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 Good morning, let's call to order the Public Utilities Board meeting of December 10, 2018.

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 First item, I'd like to move the closed meeting to the end of the agenda that will give the

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 staff ability to get out of here and not hold up their time.

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 So the first item of business will be the work session to receive a report and hold

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 a discussion regarding the phase two of the 2018 Denton Municipal Energy Risk Management Policy, that's a mouthful.

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 >> Thank you, Chair Parker, Public Utility Board, happy holidays.

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 >> Hey, it's that time of year again.

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 So here today to talk about the energy risk management policy, our phase two update.

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 You may recall we were here last spring and really made a large step forward in our risk management policy.

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 We went from a document that was composed back in 2014, learned a lot of lessons,

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 there'd been a lot of changes in our staffing, power supply portfolio.

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 And we updated it to 2018 conditions, but we didn't touch on everything.

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 We left some work for a little bit later, and we're here today with a phase two update,

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 which will, you may recall Deloitte had a lot of recommendations.

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 And we're going to talk about the additional inclusions we made in the risk management policy for Deloitte.

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 We also worked hand in hand with enterprise risk consultants, you may remember them.

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 They had been here before the PUB several times, and they were very helpful to us.

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 And we also had some gray boxes that were in that phase one update that we said, hey, we're going to be doing this in phase two, so we're back to report on that.

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 Just like last time, I'm going to introduce our risk management expert, Phil DiPastina.

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 Phil put this presentation together.

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 You may recall he's got like 25 years of experience in risk management for electric utilities,

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 first saw the risk management for what at the time was the largest electric utility in the United States, and worked for Aircott.

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 He's been in the front office, the back office, the middle office, and today he's our middle office.

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 So he's sort of the traffic cop, making sure that we do the right things with respect to risk management.

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 So, Phil, if you want to come up, I see your tie is better looking than mine, so I think I'll turn this over to you.

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 >> Thank you, George.

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 >> Okay.

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 >> Hello, my name's Philip DiPastina, and as George said,

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 I'm going to go over the main changes that we're proposing to make in this risk policy.

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 George has mentioned at a high level where these things come from.

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 I'm going to go into more detail.

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 So one of the things we're trying to do in this version

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 is to be more quantitative in our

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 measurement of how well the EMO is doing.

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 And so we're proposing a few metrics to reflect that.

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 One is the reduction of risk, which is the exposure to market price volatility.

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 The second is a comparison of actual costs that we incur to a market index,

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 which we're proposing to use the ERCOT day ahead price as our

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 target to try to meet or beat, plus a small hedging premium.

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 And the comparison of DME's average rates to those of other Texas municipalities.

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 Another change we're proposing is to kind of beef up the responsibilities of the risk

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 management committee, which is going to provide governance and oversight for this program.

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 In addition to that, and we can go into more details if you have questions,

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 but also go into more of the responsibilities of the

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 different groups that are involved with this program that we call the front, middle, and back offices.

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 The front offices are the people that are actually doing the day to day decisions to buy and sell and to interact with ERCOT.

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 My role is the middle office, which is kind of the oversight of the program.

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 And to ensure that everything is in compliance with the current policy.

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 And then we have a back office function, which coordinates the accounting and

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 settlements and coordinates with the city finance department.

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 In addition to that, we're proposing some more risk controls

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 over the models that the EMO uses to make their day to day business decisions.

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 And then we're adding a description of what are all these risks that we're trying to manage.

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 Most of the time we just talk about price risk, which is how vulnerable we are to fluctuations in the market prices.

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 But we also have volume risk, which is associated with the variability of renewable energy producers.

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 Commodity risk, which is a possibility that the people we're buying and

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 selling power with won't actually deliver or pay for the power.

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 Credit risk, model risk, and regulatory risk.

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 As I said earlier, we're trying to be a little more quantitative in how we measure all this stuff.

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 And so we're proposing a kind of a target of $15 million for

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 how much we're willing to pay to try to manage risk.

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 And we're going to use some metrics that are called at risk metrics.

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 But they are a little complicated, but

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 they generally try to take historical information on prices.

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 And price correlations and volatility, and consolidated into a single number.

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 And we're going to use that to compare to this $15 million threshold.

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 And then if market conditions

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 become more volatile, and it looks like we're going to have to spend more than about $15 million over a rolling 12 month period.

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 And we'd go to the risk committee and explain the situation to them and get their input.

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 And if we went over 125% of that target, we'd actually come back to you and

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 the city council and explain what's going on with the market.

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 And our plans to try to either manage that and

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 reduce the risk, or accept it and move forward.

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 Additionally, there's a concept called open position.

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 Which is kind of the vulnerability we are to the market prices.

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 The difference between, in ERCOT, the rules are set up so

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 that you essentially take all the generation you have and sell it to ERCOT.

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 And then turn around and buy all the energy you need to serve your load from ERCOT.

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 And so those two generation load costs kind of net out.

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 And the difference is what you're exposed to on the market.

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 And sometimes we have more resources than we have load in some hours.

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 And in some hours we have less resources than we have load.

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 And so that's called our open position.

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 And we're going to try to manage that.

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 And as we get closer and closer to our delivery period, the idea would be that we'd be more in balance.

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 With our loads and our resources, so that we'd be less vulnerable to market changes and swings.

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 Another section we're adding to this version of the policy or

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 we're proposing to add is congestion management strategy.

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 And what that is, is the way ERCOT works is we get paid for

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 the power that we generate at the specific points of our generation, and those are called nodes.

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 But we pay for energy at kind of an average North Texas

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 kind of number that's called the North Load Zone.

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 And those numbers aren't always exactly the same.

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 Usually they are, but sometimes they're not.

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 When the wires get kind of full, then the prices disconnect.

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 And so that's called congestion.

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 And ERCOT has a program to offer financial

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 hedging instruments called CRRs or congestion revenue requirements.

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 And point to point obligations.

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 And these financial instruments are meant to help manage that the risk,

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 the prices where the power is produced and where we buy the power are a little different.

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 And so we're adding a section to the risk policy that explains what our strategy is to manage that and how it works.

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 Another new element to the risk policy is that we're going to ask our

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 energy training group to develop plans for the next three years.

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 And review those with the risk committee at the beginning of each year.

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 And then as we go throughout the year when we meet, which is about quarterly,

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 we'll ask them to return and report on their progress at either meeting the hedging targets that they've set.

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 Or explaining where they are in meeting those targets.

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 And if things need to be changed, then we'll discuss that too.

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 And there's some miscellaneous changes you'll see in this policy.

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 Organizational charts have been updated and job titles revised.

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 A little additional detail has been added to the types of transaction types that are approved for

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 use by the EMO, as well as a checklist for

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 adding new products to make sure that the benefits,

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 the risks, and all the policy issues have been addressed before we actually do something new.

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 Finally, there's a few things that were mentioned in our consultant

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 reports that really don't fit into the policy itself.

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 Once this second draft is updated, we'll need to update our

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 operating procedures to be consistent with that.

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 And operating procedures are just more detailed than what you see in the risk policy itself.

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 The risk committee has asked us to develop an executive dashboard so

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 that when they see what's going on, it's in a standard form and

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 it's consolidated so they can quickly understand how things are going.

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 And in a similar vein,

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 we're going to be developing some consistent,

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 thankfully simple templates to report to you guys and to the council on the EMO activities.

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 Our consultants have recommended that we provide periodic ongoing

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 training to the BUB and the city council on market fundamentals and commodity training.

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 And we've talked about that and we'll probably be bringing in some outside consultants to do that once or twice a year as needed.

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 And then we've also received recommendations that we need to do a little more cross training and

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 knowledge sharing within the EMO and the different groups that make this program work together.

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 So that we can better cover each other when there's somebody out or

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 we all understand how we're trying to do the best job we can in each of our areas.

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 In the package that you received today in addition to the risk policy,

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 the draft that we're proposing, there's

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 implementation tasks status report that has all the recommendations

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 that the Deloitte made back in December 2017 for

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 improving the risk program as well as a few items that were mentioned in the AIS report back then.

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 And these gray box items,

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 which were flagged in the current risk policy as items that were still under development.

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 So that status report is there for you to see how we're doing.

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 And as George mentioned, we've accomplished or

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 we're proposing to accomplish almost all of the recommendations that have been mentioned in this update.

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 We've also included a red line version so you can see what's being proposed to change from the current version.

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 And a memo from enterprise risk consultants that comments on how the program's doing.

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 So I think, George, do you want to finish off here?

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 >> I think to summarize, George Morrow, general manager of DME.

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 The goal that we're reaching for is this increased transparency and

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 oversight of our risk management activities or energy procurement work.

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 Fixing whatever needed to be enhanced from, that was pointed out to us in the past by ERC and Deloitte.

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 We very much appreciate their input and comments.

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 But also to recognize that this is a living document.

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 We're going to be back at least annually to the PUBN city council.

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 We want to take it continually up another notch.

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 We want to add additional clarity, quantification, as Philip mentioned.

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 And one of the things we're looking forward to is procurement of what's called an energy trading risk management system, ETRM.

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 That was one of the core recommendations out of Deloitte.

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 In fact, so we're getting ready to put out an RFP to procure that model.

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 The model will be very valuable to us.

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 It'll allow us to do additional analyses in a convenient, rigorous fashion about risk.

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 And allows us to share data across that back office, middle office, and front office.

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 So everybody working from the same deck of cards, so to speak.

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 Versus manual handoffs or everybody inputting their data.

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 It's just a smart technological improvement.

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 So we'll be back to you at some point over the coming months with our recommendation for an ATM procurement.

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 And lastly, so today's a work session.

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 Just wanted to introduce the subject, get any initial comments you might have.

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 Also, we'll be back in the next month or so based on what we hear from the city council and

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 from you with an approval item or to approve this actual document.

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 So that will be the next step.

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 There's another bite at the apple, so to speak.

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 So comments and questions, if any.

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 >> Questions, Brendan.

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 >> I have a question regarding the customer risk tolerance component.

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 It says that we'll initially assume a CRT of one cent per kilowatt of load.

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 And estimates around $15 million.

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 Did we come about that dollar amount based on historical assumption of risk or?

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 >> Yeah, so we did some surveying outside of our operation.

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 Philip recalls from his history with a number of different agencies, also whatever's available out there.

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 And 10% seemed to be a target that had been accepted and promoted by a lot of different utilities.

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 So for us, we're annual revenue per year, just a round number, about $150 million.

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 You mentioned the cents per kilowatt hour for residential, average about 10 cents.

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 So this is about a penny of the 10 cents.

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 So it sort of gives us a range to work between before we get really, really excited.

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 Now we still might get excited if we're a little bit out of bounds and still within that amount.

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 But that's kind of the trigger where we want to make sure we have

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 done our best to control the risk that got us to that point.

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 Many times, things are out of our control.

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 It's not something bad that we did.

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 That's one thing I like to talk about on the risk side.

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 It's not that, hey, we did anything or the EMO did anything.

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 It's that the world changed.

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 The market changed.

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 Like we talked last summer, remember that we had a lot of power plants retiring and

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 we're seeing the same thing this winter.

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 So the summertime, the prices, whoa, they open up quite a ways.

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 And that increases the risk for all the agencies, not just for DME.

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 But we want to make sure that we have a plan and we do something about that when it does happen.

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 And if it gets too far out of bounds, and we'll be coming back to you just to say,

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 here's what happened, here's what's going on this summer, or this month, or this year.

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 And here's the actions we're proposing to take or have taken.

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 >> Just as a follow up to that.

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 So do you expect that we'll spend $15 million mitigating risk in a year?

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 Or that's just a budget cap that we may need more and

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 we'll come to PUB and alert the risk committee?

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 I mean, do you expect that we're going to spend $15 million every year mitigating risk?

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 >> No, we don't expect to spend that money.

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 And it's just a, it just gives you, let's take the football field analogy.

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 If we watch some football games this weekend, we have the sidelines.

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 So those are our goal posts, our sidelines, our guidelines.

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 We want to stay within the field, plus or minus.

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 But, and it's not actually, yeah, so we're not expecting that.

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 We have no prediction for that.

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 Our prediction is our budget that we have right now.

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 So we've set rates.

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 We want to keep within those rates.

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 But recognizing that power supply is a moving target sometime, and we just wanted to.

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 So this is our first attempt, and I'm not sure that we wouldn't come back and

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 refine that some more as we continue our dialogue with the PUB and the city council.

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 >> So then it's not going to be a budget item.

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 You're not going to add this to your budget somewhere or pull it from somewhere else?

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 >> Totally correct.

223
00:21:13,580 --> 00:21:15,420
 At this point, there's no intention to do that.

224
00:21:15,420 --> 00:21:17,580
 We're not expecting to spend that $15 million.

225
00:21:17,580 --> 00:21:18,820
 >> Okay.

226
00:21:18,820 --> 00:21:23,580
 >> For us, it's just a red flag that forces us to do some things.

227
00:21:23,580 --> 00:21:28,420
 >> Is it the ceiling above, say where we budget 80 million for power supply and

228
00:21:28,420 --> 00:21:33,740
 it's the 15 above that, is that the ceiling, that's the target?

229
00:21:33,740 --> 00:21:34,380
 >> Yes.

230
00:21:34,380 --> 00:21:35,700
 >> Okay. >> So that would be it.

231
00:21:35,700 --> 00:21:38,380
 >> And then the 125 comes after that, which.

232
00:21:38,380 --> 00:21:39,900
 >> 25 comes after that.

233
00:21:39,900 --> 00:21:42,220
 >> The whole market is falling apart at that point.

234
00:21:42,220 --> 00:21:43,300
 It's not just us.

235
00:21:43,300 --> 00:21:44,660
 >> It's not just us.

236
00:21:44,660 --> 00:21:46,460
 It's things we couldn't predict or manage.

237
00:21:46,460 --> 00:21:49,500
 It's not under our control, a lot of what happens out there in the market.

238
00:21:49,500 --> 00:21:53,580
 But as I mentioned to the risk management committee, we talked to them recently about

239
00:21:53,580 --> 00:22:00,340
 the same document, is we don't wait for 15 million impact to happen before we,

240
00:22:00,340 --> 00:22:02,420
 okay, we better do something.

241
00:22:02,420 --> 00:22:04,340
 No, we're on it every day.

242
00:22:04,340 --> 00:22:07,540
 >> Right. >> We're watching this 24 hours a day,

243
00:22:07,540 --> 00:22:10,580
 basically, we have people that watch everything that's going on.

244
00:22:10,580 --> 00:22:13,860
 And we'll have dealt with it long before we hit that target.

245
00:22:13,860 --> 00:22:16,660
 >> I have a question.

246
00:22:16,660 --> 00:22:23,100
 So is the 15 million the hedge or

247
00:22:23,100 --> 00:22:29,420
 are there market hedges that you're talking about when you speak of hedging against risk?

248
00:22:29,420 --> 00:22:31,780
 >> I think the chair hit it on the head.

249
00:22:31,780 --> 00:22:35,300
 So what we're talking about, that 15 million,

250
00:22:35,300 --> 00:22:41,580
 that would be additional cost of power supply, because everything sort of bundles and rolls together into power supply.

251
00:22:41,580 --> 00:22:45,660
 It's the cost of all of our resources that we have under contract.

252
00:22:45,660 --> 00:22:47,700
 It's our debt and energy center.

253
00:22:47,700 --> 00:22:54,500
 It's special buys that we may, hedge buys that we may have made on top of that to kind of close the open positions that Philip talked about.

254
00:22:54,500 --> 00:22:59,540
 So that all kind of gets rolled together into the, and so it's that.

255
00:22:59,540 --> 00:23:04,180
 It's that pool of cost getting increasing by $15 million.

256
00:23:05,980 --> 00:23:09,700
 >> From our expectation, from the budget that you've approved and you've seen.

257
00:23:09,700 --> 00:23:23,820
 >> So, if I understand that right, 15 million is if all hedges don't work and the market goes totally crazy.

258
00:23:23,820 --> 00:23:26,300
 >> I think that's exactly right.

259
00:23:26,300 --> 00:23:27,860
 So based on everything that we-

260
00:23:27,860 --> 00:23:32,780
 >> It's just an insurance policy, again, so we don't get caught blindsided.

261
00:23:34,220 --> 00:23:37,220
 >> Right, I think it's a hard concept to get your arms around.

262
00:23:37,220 --> 00:23:39,780
 We had a lot of discussion also with the risk management committee.

263
00:23:39,780 --> 00:23:42,660
 We'll probably have a lot of discussion at the city council level.

264
00:23:42,660 --> 00:23:45,980
 It's just the, hey, you're out of bounds.

265
00:23:45,980 --> 00:23:51,580
 You've hit the boundary of the playing field, and come tell us what you're doing.

266
00:23:51,580 --> 00:23:55,900
 And what I mentioned to the risk management committee, we'll be before them well.

267
00:23:55,900 --> 00:23:59,900
 Before that, nothing's going to happen in a day, probably.

268
00:23:59,900 --> 00:24:06,620
 We'll see things evolve and change, just like we're starting to see things evolve and change for the expectations of next summer.

269
00:24:06,620 --> 00:24:13,060
 And it just forces all of us to think about how we're managing our risk and do we need to do some other things.

270
00:24:13,060 --> 00:24:15,820
 I don't know if that explains it.

271
00:24:15,820 --> 00:24:21,380
 >> And it may not be that, I mean, we're probably going to have to spend that because the market conditions say that.

272
00:24:21,380 --> 00:24:25,980
 It's just that we're going to be that much more transparent about what is happening.

273
00:24:25,980 --> 00:24:27,340
 Is that part of this?

274
00:24:27,340 --> 00:24:31,780
 I think that's a wonderful statement about what that means and what we would do.

275
00:24:31,780 --> 00:24:36,700
 Yes, so I'll leave it right there.

276
00:24:36,700 --> 00:24:39,100
 >> I do have one more question.

277
00:24:39,100 --> 00:24:40,300
 Go ahead, Brendan.

278
00:24:40,300 --> 00:24:43,900
 >> So you brought up the Denton Energy Center.

279
00:24:43,900 --> 00:24:44,740
 >> Yes, I did.

280
00:24:44,740 --> 00:24:52,900
 >> So if, let's just say for instance, we know the Denton Energy Center is going to lose money.

281
00:24:52,900 --> 00:24:56,780
 And we're going to need more money to keep it operational.

282
00:24:56,780 --> 00:25:01,620
 Does that mean we'll pull money from this fund to keep it operational?

283
00:25:01,620 --> 00:25:09,460
 Or to pay for maintenance or something if indeed the maintenance is not being covered by the money that it's making?

284
00:25:09,460 --> 00:25:13,980
 >> So the fixed cost of power plants, for instance, and the fixed cost for

285
00:25:13,980 --> 00:25:20,340
 our resources that we've contracted for the different renewables, those are in the budget.

286
00:25:20,340 --> 00:25:29,580
 And those will be in our budget, so that each year we have enough money to take care of all of our financial requirements with respect to all of our resources.

287
00:25:29,580 --> 00:25:34,220
 So this is more of the operating side of the equation.

288
00:25:34,220 --> 00:25:38,020
 This is the hour to hour, day to day, month to month.

289
00:25:38,020 --> 00:25:43,300
 So for the Denton Energy Center, it's the variable cost of operating that power plant,

290
00:25:43,300 --> 00:25:48,820
 which in a lot of the market conditions that we're seeing, if you're just looking at the energy part,

291
00:25:50,020 --> 00:25:54,380
 it is a very, very positive hedge in insurance policy.

292
00:25:54,380 --> 00:26:00,020
 Fixed parts already kind of dealt with through the budget, so this is just the operating piece of it.

293
00:26:00,020 --> 00:26:04,660
 >> Sure, I understand that the fixed parts are in it, but the Denton Energy Center takes

294
00:26:04,660 --> 00:26:10,580
 these same risks that we're talking about by producing energy and selling it on the market, correct?

295
00:26:10,580 --> 00:26:17,980
 >> Correct, but what's nice about the Denton Energy Center is we tell the market what the price is of the Denton Energy Center.

296
00:26:17,980 --> 00:26:20,700
 We will not run if we are not going to make money.

297
00:26:20,700 --> 00:26:30,260
 So every time we start it up, we know that the market conditions are such that we're going to make a little bit or a lot, depending on what the conditions are.

298
00:26:30,260 --> 00:26:34,740
 So that's on the operating side, because we know what our efficiency is.

299
00:26:34,740 --> 00:26:42,060
 We know what our fuel cost is, and we can say, okay, we've got to get that amount when we sell this, and otherwise it doesn't operate.

300
00:26:42,060 --> 00:26:46,700
 >> Are you certain about that?

301
00:26:46,700 --> 00:26:52,900
 >> I mean, because what you just said is that we'll make money every time we turn that on, and I don't think that's true.

302
00:26:52,900 --> 00:26:59,460
 >> On an operational standpoint, I'm ignoring, I started the conversation with you that the fixed costs are over someplace else.

303
00:26:59,460 --> 00:27:01,380
 >> And I understand that, I understand that.

304
00:27:01,380 --> 00:27:04,580
 >> Well, why would we run the deck if it's not going to-

305
00:27:04,580 --> 00:27:06,500
 >> I thought Urquhart told us when to turn it on.

306
00:27:06,500 --> 00:27:11,140
 >> But Urquhart will only tell us to run it when it's positive from an economic standpoint for us.

307
00:27:11,140 --> 00:27:12,900
 >> So it's taking no risk.

308
00:27:12,900 --> 00:27:16,780
 >> Right, right, we set a price, and we bid the deck in.

309
00:27:16,780 --> 00:27:20,300
 If it meets or exceeds that price, we run the deck.

310
00:27:20,300 --> 00:27:24,860
 If the price is lower, we're not competitive, and the deck doesn't run.

311
00:27:24,860 --> 00:27:29,220
 So the worst case scenario, you would only break even.

312
00:27:29,220 --> 00:27:30,340
 That's the worst case scenario.

313
00:27:30,340 --> 00:27:35,740
 >> So we'll tell Urquhart, as Todd said, here's the price for the deck.

314
00:27:35,740 --> 00:27:42,780
 Here's what it cost us to run for the next hour, and they will not trigger that to run.

315
00:27:42,780 --> 00:27:47,900
 And we will not run it even on our own if it's not going to make some money for that period.

316
00:27:47,900 --> 00:27:49,420
 That doesn't, that's just-

317
00:27:49,420 --> 00:27:50,620
 >> Or at least break even.

318
00:27:50,620 --> 00:27:51,460
 >> Or at least break even.

319
00:27:51,460 --> 00:27:55,660
 >> Yeah, we're hoping to do slightly more, but yeah, at least break even.

320
00:27:55,660 --> 00:27:56,540
 >> Okay.

321
00:27:56,540 --> 00:27:57,420
 >> Good questions.

322
00:27:57,420 --> 00:28:02,140
 >> And I'm glad you said that, because yeah, that was my understanding too,

323
00:28:02,140 --> 00:28:07,660
 was that we might lose money if ERCOT told us that we had to run the plant.

324
00:28:07,660 --> 00:28:11,300
 So I think that's something that really needs to be repeated over and over again.

325
00:28:11,300 --> 00:28:14,300
 We're not going to lose money on the deck.

326
00:28:14,300 --> 00:28:18,020
 >> I think they just mean on the production and selling component.

327
00:28:18,020 --> 00:28:20,240
 >> Right. >> I don't think they mean on the rest of it.

328
00:28:20,240 --> 00:28:21,060
 >> We don't.

329
00:28:21,060 --> 00:28:22,780
 >> Because it can still lose plenty of money.

330
00:28:22,780 --> 00:28:30,500
 >> You're right, and if things got so dire that they forced us to run the plant, there's no question that would be a very positive thing for the deck.

331
00:28:30,500 --> 00:28:35,020
 And they have, ERCOT does have the ability to wave and

332
00:28:35,020 --> 00:28:41,020
 mitigate the TCEQ permit requirements if you ever got in that kind of emergency situation.

333
00:28:41,020 --> 00:28:47,260
 But if that ever happened, my guess is the market would be so high that you'd make a lot of money in that perspective.

334
00:28:47,260 --> 00:28:52,380
 But the deck represents no financial risk when it runs.

335
00:28:52,380 --> 00:28:57,500
 If our accounting is proper and we've bid in the proper rate, which we have.

336
00:28:57,500 --> 00:29:02,860
 And so at worst case scenario, we just break even.

337
00:29:02,860 --> 00:29:08,860
 But I think the other point that's out there, and there's a lot of misconception, is could they force us to exceed our permit?

338
00:29:08,860 --> 00:29:12,220
 My question is, if we got into a dire circumstance, they could.

339
00:29:12,220 --> 00:29:14,020
 But at that point, the market's going to be very high.

340
00:29:14,020 --> 00:29:21,620
 >> Yeah, so the objective when we operate is to make some money.

341
00:29:21,620 --> 00:29:26,020
 >> Sure. >> On a production side that you mentioned, and that offsets the fixed cost.

342
00:29:26,020 --> 00:29:28,260
 So that's a contribution to fixed.

343
00:29:28,260 --> 00:29:34,500
 And that's our objective, to make as much additional revenue

344
00:29:34,500 --> 00:29:39,220
 of our operating cost that it can offset as much as possible of the fixed expenses.

345
00:29:39,220 --> 00:29:45,300
 >> I have one more question on a previous slide.

346
00:29:45,300 --> 00:29:47,460
 >> Okay. >> Let me get to it.

347
00:29:47,460 --> 00:29:54,500
 Talking about the training of the council and the PUB, is that going to be like a joint working session?

348
00:29:54,500 --> 00:29:59,860
 >> It could be, I haven't thought about that, but that might actually be a good way to do it.

349
00:29:59,860 --> 00:30:05,380
 We could have a joint session, I'm thinking bringing in a third party might be the best way.

350
00:30:05,380 --> 00:30:11,500
 And then we would have just training that kind of builds on itself

351
00:30:11,500 --> 00:30:16,340
 to talk about a lot of these concepts that we're discussing today about how the market works,

352
00:30:16,340 --> 00:30:23,380
 how trading works, how hedging works, and hedging, energy's a commodity.

353
00:30:23,380 --> 00:30:26,740
 So it's like the commodity market, so yeah, does that sound okay?

354
00:30:26,740 --> 00:30:28,420
 >> Yep, yeah, I'm just curious.

355
00:30:28,420 --> 00:30:31,820
 >> Okay, so we'll try to get that, we get this approved.

356
00:30:31,820 --> 00:30:35,940
 We'll try to get that kicked off early this next calendar year.

357
00:30:35,940 --> 00:30:39,980
 >> Other questions?

358
00:30:39,980 --> 00:30:42,740
 >> Thank you. >> Thank you.

359
00:30:42,740 --> 00:30:51,060
 Next item, receive a report, hold a discussion, and

360
00:30:51,060 --> 00:30:57,260
 provide staff direction regarding the solid waste department's building materials recovery and rubble process.

361
00:30:58,420 --> 00:31:09,740
 >> Good morning board members, my name is Ethan Cox, I'm the director of solid waste.

362
00:31:09,740 --> 00:31:11,340
 Pleasure to be with you this morning.

363
00:31:11,340 --> 00:31:15,660
 So to refresh everyone's memory, I think we do have some new board members here today.

364
00:31:15,660 --> 00:31:20,580
 Last summer, the solid waste department had a solid waste consulting group named Blue Ridge Services come in and

365
00:31:20,580 --> 00:31:25,180
 kind of provide a 30,000 foot overview of what's working, what isn't.

366
00:31:25,180 --> 00:31:31,140
 Our department has a number of different operations and programs that we've put forth for the community.

367
00:31:31,140 --> 00:31:33,660
 And they kind of gave us some feedback on some of that.

368
00:31:33,660 --> 00:31:38,020
 In some cases, their recommendations were you need to step away from this operation.

369
00:31:38,020 --> 00:31:41,020
 But in almost all cases, there were some opportunities for improvement.

370
00:31:41,020 --> 00:31:45,220
 And so whenever we delivered this to the PUB and the council in the summer,

371
00:31:45,220 --> 00:31:50,540
 the council's recommendation was we appreciate the 30,000 foot view of this from the consultant.

372
00:31:50,540 --> 00:31:54,260
 We'd like staff to take a bit of a deeper dive and do some more analysis.

373
00:31:54,260 --> 00:32:00,660
 So this is the first in a series of these types of discussions that we're going to be having with the board and the council over the next few months.

374
00:32:00,660 --> 00:32:04,020
 As such, I wanted to kind of lay out what we're trying to do with these.

375
00:32:04,020 --> 00:32:08,500
 So on this slide, we have a definition for what a business case analysis is.

376
00:32:08,500 --> 00:32:10,660
 Typically, that's cost benefit analysis.

377
00:32:10,660 --> 00:32:14,500
 It does have some risk associated with that, that you're going to be looking at.

378
00:32:14,500 --> 00:32:17,740
 For a program, proposed investment plan of action.

379
00:32:17,740 --> 00:32:22,660
 For what we're going to be doing, a lot of this is just looking at programs that are currently on the ground and

380
00:32:22,660 --> 00:32:28,340
 not only looking at what the program purpose and objective is, but how are we succeeding in meeting those objectives.

381
00:32:28,340 --> 00:32:32,820
 There will be a financial analysis associated with these, as well as the risk assessment.

382
00:32:32,820 --> 00:32:39,740
 And at the conclusion, we'll provide both the board and the council with our conclusions and recommendations.

383
00:32:39,740 --> 00:32:43,060
 Similarly, we also want to provide some definitions.

384
00:32:43,060 --> 00:32:45,140
 Some of these operations are pretty well known.

385
00:32:45,140 --> 00:32:48,460
 Others, there may be some misperceptions about that.

386
00:32:48,460 --> 00:32:53,820
 So for today's discussion, some of the definitions that we think are important is when we talk about rubble,

387
00:32:53,820 --> 00:32:59,260
 really what we're talking about is waste fragments of stone, brick, concrete, or asphalt.

388
00:32:59,260 --> 00:33:05,700
 Our operation has accepted that from a lot of contractors and larger commercial haulers for a number of years.

389
00:33:05,700 --> 00:33:13,860
 Similarly, building materials can include brick, concrete, and other materials as well, like glass, drywall, metals, insulation, lumber.

390
00:33:13,860 --> 00:33:20,140
 I have metals highlighted here in a different font, because that's typically about the only material that you can actually recycle.

391
00:33:20,140 --> 00:33:26,300
 Now, you can process a lot of those other materials and reuse them, but you're not really recycling them into a new product.

392
00:33:26,300 --> 00:33:36,380
 And so with that, we also have our diversion definition here, which we think is pretty important to understand what is actually being diverted away from the landfill.

393
00:33:36,380 --> 00:33:40,900
 So we do not count stored and stockpiled materials diverted until it leaves our side.

394
00:33:40,900 --> 00:33:46,940
 And so for our definitions and for the figures that you'll see, diversion means there's no chance of that going in the landfill.

395
00:33:46,940 --> 00:33:54,140
 We've sold it and moved it off to be recycled or for some other use.

396
00:33:54,140 --> 00:33:57,060
 Some of the purpose and objectives we'll talk about today.

397
00:33:57,060 --> 00:34:05,860
 For years, the solid waste department's objective, a lot of cities look at zero waste and trying to achieve that, and typically zero waste means if you're diverting about 80%.

398
00:34:05,860 --> 00:34:09,820
 Our goal for the last several years has been to divert 40%.

399
00:34:09,820 --> 00:34:20,180
 We're not as close as we thought we were, simply because when you adjust that definition of diversion, not counting stored and stockpiled materials, a lot of that does kind of come away.

400
00:34:20,180 --> 00:34:26,380
 So we're typically diverting about 15 to 20%, depending on where the market sits right now.

401
00:34:26,380 --> 00:34:37,420
 The purpose of these operations for rubble processing, you know, this is one of those operations that we could typically be competing with some folks in private industry.

402
00:34:37,420 --> 00:34:45,140
 And a lot of construction outfits, they do their own rubble processing and they reuse that material because they are efficient at it and they find a good use for it.

403
00:34:45,140 --> 00:34:54,100
 So for us, getting into this type of business is to sort and process the rubble and in order to move it off the site, we have to sell it as an aggregate material.

404
00:34:54,100 --> 00:35:02,020
 There is some operational benefit to us using that material on site, but again, that's reuse, that's not necessarily diversion.

405
00:35:02,020 --> 00:35:09,300
 Building materials recovery, the purpose there is to sort, recover, and divert construction waste that would typically be land filled.

406
00:35:09,300 --> 00:35:14,420
 Essentially, when you're diverting that, you're either reusing or recycling, like I mentioned with metals.

407
00:35:14,420 --> 00:35:23,060
 Some of the participants, our customers here, like I mentioned a second ago, it's typically private contractors, commercial operators, but it's also city departments as well.

408
00:35:23,060 --> 00:35:29,020
 We have a streets operation, we do construction projects, and so they're definitely a customer of ours.

409
00:35:29,020 --> 00:35:36,220
 Operations for us, this will make a little bit of sense when we get to the budget in a moment, the BMR and mining operation were co-mingled.

410
00:35:36,220 --> 00:35:41,140
 And so last year, if you'll recall, we shuttered our landfill mining operation.

411
00:35:41,140 --> 00:35:46,740
 So when you look at the budget figures, kind of keep that in mind, that it was both the BMR and the mining operation together.

412
00:35:46,740 --> 00:35:53,740
 In terms of program performance, again, we evaluate that based on diversion.

413
00:35:53,740 --> 00:35:56,140
 Diversion is accounted for by weight.

414
00:35:56,140 --> 00:36:02,780
 So over the last five years, when the BMR and the rubble processing was up and running,

415
00:36:02,780 --> 00:36:09,020
 we accepted about 300,000 tons of rubble, of that we only diverted about 9%.

416
00:36:09,020 --> 00:36:18,820
 From a BMR perspective, much less tonnage, but again, the diversion was right around 10%, and again, that's mostly metals.

417
00:36:18,820 --> 00:36:22,580
 So when we talk about diversion, for the rubble, that means it was sold and moved off site.

418
00:36:22,580 --> 00:36:27,580
 We do have some significant stockpiles on our site that I'll talk about in just a moment.

419
00:36:27,580 --> 00:36:31,580
 We've gone through a series of audits, both internally and externally.

420
00:36:31,580 --> 00:36:37,900
 We've also surveyed some of our stockpiles out there, and currently we're unable to account for about 140,000 tons.

421
00:36:37,900 --> 00:36:46,180
 And so the assumption is, is we either use that for road base, which again, is not diverted, or it was used in some other capital project that we can't account for.

422
00:36:46,180 --> 00:36:49,620
 There's also the potential that it may have left the site without being weighed.

423
00:36:49,620 --> 00:36:57,740
 But typically, we've kind of locked down those lanes to make sure that everything entering and exiting the site is being weighed moving forward.

424
00:36:57,740 --> 00:37:04,020
 Some of the challenges that we're dealing with and why that diversion rate is so low, particularly for rubble, the source material is very contaminated.

425
00:37:04,020 --> 00:37:07,420
 I'll show you some photos here in a moment of what that looks like.

426
00:37:07,420 --> 00:37:09,900
 There's also a limited market for recovered materials.

427
00:37:09,900 --> 00:37:14,500
 And so when you're looking at lumber, we would love to be able to process the lumber and sell that as wood chips.

428
00:37:14,500 --> 00:37:20,860
 But a lot of cases that has paint, has treated material, and so there's a very limited and very narrow market for that.

429
00:37:20,860 --> 00:37:25,460
 So really what you're looking at, your best bet is to reuse that material if you can.

430
00:37:25,460 --> 00:37:30,900
 As it relates to rubble, like I mentioned, we are competing with private industries, so other processing firms are much more efficient.

431
00:37:30,900 --> 00:37:36,980
 That's their primary business, and they have very strict standards for contamination, which we'll talk about in just a moment.

432
00:37:36,980 --> 00:37:44,380
 From a financial standpoint, over here on the left, this is historical income and loss.

433
00:37:44,380 --> 00:37:47,780
 We provided this to the PBE and the council back in the summer.

434
00:37:47,780 --> 00:37:56,140
 So from a strict cash flow standpoint, we're losing to the tune of about a million dollars a year on these operations, rubble and BMR combined.

435
00:37:56,140 --> 00:38:02,580
 Recent budget activity, this is where we talked a little bit earlier about separating mining from the BMR.

436
00:38:02,580 --> 00:38:10,100
 Probably the best figure to kind of get an idea of what it cost to actually run both of these operations as is,

437
00:38:10,100 --> 00:38:15,220
 year fiscal year 16, 17 actual, about $3.4 million.

438
00:38:15,220 --> 00:38:19,300
 For this budget year, we brought that down to about $2.7.

439
00:38:19,300 --> 00:38:24,740
 Some of the changes that were made, we removed 10 FTEs that were previously assigned to the mining operation.

440
00:38:24,740 --> 00:38:32,100
 We've also reduced temporary labor expense, pretty much site wide, but associated with this, about $268,000.

441
00:38:32,100 --> 00:38:39,540
 One of the things I'll point out is both of these operations are heavily dependent on heavy equipment.

442
00:38:40,420 --> 00:38:44,260
 And so we have a lot of stranded debt service right now.

443
00:38:44,260 --> 00:38:48,900
 As we start moving into the out years, if we step away from these operations,

444
00:38:48,900 --> 00:38:55,700
 you're probably going to see about $1.2 million come off of that fiscal year 17 or fiscal year 18, 19 budget.

445
00:38:55,700 --> 00:39:01,340
 And so that draw down does take place over the next five years if we decide to move away from these operations.

446
00:39:01,340 --> 00:39:08,980
 Refresher of the council direction we received on June 26, so I mentioned Blue Ridge earlier.

447
00:39:08,980 --> 00:39:14,660
 They provided recommendations on both of these for BMR that simply felt that the financial losses,

448
00:39:14,660 --> 00:39:22,260
 the expensive equipment, and the inefficiencies associated with that operation didn't make sense in their expertise.

449
00:39:22,260 --> 00:39:27,220
 Likewise, with the in house rubble processing, there is some use for that material on our site.

450
00:39:27,220 --> 00:39:31,180
 Like I said, we do construct temporary roads and tipping pads.

451
00:39:31,180 --> 00:39:37,220
 So essentially, their recommendation was to use your rates and/or policy to regulate the volumes you have coming in.

452
00:39:37,220 --> 00:39:40,780
 Some of the stuff that the city departments have, that's perfect.

453
00:39:40,780 --> 00:39:45,740
 We just got to make sure we have some really strict contamination guidelines there.

454
00:39:45,740 --> 00:39:51,060
 Council direction at the time essentially was to bring these results and

455
00:39:51,060 --> 00:39:56,180
 analysis back to the committee on the environment, the public utilities board, and the council.

456
00:39:56,180 --> 00:40:02,980
 In the meantime, it was to temporarily convert the BMR into a public disposal area, as we call it the PDA.

457
00:40:02,980 --> 00:40:08,540
 Also relocate recycling drop off, I'll show you a little bit more about that on the next slide.

458
00:40:08,540 --> 00:40:11,580
 And then also to temporarily suspend rubble processing operations.

459
00:40:11,580 --> 00:40:16,820
 So, last few months, what we've really tried to do is really pilot,

460
00:40:16,820 --> 00:40:21,140
 is there a more efficient way that we can do this a safer way?

461
00:40:21,140 --> 00:40:27,540
 Something that actually serves our citizens as opposed to commercial haulers and folks that may not necessarily live or work here.

462
00:40:28,980 --> 00:40:34,100
 First thing that we did was convert the BMR to the public disposal area.

463
00:40:34,100 --> 00:40:37,860
 I'll talk about the numbers in a moment, I want to walk through the images first.

464
00:40:37,860 --> 00:40:44,420
 Lower left hand corner, that's kind of a good snapshot of how the BMR would typically work.

465
00:40:44,420 --> 00:40:48,340
 You'd have commercial haulers drop a lot of their loads on the ground.

466
00:40:48,340 --> 00:40:53,660
 We'd have loaders, skid steers, heavy equipment that would kind of move that into position for

467
00:40:53,660 --> 00:40:57,700
 either an excavator or some type of material handler to put that on a conveyor.

468
00:40:57,700 --> 00:41:04,620
 And then you'd have a team of personnel up here kind of sorting by hand some fine materials.

469
00:41:04,620 --> 00:41:08,700
 A couple of challenges with that, it's very dust intensive.

470
00:41:08,700 --> 00:41:11,820
 Dust is a consideration for us out at the landfill.

471
00:41:11,820 --> 00:41:15,340
 It's also a little bit of a risk in terms of safety.

472
00:41:15,340 --> 00:41:19,460
 You got a lot of sharps, a lot of things in there that you have to protect those folks that are on those lines.

473
00:41:19,460 --> 00:41:24,740
 So all in all, kind of a really inefficient operation.

474
00:41:24,740 --> 00:41:27,980
 What we've done is we've converted that to the public disposal, as you can see here.

475
00:41:27,980 --> 00:41:34,140
 We're using less than half the amount of equipment, less than half the amount of staff.

476
00:41:34,140 --> 00:41:38,780
 What we feel like is we have a much safer operation, so this little gentleman right here.

477
00:41:38,780 --> 00:41:42,100
 He's helping direct our residents and businesses.

478
00:41:42,100 --> 00:41:44,740
 These are not always big commercial haulers.

479
00:41:44,740 --> 00:41:47,860
 We're really focused on someone cleaned out their garage.

480
00:41:47,860 --> 00:41:52,020
 Let's not have them go to the landfill and jockey for position with a big haul truck.

481
00:41:52,020 --> 00:41:56,300
 Let's get them into the public disposal area, have them a nice clean experience.

482
00:41:56,300 --> 00:42:01,900
 So that's really what he's doing here is making sure that the right folks are using this, that everyone's backing up in their lanes.

483
00:42:01,900 --> 00:42:04,460
 And then this is kind of the snapshot on the backside.

484
00:42:04,460 --> 00:42:11,020
 Again, we have a gentleman back here that's making sure that everyone's clear of the heavy equipment as he's pushing that material out.

485
00:42:11,020 --> 00:42:17,620
 Also, what we're asking residents to do is if they have metals and things that are easily diverted, so go ahead and set that off.

486
00:42:17,620 --> 00:42:24,220
 We have bins that you can't necessarily see here in this picture, but there's a separate area for appliances, electronics, a lot of that.

487
00:42:24,220 --> 00:42:28,980
 So there's self-separation going on, and then also our staff is here.

488
00:42:28,980 --> 00:42:34,580
 So this gentleman, probably go grab some of the cardboard and things like that to try to get that out of there if we can.

489
00:42:34,580 --> 00:42:42,580
 All in all, we've cut down about half of the cost, and that's not including the debt service that will roll off.

490
00:42:42,580 --> 00:42:46,500
 But we're still diverting about 85% of the material that we were previously.

491
00:42:47,700 --> 00:42:57,380
 The commodity revenue is down, but that's just kind of part and parcel of where the market is right now with recycling in general, but metals were also impacted a little bit.

492
00:42:57,380 --> 00:43:04,180
 We feel like we've got a much cleaner, safer, more beneficial operation through the PDA.

493
00:43:04,180 --> 00:43:07,540
 It's working really well, and our staff's done a really nice job implementing it.

494
00:43:07,540 --> 00:43:14,860
 One of the other things that was not necessarily tied directly to this, but we wanted to try to clean it up if we could.

495
00:43:14,860 --> 00:43:18,220
 We have a number of recycling drop off areas in the city.

496
00:43:18,220 --> 00:43:22,460
 This one was notorious for illegal dumping and contamination.

497
00:43:22,460 --> 00:43:27,260
 This was right at the entrance of our facility, so essentially I think what would happen is someone would roll up,

498
00:43:27,260 --> 00:43:33,020
 either were closed or they didn't like the price they got at the gate, so we got to take it for free out at the recycling drop off.

499
00:43:33,020 --> 00:43:40,420
 So this is open access, there's video camera monitoring, but we really didn't have much enforcement going on.

500
00:43:40,420 --> 00:43:48,820
 We're doing a good job diverting cardboard, because you can see with these containers, their slats really can't fit much in there besides flattened cardboard.

501
00:43:48,820 --> 00:43:53,980
 Single stream diversion, which is your mixed recyclables, that's where we were really having a hard time.

502
00:43:53,980 --> 00:43:57,260
 And so all of this right here is what we call contamination.

503
00:43:57,260 --> 00:44:02,740
 We did a couple of material audits with our partners, Pratt, and they looked at it and said it's not worth sorting.

504
00:44:02,740 --> 00:44:11,180
 So all of them went to the landfill, which is really unfortunate because you do have folks that are using these containers responsibly.

505
00:44:11,180 --> 00:44:14,420
 So what we did is we moved this right next door to the public disposal area.

506
00:44:14,420 --> 00:44:19,500
 As you can see, much cleaner, more organized, staff's on site to help the customer.

507
00:44:19,500 --> 00:44:21,460
 Cardboard diversion remains high.

508
00:44:21,460 --> 00:44:27,180
 We were able to increase our single stream diversion to 80% versus the less than 1% we were getting before.

509
00:44:27,180 --> 00:44:33,300
 So again, a much better result as moving this behind the gate.

510
00:44:33,300 --> 00:44:37,180
 So the remaining challenges we have mostly are related to the rubble processing.

511
00:44:37,180 --> 00:44:47,300
 We estimate based on surveys and quotes from vendors that would help us out with this that we have about $1.5 million worth of stockpiles that need to be processed.

512
00:44:47,300 --> 00:44:50,660
 Of that, we talked about contamination earlier.

513
00:44:50,660 --> 00:44:55,620
 You can see this is fairly clean in spots, but you also have a lot of soil in here.

514
00:44:55,620 --> 00:44:58,020
 This is almost entirely soil.

515
00:44:58,020 --> 00:45:01,460
 You also have some materials up here that look like waste.

516
00:45:01,460 --> 00:45:05,700
 The problem with soil is if it's not tested, we may not be able to divert it and use it on site.

517
00:45:05,700 --> 00:45:07,780
 It may be classified as waste product.

518
00:45:07,780 --> 00:45:16,460
 And so whenever we go through this and separate this material, we need to determine is this soil we can reuse for cover or is this soil we actually need to landfill.

519
00:45:16,460 --> 00:45:25,340
 What that would mean is if we don't process any of this, we move all this into landfill, we've lost about $3.3 million of potential airspace.

520
00:45:25,340 --> 00:45:33,900
 Processing, we feel confident that we could recover about $664,000 of that, that's that 20% recoverable material.

521
00:45:33,900 --> 00:45:42,180
 The challenge is there is a limited resale market, and if we can't move it off site, then we'll typically reuse it for our operations.

522
00:45:42,180 --> 00:45:48,660
 If we do process, we do have $180,000 in avoided costs because we do need that for our operations.

523
00:45:48,660 --> 00:45:58,900
 What I would say is this is still upside down financially, but the biggest issue is the stockpiles are in the way of future landfill cell development, so we're going to have to move it anyhow.

524
00:45:58,900 --> 00:46:05,180
 We might as well process it and try to get some use out of it if we can.

525
00:46:05,180 --> 00:46:13,100
 So options and recommendations, option one is to discontinue the acceptance of rubble for commercial entities.

526
00:46:13,100 --> 00:46:19,540
 We would implement quality standards for material from city departments, that's less than 5% contamination.

527
00:46:19,540 --> 00:46:24,140
 We'll also sort and process the existing stockpiles over the next five years.

528
00:46:24,140 --> 00:46:31,900
 Like we said, that is an expense to some plants, we would meter that out to occur over about a five year period.

529
00:46:31,900 --> 00:46:39,140
 And then also we would recommend eliminating the BMR and continue with the public disposal and recycling drop off areas that we've created.

530
00:46:39,140 --> 00:46:42,500
 Option two would be to reinstate these operations as they were.

531
00:46:42,500 --> 00:46:46,500
 The associated operational cost capital investments would come back into the budget.

532
00:46:46,500 --> 00:46:53,340
 We would need most likely a budget amendment to increase to about $680,000 to that $2.7 million you saw earlier.

533
00:46:53,340 --> 00:47:04,300
 Anytime you have a operation out there that is under recovering on a financial basis, there is a subsidization that takes place.

534
00:47:04,300 --> 00:47:10,060
 Some of that happens at the gate, some of that does get meted out to the residents and the businesses.

535
00:47:10,060 --> 00:47:18,980
 So right now at that $2.7 million budget, current monthly costs to our residents range from 39 cents to 77 cents a month.

536
00:47:18,980 --> 00:47:24,980
 Commercial, much wider swing, that's because the costs vary according to container size.

537
00:47:24,980 --> 00:47:32,780
 Keep in mind traditionally, in the past, these are operations that businesses and residents weren't getting much benefit out of.

538
00:47:32,780 --> 00:47:42,060
 As we talked about drawing down on your debt service, you do see about a 42 to 56% reduction, depending on the rate class.

539
00:47:42,060 --> 00:47:48,420
 We believe if we play our cards right from a rate setting standpoint at the gate, we can eliminate the vast majority of that subsidization.

540
00:47:48,420 --> 00:47:56,500
 Option two, if we were to go that route, would negate the year over year cost reductions and it would actually increase your monthly cost.

541
00:47:56,500 --> 00:48:01,500
 Adding that $700,000 back in, this is what you'd be looking at in terms of subsidization.

542
00:48:03,220 --> 00:48:09,100
 Talking to the committee on the environment, there are some environmental impacts here.

543
00:48:09,100 --> 00:48:14,060
 Namely for option one, we're reducing about 20 pieces of heavy equipment.

544
00:48:14,060 --> 00:48:18,060
 So that reduces our diesel consumption by about 19,000 gallons a year.

545
00:48:18,060 --> 00:48:21,300
 And then you also have your emissions that would be reduced as well.

546
00:48:21,300 --> 00:48:27,380
 Other factors like we talked about is the reduction of dust at the BMR and rubble processing.

547
00:48:27,380 --> 00:48:31,820
 You also have less waste going into the landfill if we don't accept some of this material at all.

548
00:48:31,820 --> 00:48:35,460
 But that also reduces your greenhouse gas emissions from the landfill operation.

549
00:48:35,460 --> 00:48:43,500
 When we talked about this with the committee and the environment, their recommendation was to pursue option one.

550
00:48:43,500 --> 00:48:51,100
 With a couple of additional pieces of direction is to try to explore some local partnerships to divert the building materials, i.e. brick.

551
00:48:51,100 --> 00:48:53,060
 We have Acme Brick here on site.

552
00:48:53,060 --> 00:48:59,020
 Again, this is not a recycle opportunity, but it may be a reuse opportunity for them.

553
00:48:59,020 --> 00:49:02,900
 We can also consider rate changes to encourage either material sorting.

554
00:49:02,900 --> 00:49:08,500
 Or if it's something where we don't really necessarily want to accept construction and demolition waste in landfill,

555
00:49:08,500 --> 00:49:11,700
 we can use our rates to encourage folks to go elsewhere.

556
00:49:11,700 --> 00:49:18,820
 So with that, I'll stand for questions and I'll back up to get in the PUB's direction.

557
00:49:18,820 --> 00:49:21,860
 >> Questions?

558
00:49:24,500 --> 00:49:31,060
 I guess one question that I have is when you say encourage them to go elsewhere, is there an elsewhere for them to go?

559
00:49:31,060 --> 00:49:36,180
 >> There is, I mean, we are a regional facility, but there are other regional facilities in the area.

560
00:49:36,180 --> 00:49:41,900
 Rubble processing is a great example is there's concrete processors all around our area.

561
00:49:41,900 --> 00:49:46,940
 And so whenever we put a temporary hold on that, what would happen?

562
00:49:46,940 --> 00:49:49,300
 Commercial operator come up, we don't accept that right now.

563
00:49:49,300 --> 00:49:53,580
 Here's your list of options and we haven't had much pushback as it relates to that.

564
00:49:53,580 --> 00:49:57,420
 And construction and demolition is something that we would have to take a closer look.

565
00:49:57,420 --> 00:50:05,740
 I know Fort Worth runs a C and D only landfill, and so there are some opportunities there, but it may be a bit more of a drive.

566
00:50:05,740 --> 00:50:13,900
 And I think probably the biggest thing that I would say on that is if that's something we want to explore, we can go back and do some more analysis.

567
00:50:13,900 --> 00:50:21,820
 We also want to circle back with the PB and the council to have kind of a rate discussion, a rate strategy discussion as well, and we can provide that there too.

568
00:50:21,820 --> 00:50:26,980
 >> I guess my only concern was just that you'd see more dumping as a, you know.

569
00:50:26,980 --> 00:50:28,780
 >> That is one of the risks of it.

570
00:50:28,780 --> 00:50:29,580
 >> Yeah. >> It is.

571
00:50:29,580 --> 00:50:30,080
 >> Okay.

572
00:50:30,080 --> 00:50:34,420
 >> Do we have a way of monitoring that risk?

573
00:50:34,420 --> 00:50:35,260
 >> Illegal dumping?

574
00:50:35,260 --> 00:50:36,500
 >> Yeah.

575
00:50:36,500 --> 00:50:37,700
 >> Not a great one.

576
00:50:37,700 --> 00:50:40,340
 I think that's something we would need to take back and take a look at.

577
00:50:40,340 --> 00:50:46,260
 I know for the sites that we manage, we have a pretty good handle on it.

578
00:50:46,260 --> 00:50:49,620
 But we probably need to visit with other city departments, code enforcement, etc.

579
00:50:49,620 --> 00:50:53,100
 To figure out, where are you seeing this occur?

580
00:50:53,100 --> 00:50:57,660
 And if we make a change from a rate standpoint, does that move the needle one way or the other?

581
00:50:57,660 --> 00:51:05,020
 And I haven't done a lot of research on this, but typically that's why most cities provide bulky item collection and things like that.

582
00:51:05,020 --> 00:51:11,380
 Because if we don't do the right thing by our residents, you have a situation like we had with our recycling drop off.

583
00:51:11,380 --> 00:51:15,140
 >> Other questions?

584
00:51:15,140 --> 00:51:17,300
 Go ahead, Brandon.

585
00:51:17,300 --> 00:51:19,980
 >> That's okay, that's okay, I don't ask other times.

586
00:51:19,980 --> 00:51:23,180
 >> So do you need direction from us as to which option?

587
00:51:23,180 --> 00:51:27,740
 >> Certainly, we're going to be talking to council tomorrow and we'll include your recommendation in that discussion.

588
00:51:27,740 --> 00:51:32,540
 >> So, what do you feel?

589
00:51:32,540 --> 00:51:35,340
 >> It seems like option one is sort of a no-brainer, I don't know.

590
00:51:35,340 --> 00:51:36,340
 >> Yes.

591
00:51:36,340 --> 00:51:43,540
 >> But we don't want to go back to our citizens and say we're going to raise your rates for something that's not paying off.

592
00:51:43,540 --> 00:51:45,820
 >> Something they're not benefiting from either.

593
00:51:45,820 --> 00:51:47,740
 >> They're not benefiting from that operation.

594
00:51:47,740 --> 00:51:51,980
 >> That's my feeling, option one.

595
00:51:51,980 --> 00:51:57,700
 >> Yeah, option one with the caveat that, I don't know, we might have to beef up some security to or

596
00:51:57,700 --> 00:52:04,020
 take a look at if dumping is increasing, maybe finding a way to resolve that issue.

597
00:52:04,020 --> 00:52:11,460
 >> Okay, so with rebel processing,

598
00:52:13,100 --> 00:52:19,820
 if we couldn't account for 140,000 tons and

599
00:52:19,820 --> 00:52:29,380
 let's just say they were diverted, that would have represented a 60% diversion, if that's what happened to it.

600
00:52:29,380 --> 00:52:37,180
 So we haven't actually run the rebel processing operation in a responsible manner at any point.

601
00:52:37,180 --> 00:52:40,660
 >> I would agree with that.

602
00:52:40,660 --> 00:52:46,540
 So you're asking us to make a recommendation on suspending or

603
00:52:46,540 --> 00:52:51,420
 canceling a project that at one point we saw benefit to,

604
00:52:51,420 --> 00:52:57,380
 then we mismanaged it and now you're asking us to recommend closing it.

605
00:52:57,380 --> 00:53:04,340
 And I have some trouble with that because one, where did 140,000 tons go?

606
00:53:05,660 --> 00:53:12,540
 And so that seems, I have a hard time recommending stopping something

607
00:53:12,540 --> 00:53:16,420
 other than just saying, well how come you can't just manage it properly?

608
00:53:16,420 --> 00:53:16,920
 >> Right.

609
00:53:16,920 --> 00:53:23,340
 >> So you want to spitball where you think the 140,000 tons went?

610
00:53:23,340 --> 00:53:30,020
 >> Well, like I said, our assumption is that it either went into one of our capital projects used on site.

611
00:53:30,020 --> 00:53:35,900
 There's kind of a stone wall as you drive down the hill and you see bordering the landfill.

612
00:53:35,900 --> 00:53:39,620
 Some staff said that that's where some of the material went.

613
00:53:39,620 --> 00:53:43,780
 But the other possibility is it did go into road base or tipping pads.

614
00:53:43,780 --> 00:53:47,300
 The third possibility to your point is it could have left the site.

615
00:53:47,300 --> 00:53:52,020
 Now, if it did leave the site, that wouldn't mean it's diverted, but it didn't cross our scales.

616
00:53:52,020 --> 00:53:59,180
 And so at this point, we've pretty much hit a dead end with trying to track down what happened to that material.

617
00:53:59,180 --> 00:54:04,980
 And our assumption is that whatever happened to it, the diversion rate is probably close to what it is now,

618
00:54:04,980 --> 00:54:08,380
 if it's anything similar to the material that we've processed previously.

619
00:54:08,380 --> 00:54:14,020
 So I know that's not great information, but that's the best that we've been able to do with all of our research.

620
00:54:14,020 --> 00:54:20,780
 >> During fiscal year 2012 through fiscal year 2017,

621
00:54:20,780 --> 00:54:25,180
 did we have a different definition of diversion?

622
00:54:27,420 --> 00:54:29,180
 >> I'm not sure what the definition was.

623
00:54:29,180 --> 00:54:31,380
 What I will say is there were various materials.

624
00:54:31,380 --> 00:54:36,100
 Let me use lumber as an example to where that was being counted as a diverted material.

625
00:54:36,100 --> 00:54:39,540
 But what was actually happening is it was being processed and

626
00:54:39,540 --> 00:54:45,460
 then put into the liquid disposal operation to kind of be a bulking agent.

627
00:54:45,460 --> 00:54:47,540
 All that ended up in the landfill.

628
00:54:47,540 --> 00:54:50,540
 And so by our definition, that's not diversion.

629
00:54:50,540 --> 00:54:51,260
 >> No, it's not.

630
00:54:51,260 --> 00:54:52,220
 >> I agree.

631
00:54:52,220 --> 00:54:56,340
 >> That's reuse, but it's ultimately going straight into the landfill.

632
00:54:56,340 --> 00:55:00,820
 I think when you look at some of the rubble is if it's not leaving the site,

633
00:55:00,820 --> 00:55:04,300
 it eventually finds its way into the landfill somehow.

634
00:55:04,300 --> 00:55:08,460
 What that means, you can break this material down to make it compact better.

635
00:55:08,460 --> 00:55:13,260
 Most of these materials are already pretty dense and there's limited upside gain for

636
00:55:13,260 --> 00:55:16,540
 going to that level of processing just to bury it.

637
00:55:16,540 --> 00:55:21,180
 Compactors and some of the material or machinery we use on the site does a pretty good job of compacting that on its own.

638
00:55:23,740 --> 00:55:30,900
 >> Just had a, looking into the future, I was just curious if suddenly there's like this huge run on rubble and

639
00:55:30,900 --> 00:55:39,860
 we could make lots of money off of it, how long would it take to re-instate a kind of rubble recovery operation?

640
00:55:39,860 --> 00:55:43,260
 >> It would really depend on how we want to implement that.

641
00:55:43,260 --> 00:55:48,340
 So if we were to bring in an outside contractor to process, you can turn that up pretty quickly.

642
00:55:48,340 --> 00:55:50,900
 I mean, essentially, you're looking at procurement time on that.

643
00:55:50,900 --> 00:55:55,180
 If we wanted to do it in-house, we'd be sourcing several pieces of heavy equipment.

644
00:55:55,180 --> 00:56:00,100
 So it'd typically be longer than a six month period, maybe a year, we'd probably get it up and running.

645
00:56:00,100 --> 00:56:03,940
 >> By which time the rubble market may be dropping, so.

646
00:56:03,940 --> 00:56:11,020
 >> And that's the challenge of making a capital investment for five to ten years and you're subject to the market fluctuations.

647
00:56:11,020 --> 00:56:16,580
 And we see that all across our industry, so you really have to kind of weigh the risk out of that whenever you look at it.

648
00:56:16,580 --> 00:56:19,860
 >> I just want to get some clarification.

649
00:56:19,860 --> 00:56:26,020
 So we're just discontinuing from commercial entities, which have another alternative to go to.

650
00:56:26,020 --> 00:56:31,180
 So should we be competing with those other alternatives?

651
00:56:31,180 --> 00:56:40,060
 We should be serving our citizens, certainly, but is it our role to compete in commercial rubble?

652
00:56:40,060 --> 00:56:41,380
 Is that our role?

653
00:56:41,380 --> 00:56:46,180
 >> Well, it seems as though quite a bit of it could have been used on site.

654
00:56:46,180 --> 00:56:52,340
 And so that's us getting paid to take something and then not having to purchase it.

655
00:56:52,340 --> 00:56:56,100
 So that's not necessarily a commercial operation, is it?

656
00:56:56,100 --> 00:57:01,060
 >> I think the source of which you're getting it from is the commercial.

657
00:57:01,060 --> 00:57:04,580
 Am I understanding that correctly?

658
00:57:04,580 --> 00:57:08,100
 >> Yeah, most of this is coming from contractors and commercial operators.

659
00:57:08,100 --> 00:57:12,860
 >> Right. >> And there are other private entities that provide processing services for rubble.

660
00:57:12,860 --> 00:57:17,780
 >> One of the things, I think we're kind of circling back to the financial losses and you say, how did we get here?

661
00:57:17,780 --> 00:57:23,020
 Most of the rates that were set and applied in these cases, it was price matching.

662
00:57:23,020 --> 00:57:25,740
 So you can take the sum of these processors.

663
00:57:25,740 --> 00:57:31,660
 They'll accept them material free because they're so efficient at processing it that they will make up their money on the back end.

664
00:57:31,660 --> 00:57:35,700
 For us, in order to compete there, we say no charge at the gate.

665
00:57:35,700 --> 00:57:40,820
 Then we must make up our financial loss on the other side to sell it and move it off site.

666
00:57:40,820 --> 00:57:46,300
 So that's exactly what happened here is we were accepting this at a cut rate or even free in some cases.

667
00:57:46,300 --> 00:57:53,220
 And then we're trying to price match more efficient operators on the sales and we couldn't move the product.

668
00:57:53,220 --> 00:57:57,420
 We also have an inferior product that if we were to try to compete with them on a quality basis,

669
00:57:57,420 --> 00:58:01,020
 it's going to cost us about twice as much in terms of processing.

670
00:58:01,020 --> 00:58:06,780
 And so I think certainly from where we stand,

671
00:58:06,780 --> 00:58:12,460
 it's the POV and the council's pleasure on what we do in terms of competing or not competing.

672
00:58:12,460 --> 00:58:18,540
 I think from a staff perspective, what we would say is we're going to have a hard time competing on a cost basis,

673
00:58:18,540 --> 00:58:21,180
 on a price basis with those that do this for a living.

674
00:58:21,180 --> 00:58:25,740
 >> So back to direction.

675
00:58:25,740 --> 00:58:27,500
 I think we have three saying option one.

676
00:58:27,500 --> 00:58:37,260
 >> I think I'm going to just reserve my opinion.

677
00:58:37,260 --> 00:58:39,060
 Well, I've already made it clear.

678
00:58:39,060 --> 00:58:42,660
 >> All right, do you have what you need?

679
00:58:42,660 --> 00:58:45,300
 Okay, thank you.

680
00:58:45,300 --> 00:58:53,500
 All right, we're going to move the closed item to the end of the meeting.

681
00:58:53,500 --> 00:59:00,140
 So onto consent agenda.

682
00:59:00,140 --> 00:59:03,300
 Does any board member wish to pull an item?

683
00:59:03,300 --> 00:59:07,300
 >> I'd like to pull E.

684
00:59:07,300 --> 00:59:10,260
 >> Any others?

685
00:59:10,260 --> 00:59:23,140
 Okay, do we have a motion to approve A through D, F, and okay, A through D and F.

686
00:59:23,140 --> 00:59:24,620
 >> Second. >> Second.

687
00:59:24,620 --> 00:59:26,220
 >> All in favor?

688
00:59:26,220 --> 00:59:27,340
 >> Aye. >> Aye.

689
00:59:27,340 --> 00:59:27,860
 >> Opposed?

690
00:59:27,860 --> 00:59:29,900
 Okay, item E.

691
00:59:29,900 --> 00:59:41,620
 >> I just had a quick question on this, which can probably be handled in two sentences.

692
00:59:41,620 --> 00:59:48,620
 I was wondering if the roof of City Hall was subject to historic landmark rules.

693
00:59:48,620 --> 00:59:52,660
 Since this is an O'Neill Ford building.

694
00:59:52,660 --> 00:59:53,700
 >> I'm trying to answer that question.

695
00:59:53,700 --> 00:59:58,100
 Our facilities manager called in sick this morning, so bear with me.

696
00:59:58,100 --> 01:00:01,420
 No, ma'am, because it's a maintenance item, so it is not all under.

697
01:00:01,420 --> 01:00:03,060
 >> So it's not changing any of the visual?

698
01:00:03,060 --> 01:00:08,180
 >> No, ma'am, it's purely just the structural, just to make sure that it doesn't leak.

699
01:00:08,180 --> 01:00:12,180
 >> Yeah, it's a flat roof, so I'm assuming there's nothing visible from the street anyway.

700
01:00:12,180 --> 01:00:17,220
 I didn't want these neat little wood slats to be messed with, for instance, sir.

701
01:00:17,220 --> 01:00:19,060
 >> Actually, those are new, so they're not going to be messed with.

702
01:00:19,060 --> 01:00:20,100
 >> Those ones are new, yes, ma'am.

703
01:00:23,140 --> 01:00:24,460
 >> Okay, that was my only question.

704
01:00:24,460 --> 01:00:28,100
 >> Okay, do we have a motion to approve item E?

705
01:00:28,100 --> 01:00:30,380
 >> So moved.

706
01:00:30,380 --> 01:00:32,060
 >> Second?

707
01:00:32,060 --> 01:00:33,220
 >> Second.

708
01:00:33,220 --> 01:00:34,700
 >> All in favor, say aye.

709
01:00:34,700 --> 01:00:35,740
 >> Aye. >> Opposed?

710
01:00:35,740 --> 01:00:37,900
 Motion carries.

711
01:00:37,900 --> 01:00:40,540
 Items for individual consideration.

712
01:00:40,540 --> 01:00:45,180
 The first item is approval of the board minutes of November 12th, 2018.

713
01:00:45,180 --> 01:00:47,980
 Are there any changes or comments?

714
01:00:47,980 --> 01:00:52,420
 Okay, having none, we'll approve as presented.

715
01:00:53,620 --> 01:00:54,300
 ACM update.

716
01:00:54,300 --> 01:01:02,660
 >> Madam Chair, members of the board, in your packet, you have a memo from Nick Vincent to me

717
01:01:02,660 --> 01:01:06,500
 about the water and wastewater rate comparisons around the region.

718
01:01:06,500 --> 01:01:11,540
 If you have any questions, specific questions to those, Nick is here to answer those questions for you.

719
01:01:11,540 --> 01:01:21,420
 Along with that, you'll notice in your future agenda list the month of January is going to be pretty busy with some reports coming forward.

720
01:01:21,420 --> 01:01:27,540
 And we'll be bringing to you more information about the commercial recycling.

721
01:01:27,540 --> 01:01:32,540
 Also, the report on the performance of the Denton Energy Center as far as the financials.

722
01:01:32,540 --> 01:01:38,460
 And the first of a number of quarterly reports that we were bringing forward to you all about our CIP and

723
01:01:38,460 --> 01:01:45,420
 our projects that are happening around the community, just to keep the PUB informed of those activities and projects.

724
01:01:45,420 --> 01:01:48,780
 And I have nothing further to report.

725
01:01:50,100 --> 01:01:53,820
 >> All right, so now we can do concluding items and then close, Larry?

726
01:01:53,820 --> 01:01:59,620
 >> Yes, Madam. >> Okay, concluding items, are there any items any board member would wish to have put on the agenda?

727
01:01:59,620 --> 01:02:07,780
 >> I just, I wanted to reiterate that I wanted the dumpsters on right-of-ways,

728
01:02:07,780 --> 01:02:12,260
 especially on Oak Street, to be added to the discussion about the Mews buildings on square.

729
01:02:12,260 --> 01:02:20,020
 Or some of the solutions to the dumpsters in the Mews area could be applied to other streets.

730
01:02:21,060 --> 01:02:22,780
 To get the dumpsters off the sidewalks.

731
01:02:22,780 --> 01:02:26,860
 >> Okay, any other items?

732
01:02:26,860 --> 01:02:35,260
 >> I just wanted to, I actually e-mailed Mario over the last week or so about,

733
01:02:35,260 --> 01:02:39,540
 we got a public notification regarding, I can't remember what it was now.

734
01:02:39,540 --> 01:02:48,740
 But we've received also another one for the closure of Eagle between Elm and

735
01:02:48,740 --> 01:02:52,380
 Merrill for five months for a drainage project.

736
01:02:52,380 --> 01:03:04,340
 And I was just wondering if we could get some kind of in-meeting notification that those things are going to happen before the public gets notified that they're going to happen.

737
01:03:04,340 --> 01:03:13,940
 Just so we can help, we can actually help diffuse that a little bit if we can help explain to those people who are concerned about it.

738
01:03:13,940 --> 01:03:19,460
 >> We can certainly do that, it's just to get the information out to the board members and council as well.

739
01:03:19,460 --> 01:03:24,620
 A lot of times what we do is those press releases are sent to the council.

740
01:03:24,620 --> 01:03:33,100
 The day of that we send it out to the community as well, to our various media outlets, and so just in a different format.

741
01:03:33,100 --> 01:03:39,020
 But we can work with our public communications office to include you certainly on that distribution list.

742
01:03:39,020 --> 01:03:44,500
 So that way you're not seeing it when the public sees it, you see it a little bit ahead of time, just as a heads up.

743
01:03:44,500 --> 01:03:45,100
 >> All right, thank you.

744
01:03:45,100 --> 01:03:50,260
 >> Okay, so I'm looking at Larry.

745
01:03:50,260 --> 01:03:52,460
 We adjourn?

746
01:03:52,460 --> 01:03:54,740
 Okay, we need a motion to adjourn the meeting.

747
01:03:54,740 --> 01:03:59,500
 >> I move we adjourn our open meeting.

748
01:03:59,500 --> 01:04:00,780
 >> Adjourning the public meeting.

749
01:04:00,780 --> 01:04:02,660
 >> Yes, the public meeting, there you go.

750
01:04:02,660 --> 01:04:04,860
 >> Okay, Brendan motioned.

751
01:04:04,860 --> 01:04:06,140
 >> Approved.

752
01:04:06,140 --> 01:04:06,940
 >> No, no, no.

753
01:04:06,940 --> 01:04:08,540
 >> Lillia seconded.

754
01:04:08,540 --> 01:04:10,260
 All in favor say aye.

755
01:04:10,260 --> 01:04:11,740
 >> Aye.

756
01:04:11,740 --> 01:04:12,540
 >> Opposed?

757
01:04:12,540 --> 01:04:14,780
 Okay, go into closed session.