to forecast out what are the revenues being realized for each of those services you know are you under recovering over recovering and then based on that step four recommend or design rates for residential and commercial collection services the fifth item was a market analysis and what that entails is looking at what are you charging for wholesale solid waste coming into the landfill whether it's from private contractors other cities what have you basically garbage not collected by your city and then finally presenting presentation to to you folks City Council and then we'll be issuing a draft and then a final report with our findings and recommendations I want to talk just briefly on the cost of service methodology and what we did drill into it a little bit more what we did is first of all we developed what's called a test year which is using your preliminary fiscal year 2019 budget spent a lot of time with staff and I do want to compliment them because they spent a lot of time with us going into it as far as looking at the budget the capital plan all the equipment and personnel and how they get assigned to the different services and so with that we then developed a five-year revenue requirement key component in that is the capital improvement plan that's for purchasing rolling stock your debt service and all that I've got a couple slides that will show with regard to that here in a few minutes and then allocating the cost to the service categories you have 22 service categories I'll just show you those briefly and then allocating to the customer classes and then calculating the cost of service couple highlights I want to emphasize here your own M again is based on your fiscal year 2019 proposed budget adjustments were made to reflect reoccurring cash needs and investments again I'll have a slide on that what that means is what we're really focused on is seeing if we can help in looking at the forecast move to more of what we call a pay-as-you-go cash funding some of your rolling stock and again I have a slide to show the increase in that so you can pay with cash versus debt or you know phase that out great news and good thing that is the the third bullet annual debt service payments again I'll have a slide here I'll show it to you but you're seeing a decrease in your debt service declining by 3.8 million dollars a year from fiscal year 2019-2023 what that allows you to do is increase the cash you're setting aside for paying cash for your equipment versus issuing debt and so again that that leads into the final bullet you'll see a significant increase in the funding for that equipment on a pay-as-you-go basis these are all the services you provide you probably don't know all these services you take them for granted a lot of it's behind the scenes but there are 22 different service categories here again they're focused between the residential the commercial and then administrative gets allocated to them and then you have the disposal related operations I'll keep moving on that unless anyone has questions so what we've got here is the five-year revenue requirement a lot of numbers let me just highlight a few things bottom line for fiscal year 2019 you've got a total revenue requirement of just over 33 million dollars by 2023 if you look at that bottom right corner it's about 34.3 million dollars bottom line coupled with watching some of the cost the debt service reduction even with increasing pay-as-you-go for your equipment if you look at that that's about a 1% increase per year it's very manageable it's very reasonable and again you know that that's good news from that standpoint the next slide what we're showing here are the fully loaded cost of service if you go back well I'm not going to go back but if you had looked before what we 've done here is we've allocated to for instance residential collection services there's of about the 280,000 tons a year of garbage it comes into your landfill about 29,000 tons a year is picked up by your residential trucks in this slide versus the prior slide we've allocated the disposal cost to the residential collection services so on the prior slide it was a little over 11 million or 11.3 million now it's at point 12.3 million because we've allocated the disposal cost associated with residential garbage service okay the red and green bottom line the green show the services that are covering their costs recovering their costs the red ones are those that are under recovering and again we'll talk about that in just a few minutes with regard to some of our recommendations and that's the key things I want to focus on there and I'll be glad to take more questions at the end on that but you can see overall your commercial services are doing well something I want to show that again going back to the annual debt service and revenue funding this is a key slide that gives you some flexibility going forward if you look at your current debt service and fiscal year 2019 it's just under nine million dollars at eight million nine hundred ninety five thousand dollars it does decrease over the next five years to five point one million dollars which again that debt service is rolling off if you notice there's some projected new serve debt service starting in 2021 but it's very minimal and you still have a significant reduction there what that allows you to do then is the replacement fund one of the things we've put in and again spent a lot of time with staff what we looked at was the equipment needs you have for your utility whether it's residential garbage collection trucks recycling trucks your commercial front loads your roll-offs all that equipment there's typically a life cycle that's put together when does it have to be replaced when is it cheaper to replace it versus to keep trying to fix it that equipment takes a lot of wear and tear so that's factored in to develop in this replacement fund okay so bottom line what's built into that revenue requirement that I showed you that was only increasing 1% a year is setting aside these funds where it's starting at six hundred and twenty thousand dollars in 2019 and it grows to three point three million dollars in 2023 so again I want to emphasize built into that 1% increase in the revenue requirement with the debt service rolling off you're able to increase the cash you're setting aside so you can pay cash for this equipment and minimize the issuance of debt so really good good story there question yes on the on the debt service that's rolling off is is that associated with just what you said the equipment trucks and it's a combination of things but I call short-term assets yeah it's equipment and the landfill so it's a combination of rolling stock and the landfill okay and then the projected new debt service the projected new debt service some of that is related to rolling stock so some equipment can't move straight to a cash right paying as you go so it's a combination of both so you're increasing the cash minimum reducing your debt in 2023 there is a little bit of funding for design planning engineering consulting services for the new cell that you will be building okay and this is really the bottom well this is one of the key things I want to focus on it's pretty close to be in the bottom line when you look at the utility overall it's under recovering about three hundred and four thousand dollars are projected to under recover three hundred and four thousand dollars in 2019 however what I want to emphasize with project the continued projected growth in the city and with that cost containment 1% increases there you're projected to over recover gradually over time so by 2023 at these projected costs you'd have a over recovery of about 3.7 million cumulative over recovery of about 8.1 million as we all know there are a lot of things that can happen to you know create surprises I'll give you an example you're in the commercial roll-off business when a recession hits we work with clients that business that can drop by two-thirds and that again fixed cost business that revenue can drop quickly so we didn't bake in a recession here because we're not that good at forecasting those things but this is based on a conservative forecast going forward okay so overall the utilities in good shape going forward so the findings recommendations we have we do not I know you've had a recent decrease in the residential rate we would not recommend any further decreases in the residential rates in fiscal year 2019 and for the foreseeable future I'd keep them as is we would recommend that you increase the wholesale rate you have about a hundred thousand tons a year that comes in from private contractors and we would recommend and we looked at the market we talked to numerous folks we would recommend an increase there from 23 to 2450 per ton it's a dollar 50 per ton it would generate about another hundred and fifty thousand dollars one of the things whenever we work with folks on this we recommend small incremental changes if you're doing this versus drastic increases you don't want to chase off the tonnage again in a fixed cost business but I would start recommending you look at moving that up we'd also recommend you look at put or pay contracts if you 're familiar with them on the water side with taker pay contracts it's very similar in other words if you have a contract let's say with waste connections and they say we'll bring you 30,000 tons a year at this rate then if they only bring you 27,000 tons they still pay for 30,000 tons okay we'd also recommend you maintain the commercial dumpster rates that you have right now you may want to look at modifying them in the future I think the key thing I want to emphasize right now we're not recommending any rate changes other than that wholesale rate from $23 to $24.50 what I would recommend is during this fiscal year 2019 you kind of look at some of your rates versus your recoveries and under recoveries what have you to put a game plan together but you have the luxury of having this upcoming fiscal year to kind of figure out okay where do we want to go going forward for the next five years so it's really nice you have that luxury of being able to plan for that tied to that you may want to look at your commercial rate structure and how that's set up you might want to look at tweaking that a little bit key thing and especially with a community that's growing it's really important to look and make sure that you're you've got all of your proper container counts everybody's being billed as they should be both on commercial residential the recycling customers and also at the landfill there a number of different services provided there I know you've had some other presentations on that recently but being able to track the specific tonnages by the specific services helps you to figure out okay how our how's our cost recovery versus the costs incurred okay and then what we just said is you know any over recoveries again setting those aside into a restricted reserve would be good again keep in mind you will be looking at a new landfill cell out in fiscal year 2024 and then finally there was some discussion again like I said looking at 2019 and what do you want to consider as far as tweaking rates and here's the key thing I want to emphasize if you're looking at your rate structure we're talking about tweaking things or moving things you know evaluating those options there's nothing major that you have to look at and that's the the good news and with that that's my presentation I'm glad to take any any more questions you may have questions I had one I think you maybe addressed it this the slide well slide 11 that that we keep it's showing that we're we 're not collecting enough slide 11 there we go did our recent rate reduction make that happen or you had a lot of moving parts here that that is correct that was a component of it one of the things we always say you remember those 22 service categories I showed you you never know exactly where you are until I mean to give you an idea you know the hundred-plus employees you have all the equipment we went through exercise which is what we always do in cost of service studies where every person every piece of equipment is allocated to those 22 different services and some of them pretty easy you say hey you know this this guy is out there he's collecting garbage five days a week he's a hundred percent on residential refuse or you know whatever and that piece of equipment but then there are other pieces they may be allocated and there's certain work that seasonal also so you have to allocate that so there was a lot of work that went into allocating all those costs and so what I always say is you never know where what your costs are until you go through an exercise like this so it's a combination of things there okay and then on the 2250 for the landfill rate what are other rates around us is that you said you did a market right analysis yeah generally speaking and I'll give you a broad range you're looking at around 30 to 35 dollars this what the the post to gate rate now here's the one thing oh here's my caveat those are posted gate rates now if someone is bringing a large volume you will get a discounted rate that you won't know and especially if it's a private they do not want to share and say what we're giving you know as far as a discounted rate but the gate rates we're seeing that are posted are 30 to 35 dollars kind of the benchmark of who sets the the standard in the DFW area but you're pretty far away so transportation costs become an issue but you know overall lowest is the Dallas McComas Bluff landfill we spend time talking with those folks because they have a put or pay contract process they offer lower rates for higher volumes with that said your you know they have rates that decline lower than you know the 23 24 but you're still cheaper up here generally speaking that moving again a dollar dollar 50 you should be in pretty good shape from that standpoint and we're not so cheap that we're getting too much garbage so that we can't serve our own citizens over no I mean you're not from that standpoint it does bring up and again it's one of those issues in cities wrestle with this topic how much waste do you want to bring in from outside if you have capacity and again that it cuts both ways so I'm not saying what you should or shouldn't do but you know for instance we've been working with the city of Tucson for the last 15 years they bring in a significant amount of waste they compete in their market but they bring in waste from outside just their city residential and commercial trucks it's still collected in the city but by other by privates but it can be a source of revenue for you but it does fill up your airspace so you've got to figure out what your balance is there and what you want so you I think you mentioned a hundred thousand tons about it's what we average right from wholesale customers is the the cost of service on wholesale does that take into account airspace it's being taken up yes no it factors all that in other comments I'll just go ahead to outside garbage coming in because you know I don't understand that I guess I don't I think the you may want to answer this my general idea is if you 're if you're we shouldn't be we should be recovering our cost larger that's my it is it is a as Dave said it's it's a source of revenue that offsets fixed costs we have but do we know that it's actually offsetting anything I mean look at those numbers to see if it's worth taking that I can take a stab at this this is definitely a kind of a policy discussion and probably one that we don't have a lot of time for today but at a high level a lot of landfills will look at bringing in outside waste not to cover cost what your goal would be is we cover our cost for our citizens through rate recovery then you can also look at subsidizing what you have in the city your residents your businesses by bringing in outside waste and so it really comes down to the landfills an asset the airspace is an asset do we want to accept outside waste to help subsidize and reduce rates for our citizens and our businesses and so that's that's why you see some of those they can offer those that reduced rates because it's basically dealing with pure profit at that stage because you've already covered all your costs through your curbside rates we're not there yet but as mr. Yankee said we're financially positioned that we can let the market kind of come to us over the next four to five years and we've much we have much more flexibility as a utility to kind of deal with do we want to compete and if so at what level and what is that air space really worth in terms of selling in the open market where we've been up to this point is we've been kind of strapped by debt to where if wholesale were to leave today we'd have a two to three million dollar hole in our budget that we'd be hard-pressed to cover and so we're not competitively where we need to be but in the next four to five years I think we will definitely be well positioned to take advantage of that if we want to do it so that makes sense yes right okay there's no other questions for mr. Yankee I do have a few things that I can follow up on just from a management standpoint all right so thank you to Dave also again I want to reiterate thank you to our staff they've done a tremendous amount of work Lee Rodriguez Tina Eck Nick Vincent it's been a kind of a team effort as we work through this budget process like I said we started last June on our budget and so we hope to bring that forward to you in the next few next couple of weeks and then we'll also be talking a little bit about rates we do have some right corrections that need to be addressed as mr. Yankee said it's definitely doable with where we are positioned financially what we're really talking about is is rate subsidization and the little green and red font that he had up there gave you an indication of what's a recovering its cost and what's under recovering our goal unless directed otherwise as a service provider would be cost recovery through equitable rate design what that means is if you're using the service you're paying cost and nothing more for our residents and our businesses we do have some rate subsidization that's happening between and within rate classes what that means is you may have residents subsid izing a program at the landfill that's not recovering its cost likewise you may have a business subsidizing a residential program that's not recovering its cost as well and so kind of tying that back to the operational discussion we had a couple of weeks ago is if we have a program that's not performing and not recovering its cost we're not trying to dismantle programs that both the board and the council want to keep but we really feel like it's important that we present that to you all and give you a clear indication of here's what the program's purpose is here's what's intended to do and if we want to continue going on it's going to need to be subsidized in some form or fashion and this is how we go about that we just want to be very candid and transparent about it our approach on this like mr. Yankee said is we want to make sure that we don't have drastic changes in our rates one way or the other so we want to try to phase in corrections over time number one because we do compete unlike some of the other utilities we have market rates that we have to be sensitive to for the landfill we also compete for commercial recycling and so we can't have a lot of drastic rate swings otherwise we may end up losing some of that business so we want to phase those in over time and protect the funds financial health as Dave said we've reduced our debt funding significantly I think he did a really nice job of illustrating what our goal is to try to get more cash funding or pay-as-you-go and also to the operational review we want to improve operational efficiency I'll highlight what that looks like on the next slide and then like I said evaluating those subsidized programs and services and just making sure that we're all kind of calibrated on what we want to do with those moving forward for the rate of classes that we're talking about I want to highlight just a little bit of our approach on that like Dave said with residential we would maintain rates at existing levels that being said there may be opportunities to adjust rates if we are able to drastically improve operational efficiency some of the things that you heard in the operational review where we can improve routing increase route sizes maybe reduce the number of trucks that we have to have on the road fleet maintenance is one of those key factors that are key recommendations that came out of that report as well is we're carrying a very heavy part of our fleet is back up if our fleet starts performing better then that's a substantial reduction in cost and you're getting closer to a full cash funding versus debt funding some of your rolling stock and then we do have some of the under performing programs that we want to assess and seek direction from our residential yard waste is one that kind of comes to mind is it's it's about six dollars a month on everybody's residential bill it's bundled in with your residential rates not everyone's using that every month and so that's what we talked about when it's subsidized doesn't mean it's a bad thing it's just one of those things we want to make sure that we're kind of calibrated with how we're performing that from a commercial rate structure standpoint if you look at our rates on the page they don't really give a full indication the complexity that's there with commercial rates so our goal with this year's race is to make sure that everything is very transparent and what you see is what you get and then within that commercial is the the one rate category where there is some subsidization within the rate class meaning a small container may not be fully recovering its cost a large container may be slightly over recovering and we want to try to balance that out if we can short term and this may answer the question that came up earlier is you know why are we drawing down and having an under recovery as a fund we do have some excess reserves that's kind of how we address the residential rate reduction we're still taking a look at this but we feel like we may be able to do the same thing for some of the commercial rates that are over recovering if that's possible we'll bring that forward as a recommendation and utilize those reserves to to reduce those over recovering rates from a long-term standpoint we want to slowly adjust those to toward cost recovery again we don't want to have big spikes one way or the other from a landfill standpoint I think Dave summed this up very well we want to make sure that we're recovering our costs addressing the subsidization while remaining competitive in the market so that is making sure that we adjust toward the market establish those put or pay agreements with some of our bigger haulers and then also see direction on some of the subsid ized programs and operations like we talked about with PUB and council the building materials recovery and rubble processing on Dave's slide earlier it's about a two million dollar under recovery per year that's something that we feel like it we we certainly want to take the utilities board in the council's direction but that is something that that gets picked up by residential and commercial rates if it's not performing as well as it should so is that that those operations are they included in the 2019 proposed budget they will be and that 's that's a good segue to the next slide our proposed budget is going to be coming back to you in July the 23rd we met with the council I believe it was last week or the week before last and essentially the direction we got from the council was to place a temporary hold on both rebel processing as well as the building materials recovery that certainly kind of helps us stop the bleeding but it doesn't necessarily reduce ongoing cost and so that's something that we'll definitely kind of point out as we go through our budget process with you all so in terms of next steps we do still have some rate design work to complete as well as the final market study in terms of the rate correction strategy that I just laid out we do want to partner with Nugent on that and try to work through that plan over the next two to three months and then once that's that's crafted we'll come back to the the board and the council and seek direction on is that the strategy that we want to go we'll talk about timelines you know impact one way or the other and make sure that everyone's comfortable with the direction we're headed council received this presentation on July 17th and then they'll also receive the department budget after the pub on August the 4th with that I'm happy to stand for any questions that you have for from your Nugent questions looking forward to the see what the budget is gonna look like sir thank you okay that's the end of the work session our regular meeting we have consent agenda items ABC D&E and it's been recommended actually it 's we're gonna need to pull item number a off consent we're still looking at some details on that agreement I understand so we're pulling item a so I'd ask at this time if there's any other items that any individual member would like to pull for individual consideration okay good any other items BCD or E on consent okay hearing none then is there a motion on items B C D&E on the consent agenda I move approval second I have a motion and a second to approve those items in your discussion all in favor say aye aye any opposed okay those items are approved as presented for items for individual consideration we have item a which is considered approval of the public utilities board meeting minutes of June 25th 2018 any questions changes on those minutes is there a motion on item a then I'll move approval take it have a motion motion and a second discussion all in favor say aye any opposed not a maze approved item number B or item B is to consider recommending approval of the municipal electric fiscal year 2018 19 operating in capital budget Mr. Chairman and members of the PAB Tony point the director of finance have just a very very quickly going to go over our financial forecast and and the budget for you for the municipal electric I will tell you that there has been no changes well there's been a couple minor changes that I'll walk through for you but no no real material changes from what you previously saw the council also has reviewed this and has also recommended approval so today we're seeking your formal approval on this particular budget and then we'll be presenting that to the council as part of their citywide budget discussion on August 2nd so just really quickly want to go through just the the financial assumptions that you've previously seen the first is this this forecast this budget assumes the payoff of twenty eight point six million dollars of the 2010 TMP a related you know scrubber debt the plan would be to come back to the PAB in November December time frame and and then to the council with a with an ordinance to call this debt and pay it off we would be doing that sending a wire on February 15th and and extinguishing that that debt no base rate changes George went through the rates for you earlier talked to you a little bit about the TCR TCRF suspension that will result in decreases to both our residential and our commercial customers as well you know I'm not going to repeat everything George said again but uh but he 's covered that again the ECA will be maintained at the current rate we've proposed to in the ECA ordinance to reflect the debt cost certainly reduced purchase power costs are part of this there's substantial reduction in the capital improvement program we there's been no changes since we previously discussed that with you and then of course the there's a move to cash fund a larger portion of the of the transmission and distribution that CIP program going forward I did want to show you just really quickly here the forecast we have made some formatting changes I think that you know without discussion with the council kind of help clarify things a little bit so I wanted to point out that we have first of all separated out our deck revenues that were previously part of the base rates and so we've separated that out to make that a little bit more transparent and clear additionally we've broken out the debt cost from the purchase power which is combined to again to just make that a little more transparent that was a request that the council had other than that there really is no changes other than a couple of minor items that I'd like to point out to you of course there was as George as a we discussed earlier with you on the miscellaneous reconnect fees those have been reduced that's approximately about two hundred thousand dollars of reduced revenue to DME but again it aligns that particular fee with what the true cost of service is for reconnecting those meters we've also included the deck related insurance that was previously not part of this budget but a little bit over two hundred thousand dollars that's included in the 17 18 estimate and going forward those are really the only changes that we've made to date be happy to answer any questions that you may have but we are seeking your formal recommendation today to proceed with this budget or any changes you may have so that we can proceed to the council on August 2nd I wanted to ask a question about the do we evaluate the energy cost this judgment annual annually or quarterly that is quarterly yes and do we have the ability to pass that adjustment on to our customers through there just it throughout the year that's correct okay and so will you come back to us if those change and we're gonna pass them on or we're just gonna do it on the floor no we will come back and seek your recommendation and also go to the council okay all right thank you I just want to make it come I like the breakout too it's a lot more transparent we can really see what's going on and I won't go through this but we've done a similar thing on the other debt information that we've provided to you and we'll provide to the council as well so okay any questions I know we've seen this before but this is as you say I like the way the categories are broken out any other questions on these no okay thank you thank you Tony do we have a motion then on item B we have a motion and a second any discussion all in favor say aye aye any opposed same sign okay item C is to consider recommending adoption of an ordinance of the city of Denton Texas authorizing the city manager or his designee to execute an advanced funding agreement in a form substantially similar as attached here to his exhibit to in the approximate amount of three million two hundred eleven thousand seven hundred twenty dollars which is to be finalized after bids are open by in between the state of Texas acting through the Texas Department of Transportation in the city of Denton regarding water and wastewater improvements associated with the US 77 which is for work drive roadway widening project located between interstate highway 35 e to the south of farm-to-market 1830 within the city of Denton that's correct thank you yes good morning members of the pub I'm Chad Allen deputy city engineer and yes I'm going to talk about the Fort Worth Drive project we're relocating our utilities as part of that projects and it's also associated with the text on US 377 project and specifically I want to talk about an advanced funding agreement that's required for us to execute with text on it so that we can pay to remove our utilities from the text out right away so this map shows the scope of the text out project text out is going to widen for worth drive to be a six-lane facility with a raised median they're going to construct various turn lanes and the limits of the project start on the north end from I 35 East and they end south of Country Club Road or FM 1830 so they're going to widen that to six lanes install a median they're going to construct traffic similar improvements at various intersections they're going to install an underground storm drain system and remove the roadside ditches and then they're going to build sidewalks on both sides of the roads road throughout the project limits so before they do that we're required to move our utilities outside of the text out right away text out does not allow public utilities to be located under new pavement for their projects so we have to move all of our utilities outside of the right away so for the last couple of years we've hired a consulting firm and we've designed our utility relocations and we've also our real estate group has obtained easements to put the new utilities in outside the right of way and then we've gotten temporary construction easements so we can actually build the utility improvements so we're moving them all outside the right of way in certain areas we're constructing new crossings across the right of way and then sometimes we have to adjust our utilities to avoid the text out improvements our consultant has designed final plans and what we've done is we put our construction plans in into the text out plans so text out is bidding the project all is one project the roadway project and the utility project has been combined so they're about to bid that job tomorrow unfortunately they won't pay for the utility improvements we have to pay for those and so we have to enter into an advanced funding agreement with text dot and that agreement sets out the terms and conditions of the payment and the agreement that you have in your backup right now is just draft the numbers that are in that agreement are based on construction cost estimates and they're approximate tomorrow text out opens bids and we'll have the final numbers but we didn't have those before bringing it to pub today so right now the approximate cost based on cost estimates from our consultant for the utility improvements is approximately three point two million dollars so text out is opening bids tomorrow and at that time we'll know the final numbers for the utility improvements we'll take the advanced funding agreement and update it with those numbers and that 's the amount of money we expect to have to pay for for our utilities to be relocated as part of the project the only way that would increase is if we request change orders during construction or if we request additional work and then we would have to pay for that additional work so we'll have the final numbers tomorrow we'll update the AFA and then we'll take it we're planning to take it to City Council on July 17th so what we're asking you to do today is recommend adoption of an ordinance for the city to execute the AFA between the city and text dot and the approximate amount of 3.2 million the final amount will be determined tomorrow so that we can relocate our utilities as part of the Fort Worth Drive US 377 project and then if you have any questions I'll try to answer them just question and I did have a question on how on how increases are addressed these have to be requested by us yes for us to have any and I guess you know when you start replacing utilities who knows what you're gonna find that's exactly right so something could happen during the construction project that caused us to request additional work to be okay and we would have to pay for that yes I guess the only other question the ground pardon you never know what's well that's true the only other question is when the bids come in tomorrow I guess if it's you probably need to react to that before the next time we meet I would imagine if it's in significantly more than what we estimate now okay you know what what do we do well I guess it goes to council yes it goes to council with those final numbers with silent on the 17th okay so usually textile lacks for municipalities to take approximate numbers to council we try not to do that we want to take the final numbers to council right so this is the process we have to go through textile is sort of giving us an exception to do that way to do it that way so what they expect for us is to send them a check immediately after the council meeting so that's the process we're trying to go through right now okay do you know what size your contingency was I believe it was five percent we'll come back and update the PBA don't we get the file just to bring that back to you so you'll have the recommendation we need to look at is based upon the preliminary numbers and the concept of an advanced funding agreement it's really what we're talking about exactly okay any other questions no is there a motion then on item C so moved to approve most to approve their second second Charlie any discussion all in favor say aye any opposed when does construction start I'm just curious they're hoping to start construction in October okay so yes pretty quickly yeah well that's it's a long time coming yeah it's been talked about for a long time it has okay thank you okay thank you Chad item D is ACM update mr. chairman members of the board nothing to report okay concluding items under section five five one dot o four two the Texas Open Meetings Act is to respond to inquiries from the public utilities board or the public was specific factual information or recitation of policy or accept a proposal to place the matter on the agenda for an upcoming meeting anything to add to upcoming meetings or our matrix from anybody no hearing none is there a motion to adjourn motion to adjourn and a second second all in favor say aye thank you