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