Mar 25, 2024 Public Utilities Board on 2024-03-25 9:00 AM

>> Okay, it is nine o'clock and we do have a quorum, so we're called to order the public utilities board meeting for March 25th, 2024 for the city of Denton. Cassie, did anyone register to speak? No. Okay. And we'll go into the consent agenda. Does any board member wish to pull an item from A through D? Okay. I see none. Do we have a motion to approve the consent agenda? >> So moved. >> Thomas moved. And do we have a second? Second? Devin, seconds. All in favor say aye. >> Aye. >> Carries. Approval of minutes for March 24th, 2024. Do we have any changes or corrections? Do we have a motion to approve? >> So moved. >> Billy moves. Do we have second? >> Second. >> Thomas seconds. All in favor say aye. >> Aye. >> Opposed? Carries. All right. Item B. >> All right. Good morning. >> Good morning. >> Members of PUB. I'm Vispa Pandavong, AD of Finance, and I'm here to talk about the Wells Fargo Letter of Credit. So just to give you some background on the ERCOT credit and collateral protocols. So before October 1st, DME or the state of DIN had a $40 million unsecured line of credit with ERCOT. And we were basically saving cash to supplement that from time to time. So after October 1st, the ERCOT protocol changes. They said, you know, no market participants will get any unsecured line of credit going forward. And we as a city, we went out and did a RFP, and we looked at the options that they gave market to market participants, which was cash or letter of credit. So -- >> There's a question on that. So is that going -- is that an escrow -- how is that treated, the cash? >> So like -- so right now cash, yes, the cash is sitting with ERCOT as like an escrow account. >> It goes to ERCOT? >> Not under -- okay. Gotcha. Thank you. >> So just to talk about the letter of credit program in general. So this program is going to cost around $500,000, and it's going to be for three years. Drawdown is not anticipated, you know, currently when we move forward signing for the letter of credit. And in the event of a drawdown from the letter of credit, the city has multiple options to basically explore financing those dollars. So now staff recommends the use of the letter of credit for a couple reasons. It really protects the city liquidity. Also the city will be earning interest when the cash is sitting here with us. And then the third thing is to really meet the ERCOT protocols or requirements. So staff is here today to request for the city and DME to basically authorize or recommend to sign the Wells Fargo letter of credit up to $60 million. >> Questions. Go ahead. Devin first. >> Excuse me. What is the annual cost to maintain the line of credit? >> Around $500,000. >> And so of $60 million, that's a fraction of a percent, like 0.3% or something like that? >> Correct. >> Okay. Thank you. >> Yes. Go ahead. Rob. >> I may have misunderstood, so the $500,000 is for each year. It's not for the full three years. >> Correct. $500,000 each year. >> Thank you. >> And how much do we have sitting with ERCOT now that will come back to us? >> I think it was around a little bit over $30 million, somewhere around there roughly. And that number fluctuates because ERCOT pretty much dictates how much cash we have to send over. And then we have some time to actually send that cash over. There's a period that ERCOT provides us. >> Okay. Other questions? >> How's the LOC treated on it? Is that going to be a long-term asset, is that what that is? >> This one is a letter of credit, and this is not going to be revolving. So it's up to that $60 million, and once we draw it down, then that's all you get to draw down. >> Okay. >> So it basically gets subtracted from that $60 million. >> Okay. >> Further questions? Do we have a motion to approve? >> Move approval. >> Okay. All in favor? >> Aye. >> Aye. All right. Thank you. >> Thank you. >> All right. The next item is consider recommending the adoption of an ordinance directing the publication for notice of intention to issue 84,770,000 in principle amount of certificates of obligation. Good morning. >> Good morning. Randy Klingle, Treasury Manager. I also have one presentation for the second agenda item as well. >> Okay. >> So let's go together. >> So I'll call that one too. >> Yes, please. >> Consider recommending the adoption of an ordinance directing the publication of notice of intent to issue 177,560,000 in principle amount for certificates of obligation. >> Yes. >> Thank you. >> Thank you. >> I'm here just to have a brief presentation regarding the certificates of obligations requirement for notice of intent, and that is the first reason that we do them. The most important reason is that it's required by law and is required for us to publish this notice of intent in our local circulation, which for the City of Denton is the Denton Record Chronicle, and we will publish that twice in consecutive weeks as well as putting it on our website for the entire period time that is required. In addition to that, we must pass the bond parameter ordinance within 56 days of the first issuance of the post on the Denton Record Chronicle, and we'll be coming back to you with that bond parameter later in the summer. Most of the slides that you will see today are the project list from the utility funds, which are also in your backup, and will illustrate the budget amount in the capital project plan versus what we're going to NOI with. So our first budget here is the solid waste budget, which reduced their NOI budget notification from the original budget by about $2.8 million. They're looking at pushing the cell formation out to future years, and I believe the other thing was just making a priority on the fleet shop, so they moved some monies around there for that purpose, for the notice of intent. Question? Yes, sir. Could you go back? I'll go back the other way, yes. You want to push it? There it goes. What's the difference between new additions and replacements? New additions and replacement vehicles, I don't have the extent of that. I'm assuming purchasing new vehicles versus replacing old ones. Is that correct, Eugene? Or would you like to elaborate? Good morning, Eugene McKinney, Deputy Director of Solid Waste and Recycling. So a new addition is supported by growth of employees, growth of the community. So as the community grows, we need more equipment to move forward, and the replacement is once those vehicles reach their service life, where there are no, you know, the end of life, it's time to get a new car, it's time to get a new truck, because if you keep them beyond the service life, it costs us more and more to maintain them. And do you have an estimated number on the vehicle replacements? That three million or two million, how many vehicles are you thinking about replacing with that number? Yes. And I don't have a number right off hand, you know, an estimate of, you know, just to give me an idea. Well, typically we see on the collection side, we can see anywhere from five to seven to 10 vehicles per year depending. And what happens, there's some history behind it, because we forewent some opportunities in the past, and we kept them longer, so we're trying to get back on track with that. But something to keep in mind here with that overall cost is that the equipment prices now look a lot different than they do now than five, 10 years ago, right? So we took a huge spike. I think we were using a 3% inflationary factor when we ordered from year over the year. We've seen that number double and triple now just because of the microchip issues and getting metal and different things factor into that large amount. Thank you. Thank you. All right. So solid waste, 4.1 million. We moved to the water fund, which reduced their notice of intent budget to about $60 million, which is about $22.5 million reduction. And most of this, generally speaking, is some of these projects, a lot of these projects are still in design, so they couldn't move forward with, you know, tangible builds and starting the projects. And so that is the reason for the reduction for some of the water. Wastewater projects remain the same from budget, so they're still on target for needing what they thought during the budget process. And last, we have the electric fund, which is reduced also about $22.5 million, and they just did a complete revamp of reviewing their project list from the time that they created the budget. So in all the notice of intentions, we have $4.1 million for solid waste, and in the utility system project list is total with the issuance cost and flexibility pricing included $177,560,000 for the notice of intent at this point. And our next steps, if you recommend this, I will take it to council on April 2nd to post the notice of intent and continue through that process. Then I will be back in May to you, and then eventually to council for the bond parameters ordinance with the last look of the last project, that will be the final list. And then June is the potential sale with proceeds being received in late July. Kind of our standard outline of the bond process. Any questions? Questions? Go ahead, Billy. Just on the DME side, you've got an NYI for feeder extensions and improvements that went down substantially. Is that due to availability of those materials? I'm sure Jerry is coming up. Am I right? There we are. Hi, Jerry. Can everybody hear me? Just making sure. Jerry Felder, engineering manager at DME. Much like the other departments, sometimes we look at the projects and we say, okay, this is probably not going to start until a certain time. We also, if you look at feeder extensions and improvements, some of that has to do with the new line extension policy we have where the developers have to pay. Some of that comes in the new residential commercial, but also the new line extension policy affects the feeder extension improvements, which helps us reduce that down. Okay. All right. Simple. Thank you. Other questions? Do we have a motion to approve both these items? Actually, we'll vote on them individually. Thank you, Marcia. Thank you. You keep me so honest. Okay. Do we have a motion to approve item C? So moved. Devin, second? Second. Thomas, second. All in favor, say aye. Aye. Do we have a motion to approve item D for the notice of intent to issue $177,560 million? So moved. Devin, moved. And Billy, just second. All in favor, say aye. Aye. Okay. Management report. Madam Chair, members of the board, today we have a couple of items for you. The first one is on voting requirements. I'll go ahead and turn it over to Marcella. She can walk you through that. Hi, I'm Marcella Lenn, senior deputy city attorney. Just really quickly, just a little bit of education for both me and y'all is going through the voting requirements. So our code of ordinances, which was provided in the management report, requires that you vote unless there's a conflict of interest. So the only permissible abstention under our code is if there's a conflict of interest and you fill out the conflict of interest affidavit. If you have questions on something or you're not sure that you're ready to vote on it, you can move to postpone, especially if the rest of the board feels similarly. And then another option would obviously just be voting no. So our votes are recorded and shared with city council, so city council is made aware of kind of how the discussion happened at PUB, but just so you guys know, going forward, we do require a yes or no vote unless there is an event of a conflict of interest. Yes, Rob, go ahead. Is the ethics board involved with any of the actions that you just mentioned? Only if there's a question on the conflict. So if the board member comes forward and submits the conflict of interest affidavit and we review it and that's kind of submitted, I don't think the ethics board is involved with that unless there's a question from another board member that wants an ethics opinion on whether or not that is a conflict or if someone should have issued a conflict. But if it's just kind of the ordinary course of we receive the conflicts affidavit, I don't believe there's any involvement of the ethics board. I have experienced the ethics board having a different thought concerning that and have had even council members come directly to them for direction before they went anywhere. And we're all officers according to the ethics board. I just ask that because it's just a preparation. Yeah, so that would be the ethics opinion process. So I believe that the council members came to the ethics board to ask for an opinion. But if there's just the ordinary course of submitting an affidavit, that doesn't prompt ethics board action. Thank you. Excuse me, Madame Chair. So I think this refers to an item that, as usual, I'm guilty of. I abstain on a vote which I probably just should have voted nay because I abstain because I didn't think there was enough information they should have brought up towards the board without a description. So my apologies, I'll just vote no next time. I feel that way. I had no conflict of interest in the matter. No problem. All right. Well, I was just addressing and I'm pardon me, Mr. Chairman. I was addressing just for conflict of in versus just should I voted yes or no, because it's a very sensitive issue with that board. Would it be helpful for us to provide some additional information on the ethics board process? I won't need it because I just got off the board. Okay. Thank you, Marcel. Do you have any personnel expenses? Yes. So the next item, there was a question at the last meeting regarding personal expenses in the forecast that we've shown you. We did go back and looked at those numbers a little bit closer. We did make a correction when simply when we pulled the report, we just captured some accounting entries that shouldn't have been included so I've given you a table that shows you what the correct number should be. I think overall the variance is really about $1.2 million. It's about a 5% increase. Just so the board understands, certainly that number includes our annual budget that we include for salary increases, about a 3% average. Also there's additional personnel that go into those numbers. So my hope is that the memo gives you a response to the question that you had. Certainly if there's more detail or if you have other questions, I'd be happy to answer that. Certainly finances here as well if you have any other questions on that. Keep going. Okay. So the next item is just future agenda items. I know we've been talking about this, you know, budget, budget, budget, right? So you have your dates on there. If you're not going to be available during that time, if you could just let us know. But certainly we want to give you plenty of heads up so you know when those dates are coming. And then new action items, the items that we had that we've worked through already is the cost allocation analysis that's been completed. Obviously we've provided you a response to DME personnel items and we have the EV item. There is one additional new business item that I did want to inform the board. And so at the last meeting the board took action on the electric rate ordinance. If you recall, there was a section on delegation to the board. When we took that to the council, the council opted to make a change to that. You know, the charter, any type of rate increase expenditure associated with the utilities has to come to the board. So changes to the ECA, TCRF will still come to the board for your recommendation, but the council still wanted that item to go to them formally on their agenda. They asked that we placed that on their consent agenda. And so based on council's direction last week, we did modify that ordinance slightly so that the PUB doesn't have sole authority to make changes to the ECA and the TCRF. So we wanted to just inform you of the council's action, but again, under the charter, we still have to come to the board. There has to still be a recommendation from the board to the council on any changes to really anything in the electric rate ordinance and any rate ordinance for any of the utilities. So with that, I'm happy to answer any questions that you may have. Will that slow down the timing of bringing the ECA through or are you working that through how it would come here and then go to the council? There might be a slight delay, and we certainly conveyed that to the council and they understood that. And that was really the reason for them asking for us to put it on their consent agenda to try to speed that process versus doing a work session or an individual item for consideration. On the consent agenda, there could still be questions that could still be pulled for individual consideration. We'll be prepared. But we don't anticipate that there'll be a big delay other than just simply kind of skin desk scheduled. Okay. Thank you. Other questions? Oh, Rob, go ahead. Could we consider, once we do our due diligence, we'd be one and done and the council wouldn't have to bring anything back to us for reviewing? Yeah. So certainly with the ECA, if you recall, there is a plus or minus $5 million test that goes into that. So if the ECA balance doesn't fluctuate beyond, within that confines, there really is not going to be any change. Our hope is that we can set a rate that'll be good for at least six months, if not nine or 12 months. But again, depends on what's happening in the market, what types of issues we may have with energy. We probably won't see a whole lot of changes on the transmission side, because those are really set annually, other than there's a slight change kind of at the beginning of the year after we've set the budget. But other than that, my hope is that we don't see a lot of variation, but it is an unknown market. And so I can't make that promise, but that's our hope. Thank you, Madam Chair. Welcome. Other questions? No? All right. We'll move on to concluding items. Does any board member wish to say something to the public or have something put on a future agenda? I don't see any. All right. Move the adjournment. Thank you, Devin. We are adjourned. Thank you.