Okay, it is nine o'clock and we do have a quorum so call to order the Public Utility Board meeting for the City of Denton on Monday, June 27th.
The first item on the agenda is presentations from members of the public. Does anyone from the public wish to speak?
Okay, seeing none, we'll move on to the consent agenda. Does any board member wish to pull an item from A through D?
Yes, Ben, go ahead. Item A. Any others? All right, do we have a motion to approve Items B, C, and D?
Mr. Beck is moving. Second. Mr. Redbeck seconding. All in favor say aye. Aye. Opposed? Item A.
Do we have someone to cover Item A? Hi, I can try. Larry Hill, purchasing manager. Morning.
Yeah, I mostly had financial questions. So contracts for compressed natural gas for vehicles, I was curious how does the fixed, it talked about the difference between fixed and variable rates, how does a fixed rate in the contract compare to say market prices today?
Do we know that? I do not know that. I would have to get that answer and can get it to you. I know we sign a contract every six months for a fixed rate.
Do we know any kind of benefit of that fixed rate as compared to the market? I do not have that answer, so I'd have to get that back to you. Do you have it?
Good morning. JJ Tips, administration manager for solid waste. The benefits is that it's a locked price, so that we can do better to forecast that. The six month contract we sign is based on the price at that time, so Lumina offers it, basically tells us the most up to date. We choose to lock it in at that point. And I'm sorry, I forgot your other question.
Oh, that's okay. Yeah, so basically I was just trying to get an idea of is a fixed rate the best way to go? And so like how does it compare to the market? Are we generally coming out ahead? Are we 50/50? How does that work?
It varies due to the volatility of the market. What it does for us is it allows us to better project and budget for that. We know what the price is going to be for six months as opposed to just spot pricing each time we fill up.
Okay. But on the whole, I think it works out. We get hit, you know, we lock something in and the prices go up, or the same thing happens the other way. Do prices ever go down?
We've seen it, not in a while. But yeah, I think when I first started a few years ago, CNG was around $2 per, I think MMBTU is the measurement. Now we're up around six. Wow. Okay. Okay. All right. Do we have a motion to prove item A? Mr. Beck motioned and Barbara second. All in favor say aye.
Aye. Opposed? You're an aye? Okay. I did vote for it. Yes. Okay. It was late. I just want to make sure it was what you wanted. Okay. The next item is considered the approval of the June 13th minutes. Were there any changes or corrections? Okay. Seeing none, do we have a motion to approve? So moved. Okay. Barbara moved. Billy second.
All in favor say aye. Aye. Aye. All right. Management reports. So Madam Chair and Board, really no changes to both of these items for you. Just as a reminder, July 25th is kind of our targeted date for the POB to formally approve or make a recommendation on the budget and the rates to the City Council.
So that's a pretty important date for you to have on your calendar. Obviously, you know, we have a budget presentation day. We'll have some additional presentations coming to you on July 11th. And then, of course, the 25th will be the date that we designated for you to approve the budget formally.
So we'll be asking you to approve an ordinance or approval of an ordinance to go to the Council. And then the two items that we have on the agenda today, there's a presentation by our procurement department on a question that was asked about the frequency of meetings and then the other item we're still working on.
So with that, I'm happy to answer any questions that you may have. Any questions? Go ahead. I know it's an issue right now, but we haven't really spoken about the drought conditions and what that's doing to our current water supply. I wonder if we could get something brief on that.
Yeah, we could probably bring that back to you. I think there's a discussion today. I don't know if Steven might be prepared to answer that later today during the work session. Okay. Thank you.
All right. Concluding items. Does any board member wish to have a future item added to the agenda or have anything to say?
No. All right. We'll go into our work session. The first one is to receive a report, hold a discussion and give staff direction on the public utility board meeting schedule.
Morning. Lori Hewell, purchasing manager. A little background first. On May 9th, you guys requested a work session to determine the feasibility of moving to one meeting per month. The city charter does require the PUB to meet at least once a month.
The current process is you're meeting twice a month. And our process in procurement for all of our procurement items is that we get a recommendation of approval by PUB a minimum of five days before council. We do have a couple exceptions to the process.
The back to back meeting, like this week, we have council tomorrow, so there's a couple items going back to back. We're allowed to do that when there's no scheduled council meetings within 10 days. Since the next council meeting is not until July 19th, we're approved to go bring a couple items back to back.
The other would be retroactive, which means you guys see it after council has already approved it. This will occur if there is a PUB meeting canceled or if the existing contract is going to expire or there's some issue that it needs to go to council first before PUB.
>> Thank you. Thank you. >> Thank you. >> Thank you. >> Madam, before you move on. >> Yes. >> One of the items on your slide was meeting is canceled by PUB chair and/or staff liaison. Under what circumstances do we normally cancel a meeting?
>> Lack of quorum. >> Lack of quorum, okay. And from the staff side.
>> We have an emergency meeting. We have an emergency meeting. We have an emergency meeting. If there was an emergency situation, something like that. Generally speaking, if that's going to happen, I'll be in touch with both the chair and vice chair of the PUB and get some consensus and notify the PUB in advance.
That's the only time if there's an emergency situation that would necessitate. We wouldn't cancel it just because we had a short agenda or anything like that.
Otherwise, you'll try to hold the -- we will try to hold the meeting. And if we don't have a quorum, we just can't make any decisions. >> Right. >> Okay. Thank you.
>> Okay. So PUB does not just approve purchasing stuff. We have the majority. But then there's budget also. And then just miscellaneous non-procurement contracts. These are just some purchasing metrics of how many months we had, like how many had two meetings a month and how many just had one.
Normally, it's just November and December with one meeting. So this is the metrics for 2021. We actually brought you in 2021, 133 items with seven of them going retroactive. So you saw it afterward.
And this year so far, we've had 78 items brought to you. But we also did -- had 21 retro items because of the break in January that there was a five-week break. And actually, it was longer than that. I think it was like six or seven weeks.
And 18 of those items were from that break of the 21 retro items. The average time it takes us from when -- we do not allow an item to go on to the agenda unless it is complete, meaning that the vendor has signed it and then we have an ordinance from legal.
So from that point, the average time from it being complete to it getting approved by council is about 24 days. That's where we're sitting right now. So to kind of get the item to that agenda-ready process, it takes about 70 to 120 days of staff time to get it there.
And that's staff time in the procurement office. There is more time with the department getting the specifications ready, getting the scope put together, price lists and all those items, and then they bring it to us at solicitation review committee.
We tend to try to get that advertised within two weeks of it coming to us. Then it's advertised anywhere from two weeks to a month. And then it goes to the evaluation committee and interviews, and that could take anywhere from two weeks to a month, a month and a half, depending if there's demos and things like that.
And then once we've picked our top vendor, then we have contract negotiations. Sometimes those go really quickly, but sometimes those can last up to a month. So that's kind of where we get the seven to 120 days.
Once all that is done and we have a signed contract by the vendor and an ordinance from legal, we consider it agenda-ready. It has to be agenda-ready 12 days before -- well, it has to be completed.
So there's 12 days until we have to have it on legislature. So it has to be completed, and there's 12 days from that date till PUB. So once we get it in and start that process, after PUB recommends approval, it takes seven days to get to counsel.
So no matter what, in that process, there is 19 days, but we still tend to average about 24 days from completion.
>> Yes, go ahead. >> Yes. >> Last meeting, we talked about your request for the increase in staff. >> I think we need -- do you see the increase in staff shrinking that 70 to 120-day time period, or is it going to remain about the same?
>> Yes, I hope it would. >> It should? >> Yes, it should. >> Okay. >> Give my staff more time to work on -- we'd be able to divide the departments up better to where they wouldn't have as many departments, so they'd be able to get to their items quicker.
>> Okay. Thank you. >> Yes. Okay. So currently, the average number of days, like I said, was 24. If we went to only one meeting a week or a month, sorry, it would possibly increase up to 42 days.
Material, supplies, service, and construction may take longer to purchase. So exception increases, like if we were going down to one month, we would like to add a new exception to the retroactive, which would be that if the next scheduled PUB meeting is more than 20 days from contract completion, we would be able to go to counsel first, so that would mean most likely that there would be more items that you guys would see retroactively, so you wouldn't see it before you got the approval.
And then also during budget presentations, like the summer, so May through September, to keep the two meetings a month. To change, to do one meeting a month, it would just be the approval of a new calendar.
Staff, we do recommend staying at the two meetings per month schedule just to ensure, you know, the timely procurement of the material, supplies, and services. Questions? >> Questions. >> Since this is my question, I'll ask another one. Thank you for that. I understand it's a long and involved process for procurement because it is a public entity, the city. I'm sure the same is true, county, state, federal, so forth.
But we had several meetings in a row where we had a total time of meeting of less than 20 minutes because there was really only one item for this sort of thing on our agenda. >> Well, most of our items are on consent. >> Yes. >> So even though there was -- >> Right. So since your items are on consent and we didn't pull anything out of consent, so that's on us, but my point being is that, you know, we were brought in here for several meetings in a row where we were only here for 15 minutes.
So it doesn't seem like a good use of our time, and I recognize you have a long process. Is there a way for you to, since you have this long process, to sort of shepherd these things into a little bit more occurring in a per meeting basis in our offseason when we are not in the budget cycle?
>> I think it's just really hard to know when the contract is going to be done. Sometimes we have it completely done, and then we put it in, and then the vendor has more questions. So it's really hard. Most of these items -- so our biggest complaint from departments is that this process takes a long time, so -- and there's stuff we can control, which is our time, but there's a lot of stuff we can't control. We can't control the vendors, you know, contract negotiations, how long it takes them to get us a BAFO back, a best and final offer.
There's a lot of things that are not in our control, and then even the end process. There's 19 days that we can't control because we have to get it into Legistar those 19 days before, so 12 for PUB and then seven for council. So there's a lot of days in the process we can't, so once it's done, we just try to get it on the next, just so the departments can get what they need, and a lot of times they're getting it to us way ahead of time, and we still don't make the deadline to get a contract.
And before the other one expires, or if it's like a construction project, before they wanted to have it started, before it was like planned in the CIP to get started, a lot of times we are missing that date. So this would just add, it would increase most likely our average to be, instead of 24 days, it could be up to 42 days, so they'd have to wait to get it approved.
And I know from my perspective, you said 21 contracts had to go to council, and we were informed retroactively?
Correct.
And I think Billy will concur, I'm not speaking for him. I think it's our duty to even show up for 20 minutes to approve those contracts before city council, so that's my opinion is that we, go ahead Barbara.
Is it possible when we anticipate a very brief meeting that we zoom that meeting?
No, Barbara, there's very limited circumstances in which we can teleconference under state law as well as our charter and board and commission meeting standards.
Susan and I share a similar opinion on this, I think it is our duty, it's the charter and it's the law, and I think we ran into, or during the pandemic, we ran into a situation, we had a conundrum, and it was, everything was coming to us retroactively, but it still needed to be approved in accordance with the charter, right?
I believe it's, if not state statute, but then at the same time, I've asked this question several times, you know, if we're going to do that, then why do we have to have a public utility board?
So, true, yeah, because the charter says we do, anyway.
Well, Billy, and kind of in response to that, if you recall, we set up a procedure that we shared with the board on how we're going to handle items that go to the council first and then retroactively to the PAB, but that was intended to be kind of the exception and not the rule, and I think we've tried to do a really good job.
And frankly, to be honest with you, I think what Lori's saying is that two meetings a month is almost the bare minimum when you consider the number of contracts and procurement items that they have on the agenda, obviously, some of those items are on your consent agenda, and there's very little questions, but that's certainly incumbent upon the board to review those items, and if there are questions, you're free to pull them.
You know, we try to exercise some judgment as well on some items, depending on what the item is and the dollar value, sometimes we preemptively will put them for individual consideration and plan a presentation if it's an item that we know you're ultimately going to have questions about anyways, and so, but again, kind of just going back to Billy's comment, that certainly was an issue.
We met with the chair and the vice chair, we heard them loud and clear, and that's why we established that procedure that we have in place, and hopefully, the number of items that are going to the council before the PAB are very minimal.
Right. You know, and I think, you know, we've spoken about this sidebar just saying that having the two meetings there doesn't mean you can't cancel one if you don't need it, so that's all.
So what do you need from us?
No, I think Laura's just kind of looking for some concurrence or some direction from the PAB on, I think the recommendation is to keep things the way they are, and if there is a situation where we have to cancel a meeting or if there is an opportunity for us to aggregate things and maybe cancel a meeting, we're willing to take a look at that.
It's just based on the volume of contracts she has, I think it's going to be almost impossible at this point.
Go ahead, Devin.
Thank you, Chair. This might not be the most exciting part of being on the PUV, but this is a critical function for government to operate, for the utility department to function, so it's a small sacrifice, I think, to come up here for 15 or 20 minutes every two weeks or so, so I don't see a problem with the volume.
We're seeing 180, 200-plus approvals a year that are needed and the delay that it would incur, or the change in process where there'd be a 10-day period every month, a third of all contracts would go to City Council first and come back.
That seems like that's a pretty big hole in the process, so, I mean, two meetings a month, except when they can't happen for urgent reasons, is appropriate.
Okay, I see Mr. Beck shaking his head, yes.
I concur with Mr. Taylor, and these brief meetings that we do have could turn into longer ones. It is an opportunity where if something came up where one of us really wanted an elaboration on an item, it could turn into a 30- or 45-minute meeting, so it offers us that opportunity, too.
Well, since this was my complaint, I would appreciate it if items could be aggregated during the off-season as much as possible, and I understand we do have to meet, we are obligated to look at these items and approve them, but if our agendas are going to be short, I shall be sure to pull more items from the consent agenda to make our meetings more worthwhile.
All right, so I think you have your direction. We'll stay as we're doing, okay, thank you.
Thanks.
All right, and the next item is to receive a report and hold discussions and give staff direction on the preliminary budgets.
Good morning, Chair Peebe, members, thank you, and Assistant Director of Finance. Let me get the first presentation pulled up.
So, before we get started, just give you a brief introduction to the presentations, and we definitely can get started with each one.
So, there's three presentations for you today. The first presentation is a continuation of the water, wastewater, and solid waste presentation.
The second presentation is the electric operating budget. That's actually the first time that's come forward to you. And then the next one is the capital budget that's being proposed for fiscal year 2023.
Okay, so I know several Peebe members were not here last meeting, so please feel free to ask questions if you have them.
Definitely, I'm glad to answer those, even if they're the same questions. So, just a little bit of overview of the presentation.
We have removed the operational slides for water, wastewater, and solid waste from today's presentation.
This presentation will focus just on the financial perspective of these utilities.
So, we will talk about the water, wastewater, and solid waste budgets.
So, the financial assumptions for water, just for anybody who went here last time, I'll run through these really quick, and then please ask any questions that you may have.
So, average growth for the water utility, we're currently forecasting 2% over a 10-year period.
The financial forecast that you'll see today is actually a five-year forecast, but we do plan in a 10-year window.
The Hunter-Cole Ranch development is accounted for in 2024, so we start seeing those rooftops pop up with the Hunter-Cole Ranch development starting then.
We do have 2% to 3% increases in non-rate revenues. This expense should not be there. That's actually a typo.
So, we have 2% to 3% expense increases also in the budget.
One update I did want to tell the Peebe about that's happened since our last meeting is the TMR's contribution rate increase from 17.65%
to 18.15%, and then the capital budget expenses were revised based on some internal cross-departmental meetings.
So, meeting with the engineering department, meeting with water, wastewater, looking at the projects, doing those cross-coordination medians has resulted in some changes to the capital budget.
They're minimal, but we wanted to make sure to point them out.
The TMR's rate increase, could you give us just a brief description of what that is?
Yeah, great question. I should have spelt that out here. That's the Texas Municipal Retirement System, so that is the city's retirement system for the employees.
So, we make a contribution. The city makes a contribution to that plan on behalf of employees.
This is the contribution to make that fund whole this coming year.
As part of the budget, this rate increase in that contribution then?
That is correct. Yeah, absolutely.
So, the percentage of increase was dictated by the total dollar amount needed, or did the council raise the rate?
No, great question. So, we do have consultants to look at that. That is the total percentage needed to make that fund whole.
That is what's needed this coming year to make it whole, based on who's putting into it, who's taking out interest earnings, everything.
I have a question on the 2 to 3 percent increase. Do you think that's enough with how quickly certain items are inflating?
I think, Susan, that's definitely a great question, something we talked about last time.
I mean, I think inflation, you look at the news, and inflation is at 8 percent. We're budgeting a 3 percent increase in expenses.
We do think, I think, from cost containment and some cost reduction strategies, I think it is sufficient, but it's definitely something we're going to have to monitor throughout the fiscal year.
And a good example of that is fuel. You know, we're increasing a 52 percent in fuel, a 52 percent increase in fuel, but it's very possible it may not be sufficient.
And if it's not sufficient, we'll definitely come back to the Public Utility Board during the fiscal year, update you with a possible budget amendment.
So, hopefully that's not the case. Hopefully see inflation start going down, and the 2 to 3 percent will be sufficient, but you have to be determined.
Yeah, fuel was my main concern because of the 2 percent increase.
Yeah, big component of the solid waste budget, absolutely. Thank you.
OK, so this is the water forecast here, as I'd said. So, we do plan on a 10-year financial picture.
I am showing just a five-year picture here for presentation purposes, and just a little bit, the numbers can be a little bit bigger for you.
So, I'm going to walk through this slowly. Please feel free to ask questions if you have them.
The fiscal year 2022 columns, you can see that column here. This is the current fiscal year that we're in. This runs from October 2021 to September 2022.
The fiscal year will be ending pretty soon. You can see our adopted revenues here are $52.2 million, and then our expenses are $51.2 million.
I think Mr. Cheek had a question earlier about revenues, and I know Stephen is here and definitely can talk to the drought conditions that we've been seeing here lately.
But we are currently forecasting about $51.4 million in water revenue. So, really close to the budget.
I think water sales, we're definitely forecasting those to continue to increase in the summer months as we continue to see this dry weather.
On the expenses, you can see the estimated expense is about $50.3 million. So, for net income, about $1.1 million.
2023, so this is the budget we're here to talk to you about today. You can see we have planned revenue of $62.2 million.
One thing we did talk about last meeting was this large increase between the adopted revenues of $52.2 million and what we're proposing for 2023.
This is a cost participation. So, we do have some cost participation funding coming in for some different tech stock projects, and we'll look at those shortly.
So, we're simply pulling those into the operating budget and expensing them out to the appropriate project.
On the expenditure side, you can see we have $62.4 million in expenses. So, using about $248,000 in reserves.
Going down to the bottom down here, one thing I definitely want to point out, it's important for this utility.
This utility is healthy. This is a great utility as all the utilities in the city are great.
But one thing we focused on the water utility is really leveraging those revenue funding of projects and impact fee funding to offset some debt issuance.
So, it's really benefited this fund in the last three or four years. I just want to make sure I pointed that out because the staff has done a great job.
So, this rate increase, you can actually see for the five-year window, we are not forecasting rate increases for their water utility.
This does not include those contractual agreements. There will be some contractual agreements that will come back to the public utility board during the July 11th meeting.
So, we'll be looking forward to those. They will be coming forward to you.
As you move down the page a little bit here, you can see the end of the reserve balance. So, we do keep a reserve balance for the water utility in case something catastrophic was to happen.
Currently, we have about $24.5 million that we are forecasting to have. You can see that number right there.
The reserve targets, if you remember last year, we did talk to you about reserve targets for the different utilities.
The minimum reserve in this utility is $18.4 or 120 days and then $27.8, which is 180 days. You can see those numbers there.
So, we do fit in that reserve target in each of the years. We slightly dip below in 2027, but we will look at this annually to make sure that we are above that reserve target in the future.
Does anybody have any questions on water? Yes, sir.
Yes. In the previous slide, we talked about like a 2% to 3% increases in expenses, revenue, and it looks like this is about a 12% increase in revenue from current year.
Is that like $57 million versus $50.5 million? Is that $51 million?
Are you talking this $52.2 million in 2023 or 2022?
Yeah, $51.447 total revenue versus $62 million minus the $6 million. So, we are expecting that is 12%?
Yeah, great question. So, it probably is 12%. I can't do that math this early in the morning, but the majority of that is the cost participation.
So, if you look up here, you can see that $6.2 million. So, that cost participation is coming in as a revenue. If you were to exclude that, right, it would bring that number down to about $56, $55.
So, I think the majority of that increase that you are seeing is associated with that cost participation from text-dot reimbursements.
Okay, let's look at the total expenditures in less aid and construction. So, we go from $50.3 million to $56.2 million down the line. That's more than a 10% increase?
Yep, great question. So, if you excluded, now we could do a couple things, right, is you could exclude the revenue funding capital if you wanted. The majority of the increase is the same thing here, right, we have the cost participations that are being expensed out of the operating budget.
So, that $6.2 million is buried in this $18.9. Another thing that you are not seeing is the revenue funding component of it. So, we are continuing to increase that revenue funding in the future for those projects.
I think if you were to exclude all that, you would not see that drastic increase. Hopefully that answers your question. Is that 2% is non-revenue funding of projects or debt service? That is O&M expenses.
Okay, so we are anticipating water revenue to increase by more than 10% next year?
No, not water sales. No, water sales for residential customers. I may not be understanding your question.
Total expenditures, less aid in construction, is $50.3 for FY2022. Yeah, right, down one, down right there, and then it's $56 in 2023, and that's approximately what it would, if you take the total revenues and you subtract out the cost participation, those are in line with each other.
So, that appears that revenue is forecast to increase by $5 million or so, and expenditures are also, am I, I must be missing something here.
I think you're correct. I see exactly what you're saying. So, this aid in construction line that you see down here, so we have $50.3, then it goes to $56.2. This does exclude aid in construction, so this cost participation project, right, but there's other things it doesn't exclude, and what are those things it doesn't exclude?
So, this year coming up, we are looking to do some supplemental packages, right, currently of $1.1 million, so that'd be above that 2% or 3% that we're talking about. Then we're also to do an additional $2 million or $3 million in revenue funding of projects.
So, I think if you take both of those, right, it's going to be about $4 million that's increasing this next year. So, that, when it says excludes aid in construction, it's just excluding the cost participation projects. Hopefully, that helps answer your question.
Right, but that does indicate that revenues are increasing from $51.4 to $56, right. So, if I take $62.2 and subtract out the $6.2, we get about $56 million in revenue.
So, Nick, I think if, you know, so Devin, if you take a look at the user charge, right, so in fiscal year '22 estimate, right, the first two lines, about $40 million, right, that's projected to increase to about $43 million.
That's about roughly a 1% increase. That's the actual revenue. All the other increases really coming from those miscellaneous revenues and then also the cost participation that Nick's talking to. So, the actual user charges, it's only about 1% increase.
Okay, and then the additional, I guess there's another 1.7 additional in miscellaneous revenue, 1.7 million additional in miscellaneous. And what accounts for that?
So, the majority of what's in miscellaneous revenue is you have some wholesale agreements that are in there. So, for some raw water sales, then you also have tapping fees, meter fees, it could be meter replacement fees.
So, we're continuing to see an increase in tapping fees. I think actually last fiscal year we saw like a $1.4 million increase or something that fiscal year. So, that 2 to 3% that Tony talks about, right, is from a volumetric standpoint.
The numbers that you're seeing in DAWN or miscellaneous revenues would be the non-volumetric revenues, those things that would be outside of 2 to 3%. So, they'd be above that.
And I guess a driver of tapping fees would be new houses.
Growth, yes, absolutely. Yes, sir.
All right, thank you.
You're welcome.
Okay, so I'm going to go to, I think the next one here is waste water. We'll go through these, very similar to water. We try to be as consistent as possible across the utilities, especially water, as you can imagine.
So, average population growth at 2% over 10 years, 100 coal ranch, of course, is in 2024. We do have the 2 to 3% that Mr. Taylor was talking about just shortly ago.
And we have expenses of 2 to 3%, and, of course, the TMRS rate. I'll have to repeat the percentage for you, but you can see that increase that we talked about.
With this reoccurring supplemental request, we'll talk about these in greater detail if you want and provide that backup for you. It's actually provided as an exhibit in your agenda today.
And then you can see some new positions that are being requested in the department.
So, wastewater fund, very similar to water. We are showing a five-year picture. We do have a 10-year forecast for this utility, just like water. A little bit different. Wastewater does have some forecasted rate increases in the future years.
We talked about last meeting, so I want to make sure to make the PUB aware of that. We'll talk about that a little bit.
So, you can see in this column here, the 2022 budget of what we're currently in. We had adopted revenues of 38.6 or 38.7, expenses of 37.9.
We are forecasting about 45.8. That increase is mostly contributed to a cost participation project from a development. We've already received an $8 million contribution from that project.
So, we are showing that as revenue coming in this year. It's one, one project. That was for, I may have to have Stephen come up and talk to that, but yeah, but I do believe I know which one it is.
I hate to tell you the wrong name, though. But it is one project, though, Mr. T.
So, I might be asking the same question if I didn't hear it very well. So, the cost participation, you've got a big bump in two years in the wastewater fund and only one in the water side. I'm curious why the difference.
This $8 million, this $12.6. Okay, in '22 estimate, you've got a cost participation of $8 million. In '23 preliminary, you've got one up to $12.7, whereas in the water side, you only have one cost participation fee in one year.
I'm just curious why it's two years versus one year. That's all.
Well, Stephen Gay, Director of Water Utilities, I can let Nick answer the question about the timing, but with regards to the project, the cost participation project, you may recall, I want to say about almost three meetings ago, you guys approved us entering into agreement with the developer to do those improvements on Milam Creek up on the, as part of the TechStat relocation, and that was an $8 million contribution to complete that project. So, that's what that, that's what that cost participation is for.
So, we're installing a gravity line, and we're funding it this year. We have to do some design work, and so next year, we'll be doing all the construction. So, this budget cycle is when we're going to be completing that construction.
So, then what's the preliminary for next year, '23, the $12.7 million, or six?
Yeah, it's the $12.6. So, I was just talking to Cassie, which she brings up a great point.
So, in wastewater, we have two projects, one of them being a Milam project, Milam Road project, and we have one for TechStat. So, there's two projects that we're showing as revenue coming in in 2023.
Okay, thank you.
Yeah, you're welcome. And on water, it was just one, so, yeah.
Okay, so, 2023, I'll continue here, just total revenue, you can see $55.3 million in revenue. We are planning to use some reserves. We'll talk about that here in just a second.
Expenses, you can see 62.5, of course, the majority of that increase is associated with those cost participation and then revenue funding of projects.
Moving down the page a little bit here, you can see we are not forecasting a rate increase this current year. We are proposing to use some reserves from the fund balance to offset some of these expenses.
Moving out in the future, though, what I did want to point out to the Public Utility Board in '24, '25, and '26, we are forecasting a 3% rate increase each year.
One thing I talked about the Public Utility Board last meeting was, is that we look at this budget annually, even though we're forecasting in 2024, staff will take a look at it again next year.
And if that rate increase is needed, we'll bring it forward to you. But we just want to be transparent and tell you what's on the horizon for the Wastewater Fund.
Does anybody have questions, Susan?
Can you remind me what our debt coverage ratio is for our bond covenants?
Is it 1.2? Great question. 1.25 for this utility.
So we're always meeting that. Thank you.
Did you have something, Tony?
Hey, before you leave both of these funds, there was a question that Billy had earlier about drought conditions. Billy, do you want -- you used to want to ask --
It was more of a physical -- physically where I went with our water right now.
Okay, I think Stephen has some information he can probably address now.
Good morning, Stephen Gay, Director of Water Utilities, PB Member Cheek.
We just -- I checked this morning, so the Corps of Engineers shows both of our reservoirs are actually spilling currently, so we're in really good shape.
Current elevation at Ray Roberts is 632, Lake Louisville is at 522, and we monitor those lake levels very regularly.
And we look back at the five-year condition, and we actually have more water in the reservoirs today than we had in 2017 and 2018.
So hopefully that answers your question. Yes, sir?
Is the dry weather increasing customer demand?
Yes, it is, yeah.
And you'll see when we -- in our next budget presentations, if we put the operational information in, we'll update those numbers, and you can see that escalation in production.
Thank you.
You had referenced a couple of numbers when you were saying what the levels were, were those feet of depth or acre?
They're the actual elevation of the water in the lake.
Thank you.
Yes, sir?
What's the threshold that sends up the red flags?
It's -- when we get down, I want to say in Ray Roberts, it's 622, and in Lake Louisville, I want to say it's 510 to 18.
So we've got some bandwidth there.
And the Corps of Engineers who is responsible for operating those lakes, they're the ones that are monitoring it, and they're actually spilling currently.
So we have plenty of water coming into the reservoirs at this time.
When we do reset threshold, what are the initial actions the city starts taking?
Yeah, we have a conservation and drought management program, and so what we'll do is we'll start messaging that to our community.
And, you know, you may or may not be aware, but the largest use is outdoor water use and watering, so that will be the first step is to curtail outdoor water usage.
And so then we'll kick into maybe a two-day watering scenario and, again, message that to the public.
Okay, thanks.
You're very welcome.
Good.
Thank you, Stephen.
Okay, anybody else with wastewater?
That's okay.
All right, so drainage.
Drainage does roll up into the wastewater utility, but we do show it separately just for transparency.
So you can see the adopted budget here that we're currently in, what we're forecasting in the preliminary budget.
So preliminary budget for drainage is $6.4 million, right, and the majority of that is from that impervious surface revenue that we receive for drainage fees.
And you can see expenses, about $6.4 million in expenses, and we keep a million dollars in fund balance for anything that may happen on the drainage utility.
This is the solid waste financial assumption is a little bit different than water wastewater, so I'll walk you through it here and ask any questions you may have.
So we are including the wholesale agreements for solid waste.
As a reminder, these agreements actually came up for renewal this year.
The public utility board and city council, we were considering those for approval here in the next couple weeks.
So be on the lookout for that.
The financials you see today include those wholesale agreements.
If they don't get approved, something was to happen, we'd come back to you with a modified financial picture with those taken out.
So just keep that in mind.
We are projecting an increase between 2.5 and 3.5 percent, a little bit more growth in the solid waste utility just for some landfill traffic that we're seeing coming in that facility.
So it's a little bit outside of that city growth. It's actually outside growth coming into that facility.
Expenses, we are 100 percent revenue funding of vehicle replacements is a great achievement in this utility.
This is something we started talking about a couple of years ago and we finally reached that benchmark.
So we are proud of that.
Fifty three percent increase in gas and oil.
Hopefully that is overstated.
Hopefully it's only a 10 percent increase.
So we get to be determined.
We are maintaining the contributions to the closure post closure fund.
We actually updated this or are in the process of updating the closure post closure study this year to incorporate the new permit that was approved.
Yes, sir. Mr. Jumper.
I can't remember if a meeting or two ago recently we talked about possibly the possibility of electric vehicles instead of gas or diesel vehicles.
Can anybody remind me where we landed on that?
I'll ask Eugene to come up here and speak to that from Solid Waste. He has the details.
Good morning, everyone. Eugene McKinney, Deputy Director, Solid Waste and Recycling.
To your to your point of electric vehicles, we've been exploring that for quite some time now.
There are a lot of different models on the market promising a lot.
But as we dig down and look at some of the solid waste equipment, there are heavier trucks that require a lot.
And just to be honest, the battery life is just not there to support a full route for one day.
In fact, we just demoed Mac makes a great product.
But I think on a residential route, we have about twelve hundred homes.
The city is growing. Right. The capacity for that truck before recharge is only one hundred and fifty tips.
That's only an hour because not only is the engine and everything electric, the mechanics of the body are electric.
So it almost reminds me of the first cell phone we can imagine we've seen. Right.
It was kind of big spaceship thing. And now we've got a little computer in our hands. Right.
So evolution is coming. But we're just concerned about jumping into it right now.
Great. So basically, longevity, work life, battery life, all that. Yes.
Not even close. It sounds like, you know, when I say close, I'm thinking I just I just attended a trade show.
And the best estimates were about three, five, seven years.
You know, however, we are we are putting our investment in smaller footprint vehicles.
We have some electric cars. They have much better range.
So if you live in the city, question you do, you got an automated cart that we deliver.
We're looking at an automated truck, I mean, our electric vehicle for that, that box truck.
It has a range of six to eight hours from from from full to empty.
Of course, the lighter the vehicle is, because as the day go along, the more efficient it is.
So it's coming, but just not from the applications we're looking for right now.
You know, one of the questions that was asked, well, if it only get one hundred and fifty containers for one truck,
we need about 10 trucks to pick up one route. So that's kind of where we are.
OK, thanks. Thanks. Good question, though.
All right. We will look at the financials now. Oh, yes.
Oh, sorry, Barbara. I'm sorry. I am hearing that in reference to the dump.
This may not be a question for you, but that either there are a lot of people using it or something's not working real correctly
because it's a three to four hour wait to empty at the at the dump.
And I was just wondering if you had a sense of why it's taking so long or there that many people using it.
We can join together. So we have had a lot of questions about that line coming in.
We have a capital improvement project in the budget to redo the scale house to help with that coming in and out.
But Eugene will probably tell you the DFW landfill closed, which was in Louisville. So that has created a large shift
where people are coming in and accessing the landfill at much greater numbers.
Now, they do have a great plan of getting people in and out.
And then we're looking at expanding that scale house so we can get maybe our trucks on a different route or more than one lane.
They've been closing and technically they're not completely closed. They're in a process called post closure.
So they're limiting the amount of waste that's coming in so they don't reach capacity.
Well, in the process, they're raising the gate rates.
So it becomes it might be a closer drive, but the rates are so high it's cheaper to just to come to them.
So, you know, and that's just a way of controlling what comes in.
You raise the rate, I'm going to pay just six tickets, I'm going to pay seventy five dollars here versus twenty five dollars here.
Always I'll expire the extra five dollars in gas and I'm still safe.
Should we be looking at raising hours?
I guess that's part of another conversation with the comprehensive management strategy that's coming forward.
There is going to be a large emphasis on the diversion.
So looking at what's coming in and out, so definitely Brian and Eugene have lots of programming changes coming up to address that.
But what is coming in, we are working on, you know, what does our footprint look like?
How do we get people in and out quickly and expanding that scale house and what technology can we approve so that it's not a face to face transaction for entering the landfill and exiting?
Thank you, Taylor. Go ahead.
So I also I took some stuff out to the landfill recently and I noticed that it is a one point seven mile drive.
Once you pass the scale house to the working face and then another one point seven miles back is where it used to be about a half mile.
That change was that change, I guess, what was the cause of that, because that's that's a pretty significant additional mileage for every customer and every city truck.
Well, a couple of things drove that one, we have to stay in compliance with our permit.
And one of that one one of the reasons for that is it's a control of the mud that comes out of the landfill.
So the further to travel on concrete, the thought is you'll get some of the mud off on concrete.
Now, for your light vehicles, we are finalizing the completion of our PDF, our public disposal facility, which you won't have those barriers in that area if you just bring it some out.
But but again, these are heavy trucks. They track the mud in and out.
We get a wet day. We can't we try to minimize having that on the main roads because we have to be compliant with our permit.
We have people out all the time. We have sweepers and things like that.
But as much as we can do, it starts inside the facility.
Right. So as much as we can reduce the mud inside, it kind of results to the street.
OK, and another question unrelated, the the wholesale agreements has has declined about one and a half million twenty twenty three to twenty twenty two.
Do we have an agreement expire or are we just expecting less tipping from one of our agreements?
I think JJ, I'll bring you back up here. That's his subject matter area. He monitors those.
Good morning again, JJ Tips, Solid Waste Administration Manager.
This year, to coincide with the management, the Solid Waste Comprehensive Management Strategy, we elected to cap the volume we were going to accept.
So I believe it was around one hundred ninety seven thousand tons on this previous round.
We capped it at one twenty on this one.
And then there's some incentives for diversion to gain a little bit more for those haulers.
So we currently have six agreements we're going to look to go on this next round, it looks like, with three.
So you said. So we are. The reduction in tonnage will come from removing three agreement or canceling ending terminating.
Yeah, we put out a competitive agreement. We capped that total amount at one hundred twenty thousand tons.
Now, that doesn't mean that the other haulers who aren't getting in on the new contracts will stop.
We don't know what that'll look like. So we may still get the same amount of tonnage.
But at that point, they'll be paying the full gate rate as opposed to a discounted rate.
I see. And so it's great news to be able to use this as an incentive for the diversion. Thank you.
Thank you. And we can point that out on the financials to Mr.
Taylor about some of that transitioning to the gate rate.
I'll point that out here in just a second. So let me keep going.
I'm glad I invited everybody to the meeting today. A bunch of people come up here.
It's good. Good interaction. So, hey, we like the questions. So the five year forecast, the solid waste utility.
So you can see the current budget that we're in here in twenty twenty two, about thirty nine point eight
million in revenue, about thirty seven point one million in expenses.
So about two point one or two point seven million positive and net income for the end of the year.
We're fairly close to the budget, about three point six million in net income to finish this fiscal year in 2023.
So the preliminary budget that we're going into, you can see revenue about thirty nine point eight million.
We do have some planned reserve usage and this is strategic.
We are looking to revenue fund some assets this coming year.
So we'll talk about that here in just a second. But going back up here really quick.
So you can see that wholesale agreement, Mr. Taylor, decreasing from six point two to four point seven.
You can see the transition to this rate revenue, which would include that landfill gate traffic or they pay the gate rate, basically the higher rate.
So we are anticipating that expenses for twenty twenty three.
You can see forty two point seven million in expenses. So it is increasing in twenty twenty three.
The majority of this increase you can see up here is that this vehicle replacement, three point six million in vehicle replacement.
This is one hundred percent of the collection vehicle in my mouse to work here.
One hundred percent of the collection vehicle replacement in the coming fiscal year.
We do have some revenue funded capital. You can see here.
And then we are also looking to start revenue funding our cell construction.
So budgeting annually for some contribution to a cell fund to build the next landfill cell.
So we are looking to do that. This fund is healthy.
We're looking to put that money to work for us and decrease the debt issuance moving forward.
So great news in this fund. Definitely positive things.
Is that a one year one year expense depreciated at all.
We use typically depreciated a life of the asset. So if we look to I think currently, if I'm not mistaken, I'm looking over here.
I think we're currently doing like five years on cell development just to stay consistent what we're seeing.
So yeah, the next cell slated, you can see here one point five, one point five and three figure on the twenty twenty five time period.
So coming up before you know it, I'll be here moving down the page a little bit.
You can see the operating reserve. So ending this fiscal year using a two point eight million in reserves or seven point five million.
Our reserve targets in this fund are five point nine to seven point six.
So we do maintain within that reserve requirement for the current year.
Moving into the future, we do dip below a little bit.
But that is as we continue to revenue fund those assets and then we bring it back up in the fifth year where we're in compliance with that revenue requirement.
So I just want to point that out to you.
No rate increase, no rate increase for solid waste customers down there.
Yeah. Yeah. And the same thing with with this utility like the others, are there any rates that do need to increase for cost of service based reasons?
We'll bring it back to you on July 11th. So yeah.
But for the average residential customer, we're not forecasting rate increase.
But then next steps. So whoever wasn't here last time, just go through these really quick with you.
So June 28th, we do have a city council presentation.
We actually moved the electric discussion from city council then, but we do talk capital budget to city council tomorrow.
So we encourage you to watch that meeting.
They will see a version of the presentation that you see today later today, but it will include general fund departments.
So what you see today will just be for the utilities.
They'll get the big picture, be like a 60 slide presentation or something.
Cassie's looking forward to that presentation.
So July 11th, we'll start talking about the utility budgets again, start talking about those rate discussions.
And then, of course, on July 25th, as Tony mentioned earlier, be looking for your approval for the budget and rates.
That concludes this presentation. We have two more presentations.
The next one will go through electric. Tony's going to come up and present the operational information.
Once he gets done with that, I'll walk you through the financials.
Oh, go ahead. Sorry, Mr. Taylor has one more question.
Do we just have a like a two minute break? Oh, a two minute break. Sounds good. Sure.
Let's have a two minute break. We'll be back at 10, say 10 a.m.
All right, Tony.
OK, it is 10 o'clock and we are back.
Go ahead, Tony. OK, so, Madam Chair, members of the P.B., Tony Puente, DME General Manager.
I was telling Susan that's probably been about two and a half years the last time that I did a presentation here.
So I'm a little nervous. But just so you know, in case you don't know, it's been pretty hot, right?
And so I wanted to just kind of share a little bit of anecdotal information for you.
So prior to June of this year, ERCOT's all time summer peak was set in August of 2019.
It was seventy four thousand eight hundred and twenty megawatts.
In the month of June, we have exceeded that peak four times now, right?
With the latest peak coming on June 23rd, seventy six thousand five hundred and ninety two megawatts.
And that's in June. Right. So so again, so if you haven't noticed, it's pretty hot.
Energy use is certainly certainly up.
So so a couple of things before before I get started here with this part of the presentation.
So DME's mission is to provide safe, reliable and electric power and excellent customer service.
That continues to be our mission statement, continues to be kind of what we're focused on.
And as I was thinking about this presentation last night, I was praying for us.
I remember a quote that was that was said by an admiral Nimitz after Iwo Jima.
He said, uncommon, uncommon valor was a common virtue.
And I can tell you that's been my experience at DME with the staff that we have.
And let me tell you that you have a wonderful staff, right?
Not taking away anything from the rest of the city.
We have fabulous staff all across the city.
I'm certainly just responsible for DME now.
And I tell you, the folks there are fantastic.
And when we talk about valor, you know, just going back to Winter Storm Uri and even even last year with Landon and Oakley,
many of our staff members left their families in the dark, right, to come here and serve our customers.
Right. And so certainly when I think of valor and I think of of our staff, that certainly rings true for me.
And certainly I can echo that for all our management team as well.
So DME, as we have up here, was founded back in 1905.
That's one hundred and seventeen years of DME providing local public power to to customers here in Denton.
And what's interesting is that, you know, that that actually happened thirty nine years before the city was even incorporated.
And so DME has actually existed well before the city ever came about its incorporation.
And then finally, DME, as most of you know, does have a defined service territory.
We do serve some small parts of Corinth.
And then we have some areas that are dual and triply certified where we actually do compete for developments.
And that's usually at the very beginning of the development process.
And so this is a map.
Everything in Teal is really our single certified territory.
Everything outside of that, that's in a different color, and I apologize, I'm a little color blind, is where we're competing mainly against Encore and also CoServe Electric.
And so so we so we try to get ahead of the curve there.
This year, the PAB approved and council also approved a new line extension policy where we're going to be treating some of these service areas a little bit differently so that we can be in a better position to to compete for those developments and those customers.
And just as a reminder, the vast majority of the Hunter and Coal Ranch development will be served by DME.
And we're able to we're able to negotiate that early on in the process.
And so that as you know, that development is is is is in the works.
One of the things that we're very proud of and something that we're that we're certainly focused on is safety.
We've made a lot of changes in safety. We have a whole new group of people under under Jeff Brown, who's our who's our manager over safety.
But this year we were awarded the safety award. If you remember, we brought that to you not too long ago.
That's a number one in the category of two hundred and fifty to a million worker hours that we're judged against with other utilities.
There's something that we're proud of. And one item that that I will mention to you, our long term goal in our budget is to designate or to allocate one percent of our overall budget to safety.
I think that that sends a really good message to our staff. Right.
One of the things that we tell our staff is we want to make sure that that we send them home just like they came.
And if we get send them home even better, we certainly try to do that as well.
So thank you. So just speaking of metrics, one of the metrics, one of the main metrics that we that we track is the safety metric.
That's really an indication of how long does it take for us to restore power?
How long is a customer out of power? And as you can see on here, we're well below the national average.
Right. We have ticked up a little bit over twenty twenty, but certainly I think it's well it's something to be proud of.
And it's something that we're constantly commended by our customers on the performance of our staff and how quickly we get out there and respond to to outages.
And these and these are forced outages. These are not the rotating outages or the mandated outages by our system type outages that happen.
There's a failure and some equipment are lying down and we deploy our staffs pretty quickly to get those restored.
Comparison that we want to show you and certainly we'll be talking with you a little bit about about rates, the finance department will be doing that.
But where we are today compared to other MOUs is something that's that we present regularly every year.
So this is as of May of this year, we did this comparison.
Our current average residential rate, about one hundred twenty one thousand two hundred kilowatt usage is one hundred twenty four dollars and eighty cents is the average electric only rate.
I want to make that very clear. Our customers get a lot of different services build on their bill.
But this is just the electric portion. And where we compare, I think we're very competitive right right in the middle of the pack, but certainly itching to the left.
I think as as as the year budget, the budget year goes goes forward, you're going to be seeing many of these utilities increasing rates.
And so one of the things that I wanted to skip to really quick, if if if I could, we ran a comparison.
So we want to show you kind of these rates here, these are kind of the competitive rates that people are seeing out there that they're able to lock in.
And so a standard rate with no prepaid 12 months fixed price with one hundred and fifty dollar cancellation fee.
These are the rates that people are looking at, 17.9 cents, 18.1 cents, 18.1 cents.
These are these are the companies, the private companies that people are able to lock their rates into.
What's very interesting here is the energy only component, the energy cost component.
If you can see that 13.7 cents, right, that compares to a three cent ECA that we're charging our customers currently.
Which is why they give you a context. And certainly the market, certainly the price of natural gas is certainly driving this out in the private sector.
Certainly we're not immune to it. The other thing to this having an impact here is passed through charges related to winter storm Uri.
And as you know, certainly over the last year and part of our recommendation this year is to try to get one more year kind of under our belts to try to absorb that.
I think we've been fortunate to do that and not being able to not having to pass that forward to our customers at this point, certainly.
And we'll talk a little bit about the data center. I would imagine somebody may have a question that's also part of the reason why we've not had to pass that forward at this point.
But I wanted to show you this and just give you some context as it relates to our current rate, overall residential rate, you know, right under ten and a half cents, so.
Go ahead, Mr. Taylor.
I'm not sure if now's the time to ask it or if it'll be later, but regarding the ECA, how like how how comparable is the ECA to the energy only rate?
The energy only portion of these as far as like DME's budget versus the transmission distribution and full energy delivery.
And I don't know if you're going to have anything talking about ECA in the presentation, it might be better to bring it up then.
Yeah, I think I think the discussion about ECA just kind of look at my finance friends here.
I think I think that that's going to come back to you when we start talking about the rates and how we how we have those structured.
And we can certainly take a look and see if there's a way for us to give you that kind of comparison so we can kind of try to size up what are three cents.
How does that weigh against something somebody is charging 13 cents?
We can certainly try to do that. Yeah.
So just headed back to the presentation.
So so the other the other comparison that we do is, as you know, DME achieved 100 percent renewable.
It's a 100 percent renewable goal in twenty one.
And so we try to give a comparison of what would somebody out in the market get currently on 100 percent renewable type pricing structure.
And we're certainly way on the left side of that certainly far less expensive.
The average that you see up here is two hundred twenty five dollars and 83 cents per month.
Ours is at one twenty four. It's an all in all in rate, as you know.
So the next item, just briefly on our organizational chart, you know, pretty, pretty linear.
One of the things that I wanted to say is so we've had this structure now for about a year and a half.
I can tell you, we've been very fortunate that many of our, you know, certainly our senior executive staff and our division managers are still here with us.
Right. You know, these folks were with us during winter storm URI and some of the challenges that we've had.
And some of these folks have actually been at DME for over 30 years. Right.
And so so we have a lot of stability. Our current turnover rate's about seven percent.
So I think we've done a pretty good job of retaining our staff.
But I will tell you, that's not without its challenges.
Certainly, we're seeing some pressures in the market, just like everybody is across the city and across, really, you know, the entire country and all the industries.
I mean, the other thing that I'll mention is that that, you know, if if in fact, you know, we make some recommendations on adding 11 FTEs, if those are added, you know, we are committed to looking at this structure a little bit closer.
So we may make some adjustments just kind of on our business needs and certainly being sensitive to the span of control that some of our some of our some of our staff has.
We don't we want to make sure that we have a good work-life balance with our staff.
And so we'll be looking at the structure, you know, if if if those positions are approved.
So this is our FTE counts. One of the one year that's not on here is fiscal year 1920.
Just wanted to point out that in fiscal year 1920, we had one hundred eighty nine FTEs that were budgeted at the utility through the VSP program and through some other cost reduction efforts that we had some reorganization.
We were able to eliminate 20 FTEs. And so we got to one hundred and sixty nine last year.
We did add four new FTEs to the budget and this year we're requesting 11.
So that'd be a total of 15 FTEs that we'd be adding back to DME.
But again, from an all time high of one hundred eighty nine.
So we would still be five short, if you will, to get us back to to what we consider full strength.
But I think we've made a commitment both to the council and to the community that we're going to strategically look at those positions and add them on as we feel we need them.
And so so that's where we are currently. Just want to give you that flavor.
And certainly, I think there'll be a discussion after this on the actual positions.
And certainly, if you have any questions, we have our staff here to be able to address any of that.
I remember out of the internal audit that there was a recommendation to add to staff and is that what's in regulatory risk is adding those staff?
Well, there was actually a recommendation to add three staff, three staff people.
And so of the 11, three of those are directly related to that internal audit recommendation.
Yes, ma'am. Thank you. So with that, that that concludes our operational presentation.
I'll turn it over to Nick. Thank you, Tony. OK, so financial assumptions very similar to the other utilities.
Just want to summarize them really quick for you. So we have an average load growth of two percent for twenty twenty three.
Of course, we look at that annually for this utility.
We are looking to increase the data center revenues with the associated higher forward energy process.
And we'll look at that shortly. And then the end of your estimate for purchase power reflects significant increases.
We will talk about this shortly. You'll see it on the performer.
Energy prices have definitely increased with electric utility such that we may have to bring a budget amendment back this fiscal year.
So I just wanted to put that in the process out there. Some basic revenue definitions for the electric utility.
I won't read these word for word, but definitely go through them really quick with you.
The first one is the non-deck based rate revenue. You can see ECA revenues and Mr. Taylor asked the question earlier regarding those revenues.
We got non-rate revenues, data center revenues, and then deck revenues, of course, and then the planned use of reserves.
And we'll talk about these on the performer here shortly.
So revenues for the electric utility. We'll go through these really quickly, try to take my time and go through them if you have any questions just ask me.
So in twenty twenty two, the current budget that we're in, we have two hundred forty five point seven million in revenue.
We are forecasting to come in about three hundred eight point five million for the end of your estimate.
Plummon area, about four hundred and fifteen million. We are looking to use some reserves and you'll see this on the performer here shortly.
Yeah, so the deck definitely could change day to day on the deck with energy prices and we can run that facility and Tony can talk to it a little bit more.
Chris is here also. But in twenty twenty two, right, we had a budget of twenty one point two million.
We are forecasting the deck to come in at fifty seven point three million, right, because energy prices are increasing.
The deck is running more. Mr. Cheek, to your point, could it be more? It definitely could.
Could it be less? It could be a little less, too. Yeah. Yes, sir.
I was curious of that big increase in the deck revenue and also the data set of revenue is obviously ramping up so that in twenty two, twenty three, it's going to be a pretty significant contributor.
So to what do we attribute the growth in both of those? I think you were just addressing the deck.
Yeah, and the data center definitely can take a stab at it and Tony can correct me or interrupt me if it's. Oh, Terry's here. I didn't see Terry's center there.
Terry will answer that question. Hang on a second.
Good morning, Terry Nolte, Assistant GM. So two things drive both the deck revenues and and the data center, and those are forward prices.
So gas prices, natural gas prices, which is the fuel.
We use at the Denton Energy Center are up from this time last year was about three dollars and fifty cents today.
They're trading close to eight dollars, so that's over two hundred percent increase in costs.
Obviously, we don't run the deck unless we can make a gross margin against our variable fuel costs and variable operating costs.
And so due to the changes in ERCOT after winter storm, you're a much more conservative approach.
We are seeing more dispatch hours, even with that higher gas price, and that's what's attributing the higher revenues.
So revenues are going up. Gross margins are pretty much online with what we had in the budget.
So while revenues are an indicator of the amount of the cost of running the unit, we really track gross margin because gross margin is what if we aren't making gross margin, we can't cover fixed costs, the debt primarily.
So with respect to the data center, Ford prices for electric prices are also up significantly because in ERCOT, the price of Ford power is really dependent upon the price of gas, natural gas.
So with that large increase in natural gas price, Ford electric prices have come up accordingly.
The structure of the transaction that we have with the data center takes that risk away from DME and our ratepayers and passes that higher electric cost risk onto them.
And that's why you're seeing a larger increase than what we had originally budgeted.
Right. Is that rapid? Yes, it's the increase in the Ford prices.
OK, thank you. So to continue that, the margins on data center and the deck, are they fuel cost is up, Ford purchase energy cost is up, but those are all just passed through basically.
So are the net, is the net level or is the net increasing as well?
So on the deck for the Denton Energy Center, relatively on budget, on gross margin basis for the for the data center above budget and primarily that we say above budget.
You know, there is a the the franchise fee, the ROI that we pay to the city is a function of the actual price of electricity.
So as the price of electricity goes up, those franchise and rent and ROI fees will go up as well.
The net income to DME associated with the data center is fairly constant.
So that's probably not going to change, even if we see prices go up in the wholesale market.
The General Fund receives the benefit of those higher numbers. Correct. And, you know, I just say, you know, there is the rate pressure that Nick will talk about is really do the fact that we don't 100 percent supply all of our energy from the deck or from our renewables.
And so when we're in the market buying power, we're paying wholesale market prices, which are up relative to where we had the budget at this time last year.
Thank you, Terry. All right. Let me revenues.
Anybody else got questions on revenues or is OK.
We'll go to expenses. So for the current fiscal year, you can see here we have two hundred and forty point seven million in expenses.
We are forecast about two hundred ninety one point, well, two.
So as I said, we may be coming back with a budget amendment is very likely here pretty soon to offset those purchase power expenses.
So be looking forward to that. Definitely will probably come forward to you for the end of the fiscal year.
In twenty twenty three, we have four hundred fifteen million in expenses. Tony had hit on this a little bit earlier.
We'll talk about a little bit more shortly. We do have some baseline adjustments, about one point three million and some supplemental packages, about two point one.
So this is the five year forecast. I'm very proud to say we have a ten year forecast for electric now.
This is actually our first year to have a ten year forecast for this utility.
So we're showing you a five year picture here, but be consistent across the utilities.
We do plan on a ten year window. So the adopted column here, we already looked at these numbers, won't go through them line by line, but walk you through the totals.
Two hundred forty five point seven million in revenue in the adopted budget, about two hundred forty point seven million in expenses into your estimate.
Of course, revenues are three hundred and eight point five with those expenses, about two hundred or two hundred ninety one point one preliminary budget in this column, you can see three hundred and ninety nine point nine million in revenue.
The majority that we talked about earlier, about one hundred and forty eight point five million is coming from that data center to offset those purchase power expenses associated with it.
Coming down to the expenses here, you can see four hundred and fifteen million. And I will note the majority of the increase in expenses is associated with that data center.
We had called the data center out separate from this, what I prefer to as a city didn't purchase power, non data center, the non data center purchase powers up here right here.
Seventy point one. You can see some deck fuel, of course, that natural gas that Terry was talking about earlier and then that purchase power for the data center.
This pro forma does assume that the return on investment to the general fund stays at six percent that will be discussed to city council here in the coming weeks as we start the budget discussions.
So I want to make sure I pointed that out. As you move down the pro forma here, you can see we have reserve usage of fifteen point two to balance the budget.
We are not looking to do rate increases in the preliminary budget of twenty twenty three.
I mean, you can see that ECA rate that Terry had talked about earlier, so point zero three four one similar to wastewater.
We are forecasting some increases in this utility based on energy prices and what we're seeing in the market.
So that rate, you know, that rate base and the burden that's putting on the rate base, that energy prices that we're seeing.
So in twenty twenty four, you can see we're currently forecasting for the average residential customer.
They would see a five percent increase in their bill. So this is coming up in twenty twenty four.
Twenty twenty five, we also have a five percent. Twenty twenty six, we have a two percent.
And then twenty twenty seven, we don't have anything. This is important.
You know, we will talk about this in twenty twenty four again. We come back to you at the preliminary budget.
If the energy market changes and we don't need this increase, of course, we can talk about that at that time.
One thing we do to Mr. Jump or Mr. Taylor's point earlier about the ECA rate, we are assuming that the ECA rate would fluctuate going forward.
This pro forma assumes that we would have the conversation with PB and city council to talk about that rate and the need for it to adjust.
But we do deem it necessary. We do need to talk to you in detail about that.
July 11th, we can have that conversation and then we can ask every question that you have regarding that.
Moving down the pro forma just a little bit here, you can see the end and reserve target of one hundred and twenty one point eight is what's currently in the reserve.
A reserve target is one twenty five to one hundred eighty eight.
You may remember last year as a result of winter storm Uri, we did increase the reserve target for electric, actually increase those percentages to the minimum of forty six with a maximum of sixty nine.
Prior to that, the reserve targets were closer to forty to fifty million, so about double what it used to be.
Then going out in the future years, you can see where we fall within that reserve target.
So in twenty twenty seven, we end at one twenty two point three with the reserve being one sixteen point seven is the minimum.
So definitely within that reserve target.
And then, Barbara, I know you'd asked our Susan, excuse me, Susan, I know you asked earlier about the debt coverage ratio for this utility is one point five.
OK, yeah. Anybody have questions on the pro forma? I know it's a lot of numbers here. Yes, sir.
So I'm trying to go back to slide, actually on the expenses slide, the administrative cost has increased about twelve million and I was trying to.
That's a bucket. So it's and I'm trying to figure out where that where that goes like on the pro forma or.
Does that also include energy trading costs?
So the administrative costs that you see here on this slide, it rolls up those transfers to the general funds.
We talk about the franchise fees and return on investments, they roll up into the administrative cost.
OK, thank you. Yeah, they're broken out of this slide.
OK, I'll keep going along here. So this is the deck pro forma we wanted for transparency purposes, break this out and show this to you separate.
This is buried in the forecast that you just saw.
So when you see the deck revenue and expenses, but this is a look at just the deck.
So you can see some history here going back to seventeen eighteen all the way to the preliminary budget of twenty twenty three.
We are currently forecasting at fifty two point five million in revenue this upcoming fiscal year at sixty point four million in expenses.
So about seven point nine million deficit for the deck.
So I wanted to point this out to everybody.
The capital plan will definitely get into this in more detail in the next presentation.
We have a very long presentation for you to discuss it, but at a real high level here,
you can see they have eighty one point seven million in capital projects planned in twenty twenty three of that.
About seventy four point nine million are going to be debt funded.
One point one million to be revenue funded and about four point four million in aid in construction or those contributions for those different developments or textile.
Capital plan, just a little bit different view of it.
So you can see how they fit into the different categories, what makes up the fifty three point five million.
So you can see the largest categories being the distribution substations, the feeders and extensions.
You get down here, you got some technology and then you have some electric relocations and so forth.
So capital plan. So this is just forty three point eight million of the projects that make up the eighty one point seven million.
That said, we'll get into greater detail of this in the next presentation.
And Tony and Terry and then we're happy to answer if you got questions, but you can see some of the big projects.
We have the Hickory, G.I.S. substation of twelve point five million in twenty twenty three.
Next biggest one here, we have some textile relocations of five million.
Then we have the Hickory and Locust transmission line for the four point four million.
OK, so Nick, I just want to say, you know, if the board has any questions, those projects, Jerry Fielder, our head engineers here.
So feel free if you have any questions on any of these projects. All right.
If I'm going too slow, just tell me to speed up.
OK, so baseline adjustments, I'll walk you through these.
If you got questions, I'll definitely get Tony or one of the staff members up here to answer it for you.
But we currently have I'll show you the total really quick and I can flip back to the side.
So I have one point three million in baseline adjustments.
Those baseline adjustments are adjustments to existing line items within the budget.
They usually do not include new programs or new initiatives that the department wants to do or new positions.
But we do ask that the department break these out for transparency purposes.
So if you have any questions, of course, we can answer them.
But you can see we have, you know, some regulatory fees.
We have TMD contracts for metering, some increases in those contract costs, so forth.
Some training increases, upcoming legal matters of two hundred and fifty thousand.
And then we have some outside contract treatment services for five hundred.
So the one point three that I mentioned earlier.
Supplemental packages, I know Tony had mentioned these positions earlier,
but this is a summary of the positions that are being considered this year for approval.
You can see them position title listed on your left hand side.
You can see any one time costs associated with the position, what the reoccurring cost is, and then what the total is.
And I think last meeting, we should have spelled this out here.
What does FT stand for this full time equivalent?
So just make sure everybody is aware of that.
And Nick, sorry, just to answer Susan's question, Susan,
the ERCOT settlements rates administrator, credit analyst and the energy market analyst are the three that were recommended through the internal audit.
Thank you. Yes, ma'am.
And then we have some additional positions on here.
You can see just the engineering supervisor, regulatory affairs manager and administrative assistant, so forth, going on the page.
About two million in supplemental packages. These are included in the financials that you just saw.
And then next steps won't repeat this for you, but we'll come back to you two times in July for further discussions.
If you have questions, we'll be happy to answer them.
And then that is the rest of this presentation.
Questions. You must have done a great job. You do have one.
Whenever we when we come back for the rate conversation, I was curious if we could.
Is it possible to see the performance of our renewable purchases versus the general wholesale market?
Yeah, we could do that. As you know, much of the information is confidential, so we don't have to place a closed session discussion with you, but we could probably do that.
We'll we'll talk with with legal and get some direction on that, sir.
Yes, go ahead, Mr. Beck. I guess it's as good as time as any, since we're under the electrical banner here.
Just any progress on our search for a gas well inspector?
Yeah, that's actually in the environmental services budget.
That's not part of our budget. OK, sir. Quickly. Yeah, I didn't mean to bog us down.
No worries. So that position actually reports of their sustainability.
Michael Gagne is the director. They do anticipate having that position open and recruiting for it in the next week.
OK, and then this is electrical. Any plans or thoughts on the city installing electrical stations for EVs?
Yes, as a matter of fact, we've applied for a couple of grants.
We are currently working on installing two, I think it's a total of four charging stations at the Development Services Center over here off of Elm.
So we're working through that process now. And so certainly we're taking a look at that.
The other thing, too, that we're looking at is, as you know, the state has a plan out there to have charging stations every 50 miles off of major interstates and highways.
And so we're certainly going to be looking at that, those opportunities.
Certainly, if we can use other people's money, we certainly want to be able to do that first to be able to defer any any of those costs.
But but we are looking at that, you know, Mr. Beck.
And so all you pretty much have right now in the future, anyway, is the four at a certain location, nothing, nothing, nothing distributed around the city.
Well, again, we're looking at those at the Development Services Center.
We're looking at two at the Civic Center, kind of keeping it kind of here in the downtown area.
As you know, some establishments, private establishments are deciding to install their own.
So you have you start to see some at hotels, certainly over at at at Razor Ranch.
You see some there as well. So so there's certainly a growing interest.
I think I think many of our private sector partners kind of see those as opportunities for their own customers to be able to attract customers.
And so we're certainly working with them to install those.
Those either tend to be at a at a direct charge to the customer or they provide it for free to their customers.
And obviously, then we charge them for the electric use separately.
So great. Thank you.
Morning, Mr. Beck. So Chris Ludwig, executive manager of operations, a prior project that DME has completed about two years ago, the North Lakes Library at the North Lakes Park.
There are there are four charges or two charges there, two dual charges there and the same at the South Lakes.
So those those were put in by DME two years ago using some some grant money.
Yes, sir. OK, Susan, we are ready for the next presentation.
To be capital. Yep, capital is here.
So in your backup, you should have had a detailed capital budget.
Just want to take a second to recognize staff.
It was a great effort that Danielle and I know Matt sent up there to work together to put that together this year with the department.
So first year, we've had this document.
We are extremely proud of it and we hope you are, too.
So we'll walk through it really quick with you.
OK, so we'll talk about the development process, what all work went into putting the capital budget together.
We'll talk about the preliminary five year forecast for each of the utilities.
I know we've touched on these a little bit already, and then we'll talk about some upcoming dates for the capital budget.
So all the way back in December, which doesn't feel very long ago, we actually kicked off the budget process.
We began meeting with departments to review the process process in January.
And then you can see going through all the way down to currently where we're at right now, about the June, July time period, we're starting those workshops at the PB and City Council.
I think one thing is important to note is that this is a comprehensive budget development process for the capital plan.
It looks across the city and all departments.
So it's not just looking at utility projects, it's looking at streets, engineering, drainage, any department, the city parks, library.
What makes sense, what's consistent across the utilities, what's consistent across the city, and we're not duplicating efforts.
So we don't want to tear up a street and not look at the water waste water line.
So the preliminary budget, why develop a budget book?
Before, we didn't have anything, right?
It was buried in each utilities budget and it was part of the adopted budget.
It wasn't very comprehensive, but we need something to refer to moving forward to hold staff accountable and really communicate with the public what's going on in the community.
So the 2022 adopted capital budget totaled 672 million dollars, which is a large amount of projects right across 19 functional areas.
The book references resources for staff and the public, like I mentioned, just they can refer to it any time during the year.
It is an ongoing development process, so we're still working on this book today.
What you have is a great document.
It is definitely close to being complete, but like I said, as we continue having meetings internally, up until budget adoption, that book may change a little bit and we can update you accordingly as that happens.
So I just wanted to point that out.
So we'll go into a summary.
So real high level, this pulls together all the utilities into one summary sheet.
It makes it a little bit easier to visualize it than it does on an individual budget basis.
So in 2023, the electric utility, as we just saw, has 81.7 million in projects, water has 54, wastewater has 68.3, and then solid waste has 23.2.
So utility system wide, about 227.3 million in projects coming up in 2023.
If you look at the five year picture, what is that total over five years, about 750 million.
So there is a large amount of projects in the utility slated to be construction over the next five year period.
And if you want to reference this, this is page two of your book if you're looking on your smart device.
So the electric utility, as we had mentioned, 81.72 million in projects.
We are projecting a 2023 CO, so certificate of obligation debt issuance of 74.9 million.
We are anticipating 1.15 of this to be transferred from the operating fund.
So trying to revenue fund some of those projects from the operating budget.
Then we have 4.4 million in cost participation.
And then what we're going to do on the next couple of slides is just highlight some of the large projects we want to talk to you about, bring to your attention.
If you have questions, like Tony had said, Jerry's here, Mr. Filder would be happy to come up here and answer or Tony will too.
So the first one is a building construction.
So we are looking to build a backup data center.
This is the land purchase and design funding. This will be about two million dollars.
The next one is the distribution substations, about 10.8 million in distribution substations plan this year coming up.
So there's three of them, the Hickory substation, Underwood and Arco substation.
I mean, if I'm moving too fast to these next one, about 12.6 million in feeders and extensions and improvements.
You can see pole change outs, the UNT Express feeder from Locus substation.
And then we have new residential and commercial, about five million.
And then you can see the data center, excuse me, the deck as a Denton Energy Center winterization.
This is from Winter Storm URI.
Some of the recommendations we had of what we need to winterize at that facility.
And then you can see automated meter reading about one point one million.
And then we have some electrification locations, about six point five million.
And in your book, I mean, there's detail on each one of these projects that breaks it down.
So feel free to look at it to transmission lines, about 10.9 million in transmission lines.
You can see some of the major ones being on Hickory transmission substations.
You can see the Hickory gas and still insulated substation 17.3 is a major project coming up.
We have some technology software and hardware, about five point six.
And then street lighting is discussed usually annually with City Council about increasing the number of street lights in the community.
So we do have some funding for that, about three million.
This is the electric summary one more time.
So eighty one point seven million.
You can see how it breaks down here and how it will be funded coming up in 2023.
Get my mouse to work here. So debt funded the 74 revenue funding.
If you were to look at the operating pro forma that we reviewed last presentation, you would see this revenue funding called out.
Some cost participation and some vehicle replacement coming from our vehicle replacement fund, about one point two million.
Now we get into water. Does anybody have questions on electric?
I don't want to move too far in the presentation.
I don't see any. OK.
So water has about fifty four point zero three million projects is coming fiscal year.
We are forecasting about thirty one point seven million to be certificate obligation funded about twelve point three million coming from the operating budget.
So being revenue funded and about six point two being this cost participation projects that we discussed.
You can see some of the major projects we call out here for you.
The water line replacement, about twenty one point nine million. This you can see is supporting the twenty nineteen neighborhood road package.
We have some line relocations and we have some lead copper rule compliance and regular remediation that we have accounted for.
Transmission lines about twelve point five million.
You can see us in Northwest transmission lines and booster pump station.
Yes, sir. Mr. Ryback, the water line replacement.
What percentage of the replacement is the rural compliance remediation?
Small percentage, large percentage. I believe it is a small percentage.
I don't see Stephen here. I want to say it's it's a minimum.
I want to say three three hundred thousand of it's not very much.
I don't we can get that. Yeah, it's very small percentage.
I don't have the exact amount. It's very small percentage. Absolutely.
So plan improvements. This is something that's discussed to the public utility board and city council almost annually. Right. As we look at the demand in the city and where we need to make improvements and making improvements to our water treatment capacity and what we can treat, how much water we can treat.
So about fourteen point seven million going towards those efforts in twenty twenty three.
You can see some of those projects caught out here just below it.
Annual field service replacement. So when you see this, this is replacing existing water lines that are in the community that need to be replaced.
We revenue fund those typically just because they've already been debt funded once.
There are some instances where we debt fund them, but I think we're revenue fund on this coming fiscal year.
So great news. Then you see taps, hydrants and meters.
One point two million. I know, Mr. Taylor, earlier we talked about the growth we're seeing in the community.
This is to buy some of those new hydrants and meters and taps for those different facilities.
So the water total is fifty four million. As I said, the thirty one point six million in debt funding, revenue funding.
So coming from that operating budget, about twelve point two million in cost participation and scrolling on the Patriots and vehicle replacement, about three hundred fifty nine thousand total fifty four million for water.
Hey, don't move into wastewater hands. Wastewater is sixty eight point three four million on the twenty twenty three CO issue.
It's about forty point nine of that, about four point eight three will be transferred from the operating budget and then twenty point six will come from cost participation.
So two projects on the wastewater side that we had talked about earlier, you can see the lift station improvements, about twenty five point seven million.
Some big projects coming up, the Milam Creek is mentioned there, the wastewater line replacement at thirteen point five million.
You can see a lot of this supports the twenty nineteen neighborhood road package.
So supporting those bond programs are approved by voters, making sure we're looking at the water and wastewater line within those streets.
And then you see the solids handling improvements. This project was named last year in the budget, too.
So looking to continue that effort to get that project completed.
And then wastewater sixty eight point three, forty point nine of that coming from debt funding.
Large portion that come from cost participation from those two different entities and then the revenue funding, about four point eight.
Don't move into solid waste. Solid waste.
So total capital program for twenty twenty three is twenty three point two four CO debt issues, about sixteen million this coming year.
Three point five million of that been transferred from the operating budget.
You can see we have some structural updates that I know Christina came up here earlier and talked to some salehouse improvements.
We have some to the home chemical collections, our ACC facility to collect those chemicals.
You can see road and infrastructure around that facility and then building construction.
So we are looking to construct a fleet shop at Solid Waste this coming year to help with improving the repair of those vehicles.
And then cell construction reserve of one point five million, we talked about that earlier.
It's establishing that reserve to revenue fund the cell development in the future.
Solid waste totals of twenty three point two million in total projects.
Those are the numbers I just read out to you here.
A large portion coming from the vehicle replacement for those vehicle purchases this year coming up.
And then upcoming dates. So as I said, this actually the entire capital plan to be discussed with city council tomorrow.
Courage you to watch that. We'll also talk to council about it again during the budget workshop on August the 6th.
This year we actually have, I think, eight hours scheduled with them on all day Saturday, August the 6th.
So that'd be a fun filled day.
So please come out to that meeting and that's got to the presentation.
I think that's actually all the presentations for today. Yes, it is.
And I really like the budget book. Thank you. Very well done. Very well.
All right. Any questions?
Do we have a motion to adjourn?
OK, ten forty five.