Feb 10, 2020 Public Utilities Board on 2020-02-10 9:00 AM

- Okay, it is nine o'clock and we do have a quorum. So we'll call to order the February 10th, 2020 City of Debt and Public Utilities Board. The first item is receive a report, hold a discussion, and give staff direction regarding credit and collections, performance, and processes. - Madam Chair, board members, Christa Foster, Utility Customer Service, and I'm here this morning just to give some updates on some of our different credit and collections processes. Most importantly, to give an update on the release in year today on outstanding bad debt. As everyone may remember, the new board members are certainly going to get the quick refresher that in February of 2018, we made some changes to our credit and collections practices. We added some additional funds to our plus one utility assistant program. We introduced a couple of new deposit waiver options for customers. Our internal credit score and rating system was modified, which was the largest of these changes. First, interest no longer counted as a credit event. Credit scoring allowed for additional occurrences before it impacted a customer negatively. And we changed our process from requiring a two month deposit on all at-risk accounts to one of our credit tiers requires a one month security deposit. When Navigate Consulting was here in March of 2019, they were reviewing our credit and collections processes and did express some concerns about the growing rate of the bad debt that we had seen since those changes had been put into place. And we made several updates through last spring and summer, with the last being August of 2019, when we provided the bad debt performance update to the public utilities board and the council. Since that time, when we came in August, it was trending in such a way that the FY18-19 bad debt growth was 44% higher than the previous year, which is very alarming. We were tasked to please come back with possible containment strategies if it was continuing to trend that way, but to be sure to monitor that growth. At this time, with the full third quarter included, the growth has slowed somewhat and we are at a total 26% increase over the previous year's bad debt, and that is just over $330,000 for that time period. It's stabilizing somewhat, but it is not fully stable on our debt growth. This is still an area of concern. We are not bringing containment strategies today, but we are still very closely monitoring the situation and requesting that no additional changes be made to our current processes. So the other thing that's important to note is that the very early data that we're beginning to see, we're starting to see that the decrease in bad debt growth as well as late fee assessments is going down, but that trend seems to follow the patterns that we're seeing with the growth in the Pay As You Go program. So we would like to continue focusing our efforts on the Pay As You Go currently as our cost containment strategy. The second reason that I'm here this morning is our Red Flags Rule. We will be bringing to council a Red Flags Rule ordinance to formalize our policy. As a quick summary, Red Flags Rule was enacted in 2008 and all creditors were required to be in compliance by 2009. And all this is, the Red Flags Rule is here to formalize the requirement and the obligation that creditors have toward their customers to protect them from identity theft. So we have been following Red Flags practices, but during a review of our program and some of the things internally in our internal directives, we realized that there was never a formalized ordinance or policy brought to council. And so that's what we are doing now. We wanted to go ahead and just do that and get everything put together at once. When the Red Flags Rule first came out in 2008, Texas Municipal League put together a draft policy and program where they help with identifying the Red Flags as they apply to utilities in the municipal areas. We are using that model to create our program and we'll be bringing that back to you. So the next steps that we have is for you guys to review that as it comes back out of legal. We are going to recommend that it be adopted as it stands, that we will continue to monitor our uncollectible debt trend and we will be providing information back at the end of April, whether that be in a staff report, if there's nothing significant to report, but we may again be coming back with cost containment strategies if that changes significantly. That we're gonna continue with our current processes and focus on the growth of our PHUO prepaid utilities. - And with that, are there any questions? - Yes, can we get a copy of the Red Flags provisions? - You will be getting a copy. I had hoped to attach them before this so we could have that kind of discussion. It was still illegal, so we hadn't quite gotten there, but it will be coming in a couple of weeks. But yes, we will make sure that you have a copy of that. - And back on the page with the graphs, I noticed one of the covers, three quarters, and one of them covers years. The dollar amount that's on that, is that the actual write-off or the balance of uncollectible debt? - That is the actual write-off. So as you see, the $448,000, that was the entire amount of written off bad debt for the entire FY17-18 fiscal year, where the 18-19 fiscal year to date is $330,000 for the first three quarters. - But the 18, we're talking about a three quarter period versus a four quarter period? - Correct. - So. - You will see. You will see it in the graph. - So $440,000 is the number, $330,000 times four over three would be $440,000. - Well, the third quarter is actually the lowest, as you can see in each of those graphs. That is the lowest amount of bad debt that we generally produce each year. - So it'll be more than $440,000. - Typically, well last year, the amount of debt in the fourth quarter was $180,000. And as of yet, we have not seen a quarter that has not had some level of growth overall. So it is likely that it will come in above that. - And the three quarters that you're showing on the 2018-19, is that through June 30th? - It would be through the June 30th, yes. - Okay, and what's the number from June 30th through September 30th? - We don't have a number yet. The way bad debt works is it's written off six months after the account closes. So what happens is we won't see those numbers for a delayed period, which is why we're not into the current fiscal year. It has to have been bad debt abandoned for some time. It will be the first of April, but for last year, we'll be completely closed out. - So how does this impact the city budget? Does the city budget have a number in there? - Where's finance? - Okay. - David Haynes, director of finance. As we budget each year, we take into account in our revenue projections, bad debt. So ultimately, when you look at any utility funds, it's represented in the revenue forecast that we have, and ultimately, the cost of services associated with that on the expense side. - So how much do you budget for in a year's time for bad debt release utility? - We can look at that, and I don't know off the top of my head. I think a figure for you is just part of our revenue projections, but we can come back and estimate that. And it's gonna be in line with what's here distributed amongst the utilities, but we don't necessarily have a line item for bad debt. - And this is just water and wastewater, is that true? - It includes electric as well. - Includes. - What was the impact? Most utilities do the two months deposit, because by the time we know that it's going bad, more than a month has passed. So is that the main reason why we're seeing the increase, and is it both residential and commercial? - It is primarily residential, and it is because we have far fewer residential deposits on file. We saw about an $800,000 decrease in the amount of funds that were attributed to residential departments. - And was that internal direction or direction from city council, or? - This was city council direction. - I was just curious if you had any demographics regarding the debt, particular sectors, students, residents? - Actually, we did provide some demographics in terms of, we took an overlay of the different income areas based on census data, and overlaid that with the uncollectible debt, and found that there was not a specific trend one way or the other. - Any other questions? Did you get what you need from us? - Absolutely. - Okay, thank you. - Thank you very much. - You did have another question, did you? - No. - Okay. - The next item is receive a presentation, and hold and discuss a discussion regarding the water and wastewater cost of service study. - Good morning, PUB Chair, Nick Benson, Assistant Director of Finance. I have a brief presentation for you this morning to review the cost of service and rate design study that we're currently in the process of updating for water and wastewater. If you have any questions, feel free to ask me. I can address there's plenty of staff that you have appeared to address, so. A quick overview of the presentation, so we will walk you through the cost of service and rate design process and what that looks like. We will also identify the process of identifying our revenue requirements. So how much revenue do we need from each customer class from water and wastewater to cover our cost of providing service. We'll also review the pricing objectives that are currently identified in this study, the existing one and the new one that we're currently in the process of updating, and also review the next steps with you. So the cost of service and rate design process in the fall of 2019, the city contacted with TELUS to update the city's cost of service and rate design study, and this study is updated every five years. The current study that is in place in the financial model that we're using must be in place in 2015. The current study period will take us from 2020 to 2025, and the cost of service and rate design study is basically meant to identify the revenue requirements of the water and wastewater utilities where we know what rate to charge to recover our cost. We are also using principles identified by the American Water Works Association, also referred to as AWWA. This organization is used by several utilities on the water and wastewater side when benchmarking their rates with similar municipalities around the area. So the cost of service process, this table writes it down to five simple steps. You can see step number one being at the bottom, step number five being at the top. So we are currently working on step number one through three. Here pretty soon, we will be working on the design and the rate structure. That's why we're here talking to you today about how the rates are structured and what our pricing objectives are. Step number five, we do anticipate finishing the study and bringing it back to the PUV and city council this upcoming summer, so summer of 2020. Now this diagram outlines the different elements that go into identifying the revenue requirements for the different customer classes. So starting on the left-hand side here, you can see the O&M budgets. So over the last couple of months, we have been setting our operating budgets that are approved by the PUV and city council to tell us to update the financial model. We have also sent them our capital budgets for a five-year period. We do budget every capital budget, water and waste water in a five-year period. Transfers to reserves, we do have that built in here also when identifying our revenue requirements. And then we did consider key factors such as inflation, interest rates, and finance in these projects. So as we get further out of that five-year period, the project cost typically increases. So we are building that into the financial model. Financial policies, we also are considering our debt coverage ratio and our financial reserves in water and waste water when looking at our rates that we're setting. Now I think the one important thing to point out too is that both water and waste water have revenue that are non-rate related. We are backing those revenues out of the utilities not to skew the numbers one way or the other. So the current pricing structure and pricing objectives and the main reason we want to talk to you today, so the current pricing model that we have in place has two main pricing objectives. The first will be in a tiered pricing structure to incentivize water conservation and the second one being establishment of cost of service based rates. So this working model that we are currently in the process of updating, we do use it every year to input our operating budgets into and then come up with a cost of service rate that we can use for wholesale customers and residential customers and so forth. I kind of want to give everybody a couple examples of the residential rate structure and how the water conservation comes into play when we set our residential rates. So you can see wastewater customers are here at the top. There are two components to a wastewater bill that are billed each month. The first one being a facility charge which is a fixed fee of $11 a month. You can see that here. And the second one being a volume charge of three per thousand gallons. I want to point out that wastewater is a non-metered service. So what we do to get the volume and the billable volume for wastewater customers is based off their water usage. We actually call that an average daily usage and that's established during the months of December, January, and February. If a household does not have that established usage so someone wants to move in a house in June, we would use a minimum of 5,400 gallons until that average is established. The average of 5,400 gallons, if you remember in the budgeting process, we actually decreased it from 6,000 to 5,400 about a year and a half ago. So that's what the PDB and city council decided to do. Oh, water is similar to wastewater. We do have a facility charge that you can see here of $16. So a little bit more. This is for a three quarter inch meter. This is the most typical size meter for residential customers in the city. And the volume charge is a little bit different for water customers. We do break it into two different times of the year so you can see a winter rate and a summer rate. So as people start irrigating their yards more in the summer and the rate does increase a little bit as your water usage increases. So you can see a customer using zero to 15,000 gallons is being charged 415 per 1,000 gallon. Over 50,000 gallons, you can see is 1090 per 1,000 gallons. Also kind of want to show everybody where the majority of our customers are in these tiers. You can see the zero to 15,000 gallons is the majority of the customers. This is 2.7 billion gallons. I know this says 2.7 million, but it's in thousands. So 2.7 billion gallons of water in that first tier of zero to 15,000 gallons. It accounts for about 17.4 million in revenue. So the next step, so we are here talking to you today about where we are in the cost of service model. So like I said, we have been working with Retellis since the fall of 2019 to update this model. They will be providing us a financial model we can work with throughout the budgeting year as we come back to you with those budgets each year from the five year period. We do anticipate this to be done around the summer. So June, 2020 coming back to the Public Utility Board and City Council with that final product for your review and then final adoption of the rights will be in September along with the budget. And with that, that concludes the presentation. - Questions? - I was just curious as to what you folks tell people to do to conserve water. Are there publicized policies and suggestions? Anything tied in with the sustainability program, anything like that? - Let me ask Dr. Banks to look here and address that question really quick. - Good morning board members. Ken Banks, General Manager of Utilities. To address your question, the sustainability group has an energy audit program that also includes a water audit. And so typically when we go out, we'll perform both of those services for a requesting individual. And those, the water audit in particular will be focused on irrigation, indoor plumbing, all types of things to help people understand how they can conserve water to manage their systems better. We also have several types of messaging with regards to water conservation. We have a drought contingency plan as well that will enact certain policies if we end up getting into a situation where we have concerns about water usage. Typically we don't get there, but we certainly have those policies in place. So those are a few examples. We put on workshops on water conservation through the sustainability group and sustainable schools. So there's a lot of different elements. And just to point out too, as Nick went over, our entire pricing structure on the water side is geared towards conservation. So the more water you use within those tiers, the more amount you're going to pay on a per-gallon basis. - Thank you. - Sure. - Where did the direction come from to have this tiered pricing in terms of, it seems to me that the low end is extremely cheap if you could get less than 15,000 gallons of water, you've got a way of a deal at the other extreme over a penny a gallon seems pretty high. I also do business in the desert and our rates aren't quite to that level yet where water is truly scarce, right? Who gives you direction in terms of, 'cause obviously it's a judgment call at that point to see how punitive you get at the high end and how subsidizing you get the low end. - And that's a conversation we'll have with the consultant when he comes back in the summer of 2020. So who gives us direction? It'll be the Public Utility Board and the City Council. So we work with the consultant to update that financial model, we bring it forward to the Public Utility Board and City Council with further direction. But these two pricing objectives are what that model is based off of. So I think the answer to your question would be, we get that direction from the Public Utility Board and City Council during the budgeting process annually and during the rate setting process annually. So as we kick off that season, May, June time period comes along and those are conversations we'll have with you. And we'll definitely talk about that. - Any other questions? All right, thank you. - Thank you. - And then the next item is receive a report and hold a discussion regarding the following with respect to green tree estates. And there's five alternatives I'm not gonna read them all. (clears throat) - And it is quite a caption sub. Members of the board, Ryan Adams, Deputy Director of Public Affairs. And this presentation is really to give the board an update on the status of the water provision at green tree estates and to walk through some of the recent events and the direction the council provided at the most recent meeting on February 4th, and then also to answer any questions that the board might have. So this was back on February 4th. The staff provided council update on the status of green tree estates. And as a very brief overview, the residents of green tree estates were served by a private water supplier from a well. That water supplier ceased that water supply. They were left without water. Over the course of the fall, the city met with the numerous times and made a determination in November to declare a disaster so that the city could provide water on a temporary basis, three times per week, non-potable water, and then to make potable or drinkable water available to the residents. So on February 4th, staff updated the council on the work session that they held on December 10th. The results of that and the progress staff had made since then, status update was provided. We also described to council what would happen beginning February 13th once the original declaration of disaster was set to expire. We also explained the steps for residents connected to the city water system and just other issues for the council to consider at that meeting, which they did. So as a summary, on December 10th, council directed staff that they would extend the declaration of disaster originally slated to expire on February 12th for an additional 100 days, and that would bring it to May 22nd. That's the last day of that declaration. They also directed staff to begin billing residents beginning February 13th, or day one of that additional 100-day extension. They asked staff to offer voluntary courtesy inspections and to provide code compliance information. So essentially, let residents know that we're happy to come inspect your house the way we would if we were going to connect to the water system, and to provide any other code compliance information that they needed. And that we would also address life, safety, and health issues with non-occupied structures. And if you go out to Green Tree Estates, there are a number of structures on various properties. They are quite obviously non-occupied. They are very substandard. And so staff began the process of enforcement on those 'cause they are clear hazards to the public, and what we would term an attractive nuisance. Also, at that December 10th meeting, the city requested that residents and property owners of Green Tree Estates assist in providing some information, including the confirmation of ownership of all Green Tree Estates roads and easements. And I will note that they did provide what they are going to consider that confirmation just prior to this meeting, so there is an X there, but pay no attention to that X. To confirm ownership of all Green Tree Estates lots, we are in the process of continuing to do that. Confirm which lots are owner-occupied. This is important as we will have to work with all owners to actually connect them to the city water system, but we cannot work with the residents if they rent. Confirm which property owners are interested in connecting to a water meter at the Green Tree Estates boundary. Schedule courtesy inspections and to begin paying for water on February 13th. And just as a little bit of a background, the solution that staff devised to provide permanent water to the residents of Green Tree Estates is to place a meter at the neighborhood boundary. All the property within the neighborhood is private, there are no public rights away, and each individual property owner will be charged to run a service line from the residents all the way to the meter. It could be 40 feet, it could be 200 feet, but it would be essentially a long service line. Staff did engage the residents in two small group meetings between the December 10th and the February 4th council meetings. One on December 19th, where we essentially discussed the courtesy inspections and the results from that December 10th meeting. And we also met with them on February 3rd, just before that February 4th council work session, where we previewed what we would discuss with council, also reviewed how we would prepay for water services, so residents can pay ahead of time, it's a set amount of water they receive, a set cost. This way it does not obligate them to create an account and go through a credit check. And then we also answered any questions that they had, and they had some related to inspections and some other items. So the current status, the city has expended, under the declaration of disaster, just over $30,000 to provide water to Greenery estates. This does include some one-time purchases of gallons, or pardon me, 275 gallon tanks, and also some improvements to the roads there, so that we could bring a heavy water truck to deliver that water. It does not include staff time for salaried staff. So we capture the hourly wages of the workers who go, the employees who go and deliver that water, but any other staff time by, say, department directors, that's not captured in that number. The disaster declaration was on the agenda on February 4th. It was approved by council, so it has been extended through May 22nd. The residents are gonna be receiving bills for water service. They started receiving those last week. The city, again, is addressing those non-occupied, attractive nuisances. We have not received, again, all the information that was requested by council, although we have received some and we are continuing to work with the residents to get the rest. - Can I ask a question? - Yes, sir. - What is an attractive nuisance? - So I'm not sure if that is a well-defined term, but it's essentially something used to denote a structure that is substandard, so it is a nuisance, but it is open so that humans on down to, say, small animals can go in there to seek cover from, say, the elements of the weather. So you then have either a disease problem with your small animals or a public health hazard, safety hazard, if people live in these substandard structures. One strong windstorm, they could fall over and crush who's ever inside. So attractive nuisance is a kind of a catch-all term because they all are different in their own ways, but essentially it's a substandard structure that someone can access. - Why don't they just call it that, then? - To be perfectly blunt with you, I may have used attractive nuisance to save space on the PowerPoint. - Okay, thanks. - You got it. And at the time, the city had not received any requests for voluntary inspections. The residents did let us know that they have reached out and are working with a third-party inspector to provide them guidance on what improvements that they may need to make to the residences to connect to city water. Now, the city will not accept those, but it gives them a head start, and the city will come when they want to connect and do our own inspection, as required by state and local law. So beginning February 13th, residents will be billed for water. Again, it's pre-billed. If they do not pay by the due date, they do not receive water delivered to their large tanks. The residents, pardon me, paying late will receive service on the next scheduled delivery dates. The cost per week, although they will be billed monthly, the cost per week is $9.43. If the household has two large containers, just over $5 if they have one, and these are the prevailing water rates of the city. So they pay the same water rate that every other Denver customer does. So this is a very scaled-down, simplified version of the process, but for the residents, pardon me, the property owners of Green Tree States to connect to the water system, they would have to request and pass an initial inspection for us to determine if they can be connected, if it poses no risk to the system, a customer service inspection. They would then contact the city to request that water meter. They would have to pay all service meter and tap fees, just like any other resident who makes that similar request. They would have to receive a permit for the work, have a plumber perform the work for those areas where a plumber is required, a licensed plumber. It must be inspected and must pass inspection by the city. And then they would set up a billing account, just like any other residents, so that they would be billed in arrears. You use this much for a month, you get your bill the next month, and you pay whatever it is you used. So on May 23rd, 2020, currently, the declaration of disaster will expire. The city's water service, the temporary water service will cease, and the city will lose its ability to lawfully access the properties to deliver water. The resident representatives of Green Tree States did request to council that they would like to see the declaration of disaster extended. The date they gave was to May of 2021. Council received that request, but did not discuss it and did not act on it at that meeting. We also presented several issues to consider. What happens, of course, is residents do not pay for water. As I previously mentioned, they will receive no temporary water service. If they do not receive any courtesy inspections, they do so, again, at their own risk, because the city, when we do our initial inspection, may find something that their third-party inspector did not find that they would have to then comply with in order to connect with the city water system. What happens if they do not make code improvements as required? Simply, they cannot connect to city water. And what happens if property owners do not initiate private connections to the city water system? At all, we would then have to enforce our code. And what that means is we would have to view them as potentially being a substandard structure for lack of running water to the facility. And we are bringing this issue and a couple others back to the council next week to give them clarification on it. So, the final issue to consider was, what happens if less than all 14 property owners initiate private connections? So, we had provided some numbers on December 10th. They were estimates of what the cost would be to connect to the city. In addition to the meter fees, which are standard across the city, the line that they would receive water from does not extend all the way to Green Tree Estates. There's a small gap there. Just like any other property owner or developer, they would have to, once connecting, would have to cover the cost of extending that line from its current location to the Green Tree Estates boundary. And there is a cost to that that all the new connections would be required to share. When we met with council last week, we presented them this table, which showed the cost based on the number of meters that were requested from the residents. At council's request, staff is currently developing several options to bring back to council based on pro rata agreements to see if we can create a scenario where a single or a group of residents would not have to pay all these costs upfront, particularly if other residents would come in afterwards to connect to the city. Council requested that come back to them on February 18th. - Quick question while we're back on the table. Obviously the cost of extending the line is 92.04. - That's the measurement, sir. - Getting back. How much of the tap meter and impact fee is the impact fee per se, and how much of it is the cost of a tap and a meter and installation? - I'm gonna refer to Dr. Banks if I can. - Testament's fine. - I believe that the impact fee on that was around $5,900, but I'd need to go back and check that. - So it's about $1,000 of residents to get 'em hooked up, and the rest is impact on the larger fixed cost structure. - That's correct, but keep in mind, you're also talking about a meter set fee, the meter itself, some valve work. That kind of stuff. So that's all rolled into that at 69.38. - Okay, so you've got 1,000 for the meter setter and meter and that, and you've got 5,900 for the impacts to the larger system and the fixed cost. - That's correct. - And this is just a map of all the residences who we do provide temporary water to. Most of them are in the middle or towards the east side of the property. If we did connect, and can everybody see my mouse right there? Excellent. The meters would be set on the eastern edge, and then service lines would then run, preferably, in the jointly owned roads and make their way to each residence. Although, this is an area where the city only permits and inspects, so we would not make decisions beyond that regarding placement, other than what is required from state law or local law. So we will not take an active part in the planning where those lines goes. We will simply permit and inspect to make sure that they comply. - I have a question about the history of this development. - I'll do my best. - Okay. Green Tree Estates was, before it was an entity as such, was it within the city limits? - It was annexed in 2013. - 2013. - Exactly. But it existed quite a few decades prior to that, just out in the county. - When it was annexed, were the lots, do you know, were the lots divided up? - Yes, they were. They had been subdivided at that point. - Okay. - They had already been subdivided. - They had already been subdivided at that point. - And when it was annexed, the city part of the water supply was still not run up to the boundary of that annexed land, correct? - Correct. So we set out a plan, the service plan for the annexation, prescribed a process by which the owner of the Green Tree Estates water system at the time could connect to the city water and then convey that water to the residents of Green Tree Estates. The cost of that was gonna be borne on that water supplier, the person who owned the well. So the process was laid out, the costs were defined. However, the water supplier did not choose to connect to the city water and opted to continue to provide residents of water from the well that he owned until he decided to cease that provision in November. So we gave them the pathway and then waited for him to act on it. - The lots that are not marked, are those predominantly owned by the same person that owns the water well and perhaps subdivided? - For the most part, for the most part, yes. - And did he or she have to be annexed or did the city take an active step to annex his land into the city? - I'm gonna again defer to Dr. Banks on that one. He is a lot more familiar with those that were in the sign. - I was hoping I'd have another chance because the impact fee is $5,352. So when a property like this is annexed and it exists in the county, the county is required to establish a three-person committee to represent the residents that are in the annexed areas. This particular one was an interesting one because there was a private distribution system in place already that was providing service to all of these lots. And because we could not take over the private distribution system, what was contemplated was an extension of service to actually provide city water to the above ground storage tank that was being used with the well. And then the above ground storage tank would actually distribute it to the rest of the residents. And so in terms of the representation in the annexation that's done by the committee, there is always an opportunity for someone to come in and ask to not be annexed in as a part of that process. That didn't happen in this particular case. - I guess my question was, did the city come say, we're going to take you in and establish that committee, or did the landowners say, come take us into the city? Who initiated the annexation? - The annexation encompassed a much larger area than this particular place, and it was instigated by the city. - Okay, so the city said, we're going to come take you into the city. - That's correct. - As opposed to the landowners saying, please come take us. - That's correct. - Thanks. - Could I ask one question? - Yes, sir. - Are there any other communities where this same situation could happen? - So there are other communities that are served by private wells. Either they're small enough to not be regulated by the state or they're large enough that they do have a state regulation and a public large supply designation. At this point in time, staff is aware of them. We don't think any would immediately replicate this, but it could always happen in the future with anyone or any group that are being served by a private well for that private well supplier to cease that supply, and residents would be required to connect to some other water source, whether it be their own well, if their wells are large enough and they can meet all the requirements, or to connect to the city. - And the owner of this water company really is, does he or she have any responsibilities at all now? Are they off the hook as well? - So what we had determined, and we did a lot of asking and questions, a lot of questions to the state, particularly the TCEQ and PUC, Public Utility Commission, and what they had determined was that it was not large enough to warrant their regulation. So they saw it as just a private relationship between a supplier and a purchaser. The city, however, armed with evidence, presented a case to the contrary that it should have been, and it should have been for a while, regulated by the state. We submitted that to the PUC and the TCEQ. We were told we would receive an official response. Based on that information submitted, to date we have not received a response. - And how long has it been since we've supplied that information approximately? - At least two months. - And what's the determining factor? Number of households, 25? - Number of households and/or number of connections and number of quotients served, depending on which entity you're working with. - Okay, thanks. - Thanks. - You got it. - I have one comment I'd like to make. I had a little time yesterday morning in the group, I saw what it is, and the code violations that are in place in some, but not all, of these properties are at a level that I would call obscene. They are extremely bad. And I would hope that the city and the city manager's office would have, since it's been since November, been aware of those and have coded enforcement actions well underway. It's as extreme as I've ever seen. I've been in a mold on markets, so I, these are really, really awful and it needs some action taken on that. I realize we have public utilities working on that, but it looks to me, my observation is, there are some single family residences that are in need of our help, and then there's some other properties that are completely neglected, causing a real safety problem, and we're right next to concrete elementary, 10th of a mile. So it is, in my opinion, a severe problem. - A severe health risk. Health and safety. - This was not shown on any slide in prior to this meeting. Just to summarize the council, the direction we received on the fourth was that we would, again, continue to ask for previous direction from the tent, particularly with the provision of temporary water and working with the residents to just gather as much information we can on the future intentions of each property, whether they want to connect to the system or not. We are going to continue to communicate connection requirements, and pay queues, letters, door-to-door, whatever we need just so that they know what is required of them in detail, and, of course, to make ourselves available as much as we can in dual language, Spanish language and English language, because most of the folks living out there are Spanish speakers. We are scheduling a council discussion on the feasibility of a per-ad agreement and what that might look like. This was requested by the council and is currently scheduled for the 18th of February. And then we're gonna provide additional information to council that they requested regarding inspection requirements. Do those look like what exactly do we have to inspect when someone connects to the water system? And also our code requirements, generally, particularly for those residents who want to do some of the plumbing work themselves. We at least want to have an idea of what would be required if they do hire a licensed plumber to provide a little more detail with the council as well. And then we are scheduled to update council one month prior to the May 22nd expiration. So somewhere on or about April 23rd, we will give them an update on where the residents are at, how many are interested in connecting to the city, and how far along they feel they are to be ready to connect to the city. And with that, I'm happy to answer any of the questions that you may have. - Any others? - Just a comment here. It seems to me that there's a lot of lessons to be learned here from this episode in Denton City. The city initiated the annexation. The residents did not. And in doing so, the city, perhaps unawarely, unknowingly, took on some financial liability that they didn't realize it was going to have. So maybe somebody should take a look at all these other similar areas like they had mentioned, and do some kind of a preliminary cost analysis. If you duplicate this same scenario in these other locations, if they're the ones that were annexed, one of the residents of those spots did not request it, but the city wanted to include them in the city loans. So this is an opportunity to think these things through, I think, in more detail. - And if I can, I think you're absolutely right. This is a unique situation that the city has learned a lot from, but one of the things that we have done is to begin the process of understanding more about what other neighborhoods might present a similar situation, probably not exactly, but a similar situation in the future, or have the possibility of that being an option in the future, and to be prepared for that. So you're absolutely right. And that is starting to look into that as well. - Thank you. - Thank you. - The next item is the consent agenda. We have items A through E. Does any board member wish to pull one of the items? - Got a question on B. - On B, all right. - It's an easy one. - All right, yes. We have a motion to approve A, C, D, and E. - Almost approved. - That's it. - All in favor, say aye. - Aye. - All in favor, say aye. - Aye. - Here it is. Item B. And it's RFP for utilities, scale, size, and work. - Okay. - And it's D. - Good morning, you got a target on duty, assistant general manager, DME. - Yeah. - All right, Terry, this is perhaps a silly question. What in the world is a utility scale for solar energy? - Not a silly question. I think anything over a megawatt is considered a utility scale solar installation. We're seeking to reject this bid because, as you recall, we now are attaining our 100%, we've got under contract, 100% renewal. This was a long-term contract that was done at the end of 2000, RFP that was done at the end of 2018. And I think as we discussed before, we're looking to get some temporal diversity into the portfolio of some shorter-term contracts. We have bids that will be opening here in the next week. That will be alternatives to this particular requisition that will enable us to be able to get both. We can dial in the volumes we want and dial in terms that we want. - Okay. So this is really just requesting an order is to reject the proposal you received. - Correct. - Because they're not favorable. My end up was a scale, I thought you were measuring it the way the staff takes. - And you also weighed solar energy quite a bit. - Okay, I get it. - I have one more question. Would this energy be in the form of REX? - This particular one was specified in the RFP as both energy and REX. So unlike the Whitetail contract, which has a bifurcation of energy and REX, this one was a combined energy and REX. - And the new contracts that you proposed that you're just putting out, what happened? - They would be combined as well. - Okay. A little question just to educate myself. Is there a limited number of REX in the system or does ERCOT say we can only carry this much in the portfolio? - There's no limit. As long as a renewable energy generator is permitted to interconnect with the grid, it is eligible to receive REX. - Thank you. - Do we have a motion to approve IDB? - I second. - All in favor say aye. - Aye. - Opposed, motion carries. Next item is consider approval of the minutes of January 27th, 2020. Does anyone have any changes? - Approved. - Second. - Okay. All in favor say aye. - Aye. - I have a B. - I have a comment. - Sure you can, of course. - I just wanted to congratulate the minute taker on the format for this and that the responses are actually done in bolder faces. A lot easier to read. Thanks. - No, thank you. - Okay, item B is consider the adoption of an ordinance for the construction of the North-South Watermain phase three project. - Good morning, Madam Chair, members of the board. My name is Seth Garcia. I'm a project manager with Capital Projects. Today I'll be doing a short presentation on the award of construction contract for North-South Watermain phase three. A little project overview and a little background. Phase one of this project was completed in 2011. It runs from the northern extent of this project all the way to loop 288. Phase two of this project is currently under construction and runs from Rose Lawn all the way to the southern end of this project. So phase three ultimately will tie the two pieces together and provide a 42-inch transmission lane from north of loop 288 all the way to Rose Lawn, south of town. This particular phase consists of a project that is 4,200 feet of 42-inch poly-coated steel main as well as 900 feet of 12-inch water main that needs to be relocated along Bonnie Break for the installation of this line. The extents for this is completely on Bonnie Break itself from basically the Tex-Dot area office just north of the I-35 service road to just south of the Panhandle. The solicitation was sent to 296 bidders. We received eight bids, the lowest being S&J Construction Company at $4,551. A little breakdown of our schedule. With your approval, we'll go for Councilor Moore next week, February 18th. A notice to proceed will be issued shortly after that and construction will be completed by February 2021. Staff recommends accepting the competitive little bid to S&J Construction for the north-south water main phase three in the amount of $4,551.18. Any questions? - Questions. - Yeah, I have a question. Has this firm done work for Denton before? - This is the first time this firm has done work in Denton. Most recently, as one of their references, they did some work for Wichita Falls with their reuse issue. They laid a lot of the reuse line for that. - Okay, that's the follow-up question. What is the process within your department for evaluating new contractors like this? - So with this one, we actually took some precautions just because of the type of pipe that it is. It's not a very common pipe. It's 42-inch poly-coated steel. There's only generally a handful of contractors that are doing this around. So our engineering firm actually reached out to the three references listed. All three gave favorable references. Through purchasing, we got some clarification on a few things and our engineer felt comfortable recommending them for the construction contract. - Move to approve. - All right. - Second. - All in favor say aye. - Aye. - Motion carries. - Thank you. - Next item is consider recommending adoption of a new ordinance for the city of Denton to execute a contract with quality excavation LLC for the 2019 street reconstruction projects. (papers rustling) - Justin, you put a normal thing over here? - Mm-hmm. - Justin, you put a normal thing over here? I'm sorry, I'm out of time. (papers rustling) (coughing) - Go. - All right, good morning. My name is Trevor Cranny. I'm a project manager in the capital projects. Today, we're gonna be talking about the 2019 street reconstruction project. We're looking to award contract to quality excavation. So a small overview of this project. As you can see, it's kinda spread out throughout the city. What we did was pick those four main areas that consist of roadway water and wastewater improvements on a section of Hercules Lane, Scripture Street, Thomas Street, and Mary Drive. The breakdown on that is we have on Scripture, we're doing street and some sewer work. On Windsor, we're doing street and water and sewer. On the other two streets, Hercules and Thomas, we're just doing some street reconstruction. So we got four bids on this one. As you can see, quality excavation was a low bid by almost $2 million. We did go through their bid 'cause it was a pretty big difference. A lot of that difference is due to mobilization. Quality excavation does have a site here pretty close, so that kinda made a difference of where they made their low bid. Construction schedule, this is actually, we were shooting a little far in the future, but we're looking at a council next week if we get approved here. So this will actually move up a little bit. But it's a two-year contract. There are some schools located in these areas, so we wanna make sure we give them time to work on those schools during summer, when that is dictated in the contract. So we're recommending an adoption of an ordinance to accept a competitive low bid and awarding a public works contract for the construction of the 2019 Street Reconstruction Project, quality excavation, and not to exceed the amount of $10 million, $202,355.45. - Questions? DSF, what is your quality control process for a project like this? - Quality control, like as far as the construction itself? - Correct. - So in these contracts, we require the contractor to provide testing, to get a testing lab on one site, to test their materials. They have to do material testing, compaction testing, all those type of things. We also get a PO with the testing lab as far as the state's concern to spot check their testing. - So the contractor releases himself on whether he is attaining the right compaction. - That's correct. - I can answer that. My name is Dustin Roper. The program I get probably is, as we said, it's probably south in the states on this job, four hours to a minimum, four day out every day. Every time the last sample test, we'll even know that the contractor does provide the testing, the representative will sit in his letter. Every time the test, we'll give it up. Sorry, I don't know what this is, I'm cracking it up. In the other minute, for the worst of it, I'll be there, I'll probably be the manager or myself, go out and basically watch something like this. - One thing is specifically in the soil compaction, prior to placing the pavement. If a pavement breaks and fails, the year after, we put it down. Often times, that's because the soil wasn't prepared for that. And the nuclear density meter can be used to check compaction and you know the results now. Is that what you do? - Yes, sir. - That's correct. - It's also the water moisture content problem, what you're gonna do. It's also required to set a period of four or five days before we pay to make sure that there is no, when they're cracking, and so forth. Yes, sir, and now? - So that is a good point. As every building is celebrating, we also put in a small list of what we test each week, so we don't have as many cracking that we have to hold. - Right, our respects do dictate the width that they have to compact in, what the materials have to be underneath the pipe, as far as the top of the pipe is concerned. - Any other questions? I was gonna ask a question about almost two million that you beat me to it, so. You knew that didn't you? - Yeah, they did have a couple other items, mainly on the water and wastewater that were a little lower, but the majority of the bulldozer they should cost that, whether it kind of be everybody else. - I have a motion to approve. - I move to approve. - I'll second. - All in favor say aye. - Aye. - Motion carries. Assistant manager R.P. Yes, sir. - Board members, we have a few items that are included in the ACM updates. The first one is the solid waste management study, and that is just an item for your information. This item is out on the street right now, it will be coming back to you once the evaluations have been done. Let's have one to provide that information to you ahead of time so you can come see what elements exist. Brian Burner is here if you have any questions about that particular item. - Okay, the next item is a development agreement for a development called Sagebrook, and what it will be is basically, oh, I'm so sorry, I almost did it. What it will be is essentially a development agreement for an area that's being voluntarily annexed into the city. The development agreement will be put in place we expect due to the location's preliminary conversations that we've been having with the developer that there will be an oversized participation agreement for wastewater services coming off of that, and so if that happens, and it likely will, you'll be seeing that item coming forward. We just wanted to give you a little context on what Sagebrook was and why this was coming forward with this development agreement. The future PUD items, we have just a couple on there. So the wastewater rate study you've received today, it's my understanding that the energy center dashboard had to be moved, there were a few more elements to be completed on it, and it is anticipated to be at the PUD meeting on the 24th. And then moving on to new business action items, so we head to the tour of the recycling center for crack, and it's my understanding that it's scheduled for this Wednesday the 12th. So I wish everybody a good tour on that, it's always an exciting thing to see. And then we're member of effort had asked about the process for equipment replacement that is scheduled for the next meeting on the 24th, and we can figure it all out, and that's all I have. - Thank you. All right, concluding items. Does the board now wish to have anything added to the future agenda or any comments? Do I have a motion to adjourn? All right, I'll adjourn.