Okay, it is nine o'clock and we do have a quorum, so call to order the Public Utilities
Board for the City of Denton on Monday, June 24th, 2024.
The first item is presentations from the public.
Has anyone registered?
No?
All right, then we'll go into items for individual consideration.
The first item is approval of the June 10th meeting minutes.
Were there any changes or corrections?
Seeing none, do we have a motion to approve?
So moved.
Okay.
Devin and Rob, all in favor say aye.
Aye.
Carries.
Management reports.
It's Taylor.
Pretty simple.
Yes.
Good morning.
We have two items for the board this morning.
On your future agenda items, there's attachment covering that then today you're going to hear
the proposed budgets for the utilities and then it looks like on your next meeting on
July 8th, you'll have approval of any utility rate changes, recommendations for water, wastewater,
drainage, and solid waste budgets.
Any questions on future agenda items?
No?
Okay.
Next item is new business action items.
There appears to be one outstanding request and it is for comparison on our experience
with EV versus combustion engine cars and trucks.
So that one still looks outstanding.
I don't know if we've gotten any updates yet, but we can provide you how that's going.
And that's it.
All right.
The next item is concluding items.
Does any board member wish to have something put on a future agenda or address the public?
No?
Okay.
Then we'll go into the work session.
Leave a report and hold a discussion and give staff direction on fiscal year '24-'25
preliminary utility forecast for solid waste water, wastewater, electric, and customer
service.
Good morning.
Good morning, members of PUB, Chair Matt Hamilton, budget manager for the city.
Here to present the second in a series of budget presentations for you.
Today's presentation is going to largely focus on the five-year operating performance and
five-year capital budgets for each of the utilities.
I did want to mention that as we go through the financials that I'll walk through, we'll
talk a little bit about revenue sufficiency.
And as you'll see, some of the percentages that we have in there, I just wanted to note,
is representative of the total revenue sufficiency for the fund that's required.
And so at the next meeting on July 8th, we will bring back some different rate structure
options in order to meet those revenue sufficiency requirements.
So it's not specific to any one rate class, residential, commercial fees otherwise.
So just wanted to note that at the top of the presentation.
Okay.
So as I had mentioned, we'll talk a little bit about the budget process overview and
then get into the preliminary utility budgets for each of the utilities.
So this was something that we had talked about at the prior PUB meeting.
So I won't go through all of it, but we are here in June presenting the preliminary utility
budgets to PUB following the meeting on the 8th.
We will then provide this information for consideration to counsel.
They will review it on the 23rd and also at the budget workshop.
If there's anything that needs to come back to the PUB, any changes, we will bring that
back to the board.
And then in August, we'll have our public hearings and it will culminate in the budget
adoption in September.
So starting with our solid waste and recycling department, this is an overview of the current
solid waste organizational chart for fiscal year 2024, our current fiscal year.
There's a total of 133 budgeted FTEs in the department.
As we had discussed previously, included in our rate forecasts are a 2%, 2.6% growth in
residential customers, a 2% growth in commercial front-load, side-load poles, and 2.1% growth
in landfill customers.
And the graphic that you see here was something that we had reviewed last time.
But just to illustrate that solid waste is fairly consistent and our forecast for 2023
lined up pretty well with the 2023 actuals.
We anticipate the same for 2024.
And then the growth projections there are based on the percentages that you see.
So getting into specific budget request packages, just to explain a little bit, baseline adjustments
are budgetary increases for expenses that already exist or contracts that already exist.
Supplemental requests is a request for a new expense or a new service.
So looking at baseline adjustments, you can see there's seven requests.
Each of these have to do with an increase in the cost of doing business.
And then supplemental requests of $121,500 for new software that will go into the vehicles.
And that is every new software cover.
The question was about the software for the vehicles.
Good morning, Brian Burner, Solid Waste Director with the City of Denton.
It's for a program called SAMSARA.
It sets upon our existing Rubicon and ties together the routing software, the accountability
software, our third eye system, basically drops it all into one unit so that instead
of us, let's say we've had a miss or an alleged miss at a resident.
Right now we have to go and pull the card and spend an hour going through until we get
to that house to determine with this new system, not only does it allow us to pull that up
by the address, by the GeoTab, but it also helps us from a driver accountability standpoint,
make sure from the NCAP standpoint he's driving the way he needs to, monitors all the exterior
so in case we get hit we can help determine more reliably who's at fault.
So it's a risk management software also.
30,000 of that is originally for the initial installation and that's not going to be a
reoccurring charge.
So does that, if I may, does that also include looking at the trash cans or receptacles that
may need to be replaced?
Is that something the driver makes a decision at that point, is that what the software would
be useful for?
No, our existing software, the Rubicon system, if there's a crack lid, the wheel, something
that the driver observes, he can actually hit a, there's a button, there's what we
call an exception report that he can push and it will note that that may need to happen
in addition to our field auditors that are out there, they're gathering that data.
But if you have a can that may have a crack, may need to be repaired, the best way to manage
that is just go ahead and call customer service.
It gets it directly into the system and we'll have it repaired on the next service day.
Thank you.
Yes sir.
This seems like a wonderful idea but reasonably expensive so what kind of labor savings do
you see coming from this or have you calculated those out in any way?
We've calculated that but we've really looked at it from the risk management standpoint.
I mean, 131,000, that's one claim.
We place several claims a year based on alleged incidents and things that we just can't quite
prove up so we end up paying.
This really is cost neutral, cost beneficial to us.
Okay but you haven't calculated that out.
From a risk management standpoint we've looked at it, again, as I said, 130,000 or 120,000
is basically one claim potentially.
We have four or five claims a year.
What do those claims typically run you a year, the small part?
I would have to go back and look at that, I don't know off the top of my head what that
is.
If this could be one claim and you get half a dozen of them a year, then that's a half
a million dollars.
That's half a million dollars.
Yeah, exactly.
Okay.
So it's running in that range?
Correct.
Okay, thank you.
Thank you.
Brian, thanks for your department's quick response during the storms this year.
Thank you very much.
You're most welcome.
And it goes without saying that really it's the dedication of the employees that we have.
They were asking questions before we even got in on Monday, what do we need to do, what
do we need to do?
And in addition to just our guys out on the streets picking it up, working six days a
week, 12 hours a day, I want to give shout-outs to Fleet because if they weren't there, you
know, making sure our trucks were up and running, then we couldn't have done this.
And also the help we got from Water and Streets Department on Saturdays, we had their dump
trucks out, we were loading and going and into the day, you know, Friday we basically
said Operation Push, which is what we call this operation to get our debris management
taken care of.
It was over.
Today we're back in regular business.
So we're hitting, you know, Monday through Thursday piles, anything overage we're going
to be charging you for, but again, you have the debris collection is done.
So again, thanks to our employees for that dedicated service.
Yeah, I did make contact with you via someone else, of course, and you answered my question
quickly and the people on a certain street and didn't -- I didn't even tell you what
street it was on, but they called me and thanked me for getting their trees removed.
Well, you know -- And I gave you credit is what I'm --
Well, thank you.
You know, it's just the patience of our residents and our citizens, you know, it -- you know,
we just started one in and worked our way slowly slogging through it all.
But again, you know, working together as a team, you know, the citizens and the community
and our folks, you know, Denton is a cleaner place this Monday, so thank you.
Okay.
So taking a look at solid waste position summary, in fiscal year 2024, the current fiscal year
had 133 FTEs, as we saw in the organizational chart.
There are no positions being added for 2025, so we anticipate 133 positions in 2025.
Taking a look at the solid waste five-year capital plan, the plan includes, for fiscal
year 2025, $12.9 million, of which 11.1 is anticipated to be debt funded and 1.8 million
revenue funded.
So the major projects include cell five and six construction, as well as a little over
$5 million in annual vehicle replacement.
Okay.
So getting into the solid waste fund five-year forecast, for fiscal year 2024, the current
fiscal year, we had budgeted $39.2 million in revenue, for fiscal year 2025, we are budgeting
$41.2 million in revenue.
That increase is due to some of the growth that we're seeing, as well as, as you'll
see at the bottom, a 1.5% increase that is needed for revenue sufficiency.
On the expenditure side, 2024, we budgeted $41.3 million, and 2025, we've budgeted $42.2,
something that I wanted to note on certain lines.
So within personnel services, we do anticipate a 3% COLA for employees citywide, as well
as a, up to a 2.5% performance merit that employees would be eligible to receive.
And so that's primarily what's driving the increase in personnel services.
In operations, there was a budget increase that we've made to the commercial collection
business unit that has to do with vehicle maintenance and repair.
So what we found is that in that specific business unit, that we had under budgeted
vehicle maintenance in prior years and are increasing that line by $700,000 to bring
it up to where actual fleet maintenance costs are.
And then just taking a look at the debt service in 2024, it was at $4.8 million, 2025, we
anticipate $5.3 million with the recent debt issuance in the summer.
So with all that, in 2025, the ending fund balance is projected to be $8.6 million.
At the bottom, you'll see two rows under target reserves.
The first line is the minimum target reserve level, the second is our targeted maximum
level.
And so you'll notice that the $8.6 million does fall above the bounds of the upper limit.
However, the reason that we anticipate needing additional revenue in the next fiscal year
is looking out the next four fiscal years.
And as you'll see, the fund balance, you know, in 2026 declines to be within those target
limits, 2027 within the limits, 2028 and 2029.
So another piece of it that we're also cognizant of and have a policy surrounding is this very
last line, the debt service coverage ratio.
And this is a ratio that is looked at by rating agencies where our target is one and a half.
So you know, looking out the five years, we also want to ensure that we are maintaining
at least a one and a half percent or one and a half times debt service coverage ratio.
So it's really a balance between where we're keeping the fund balance, where our expenditures
are and where that debt service coverage ratio is, yes.
On the vehicle replacement, is that just for the solid waste department vehicle replacement?
Yes.
And what would -- give me an example of what kind of replacement that would be.
Is it pickups, is it trash truck?
What is the vehicle re-emplacement?
Could you write some detail?
Good morning.
And it would be all of the above.
You know, we basically have a five-year replacement cycle on most of our rolling stock.
So you know, and it goes back working with Fleet to determine, you know, amount of repair
points, cost to maintain, things of that nature.
So we'll be getting some new automatic side loaders, some new commercial front load trucks,
as well as some just front line, you know, light and medium duty vehicles to help support
supervisors, crew leaders, service delivery out in the community.
And if I may ask, of those, are you going to have -- what's the makeup of those vehicles
in that?
Are they going to be gas burners?
Are they going to be electric or hybrid?
What's your goal on those?
These will be conventional fuels, so diesel and gasoline.
However, you know, we are continuing to look at the potential of alternate-fueled vehicles
into the fleet.
You know, right now, the heavy-duty garbage trucks, there really isn't a reliable solution
for alternative other than compressed natural gas.
So we'll continue down the road, but we're working closely with Peterbilt and other manufacturers
to really test vehicles.
But where the technology is solid and reliable, our, you know, pickup trucks, box trucks,
things of that nature, we're looking actively at actually incorporating, you know, electric
vehicles and other alternatively-fueled vehicles in those mechanisms.
Would you know how many we have in the fleet right now that are the electric?
At solid waste, I believe we have five.
Five in solid waste.
Yes.
Thank you.
One more question.
On the replacement line, it's one and a half, two million, and then it kind of trickles
down to 500,000.
Is that just because those replacements aren't planned yet, or do you expect it to decrease
in cost?
Part of it has to do with when we originally acquired the vehicles, and it is a five-year
replacement.
So in that five years, you're going to see adjustments up and down.
I would, you know, this is a long-term forecast, and, you know, anything beyond about three
or four years, we're speculating.
So you know, we'll -- look next year, those numbers will be just a slight bit different.
Okay.
Yeah, and I was just curious if it was actually a planned trend down, or if it just -- the
numbers aren't there yet.
They'll probably be there in a year or two.
I think it's all of the above.
Okay.
Thank you.
Appreciate it.
A little bit of both.
What is our legal requirement for debt service coverage under the bond covenants?
Is it 1.25?
Is that what I remember correctly?
Yes.
Okay.
Yeah.
All right.
Okay.
All right.
Well, moving on to DME, this is an organizational chart for fiscal year 2024, the current fiscal
year for DME, and the current FTE count is 187.
So as we talked about last time, we do anticipate 7.53% growth in retail sales, megawatt hours,
for known residential and commercial projects.
The cost of service study, which is ongoing, we anticipate the results and recommendations
to come later in July, and so we'll bring that back to the board for your consideration.
But the cost of service study is primarily focused on fixed costs, the facility and usage
charges, and then we'll also bring back the value of solar steady results and recommendations
as well.
In terms of expense projections, and this is true for all the utilities, is an increase
in personnel costs associated with the cost of living adjustment and the merit adjustment.
So this is a graphic that you had seen at the previous meeting just illustrating that
7.53% growth in forecasted retail sales.
So for 2025, we anticipate 881,000 in residential service megawatt hours and over a million
in general service.
So a comment that had come up at the prior meeting was what expenditures make up the
various rates, and so we wanted to make sure that we provided some information in regard
to that.
So as you see here, base rates for DME are made up of personnel services, O&M, the ROI
and franchise fee costs, debt service, cost of service transfers, and capital outlay,
which are revenue-funded capital projects.
So base rates recover the cost of operations and maintenance, and the rates will vary by
customer class.
The ECA rate is comprised of purchase power, which excludes deck revenue, deck fuel, deck
variable O&M expenses, as well as any prior period over/under collection on the ECA.
And the ECA simply recovers the net energy cost as a pass-through charge to customers,
and it's the same rate for all customer classes.
The TCRF, which is the transmission cost recovery fee, is just comprised of transmission costs.
The transmission costs are determined by the PUCT, and the rates vary by customer class.
So specific to DME, we are anticipated to see a 14.2% total increase in personnel expenditures,
including benefits.
So as I had mentioned, it includes the cost of living and the merit.
However, DME is also proposing 16 and a half positions, supplemental positions.
Otherwise, there's not a significant change in their overall O&M expenditures, and debt
service is estimated to increase a little over 8% in non-deck debt service, which includes
the $60 million that was issued in the current fiscal year, as well as the recent refunding
or refinancing on some old bonds that we were able to get some more advantageous interest
rates of the savings is $1.5 million over the life of those bonds.
So that's included in that total.
And there's no change in the deck debt service expense.
Yeah.
Yes, I have a quick question.
So the additional personnel, what categories do they fall into, engineering, linemen?
I think there's a slide.
Yep.
There's a slide coming up.
So it may be the next one.
If not, it's in one or two, but -- Thank you.
Yep.
Okay.
So we're making a look at the electric fund five-year forecast.
In 2024, we budgeted $290 million in revenues and $308 million in expenses.
2025, you can see that the amount that we're budgeting for revenues has increased to $392
million, and on the expenditure side, $396 million in expenditures.
So we still anticipate a use of reserve -- excuse me -- of $3.8 million.
Something to make a note of, the amount that we budgeted in 2024 for purchase power was
considerably lower than what we actually ended up anticipating to expend, and as we've talked
about in prior meetings, there may be the need for a budget amendment in the current
fiscal year to address that, and so you'll see that 2024 was $116 million in purchase
power, 2025 is $181 million, which aligns much closer to the actuals of 2023 and the
prior fiscal year.
So I just wanted to note that, otherwise, the major changes, as I had noted, was just
the increase in personnel due to the 16.5 FTEs that are being proposed, and then also
an increase in the non-debt service.
In 2024, it was $47.1 million, and we anticipate it to be $51 million in 2025.
So taking a look at the ending fund balance, we anticipate that DME will have an ending
fund balance of about $112 million next year, which will necessitate an anticipated additional
revenue need of 1.5%.
We did finance, as had been brought to the board earlier this year, $31.5 million in
purchase power expense, which you'll see in the 2024 purchase power securitization line
here, where the $31.5 million has increased the expenditures over the next five years,
the financing period, by $7.1 million.
And so, in total, DME's fund balance will be below the targeted minimum for the next
several years.
The policy does allow us to be below the minimum, so long as a plan is in place to bring it
above the minimum within five years, which is illustrated here.
So taking a look at DME's budget request packages, baseline adjustments, the first four baselines
listed there are related to the deck, and then a fifth request, which is an increase
to the outside meter reading contract for $50,000.
In terms of supplemental requests, as I had mentioned, personnel requests of 16.5 FTEs,
which totals a little over $2.3 million, including benefits, $222,000 for equipment and supplies
associated with those FTEs, and $315,000 for a GIS cloud management service.
So all in total, baselines and supplementals, a budgetary increase of $3,721,948.
So this brings us to the slide that I think will address the prior question.
Oh, actually, it's one more, sorry.
So this is a summary of their current positions, and so you'll see in fiscal year 2024, 187,000,
and then in 2025, preliminary, the total is 200.5 FTEs.
You'll notice that that number is four FTE short, and the reason is because in electric
system operations, we anticipate moving four DME dispatchers from electric system operations
to the new 311 call center.
So this is the slide that I was hoping to get to.
So this provides an overview of all the position requests for DME, and so what you'll see
is that there are a number of positions, but they are throughout the organization and in
multiple business divisions, and so I won't read all of them, but if you have any questions
on any of these, we'd be happy to answer any questions.
Yeah.
Are these new hire projections, or are these people coming up through the ranks as it were?
These would be new positions.
So that new position could be filled by someone internally or someone externally, but it is
a newly budgeted position.
And how do you, historically, how do you find that to be a higher percentage of internal
versus coming from outside?
Yeah.
Terry, I'll ask Terry, specific to DME, if internal or external.
Good morning.
I'm Terry Conell, the Assistant General Manager.
So we have, in this budget, we're requesting for a new crew for our electric system operations
and construction.
Those generally will be, like the senior journeyman-level folks and the supervisor, will most likely
be internal hires.
That be replaced, then, kind of through the waterfall of people moving up with new hires.
We've got three or four positions in the Energy Management Office.
Those will be new hires from outside.
Some of our tech services, tech operations, will most likely be from outside as well.
So most of these positions, I would guess, would be new hires from outside.
Okay.
Thank you.
Go ahead, Lee.
I'm considering the growth of our system and added new customers coming online over the
next few years.
Are we hiring enough linemen?
Well, I think the answer to that is we're hiring what we believe is the correct number.
And you're right.
We're trying to keep up with the growth.
If you look at just residential growth, over the last five years, we've added, I would
guess, over 10,000 customers.
We're back with this staffing level that we're suggesting here.
We're back to the staffing level we were at six years ago.
So we actually moved down 12 positions from six years ago, and now we're trying to get
back up to that level.
And what's most interesting is that our revenues are almost doubling.
So we're going from about a $200 million a year business to a $400 million a year business.
So we're experiencing a lot of growth.
And we need people.
We need very talented people to make sure that we can operate cost effectively.
Well, my question kind of is you've got a lot of people in the kind of operations, administration,
support areas.
And I'm just curious if this is enough linemen, growth in linemen, to support all of this
added growth we have, you know, with the conversion of our mains and adding coal and hunter ranch.
It's a whole lot of load, a whole lot of new lines.
I'm just curious if this is --
Yeah.
So these positions will be augmented, as we currently do with outside services.
So we have an outside contractor that does transmission-level work for us.
We have arrangements with service organizations, can help us with the distribution, construction,
storm response, and the like.
But this is what we believe we need to meet the expectations of our customers.
You know, all of our linemen and our field operations people have to be able to jump
to meet the customer's expectations in the middle of the night.
And so we think with an extra crew, this four-man crew, that we'll continue to be able to meet
those expectations.
Thank you.
Thank you, Terry.
Okay.
This is the second slide of the FTE list, if there's any questions on these specific
positions.
Okay.
Sorry, I'll let us finish the interviewers.
Oh, okay.
So taking a look at the DME five-year capital plan for fiscal year 2025, this is broken
up into two parts.
The first slide here is related to distribution, and the next slide is related to transmission.
So for distribution, the 2025 total is $60.2 million, and the five-year estimated total
is $315 million.
Transmission projects, fiscal year 2025 totals $14.7 million.
So between distribution and transmission, the total is $75 million.
Of the $75 million, $67.7 million is anticipated to be debt funded, $2.1 million is anticipated
to be revenue funded, and we have $5.1 million in anticipated cost participation.
Okay, any questions on DME?
Yes, thank you.
So if we return to the slide early on regarding structure of the three parts of the rate,
I just had one question for clarification.
So deck revenue is excluded from the ECA, where is that in the rate?
Is that part of -- is that applied as a credit to base rate funds?
I'll have Terry come up.
Yeah, on the income statement, the deck revenues show up as electric revenue.
The reason why they're not included in the ECA rate is because the wholesale deck revenues
are not subject to the ROI and franchise fee that we pay to the city.
And just on this slide, the ECA rate now, ECA rate and the TCRF rate are also burdened
by that general fund transfer amount as well.
So the -- shown in the base rates, it's actually -- we do collect the GFT on the base rate,
but we individually collect the GFT, general fund transfer on the ECA and the TCRF components
of the rate as well.
And so then deck revenue would kind of come in as like a kind of cost of service transfer
from this slide or --
No, it doesn't actually make up -- it's not something that we include in the rate because
it shows up as retail revenue.
It shows up as revenue on the income statement.
So it is -- when you look at the fund balance itself, it's a credit to the fund balance.
So it helps us to keep the rates in check.
Does that make sense to you?
Yeah.
So it doesn't -- so just as a credit to the fund, which then just -- but that in effect
lowers the base rate.
Well, it lowers the ECA requirement because it is a revenue that's collected for energy
that's purchased.
Okay, so it's kind of outside the ECA but still part of that power purchase.
Right.
Okay.
All right.
Yeah, thank you.
Would that be baked into non-rate revenues in the P&O?
No, it is not.
It is actually in the retail rate revenue.
What kind of things are in non-rate revenues?
It's fees, like connection fees, it's interest we gain on our fund balance.
It's just the non-billed rates that we give directly to every customer.
Oh.
Aaron, you need to put your microphone on.
I'm probably just not close enough.
Okay.
Just got to have a closer -- okay.
Other questions?
Thank you.
Okay.
Thank you, Teri.
Okay.
Okay, moving on to customer service.
So this is an organizational chart of the customer service fund, and something that
you'll notice that is different than in prior years is that in the current fiscal year,
the customer service fund now reports up through DME, and so there's two divisions within the
customer service fund, one being the newly formed 311 operations, as well as the existing
customer service group.
And so in total, customer service for fiscal year 2024 has 62 and a half FTEs.
And just talking a little bit about the customer -- or the 311 call center, because I know
that we have some new members on the board.
The city, prior to implementing 311, had a very decentralized contact structure.
So citizens and residents, when they reached out to the city with a concern, would be routed
to the department, who may be routed to another department.
The 311 call center really centralizes all of that communication, and so all inquiries
will come into 311, and then 311 will be able to communicate that to the appropriate department
and follow up with the resident, essentially providing a single point of contact for all
their needs, regardless of what the inquiry or the concern may be.
So this is a position summary for customer service, as I had noted.
In the current fiscal year, 62 and a half FTEs.
The preliminary for 2025 is 65 and a half, and so as you'll see in that 311 call center
line for 2025, it increases from 6 to 10.
Those are the four DME dispatchers that are coming over from electric operations.
And then customer service.
We moved six positions from customer service over to 311, so they decreased by six.
And then you'll also notice the decrease from 62 and a half to 55 and a half.
There was one more position, a director level position, that was reclassified to another
area of the city with the movement of 311 and customer service now being under DME,
who had appropriate managers and directors in place to provide that level of supervision.
So in total, 2025, we anticipate 65 and a half FTEs, with the only position request
being the movement of the four positions from DME to customer service.
So taking a look at the baseline and supplemental requests, baseline requests include increases
for postage, as well as two contract price increases.
And as far as supplementals, a request for software and build out specific to 311, as
well as two reviews, one to be done on the credit and collection process, and the other,
an operational review as 311 is implemented and integrated with our existing customer
service department.
So total requests are 230,200.
Any questions on these request packages?
Yeah.
To offset the postage increase, is there any way that we could do electronic statements
so people can opt out of receiving paper?
Good question.
I'll ask Krista to speak to that.
Here comes Krista.
I don't get paper.
Well, I get paper, I don't want it.
Madam Chair, board members, Krista Foster, customer service.
Customer service is actually in the middle of a push that we're about to start marketing
more to get people moving to electronic enrollment.
Currently, we are looking at opportunities for trying to make paper opt-in versus opt-out.
We are running into a couple of hitches with that, just with the vendors that we're using
for our bill print and for our payment portal.
So I'm not 100% that I can guarantee you we could go to opt-in for paper, but we are going
to be making a very large push over the next year.
We actually have several pretty neat things that I think you guys will like seeing coming
through.
Okay, so taking a look at the customer service fund financials.
In 2024, our budgeted revenue was $9.8 million.
Customer service is an internal service fund that is funded by the other funds within the
city who utilize customer service.
For the most part, that's primarily made up of the utilities for utility billing and customer
contact.
On the expense side, $9.8 million in expenditures.
For 2025, we do anticipate the revenue to increase to $11.4.
Again, those are transfers from internal departments and corresponding $11.4 million in expenditures.
You can see one of the primary drivers is personnel increases from $5.1 million to $6.5
million.
Customer service has quite a few employees, call center employees, and the 3% COLA and
2.5% merit are a big part of that increase in personnel services.
Otherwise, not a whole lot of change year over year with the customer service fund.
Okay, any other questions on customer service before we move on?
Really quickly, I'm noticing the transfer in from electrical is going up.
I'm assuming that's because the four DME dispatchers now moving over.
Those services are now handled by customer service versus DME.
But then water is also increasing by $600,000 in expected transfers.
Are we seeing an increase in water requests?
The way that we allocate out internal service funds is we determine the percentage of work
that that internal service fund is providing to those other departments.
So it's really more of a proportional increase as customer service or another internal service
expenses increase, whether or not water or electric has more billions, that proportional
share is still going to increase.
So, yeah, it's simply driven by an increase in customer services expenses that drives
those transfers.
The reason water might be receiving a higher proportion, a little bit higher proportion
compared to the other services is just that you have a formula that splits that cost.
Yes.
Yeah.
So we look at the number of billings.
We look at the total amount that's being received, the number of customer accounts,
and that all plays into how much each utility contributes to the customer service fund.
Yep.
And so does that also, fair to say, within the wastewater, that same type of mentality
or ratio is being used?
Yes.
Yeah.
Can you provide me any kind of insight on usage adoption of things like engaged debt
and any other thing we can use to be extremely efficient with how we deal with our customers,
but also keep a high level of service?
Is that stuff that's being used?
What kind of efforts do we do to try to increase usage, but keep customer satisfaction high,
things like that?
That's a good question, Chris.
Again, Krista Foster, customer service.
So customer service has a number of self-service options that we promote on our website.
We promote them on our phone lines.
We have our representatives also promote them.
I believe that over the last 12 to 18 months, we have put out about 10 customer-facing self-service
items that now receive roughly 15,000 contacts a year.
We're working on trying to drive those even more.
We are in the process of launching a self-service residential service application.
We already have one out for the commercial services so that they don't have to call in,
but they can just fill that out online.
We're in the final stages of developing one for the residential services as well.
We're also in the process of making our pay agreements, an online process that customers
can just go online 24 hours a day and request that as opposed to having to call in.
So we are very cognizant of wanting to drive those calls to self-service.
We also know that our customers prefer self-service, a lot of them.
So yes, we are definitely making efforts.
How do we gauge customer satisfaction with things like that?
So the way that we gauge customer satisfaction formally in customer service, if you're talking
with a representative, is we automatically drop that call into a three-question survey.
We ask the customer how satisfied were they with the support that they received, then
was this the first time that they've contacted us regarding this instance of an issue, and
was that issue resolved?
So that allows us to get a customer-reported satisfaction level as well as first call resolution
rate.
Because the way I see it, I can think that I resolved your call, but if you don't think
I resolved your call, yours is the important opinion there.
So that is what we run.
And we are running over 94 percent very satisfied customers and over 95 percent first call resolution
customer reported.
Thank you.
Anything else?
All right.
Thank you.
Okay.
Turning now to water, wastewater, and drainage.
So taking a look at the water and wastewater organizational chart.
This is just water and wastewater.
It does exclude drainage and watershed protection in this chart here.
So for the water and wastewater utility, the total FTE count in the current fiscal year
is 185.
For next fiscal year, we do anticipate 3.4 percent growth in residential customers.
This is related to water.
And 5.3 percent growth in commercial customers.
Additional factors that we are making consideration of is the 100 coal development, as well as
growth in the muds that we're seeing.
So in terms of revenue projections, as we had talked about previously, a 3 percent increase
in rate revenues based on growth.
Our forecast does include some reduction for water conservation implementation impacts.
So in future years, our anticipation is that residents will start to conserve more and
therefore consumption would be more reduced than otherwise.
And then also, if we have put together an application for the Texas Water Development
Board funding for the Ray Roberts Water Treatment Plant expansion project, which certainly has
some favorable rates associated with it.
And so if that's something that we are successful with, we'll bring it back to the board with
the rates associated with that.
On the expense projection side, again, just an increase in personnel costs associated
with the coal and the merit.
Thank you.
On the growth projections with the 100 coal development, now the mud growth, is that in
correlation with the 100 coal, or is that separate?
And how many others are there?
That's separate.
And I don't know.
Are you projecting?
Yes.
I mean, how many are you projecting that we're looking at, then?
We currently have a handful.
I don't know, Kyle, I'm not certain if Kyle knows on the mud projection, we can come back
to that.
I'm just curious as to, because it seems to ebb and flow with the popularity, yet it stays
constant in that it's eternal.
Right.
Okay, thank you.
Okay, so this was a graphic that we had provided last time, and I know the board has seen prior
to that.
But just wanted to show it again, because we did have a question about the red growth.
And so what this graphic is intended to show is the blue is the maximum demand, current
maximum demand that we saw as of August 28, 2023, which was 41 million gallons a day.
And the red is the anticipated demand in megagallons, or million gallons per day, you know, based
on growth.
So what you'll see is, you know, that the red does exceed the black dotted line, and
the black dotted line is our current capacity.
And so I just wanted to bring this back really to, you know, note that this is reflective
of maximum capacity, as well as the plan for the expansion is to build the footprints of
the building and expand, do the expansion to 20 million gallons a day, add that capacity,
but outfit the building in a way that we're able to add capacity as we're seeing that
demand increase.
So it's not just a fixed expansion up front, and then if the growth doesn't come, you know,
we're stuck with a plant that is, you know, has capacity far more than we need.
We're able to put in the infrastructure and the machinery as that growth actually occurs
to be able to then meet the daily demand.
Did you just say if the growth doesn't come?
As projected in this chart, yes, let me clear for that, the growth will come.
Build it and they will come.
And as the growth does come and we project that, what is the triggering timeframe to
start the expansion and what is your expectation on the completion before we have to trigger
and go again?
Yeah.
So I believe for the current expansion, I think it's three, three or four years.
I'll ask Kyle to come up and talk about the timeline.
Good morning.
Kyle Pettigo, planning and engineering division manager.
So currently the Ray Roberts expansion is out for, it's being advertised, the CMAR project
for the base project, which is the initial 20MGD expansion and like Matt said, installation
of the underground infrastructure basins so that we can modularly increase that.
As far as the future triggers, it will be monitoring flow and maintaining those projection
calculations as we go through our next water master planning exercise.
And do you have just a guesstimate as to the construction timeframes who were not caught?
The construction timeframe, since we would be doing most of the infrastructure up front
with the initial expansion, most of the underground infrastructure, which is more time consuming
to install, the construction timeframe to install new equipment between design, procurement
and installation is right around one to two years instead of three to five years.
And do you go through a building process, building inspection process like the rest
of us?
Yes.
And it's just a year and a half?
Yes.
Okay, thank you.
Okay so taking a look at the Water Fund five-year forecast in 2024, we had budgeted $63.1 million
in revenue and budgeted $58.7 in expenditures.
Something that you may recall from a prior slide last time was that the summer of 2023
was very hot in July, August and September and so the water consumption was notably higher.
And so you'll see in the 2023 actuals for revenue there, $48.3 million and in 2025,
we're at $49.5.
And so not too much of an increase there between actuals in 2023 and 2025, but that's largely
due to a greater than anticipated consumption amount in 2023.
And so when we budget, we're budgeting on a normal year, so not a wet or a dry year.
So I just wanted to note that.
For 2025, we anticipate $55.4 million in total revenue and $54.8 million on the expenditure
side.
Personnel services, as you've seen with the other utilities, is increasing.
We're about a million dollars, as well as the debt service transfers are increasing
from $11.8 million in 2024 to $14.5 million in 2025.
So this five-year forecast does contemplate a 3% increase in revenue or revenue sufficiency
requirement for 2025.
And as I mentioned, we'll come back with some rate structures that will meet that 3%
need on July 8th.
So what you'll notice here, as was the case with solid waste, is that the ending fund
balance that's projected in 2025 is $32.8 million, which is above the upper target of
$27 million.
But something that you'll also notice is that the debt service coverage ratio is below
one and a half times.
And so, again, this is something that we're trying to balance between the debt service
coverage ratio and the fund balance targets.
But as you'll notice, the fund balance does start to fall within the targeted upper and
lower bounds in years two through five.
And so that's part of the reason why we feel that that 3% increase in revenue is needed
in 2025 and in anticipation of those next years.
If there were not to be an increase in revenue in 2025, it would simply have to be a greater
increase in revenue in a future year to meet the requirements.
In 2026, is there any concern with how low that is, doesn't that drop below our legal
obligations on the debt service coverage?
That's a great question.
So the debt service coverage ratio, although we're showing it by fund, by the bond covenants,
the utility system is comprised of the electric, water, and wastewater system, and it's a combined
amount that is looked at for the covenants.
So our policy dictates that each fund should maintain that one and a half or at least one
and a quarter percent debt service coverage ratio.
But it's viewed holistically as the utility system.
So certainly for the water fund, this is something that we're keeping an eye on, and that we
do want to increase that debt service coverage ratio.
Okay, so taking a look at the water budget request packages for 2025, there's a number
of baseline adjustments.
The most notable is the increase in chemical costs of $1.7 million.
The remaining amounts are relatively small contract and cost of service increases.
And then for supplementals, water has requested nine FTEs for 2025 additional FTEs for a total
cost of $957,431 including benefits.
So total requests, total $3,870,086.
What is the employee recruitment?
Is that to recruit those nine or -- or do you have a bunch of retirements coming up
too?
Well, there is retirement, but we also -- the employee recruitment is to recruit its external
recruitment to recruit new talent for those nine positions, several of which the water
operations manager, we're looking to bring in new people.
Are you using headhunter types for these higher up positions?
Not that I believe.
I think it's more advertising, more advertising, just getting a wider spread for the drop request.
Okay.
On the sludge recycling, that's an expense.
Is there an additional expense going to the landfill or is that just a total turnkey cost?
I believe that's turnkey, that's -- and a portion of it is due to the expansion at Pecan
Creek.
I'm just curious as to, there's that cost for the recycling to the landfill, but then
is there a charge from the landfill for taking it or is that all tied in?
I believe that's all tied in.
Thank you.
Other questions?
Thank you, Kyle.
Okay.
So, taking a look at the water position summary, in 2024, we budgeted 110 positions.
And in 2025, the preliminary number is 119 with the nine requested positions.
So, these nine requested positions, seven of them are water operators, three at Ray
Roberts and four at Lake Lewisville.
Something in a review of the organization that was found is that at the plants, we had
very few individuals who were working overnight, and it presented a safety issue at the plants
because the plants run 24 hours a day.
And so, these seven positions address both the safety risk that is currently present
as well as, you know, bringing the level of personnel up to an industry standard.
The apprentice is just in addition to get someone in to learn, and then a proposed assistant
general manager.
Currently, water is one of the few utilities that does not have an assistant director or
assistant general manager.
And so, that's to provide support to the organization.
So, looking at the Water 5-Year Capital Plan for fiscal year 2025, it totals $130.4 million.
You'll notice that the primary driver of that are the plant improvements of $78.6 million.
Of the $130.4 million, $129 million of it, so nearly all, is anticipated debt funded.
And although we wrote debt funding, this is where we're really looking at those external
programs, either through the state or federal programs, to obtain the best financing terms
that we can possibly get in order to do those plant improvements.
So, it may not end up being a bond issuance, it may end up being a loan program through
the state or the federal government.
Question?
Yeah.
Thank you.
Please answer to your microphone, please.
Thank you.
Yeah.
Miscellaneous.
Seems to be one of your largest categories.
Yes.
So, what's miscellaneous?
Yeah.
What's it this year?
I don't, I don't, Kyle, do you know offhand?
If not, I can bring that back to you.
Yeah.
That's just, I mean, I know, I've said this before, is it a big number under something
that says miscellaneous is?
We can provide, that's the itemized breakdown with the submitted capital improvement plan.
What do you think that covers under miscellaneous?
Miscellaneous are any of the items in there that don't fit under the other categories
necessarily, or bridge the gap between categories, so for either a sludge improvement project
that could fall under there, not our lift stations, but some of the other conveyance
projects are under there as well.
I would like to recommend you show a breakdown of that when you come back.
Yeah.
That'd be interesting.
That's a good point.
I mean, that's a pretty big number for just open miscellaneous.
I'd be curious as you break that down, are there some that you would consider historical
type costs you know that they are going to be coming from your previous experience that
would fall under miscellaneous versus given in its own line item?
Does that make sense?
It doesn't make sense.
We can provide that with the breakdown.
Thank you.
Thanks.
It goes past us anyway.
Okay, so turning now to the Wastewater Fund, we anticipate 3.4 percent growth in residential
customers in 2025 and 4.1 percent growth in commercial customers.
Revenue projections, 3.7 percent increase in rate revenues just based on growth, and
that's not an increase in rates, that's just an increase in the revenue associated with
growth.
But we do anticipate that potential rate increases are going to be needed in order to meet the
debt service coverage ratio and policy targets going forward.
And again, on the expense projection side, personnel increases due to the COLA and the
merit.
So taking a look at the Wastewater Fund, in 2024 we budgeted $38.2 million in revenue
and total expenditures of $39.9 million with a use of reserve of $1.6 million.
In 2025 we anticipate $39.6 million in total revenues and $40.4 million in total expenditures
with a use of reserve of $740,000.
And as was noted, personnel services increasing from $6.5 million to $7.3 million, and then
debt service transfers increasing from $8.7 million to $10.8 million.
So taking a look at the fund balance, at the end of 2025 we anticipate a fund balance of
$14.4 million, which does fall within the target reserve.
However, that does include an 11 percent increase in the revenue sufficiency requirement.
And so this was something that was known last year that we had brought forward and discussed
with you in terms of what future years may look like.
And we'll again come back on July 8th with some options to meet that revenue requirement.
So taking a look at the budgetary requests for wastewater baseline adjustments, there's
just two, an increase in cybersecurity consulting and an increase in chemicals again.
And then one request for an FTE.
So the total baseline and supplemental requests totaling $916,369.
Any questions?
So taking a look at the wastewater position summary, 2024 budget, we budgeted at 101 positions.
This does include drainage and watershed.
And for 2025 preliminary, we're looking at 102 with the one wastewater addition.
The wastewater addition is a water reclamation technician that depending on experience would
be classified as one through four.
So taking a look at the wastewater five-year capital plan for 2025, the total capital plan
is $100.4 million, which is primarily driven by the replacement of lines and lift station
improvements.
Could you go back?
Yep.
$3 million in vehicles.
Yes, those are, yeah, vehicle replacements.
Okay, drainage.
So drainage, as you know, is part of the wastewater fund, but is a separate division that receives
separate drainage fee revenues.
And so drainage really has two components within it.
One is watershed protection, and watershed protection reports up to the Director of Environmental
Services.
Watershed protection currently has nine FTEs.
And then drainage currently has 17 FTEs and reports to the Director of Streets.
So between watershed and drainage, the current organizational chart includes 26 FTEs.
Taking a look at the drainage division five-year forecast, there's not a whole lot of change
from prior year.
We do anticipate a small increase in personnel services, but otherwise it's relatively flat
with the exception of the $130,000 in baseline adjustments that you'll see on the next slide.
So these are the proposed baseline adjustments for drainage.
Each of these are increases to the cost of existing expenditures or contracts within
the drainage fund, totaling $130,552.
Questions?
Any questions?
No.
Okay.
So as I had mentioned earlier, we do intend on bringing back proposed rate structures
for each of the utilities.
There's no anticipated change in drainage fees, but we do anticipate bringing forward
rate structures for electric water, wastewater, and solid waste.
And wanted to provide just a history, I know that the Board has seen this before, of where
rates have been over the last five or six years.
So between 2019 and 2021, we did do a number of rate reductions, and rates have not increased
until the current fiscal year in which we did a mid-year rate adjustment for DME, and
we had an 11% rate adjustment for wastewater.
So the solid waste and water funds, in particular, have not seen an increase for a number of
years despite where we've seen some pretty large increases in the cost of doing business
and the cost of personnel over this timeframe.
So just wanted to provide this as a summary, but we'll circle back to it on July 8th.
Yes?
So just a question on the wastewater, are we looking at an additional 11% increase?
We're looking at an additional-
As this is showing?
That's what I'm-
Yes, correct.
Yes.
And next year?
Right, in total revenue.
So what we're looking at is how to structure that.
Is it residential, commercial, industrial, fees, in order to meet that revenue sufficiency?
That's fine.
I've just- the 11% caught me again for the second year in a row, 11% increase.
Yes.
Yep.
I look forward to that conversation.
Yeah.
And that was something, just to note, that we did bring forward last year.
It was known that this fund would need additional revenues going into the next couple of years
with the growth that we're seeing, with the increases in personnel costs and debt service.
So-
Yeah.
And I know we've already done this, we've gone over it, but it just reminds me of what,
in the past, it seemed like we would- water and wastewater went together as a pair, and
then if you had an increase in one, you had an increase in both.
Any-
Pretty level increase, too.
Yeah.
It was like we'd do 8%, 9%, or 9%, 8%, and I realized some of it was making the budget
work.
Right.
Do we have any insight into why we don't- why that's not happening anymore?
I mean, is it just we're realizing the actual cost of our wastewater?
I mean, we're getting a better idea, whereas it used to just be a huge estimate of what
it was going to cost us to run the place.
Yeah.
I think it's a couple different things.
I mean, I think, you know, one is potential differences in, you know, the cost of- in
the cost of O&M, so personnel.
As you saw in previous slides, the cost of chemicals for one, you know, fund is different
than the cost of chemical increases in another.
I also think that some of it is due to the infrastructure needs associated with each of
the funds.
The water is in a better position currently, you know, from an infrastructure perspective
than wastewater, where there is more need currently than there is on the water side.
So-
So that debt service is what's reflected there mostly?
Yes, quite a bit of it is driven by these large infrastructure projects.
Okay.
Yep.
All right.
Thanks.
Where in our-
Oh, sorry.
Where in our various income statements do we identify uncollectible or otherwise walked
away from revenue that we build, and does that come back in a future analysis, as well
as trends on 30-day past due all the way through when we're walking away from this stuff?
Yeah.
So we do budget for bad debt expense, and it is included.
I don't know offhand exactly in which line.
It's within the expenditure budget.
And so it has been, I know after we reviewed it this year, relatively steady.
We're not seeing an increase in write-offs for bad debt.
Does that help?
Yeah.
It's interesting what direction that's going, and what percentage we're losing, so to speak.
We're typically pretty low on the low end of bad debts.
Yes.
Like 1%.
Yeah.
Okay.
It is very low.
Perfect.
Thanks.
I think Krista would like to speak to that.
Krista Foster, customer service.
Customer service does track our bad debt, and we actually keep both the gross and the
net bad debt tracked.
So as we're receiving some of those funds back in, we kind of keep them going.
I want to say that we run less than a 0.25% of all of our revenues.
So we monitor those numbers very closely.
If I go back and find that that number is off by very much, then I will let you know.
But yes, it is something that we monitor and track.
And we look at our age debt on a monthly basis.
We recently did some enhancements to that process so that typically with the billing
system you're going to get that in three different intervals, right?
So we've actually increased that, does some custom reporting, so that we're looking at
it at every 30 days through six months old.
So we get to see those breakdowns and see residential versus commercial the whole bit.
Thank you.
Anything else?
Excellent question.
Thank you.
Okay.
So talking a little bit about next steps, on July 8th, as I had mentioned, we'll come
back to you with rate structures for each of the utilities.
And then on July 23rd, we will provide counsel with a preliminary overview of the utility
budgets and rates.
On August 10th, we have a budget workshop with the city council, followed by public
hearings and budget adoption.
There may be some items that are brought back to you in July and August, such as the electric
cost of service study that will be added in to this calendar as well.
With that, are there any additional questions we might be able to answer?
Yes.
I have one.
Yeah.
The budget workshop for city council, is that an open or closed meeting?
It's a public...
It's an open meeting.
It'll be open to the public if you want to attend.
I would be curious about that, because this is an awful lot of data to absorb.
And I wonder if at some point in the future, our public utility board might want to have
a workshop rather than just presentation of the budget.
I'm assuming the council's going to have the exact same presentation.
Yeah, for the utilities.
The workshop will also encompass the other departments within the city.
The general fund, the internal service funds, yeah.
Thank you.
Everything.
Further questions?
I was just going to add in Christine Taylor, assistant city manager.
I took note of a couple outstanding questions, so standard protocol will do a follow-up memo
that will accompany your backup for your next budget on July 8th.
Thank you.
All right, seeing there's no other questions, it is 10-21.
Do we have a motion to adjourn?
Motion to adjourn.
Okay, your turn.