Nov 09, 2020 Public Utilities Board on 2020-11-09 9:00 AM

Okay you're on. It is nine o'clock and it's Monday November 9th 2020. We have a virtual forum so we'll begin the meeting of the Public Utilities Board for the City of Denton. The first item is the consent agenda. Does any board member wish to pull an item? I do. Okay Russ? I'd like to pull item C as in China. Okay and Billy I saw your hand up. A is an apple. Any other board members wishing to pull? All right and do we have a motion to approve items B, D, E, F, and G? So moved. This is Charlie. Do we have a second? Looks like Ed is seconding. Is that correct Ed? Yes it is. Thank you. And all in favor say aye. Aye. Opposed? That carries. Item A. Let's do that one first. I'd just like an explanation is all. I don't understand why they were rejected honestly. So Billy this is Tony. We have Jerry coming up here with DME but I can tell you that part of the reason we're rejecting that is that you know with the decision to not construct that facility on that property we were required by state law to give the previous owner an opportunity to repurchase that and so we didn't want to move forward with demolishing those buildings and potentially impacting the value of that property. If after six months you know the previous owner decides not to purchase the property then we'll go ahead and move forward with rebidding that and coming back and demolishing those structures and then having discussion with the PUB and with the council on what to do with the property. Okay so Jerry's on here. I don't know if Jerry has anything else to add. You're on mute. I saw you shake your head. Pretty much covers it. Thank you. Okay well there's no more questions that I move approval. All in favor say aye. Aye. Item C as in China. Yes my question on this item C and item D were both for Schweitzer instrumentation and my question on C is I think this is only for fabrication of the steel cabinets in which items on the and C on excuse me on D are going to be installed. Is that correct? That is correct. Okay are all of the four bids that you received for item C will they accept the Schweitzer electrical components? Since they're custom built to that that they'll build them to the Schweitzer components? Okay so if they will all accept that in looking at this the lowest price was what was recommended $230,000 for building these steel cabinets in Mexico. The lowest price American fabrication was $7,000 more than that. So instead of $230,000 we would spend $237,000 to get them made in the USA correct? Yes sir. In my opinion we should support American workers and the difference between $230,000 and $237,000 is three percent approximately and in the overall scheme of things I think it's it's worthwhile to pay a little bit more to support American workers in fabricating these cabinets. So I would recommend we rethink that recommendation and I would recommend we go with an American source there. You're basically your number two guy on the on the list. Yes sir I mean we chose the the least expensive option. I understand I understand that and if it was my money personally I would spend the extra $7,000 if I was looking to spend that much money anyway. $237,000 as opposed to $230,000. I think it's worth a small premium to support American workers. That's that's my opinion. Thank you. And I'm going to look at Larry to see if Larry can you know is able to weigh in on this for us but I will tell you I think the the the state statute does you know prohibit the city doing business with certain countries I don't think Mexico is one of them there's also reciprocity at times between states that that you can use when you're doing bids. In this particular case I don't believe unless Larry knows any different that that we would be you know I think we would be prohibited to award this to anyone else other than the lowest responsive and qualified bidder and so I don't think I mean well I appreciate your your comments. I'm not sure that from a state law perspective there's anything that we can do here other than to award to to to the lowest qualified bidder or to reject all bids and then go back out or re-bid it. Thank you for that Tony because I was going to ask the same question Larry is that that's correct. I agree and if it if it's pleasure of the PUB to have us look at different alternatives on how to acquire purchases and different things y'all want to consider in what's going out for bid we can we can consider that and if we it if you want us to come back and discuss that more detail we can do that as well. The matter this one went out I mean it doesn't allow us to the PUB to do anything other than what Tony just suggested. Well and one quick correction that David just brought to my attention so this was done as an RFP so it wasn't done as the low bid meets qualifications but again I think in this particular case at this point really the only thing you can do is to reject all the proposals and then start again although you won't necessarily be able to put in a requirement that they have to be manufactured in in the U.S. Now I'll tell you there are some federal grants that do require by America but in this particular case there there's that this is not a grant and so those things would just not be allowed. So was price the only consideration on the RFP? No there was other there was other other components I don't have those in front of me. So we do have we do have Christine Taylor on on the phone she can address that if you'd like. Yes the other the other categories considered for this RFP were the price total cost which was 50 percent of the evaluation project delivery was 15 percent compliance with the specifications was 25 percent and then probable performance of the grant as well. Yeah I didn't catch that I'm glad you pointed that out. I think those other factors one of them wasn't by part of by America maybe that's a philosophy that the council needs to take up and we could suggest that. Yes I think I think without a policy like that in place we kind of have to go with the current rules. Correct I agree with you Karen. And I agree with Billy that that might be something council could consider. I'd like us to add that if we could if you guys are willing. To add that as a recommendation Billy. Yes. Okay purchasing can definitely look into that as a future requirement or a category that can score additional points for evaluation. We all say at the same time. All right any further discussion. Have a motion to approve item C. So moved. Do we have a second. Second. Thank you Ed. All in favor say aye. Aye. Opposed. Opposed. I guess I'm curious because I yeah just want to raise to make sure it's it's point out I think that way we know it has to be approved if they want to purchase it under his current form. And Susan just to clarify so Charlie did you abstain on that vote. I didn't hear you say. I was thinking I was on mute so I just waved to the I will go down as I. Okay so 14 okay. I'm an I. Karen's an I. Charlie's an I. Ed's an I. And Billy and Russard no. Correct that's correct. Okay. For two. All right. Thank you. Next item is consider approval of the October 26 2020 minutes. Are there any changes or corrections. Okay do we have a motion to approve the minutes. So moved. Thank you. And a second. Second. All in favor say aye. Aye. Motion carries. Item B. Consider recommending adoption of an ordinance city of debt in Texas authorizing the expenditure of funds for the payment of wholesale transmission charges in the total amount of seven million one hundred and eighty one thousand thirty nine dollars and seventy three cents and providing an effective date. Good morning chair. P.B. members Nick Benson assistant director of finance let me get the presentation pulled up really quick. All right. So a couple of slides to review the transmission charges for didn't municipal electric each year through the approval process we do bring this forward to the public utility board and city council. What this does is authorizes us to pay other transmission service providers for DME share of transmission assets. And says that this item is for approximately seven point two million. Listed in this chart are the entities of the service providers that will be making these payments to on a monthly basis. So the first one you can see cross Texas transmission of four hundred thousand. Moving down the row you can see encore NTU for one point two and then total seven point two million. So we want to do is give you a little bit of history of payments that have been made in the past. We broke it into two different categories those from zero to fifty thousand and then those fifty thousand and over. It is important to note anything between zero and fifty thousand or under fifty thousand is approved by staff. These do not come forward to the public utility board or city council for approval. Some of these you can see your wood county electric cooperative for fifteen hundred dollars for example and you see Grayson calling electric cooperative for seventy two hundred. So last fiscal year nineteen twenty we paid about twenty seven thousand seven hundred dollars in those transmission payments to entities below fifty thousand. What we wanted to show you was really what was the amount we paid over fifty thousand to each one of these entities that are in front of you today. So you see cross Texas transmission of three hundred seventy thousand and you can see encore for a million eighty thousand and then moving down you can see the total of six point five million. So we're a little bit under that seven million dollar threshold that we are seeking your approval for today but these were the actuals for nineteen twenty. With that I will take any questions you have. I have a question on the can you go put the slide back up you had right before the question slide. Hang on just a second. Oh okay. Yeah. That one the the entities in the right column how many of those are investor owned entities. Do you know. No sir I don't know that. I'm Terry Terry or naughty is present today that may can address that question but you don't have that on the top of my head. I recognize Texas municipal public municipal power agency that's a four owned by four cities and then the lower Colorado River Authority that's also somewhat of a public thing. I'm not familiar with the other companies listed. I believe that Texas TNPA and lower Colorado are probably the only local governments if you will the other ones should be investor owned utilities. Okay. That was my only question. Okay. Yes go ahead. This is I'm just curious as to with something like if in the future if the city had more distributed energy resources like solar its own solar or battery storage would that reduce these expenses. Let me Terry now he's going to come up and address that question and Mr. Salf hang on just a second. Thanks. Morning QB Terry Nolte assistant general manager DME. Yes the installation of small distributed generation such as rooftop solar does reduce our total transmission cost because it lowers our it's called the four coincident peak exposures. These charges are based upon the four hourly coincident peaks on each year. So it's calculated actually one year in arrears. So to the extent that more solar rooftop would be on our percentage of total demand for the total ERCOT system would drop. Okay. Thanks very much. Did anybody else have a question. All right. We have a motion to approve item B. So we approve Russell move change me to second. Okay. All in favor say aye. Aye. Opposed. Okay. Next item is consider recommending the adoption of an ordinance of the city of Denton a Texas home real municipal corporation authorizing the city manager or his designee to execute a contract with rush truck centers of Texas LP through the buy board cooperative purchasing network contract number 601 dash 19 for the purchase of Peterbilt trucks for the various city departments providing for the expenditure funds therefore in providing effective dates in the five year not to exceed amount of 20 million dollars morning chair members of the board Terry cater fleet superintendent if the presentation pulls up here momentarily figure out how to do that. There we go. This contract is for the purchase of Peterbilt trucks through rush truck centers. Just a little background on rush truck. If you're not familiar there are the authorized distributor of new Peterbilt products for the state of Texas. They've been around since 1965. They have a large presence in Texas as you can imagine with 23 locations and the near service centers to us are Irving and Fort Worth. We typically use the Irving service center. We use them currently for repairs and warranty work. They also have a support center called custom vehicle solutions right here in Denton next to the Peterbilt manufacturing facility that we also can access. It's a very nearby facility. They've been in business since 2011 and they're just a support system for both the plant and rush truck centers and a little bit about Peterbilt motors. Most of you probably know more about the history of this company than I do. They opened their plant here in Denton in 1980 brought their headquarters in in 1993. They currently have more than 1500 employees and they produce about 100 and they have the capacity to produce about 130 trucks per day and you can see the total production this year. A little bit about the city's Peterbilt inventory. We currently run about 125 Peterbilt trucks of various models and makes with various vocational bodies on them and you can see Solid Waste is one of the largest users of the Peterbilt truck product. We use them in all lines of their operation from front load trucks to automated side loads to rear loaders to roll offs and commercial side loads as well. So all different locations there. You can see the public works department uses a number of their trucks. These are primarily going to be dump trucks on the bodies on these trucks as well as the water department and we have a few miscellaneous other applications water trucks and some specialty items as well. A little bit on the purchase history. This is from 2016 to 2020. We you could say we average about 13 trucks a year. We had a really low year in 2016. If you took that out the average is going to be up around 14. This year for 2021 is not in this chart but I think it is in the AIS. We're planning on purchasing 16 trucks that are all capable of being put on a Peterbilt chassis if we so desired to do that. The average annual spend here is right around three million dollars over the past. I think this year we're looking at about 3.7 for the 16 trucks that we have planned. 14 of those are fleet replacements and two of those are fleet additions for this current year. Just want to put a slide in here to show you a little bit about Peterbilt's future of trucks and they are working on some electric models. They have them under development right now. They are in limited production and they have three different models, a 220, a 520, and a 567. The 520 pictured here is the workhorse for a refuse fleet primarily and it has an 80 mile range. Of course the advantage is reduced maintenance cost and zero emissions but there are a lot of factors to consider and fleet is considering this whenever we have a truck up for replacement. Is there an application that fits the operational need of the department? How reliable is that application? Has it been tested? And of course cost is another factor. We know these trucks are going to be expensive at first and I think one of the reasons for limited production as production schedules increase the price will go down on these trucks and currently I'm working with a Peterbilt plant to partnership with them on getting one of these 520s in service here in Denton if we can work out an agreement where we wouldn't have to purchase 100% of the price of that truck. I think it would be a win-win for the plant as well as fleet in the city. So they would give us a test. Of course these trucks have been vetted. They've been run extensively out on the west coast. Of course they have a little different operation out there and that's why we want to make sure that they would work for any of our applications before we just jumped in and purchased them. The benefits of the contract as with anything when you standardized you're reducing your part stocking. It's just more efficient. Training is more efficient. Diagnostic software and specialty tools and the procurement savings are reduced staff time. We get faster delivery from planning to delivery when we have a contract already in place. Current buy board contract has already been bid at 601-19 and that is for the base model trucks on all of these applications. I'd be happy to try to answer any questions you might have. Terry I assume that the actual when it comes down to replacing each individual vehicle you would go through the same index calculation that you used in the past on whether something is needs to be replaced. Makes sense to be replaced. Is that right? That's true and that's why it's really hard to predict the future. I use the history of our truck replacements. It's hard to predict the future because we do that each and every replacement to make sure that it really needs to be replaced and then look at the application and see what does it need to be replaced with. I assume the 80 mile capacity for one of these trucks compared to the 200 mile capacity. I assume the bigger the truck the shorter the range. Is that right? That's part of it. I think the other is the application the vocational body that's attached to that truck. In this case we're looking at a 66,000 pound refuse truck that's going to consume power starting to stop at a greater rate than some of the other applications. Ed I think you got your hand up. Yeah I was just curious if there was an opportunity here to add to the city's hybrid fleet. I don't know if Peterbilt's still building their hybrids but if they were if that were a consideration. Well I did check into that sir. They currently are not producing any hybrid trucks. I think their focus has been on all electric. We did run some of their hybrids in the past. Now they do have some outside companies that are making an add-on system to convert a Peterbilt truck or any other manufacturer to a hybrid drive system but we haven't really looked into what those we are looking into it but I haven't gotten any information on what that system consists of and how much it actually improves the operation of the truck. Thank you. Other questions? All right do we have a motion to approve? Move for approval. Second. Okay we'll give that one to Karen. All in favor say aye. Aye. Closed. All right thank you Terry. Thank you very much. All right management reports. So management reports we do have a couple of memos that went out to you from our solid waste department. Brian Borner is here if you have any questions regarding the relocation or the status of the relocation of the North Lake Recycling Center and also regarding outside waste haulers. So if there are any questions regarding those Brian is here and can can respond to you. Go ahead Ed. Yeah first of all thank you for the response regarding 90 percent of the city's serviced have curbside recycling or recycling collection sites. My question is which cities comprise the 10 percent that don't have those services and who are the haulers who are bringing in those cities garbage to the land? I do not have that information at my fingertips right now but I can provide that at later date. What I can tell you is that those are communities that are very isolated very small in the fringes of the North Texas and DFW areas. One that does come to mind is the city of Bridgeport. It does not have a curbside or centralized recycling program. Okay I'd appreciate the information thank you. Thank you. Okay if no other questions on on the memos I want to go through the future agenda items. They have one correction on here for the the utility budgets and rate discussions. I know the council did redo their schedule and so so that we can keep things pretty much in line with that we're going to push that budget discussion rate discussion to to January and and that way we can as soon as we get have that presentation with POB we can get in front of the council so that'll be the only change on that and then we did have a couple of items for you on the new business action matrix. We're gonna you know as you're asking questions and making requests we're gonna make sure we get these on here as quickly as we can but there we do have three items on here and we still have them for TDB but but we did add them mostly related to the solid waste. So and then one of the item that I that I have for you is a follow-up I'll turn it over to Larry we do want to provide some clarification on recusals on consent agenda items. There was a follow-up from the last meeting so I'll just turn over to Larry he can explain kind of what that process is for you. As the members know in the past when we would meet in person you'd you'd fill out a form when you're recusing from a vote and we'd like to we need to get back to doing that in a virtual setting and so we're gonna be establishing a procedure to do that by email so if when you review the agenda ahead of the meeting if you would let Kim know which you're gonna what what items you're gonna be recusing from or abstaining from that we could document that and I'll give you the language to be able to put the email on that. Thank you. Susan that wraps up unless there's any other questions on management update. Okay that brings us to concluding items does any board member wish to have something added to a future agenda item or maybe the discussion or that we had earlier about the buy America. Okay yeah I agree that makes sense. That's that's something I think the council should take a serious look at. Anything else all right let's move into work session receive a report and hold a discussion and give staff direction regarding the implementation of a hundred million utility system extendable commercial paper program. Good morning everyone David Gaines assistant city manager let me pull the presentation up. So this this presentation is gonna it will discuss the possible extended commercial paper program to help man as a tool to help manage our utilities capital program. The presentation is fairly detailed so I'll try to get through it as quick as I can but I will say we have our financial advisors in our bond council on the line so if there are any specific questions as we go through this I think we're in good hands to answer those. So I'll start off here and then start to describe what this program is and how it could be a tool for us as we manage our capital program. The history of our commercial paper program really goes back to the beginning of this fiscal year or this calendar year and follow up to our to the bond program that was passed by the voters last November. The obviously as you all know are the bond the bond election November approved the largest bond program in the city's history and so as part of that as we looked at how can we manage the the debt issuance and in conjunction with that program and really try to manage the tax rate implications and everything associated we we went to council and council ultimately approved a commercial paper program which I'll go through in detail of what it is but intended to issue debt in accordance with cash flow as opposed to issuing debt so that we have funds available for contracts as we as we move forward with the bond program. By doing that it's really allowed us to flatten out the tax rate increases and not sit on unused bond funds so that's where that's that's the history of how we've used the programs thus far on the general government side and so as it's been successful and as we've seen how it's implemented we step back and to really see how it would make a lot of sense to do the same thing on the utility side so that we could again help manage our cash flow our debt issuance on the utility side try to avoid any rate increases sooner than necessary and match our debt issuance with our commercial paper with our capital program so as I go through the presentation that's really the backdrop to why we looked at this tool for the utility system so again there's that that background on when council initially approved in April the program from the general government side for the bond program. So you know I mentioned the debt schedules and how and how this this tool ends up helping and really it comes down to the appropriation authority state law requires that before we enter into any contract we have to have the money available for that contract so without it without without this program that we're putting forward today we would have to issue all those funds up front again before we could enter into any contract this is the tool that allows us to match it more with cash flow you know we have that potential to build up balances on beyond unused funds and it could lead to accelerated rate increases so I want to draw out exactly what that could look like with a with a potential example coming up here in a few years obviously one of our largest projects on the utility side the largest project over the next five to ten years would be our water the water treatment plant so as we look at that let's say this is again this is our traditional example how we would handle things right now with all the tools that we currently have in place let's say we have to issue our initial debt for that large project in FY 27 we would issue the entire we would take out that for the entire 85 million for that project in the in the first year again with some assumptions for just for ease of example for all those contracts that we would have to enter into that project obviously is going to last multiple years so we would be taking out all those funds in the first year while knowing that we're not going to spend all those funds on a cash flow basis over three years so as I get more into the tool here in the next couple of slides that's really is intended to match that so we don't have to take out that entire 85 million in this example and sit on multiple tens of millions of dollars for a number of years that aren't necessary at the time so now I'll get into what is commercial paper and how can this be a tool for us commercial paper short-term notes with a maximum maturity of 270 days it's obviously opposed to the long-term debt that we normally issue commercial paper is typically used as interim financing with the proceeds used for the same types of capital projects so this would really be tied to our utility capital program you see that there in a third bullet any project that we would use commercial paper for would be authorized in our capital program through the budget annual budget process. The commercial program is revolving and that means that we can appropriate or issue the notes to repay or reappropriate up to an authorized maximum of the program which that's a hundred million hundred million dollars in the program that we're putting forward so that would be the max that we could use commercial paper for or use for appropriation purposes. So we have a chart here in a moment that will help lay this out but if we were going to take out a 270-day commercial paper program in the traditional sense we would have that short-term financing for 270 days and then at the end of that 270 days we would even pay it off for cash we would refinance it with long-term bonds or we would roll it over to another short-term vehicle that it's important to lay out exactly how commercial paper works if we were going to issue the the funds themselves but I think this last point is is the most important for how we plan on actually using the commercial paper contracts approved using appropriation authority provided by commercial paper will obligate your council to issue debt so we don't plan our plan is not to actually issue the commercial paper issue this short-term financing for projects as we lay out our capital plan our plan is to use the appropriation authority that comes with commercial paper so that we can issue long-term debt in association with associated with the cash flow and again I have we have a couple of table the charts and in the next few slides that hopefully will help articulate that better and obviously can answer any questions as we move forward so what are the benefits of this commercial paper program of this short-term financing you have immediate access to funds within one and one to two days you you get that appropriation authority without actually having to issue notes again that is our our goal with this program as we move forward it is commercial paper is one of the lowest short-term interest programs with you have some of the lowest short-term interest rates of other short-term financing vehicles you avoid that negative interest carry associated with long-term bonds as those years go out and the debt issuance can more closely align with project timelines again just re-emphasizing the whole goal of this is to tie our debt our debt financing with our cash flow so let's lay out an example of how we would use commercial paper we obviously looked at an example previously of in our current program we would have to issue the entire eighty five million dollars for the water treatment plant in FY27 despite the fact that we wouldn't spend all those funds in the first year so this is an example of how we could use the appropriation authority that comes with commercial paper again without actually issuing the commercial paper we get the appropriation authority to line that to line up our debt issuance issuance with cash flow so in this example in FY27 instead of issuing 85 million for all those contracts we just issued 15 million in FY27 based on the cash flow we would expect in that fiscal year FY28 we would issue 50 million based on cash flow expected in FY28 and then FY29 issued 20 million for the cash flow expected in that fiscal year again not even issuing the short-term notes as we talked forward to the previous slides but it's using the appropriation authority that comes with commercial paper so what does that look like and what is the goal of this and there's these tables are very basic and there's a number of assumptions in them but just for for clarity want to show what this means as far as debt service debt service goes so if you look at our the top table there this just lays out what we saw what we saw in our two examples the first one would be we issue that entire 85 million in FY27 and you can see over three years we're issuing 85 million in the second row we're issuing 85 million over three years but again we're spreading that out over the three fiscal years to align with cash flow on the bottom table this is just showing our increase in debt service and just for this example we're assuming we have the same interest rates over three years that would not be in reality what would happen obviously but i think it just helps to add as much clarity as we can it's what the benefits of this program are so in our traditional issuance we would have by issuing all that 85 up front our debt service associated with that would be roughly six million dollars so we would increase in six million dollars in our debt service payments in FY27 wouldn't see an increase in FY28 and 29 obviously that six million would just carry forward in those future years over three years our total would increase six million dollars in debt service payments by using commercial paper we're just able to spread that increase out so what you see on that second row on the bottom table are just the increases in debt service obviously they carry forward but we're able to level out those increases over those first three years where by FY30 we're in the same spot again this is just assuming interest rates stay flat in the same spot with our debt service increase but we're able to level that out now if we saw this all the way out to the end of the debt 20 to 30 years depending on the term at the end we would have those additional payments on the last couple of years because of the way we're doing this but it allows it to align more closely with cash flow quick question before we leave that page that last page explain to me on the issuance you show the six point nine million in year one zero in year two zero in year three zero in year four can you this is probably a rookie question but what is it that causes the debt service to be zero after we've entered issued 85 million in debt yeah that that that table was intended just to show the increase so in FY27 we have an increase of six million and FY28 it would just carry forward that six million would be there in those in those out years but for that table I was just trying to show what the year-over-year increase would be to show that in after three years you're going to be in the same spot you're going to have increased six million in total in both scenarios so that table wasn't it you could there's a way you could show that table as a six million over in each year because that six million is going to carry forward but the purpose of that you're showing the increase each year and yeah yeah thank you no problem any other questions at this point all right we'll proceed so what is the issuance process for commercial paper well you start with determining the cash flow needs obviously and that's going to be aligned with our commercial with our capital program and then we contact our commercial paper dealer in advance to talk to what is the size what is the link that we need for the program and then once all once our notes are sold then we wire the paying agent this is all if we were to actually issue the commercial paper which again is not our intent with the program but it the ability to issue the the notes is what allows us to use it for appropriation authority you would then wire the paying agent the paying agent then wires the money to the city account city of account so when the notes mature after this is again on this is a traditional commercial paper program I'm going to show a variant of this in the next couple of slides you get to the end of your you take out these short-term notes for whatever amount at the end of the 270 days you either roll the roll it over to another short-term commercial paper or you issue the long-term debt to pay that pay that amount off just as you would with our regular capital program and it would you know talk a little bit more about some other options with that as well so now I'm going to go into the variant which of that which is what we're proposing right now and it's called extendable commercial paper this is what city council approved for the bond program commercial paper that we mentioned earlier and a little bit different and you can see it here with our timeline what extendable commercial paper does is allows us to not have to have additional liquidity associated with with the regular commercial paper program so in the commercial paper program we have to have a liquidity function for the 200 if we're actually going to take the funds out for those 270 days in that program we would have to go to a bank get a letter of credit get a direct note or some other hybrid liquidity and pay cost so that we have someone backing us up as we go into it extendable commercial paper we do not have to have to have have to have that same liquidity liquidity facility and essentially we're backing it with our own cash flow so the way that this works is a little structured a little bit differently where if we were again this is all under the assumption that we would actually take these notes out which is not our plan but we want to be as transparent as possible what this program is if we're going to take it in the extendable commercial paper program we were to take out those notes we would have an initial rate for 90 days once if we had not either rolled that roll those funds over or paid them back with long-term debt after 90 days there would be a reset rate which would increase that initial rate slightly or to some extent for the remaining 180 days to hit the 270 day period so we prefer this option in this extendable commercial paper program because of so we don't have that essentially we don't have to have that additional liquidity facility we don't have to have that letter of credit from a bank as an example to back up any of those funds that we take out so okay in this option after really once you hit that 90 days you wouldn't want to hit the reset rate so it really just shortens your time scale to 90 days from the 270 days in a regular commercial paper program as we would approach if we were going to issue take off the notes as we were approached as 90 days that's when we would either issue long-term debt to pay them back use cash flow use it some other make or roll forward with another program at that time so I think once we get through a couple more slides we can answer any any default questions on this and again we have our financial advisors and bond counsel available so I know this is a lot of information that we're that we're putting out right now so just kind of step back what are the benefits drawbacks and considerations of of this external commercial paper program that we're putting forward extendable versus commercial paper program it's the same benefits as a commercial paper program we talked about earlier before cash flow for appropriation purposes but you don't have to have that additional cost for liquidity support we have more financial flexibility and then the program can be in place for up to 20 years the the drawbacks the the program itself is relatively new there are a number of cities that have done it we already we obviously did it earlier this year but there aren't the buyer base isn't that large just a few dealers that are in the market and you can see those listed there we've already actually already moved forward with a dealer on this program and the ratings the tax exemptor ratings can the rates themselves on an ECP on extendable commercial paper can be slightly higher than on commercial paper but you also don't have that additional cost for the liquidity facility so weighing those together really think the benefits outweigh the drawbacks there the bar market access can be access access can be a key credit driver free CP you know we obviously go through our ratings process we're already in the process of going through ratings for this program in advance of any action that we would take and and they need to have the comfort that we can essentially have the comfort that as we hit that 90 days or whatever term that we're able to go out to the market and and issue the long-term debt to finance which obviously is not not a concern right now from anyone so what is the timeline for the the utilities extendable commercial labor program what this month we were selecting the dealer the pay paying agent for the program and then sending out our draft draft documents to our working group presenting that was last month in November we are presenting this to the to the pub and then December ultimately have pub and city council approve approve the program itself so we bring this back as an action item for pub for recommendation for approval and then take it forward to city council in December and go through our rating ratings process ultimately looking to close on the program in January 2021. So staff does recommend to move forward with this program and just to kind of wrap it up with so I know there's a lot of information here with some of the bullet points this really a tool for us to to tie our our capital programs to cash flow our intent going in and I can't really see any situations especially on the utility side where we'd actually issue the notes really becomes a tool for us for appropriation purposes but the way that we're able to get the appropriation authority is by having the program in place so that we could access those funds on a very short timeline just one or two days if the need need arise so at this point I'll take the presentation down I'm here for any questions and we have a number of resources for questions as well and I hope this was as clear and concise as it could be thank you okay I have several questions I'm certainly no financial expert this is kind of out of my comfort zone here but I know a little bit about math and if I think I saw in your presentation that in order to have a hundred million dollar authority we would pay city of Denton would pay a five point which means five percent which is five million dollar premium is that true no we wouldn't pay a five million dollar premium but let me allow see if more of our financial advisors have any input on that question this is Mara Alexander with Hilltop securities there's not a premium associated with the program there's an upfront cost of issuance just transaction costs to set up the program yes and I'm not sure where the five million dollars coming from well this one of the slides said a three point to five point uh cost associated with the basis point okay which means what translate that for the lay people yeah jump so that slide is really talking about with the we were talking about the difference between the extendable commercial paper and commercial paper yes bendable commercial paper the interest rate that you're going to pay yes just slightly higher than the interest rate you would pay with commercial paper so um so basis point kind of one point oh five versus one point oh eight something like that they all on the interest rate that you would pay so it's just kind of that decimal point okay so ten thousand ten thousand to fifty thousand on one hundred million would be the difference in additional rate okay I see I got it one other thing I think I think I heard you say that authorizing this avoids the requirement for having the ability to repay the borrowed money is that true you you would have it doesn't avoid you know you know the one of the appealing things about this setup is you don't have to prove that you can repay the note is that right based on your revenue based on your income right so um so you do have to repay it um so I think I think the benefit is a little bit different in what I was trying to articulate was when you enter into a contract you're going to enter into a contract that's 20 million dollars right now we have to have 20 million dollars in the bank sitting there to say we're going to enter into this contract what this tool allows us to do is to enter into that contract without having 20 million in the bank because we have this tool that we can access that money very quickly so that's the difference is this tool gives us it gives us the appropriation authority to enter in the contract despite us not actually having issued the debt up front for the entirety of that 20 million so in that example say we're going to enter into a 20 million dollar contract but we're only going to spend 10 million this fiscal year we would just issue 10 million this year knowing we're going to issue another 10 million next year to line up more closely with cash flows if that answers your question okay and I think I saw I forget which slide it was uh four or five big banks that basically would fund this activity on short notice correct well we would enter into the we would enter into the program with them immediately at the onset of the program and then they would be with us throughout um throughout the time period but yeah I really wanted to just point out there's only it's a just a small market right now um but what we have no issue um we had we had plenty of interest in the program itself so so so for us to clarify that so there's only I think four banks that David has identified that are actually in this market but if a if if the pub and the council approve this we will enter into an agreement with one of those banks and then and then it would be ready for us to pull the trigger if we need to issue it directly with that bank not with the other three would be with one specific bank right right and then if for some reason Denton is unable to pay for the uh these notes uh I think you said somewhere that you would turn around we could then could turn around and issue another bond to pay for the previous loan is that right yeah if we have I mean if we were gonna um if we ever were gonna actually issue the notes our intent all along would be especially with the because we'd be doing these large capital projects for this would be to issue long-term 20 year 30 year uh debt to pay that back just as we would plan for and I'll cat or any of our capital programs so that would definitely be there that's how we would ultimately pay back anything that we took out on this kind of short-term tool um this function for commercial paper yeah like a lot of credit right and that's really where the extended whole piece comes in is we're backing it ourselves instead of going out and getting a line of credit separately we're just saying we can back this ourselves can we go back to the timeline um used I think you said in December you're going to be asking for approval we are and um you know as I had this up I didn't and it is coming back to pb as well for um a recommendation so we'll have an action item for pb I don't know that we had that on this bullet point in but it appears as though the council's going to make a decision December 7th pub doesn't have a meeting until the 14th right so we go back and look at the calendar and and adjust it appropriately so that it comes back for sure thank you for pointing that out okay one other question yep the uh the slide that you showed that show the reset rate after the initial 90 days is the reset rate determined by the loaner exclusively but yeah the market conditions um really drive it be right it would be in the agreement have it could go up it was we're not going to know exactly how much could go up after you hit that 90 days but um I think there was a cap on how much can go up obviously I think more and Adam could jump in and provide more but there's a cap on how much can go up but it can go up within a range and we wouldn't have any control over how much it could increase yeah it's based on an index plus a spread and just keep in mind that the idea is that at the end of the 90 days that if you had commercial paper outstanding that you would actually roll it generally which means you would issue a new note to pay off the old note or you would have long-term debt you know ready to take it out so this this penalty rate that you're asking about is sort of in the worst case scenario where the market's not functioning and you're forced into that extendable period we're at that penalty rate so that's the circumstance under which that would come into play and it's based off of an index plus a spread it's meant to be a penalty rate to be clear well russ and also to as the as david mentioned I mean our our intent would be to only use this for appropriation purposes so those scenarios would only happen if in fact it was actually issued again we just want to be clear that that we could be in a situation where we could issue the cp and therefore all those things would apply but ideally we would only use it for appropriation purposes only right I would just add that the commercial paper program has to look and smell like it can totally function and pass muster or it doesn't serve the purpose that you're the appropriation purpose that you're after so as you think about why are we talking about all the details of this if we're never going to really issue the notes it's how the program has to function in order to allow you to use it for appropriation authority yeah I'm surprised we haven't we didn't already have this I honestly didn't realize that we didn't already have this off this option and it's just an option too you don't have to use it it's just uh I really I see the way the budget sometimes at the end of the month your bills are higher than you expected and you've got to grab some money pretty quick or the less you've got payment problems and we don't want to have payment problems we're a payer what we owe yeah I think Billy that's really been more of the um um the the amount of debt that the city has has maintained on an annual basis um and I think as the city continues to grow and and we continue to see more reliance on on bonding um that this is why this is now more than ever certainly in the 20 years that I've been here why it makes sense today to to go ahead and have it in place you're right a lot of entities have have a commercial program we've made those commitments obviously and we need to honor them if the city I think moves forward in the future wants to consider changing the way we pay for improvements that's a different conversation but this is the commitment that we've made with these bonds we've got to make sure everything's paid so yeah I just didn't understand I didn't realize we didn't have a commercial program I'm taking it you're in support of it Billy I'm I'm in support of moving forward with this I am yes it's a good tool just one more tool doesn't mean we're going to issue it to just one more tool that's right I have a couple of questions before we move out of this um there's a lot of expertise on this phone call in terms of the presenter and the backers what are the potential misuses and what do we need to make sure we put in place at this point to avoid this extendable commercial paper from being misused in the future if we put it in place sure and I think obviously Lori could could jump in from other aspects I would just say from the city's purpose obviously by going through this program and being able to issue issue funds on such a short basis what what's incumbent on us as staff is to have a good process and procedures and we have we have our our debt policy which is this is addressed this program is addressed in our debt policy but make sure we have policy and procedures that if if we ever were in a situation where this was issued it was reported back to council and to pub but prior in following any any assurance so there's communication throughout so that's part of our internal procedures now but I think as we go as we update our debt policy to have that even more formal of how that process laid out because by going through this you know having the ability to issue funds so quickly we do not want to miss any any of the transparency that we have and how we issue that obviously as we move forward so I think that's just the biggest thing out there when you enter a program like this as opposed to the normal process we have with our long-term debt so this will require council approval prior to issuance no so once once the program notification after issuance and notification right yeah and then my second question is uh in terms of the current interest rates I know we've talked about five to eight basis points over commercial paper what are those rates running these days approximately here I'll ask if Laura wants to talk to the market right now yeah they're dependent on the term so we know 30 day piece of paper versus a 90 day piece of paper but I think there are probably less than 20 basis points right now so 0.2 percent okay that's what I expected the answer to be I just didn't know if we were talking about 20 or 40 or 60 and we're talking about basically a quarter million dollars to put this in place yeah those are those are the the initial cost and we have that laid out you're right the 250,000 but that would just be the upfront we wouldn't that wouldn't be a continual annual cost moving forward that's really just to stop the program up front would we have any continuing expenses once we put this in place there are some slight costs I believe it was I think it was it was less than 50,000 maybe 20 just it was just really kind of the cost to work with our work with bond council financial advisors because each year we do have to come back with just a parameters ordinance to for the extendable piece of the commercial paper program but not not significant cost on an annual basis okay thank you I tend to be in favor of putting the process there are the procedure in place okay other questions Karen your feelings um I I would just totally trust Billy on this one I mean he's got the most experience with money there's several of us here that spend too much money that's for sure yeah after after hearing the explanation I'm in favor of it I think would be prudent for the city of Denton to put a sign off process in place where at least two people in responsible positions have to look at each use of this and sign off on it and then make some periodic reporting to the council on what happened absolutely Ed your feelings yes I'm in favor of implementation and accountability as as pointed out transparency and accountability it's always really important yeah all right have what you need yep thank you very much thank you all right then we will be adjourning into a closed meeting and the closed meeting is a deliberation regarding certain public power utilities competitive matters under a Texas government code 551.086 consultation with attorneys under Texas government code 551.071 so um then we were just adjourned totally correct Tony because I was just confused all right yes ma'am we just uh just give us a couple minutes here to make sure that we have um anybody that needs to not be on here that's on a call to go ahead and jump off okay so if you want to just take a about two minute break um then we can get back together All right, okay.