[00:00:01]
NOT SAY THAT.YOU SEE ON THOSE? OH, SLEEP IN THEM.
[1. CALL TO ORDER AND ROLL CALL OF MEMBERS]
ALRIGHT, WE WILL CALL THIS MEETING TO ORDER THE CITY COUNCIL.THE CITY OF LEAGUE CITY TEXAS WILL NOW COME TO ORDER IN A WORK SESSION ON JANUARY 14TH, 2025 AT 5:00 PM UH, ROLL CALL MEMBERS.
AND DO WE HAVE ANYBODY SIGNED UP? WE HAVE NOBODY SIGNED UP FOR PUBLIC
[3. PRESENTATION AND DISCUSSION REGARDING THE WATER/WASTEWATER LONG LONG RANGE FINANCIAL PLAN AND RATE ANALYSIS]
COMMENTS.WE'LL MOVE INTO PRESENTATION AND DISCUSSION REGARDING THE WATER AND WASTEWATER LONG RANGE FINANCIAL PLAN AND RATE ANALYSIS.
SO MAYOR AND COUNCIL, TONIGHT WE HAVE, UH, NEW GEN STRATEGIES.
CHRIS ERCOT IS, UH, THE PRINCIPAL WITH THE FIRM AND HE'LL GET US STARTED.
GOOD EVENING, MAYOR COUNCIL, CHRIS ECKER WITH NUGEN STRATEGY AND SOLUTIONS.
PLEASURE TO BE WITH YOU TONIGHT.
UH, HERE TO DELIVER TO YOU THE RESULTS OF THE, UH, LONG-TERM FINANCIAL PLAN, THE WATER AND WASTEWATER RATE STUDY THAT WE'VE BEEN CONDUCTING FOR THE CITY, UH, RELATIVE TO THE UTILITIES ON A GOING FORWARD BASIS.
AS WE TALK ABOUT UTILITIES TONIGHT, I DO WANNA REMIND YOU WHEN WE LOOK AT THE WATER AND WASTEWATER UTILITY, UH, WE ARE LOOKING AT A BUSINESS.
WE DO PROVIDE SERVICE TO OUR CITIZENS.
UH, BUT ULTIMATELY THE UTILITY IS TRACKED IN WHAT'S CALLED A PROPRIETARY OR ENTERPRISE FUND.
THOSE ARE RESERVED FOR THE BUSINESS TYPE ACTIVITIES OF GOVERNMENT.
SO WE NEED TO TREAT OUR UTILITY LIKE A BUSINESS.
FOR A BUSINESS TO BE SUCCESSFUL, WE HAVE TO DO CERTAIN THINGS.
FIRST AND FOREMOST, WE HAVE TO LOOK AT THE REVENUE SUFFICIENCY OF THE BUSINESS.
REVENUES HAVE TO MATCH OR EXCEED EXPENSES.
IF WE DON'T, NO PUN INTENDED, WE'RE UNDERWATER.
SO, SO WE WANNA MAKE SURE THAT WE HAVE A SUFFICIENT REVENUE STREAM.
THE SECOND THING WE HAVE TO DO IS WE HAVE TO MONITOR OUR RESERVES IN THE WATER AND WASTEWATER BUSINESS.
THE WATER BUSINESS IN PARTICULAR.
UH, WHEN IT RAINS, PEOPLE TEND TO USE LESS WATER, BUT WE ARE A HEAVILY FIXED COST BUSINESS.
WHEN WE LOOK AT WATER AND WASTEWATER UTILITIES, IT'S GENERALLY ABOUT 80 TO 90% FIXED COST.
SO REGARDLESS OF WHAT PEOPLE ARE USING, WE HAVE PIPES, PLANTS, PUMPS, ALL OF THESE THINGS ARE EXPENSIVE.
WE HAVE TO PAY FOR IT REGARDLESS OF USE.
SO WE, WE GET INTO A CASH FLOW SITUATION, WE NEED TO MAKE SURE THAT WE HAVE SUFFICIENT MONEY IN THE BANK SU TO SUSTAIN OUR CASH FLOW.
SO WE HAVE TO MONITOR OUR RESERVES AND MAKE SURE WE HAVE SUFFICIENT RESERVES IN THE BANK.
THIRD THING WE HAVE TO DO IS WE HAVE TO REINVEST IN OUR BUSINESS.
AGAIN, WE HAVE EXPENSIVE PLANTS, WE HAVE PUMPS, WE HAVE THINGS THAT BREAK DOWN OVER TIME.
SO WE NEED TO MAKE SURE THAT WE ARE REINVESTING IN OUR BUSINESS OVER TIME, AND THAT'S ONE OF THE KEY DRIVERS THAT WE SEE FOR THE CITY GOING FORWARD FOR THE NEXT FIVE YEARS.
SO ULTIMATELY, THOSE, THOSE DRIVERS.
YOU ARE VERY AWARE, YOU ARE A RAPIDLY GROWING CITY.
YOU HAVE SUBSTANTIAL GROWTH THAT DRIVES THE NEED FOR CAPITAL PROJECTS.
WE NEED TO INVEST MORE CAPITAL IN OUR WATER AND WASTEWATER UTILITY.
OVER THE NEXT FIVE YEARS, WE'RE SEEING ABOUT $468 MILLION IN PROJECTS THAT NEED TO BE FUNDED.
NOW, SOME OF THAT WILL BE FUNDED WITH CAPITAL RECOVERY FEES.
WE DO TRY TO PASS THROUGH AS MUCH OF THAT, GETTING GROWTH TO PAY FOR GROWTH AS POSSIBLE, BUT ULTIMATELY IT DOES BECOME A CASH FLOW EXERCISE.
THE CAPITAL RECOVERY FEES WILL BE PAID AS GROWTH COMES ON.
BUT FOR US TO SERVICE THAT GROWTH, WE HAVE TO GO AHEAD AND EXECUTE ON SOME OF THESE PROJECTS, BUILD THOSE PROJECTS, INVEST, GET THE CAPACITY THAT WE NEED TO SUPPORT THAT GROWTH.
SO AGAIN, THOSE ARE THE TWO KEY DRIVERS THAT WE SEE RELATIVE TO RATES ON A GOING FORWARD BASIS.
SO JUST GIVING YOU GRAPHICALLY, WHAT DOES THAT CIP FUNDING LOOK LIKE? I KNOW THIS CHART IS SMALL AND THOSE NUMBERS ARE SMALL, BUT WE TRIED TO BREAK THIS OUT SO YOU CAN SEE WHERE WE'RE PROPOSING TO USE EXISTING DEBT.
DEBT THAT WE'VE ALREADY ISSUED.
WE'RE USING THOSE PROCEEDS WHERE WE'RE GOING TO U NEED TO USE NEW DEBT ISSUE, ADDITIONAL DEBT TO SUPPORT THE WATER AND WASTEWATER UTILITY.
WHY DO WE USE DEBT FOR UTILITIES? AGAIN, WHEN WE'RE TALKING ABOUT, UH, THESE CAPITAL PROJECTS, THESE LAST FOR MULTIPLE YEARS.
SO BY USING DEBT AND SPREADING OUT REPAYMENT OF THOSE PROJECTS, WE'RE MATCHING REPAYMENT OF THOSE PROJECTS WITH THOSE RATE PAYERS THAT ARE PAYING FOR THE PROJECTS AND USING THOSE PROJECTS.
SO BY USING DEBT, WE ACHIEVE WHAT'S CALLED INTERGENERATIONAL EQUITY.
AND SO AGAIN, THAT'S A KEY FUNDING
[00:05:01]
SOURCE THAT WE'VE BUILT INTO OUR PLAN.WE DO HAVE SOME GRANTS BUILT IN THE CAPITAL RECOVERY FEES, SOME DEVELOPER CONTRIBUTIONS, BUT WE'VE PROGRAMMED ALL OF THIS IN GOING FORWARD.
I HAVE ANOTHER GRAPHIC FOR YOU HERE THAT JUST BREAKS THIS OUT BY WATER AND WASTEWATER.
WHAT ARE WE ANTICIPATING IN TERMS OF WATER PROJECTS AND WASTEWATER PROJECTS? SO AGAIN, AS I SAID, WE WILL NEED TO RELY ON SOME ADDITIONAL DEBT.
WE'LL NEED TO ISSUE SOME ADDITIONAL DEBT GOING FORWARD.
YOU SEE WHAT THOSE DOLLARS ARE.
UH, ANYTIME THAT WE ARE INVESTING IN PLANTS, WHICH ARE LA SOME OF THE LARGEST PROJECTS ON YOUR CIP, THEY LAST LONGER.
WE'RE ANTICIPATING USING A 30 YEAR DEBT TERM.
THE REASON FOR THAT, WE WANNA SPREAD OUT REPAYMENT OF THAT AS MUCH AS POSSIBLE.
OTHER PROJECTS WE ANTICIPATE USING A 20 YEAR DEBT TERM, BUT AGAIN, ALL OF THAT IS BUILT INTO THE PLAN ON A GOING FORWARD BASIS.
SO THE CITY DOES USE THE GULF COAST WATER AUTHORITY FOR WHOLESALE WATER SERVICE OVERALL.
WHEN YOU LOOK AT YOUR TOTAL BUDGET, GULF COAST REPRESENTS A LITTLE OVER 13% OF YOUR EXPENSES.
NOW, GULF GULF COAST CAN GO UP EVERY YEAR ON THE RATE THEIR EXPENSES GO UP, THEY PASS THAT THROUGH ONTO YOU.
SO IF WE ARE LOOKING AT OUR UTILITY AS A BUSINESS, WHAT THIS REPRESENTS TO YOU IS THE COST OF GOODS SOLD.
WE NEED TO MAKE SURE WE'RE PASSING THROUGH THE COST INCREASES THAT WE RECEIVE FROM GULF COAST ONTO OUR CUSTOMERS, AND YOU CAN SEE WHAT THOSE DOLLARS LOOK LIKE AS WE GO FORWARD INTO THE FUTURE.
RIGHT NOW, THAT'S ABOUT 8.3 MILLION ESTIMATED TO GO TO 9.7 MILLION BY ABOUT 2029.
SO ALL THAT SAID, WHAT, UH, WHAT DOES THE RATE PLAN LOOK LIKE? HOW ARE OUR CURRENT RATES PERFORMING? SO WE CAN DEVELOP THAT PLAN.
WHAT YOU SEE HERE ON THE SCREEN RIGHT NOW ARE A COUPLE GRAPHICS JUST LOOKING AT THE WATER UTILITY.
WE COME IN, WE BREAK OUT, WE LOOK AT WATER, WE LOOK AT WASTEWATER, THEN WE PUT THEM TOGETHER TO LOOK AT THE UTILITY AS A WHOLE.
SO WHAT YOU SEE HERE IS THAT REVENUE SUFFICIENCY ON THE WATER SIDE UNDER YOUR CURRENT RATES, THAT VERTICAL BAR, THOSE ARE YOUR PROJECTED EXPENSES GOING INTO THE FUTURE.
THAT HORIZONTAL LINE THAT IS CURRENT REVENUES UNDER YOUR CURRENT RATE STRUCTURE.
ANYTIME THE BAR GOES ABOVE THE LINE, WE'RE PROJECTED TO BE IN A REVENUE INSUFFICIENT POSITION.
SO THIS TELLS US THAT OUR CURRENT RATES ARE NOT SUFFICIENT TO SUPPORT THE PLAN GOING FORWARD.
ON THE RIGHT HAND SIDE, WE'RE LOOKING AT DEBT SERVICE COVERAGE.
WHEN WE ISSUE DEBT, WE'RE MAKING A PROMISE TO BOND HOLDERS.
WE NEED TO MAKE SURE THAT WE CAN PAY THAT DEBT BACK, THAT WE CAN HONOR THOSE COMMITMENTS, HONOR THOSE PROMISES TO BOND HOLDERS.
AND THE WAY WE DO THAT IS WE LOOK AT DEBT SERVICE COVERAGE.
CAN WE PAY OUR O AND M EXPENSES AS WELL AS OUR DEBT, AS WELL AS HAVE A SLIGHT, UH, SLIGHT CUSHION.
ON TOP OF THAT, WE WANT TO HIT A 1.25 TIMES DEBT SERVICE COVERAGE POLICY.
AND YOU SEE UNDER OUR CURRENT RATES, WE DO NOT ACHIEVE THAT.
SO THOSE ARE THE WATER CHARTS.
WE LOOK AT WASTEWATER AS WELL.
NOW, WASTEWATER RIGHT NOW IS ACTUALLY IN A LITTLE BIT BETTER POSITION OVERALL.
UM, BUT LOOKING OUT INTO THE FUTURE AS THOSE BIG PROJECTS COME ON, AS THOSE EXPENSES INCREASE, OUR WASTEWATER RATES ARE NOT SUFFICIENT THERE IN THE FUTURE.
BUT WE DO PUT IT ALL BACK TOGETHER.
WE LOOK AT THE UTILITY AS A WHOLE IN THE BOTTOM PART OF THIS GRAPHIC HERE.
THAT'S OUR REVENUE SUFFICIENCY.
AGAIN, CURRENT RATES ARE INSUFFICIENT TO DO WHAT WE NEED TO DO GOING FORWARD.
SPECIFIC TO PAYING OUR O AND M EXPENSES AS WELL AS FUNDING CAPITAL.
THE UPPER LEFT HAND CORNER, WE'RE OKAY ON DEBT SERVICE COVERAGE FOR A LITTLE WHILE, BUT THAT STARTS TO FALL IN 2027 AS WE ISSUE THAT NEW DEBT.
AS WE EXECUTE ON THOSE NEW PROJECTS IN THE UPPER RIGHT HAND CORNER, THAT'S WHERE WE'RE LOOKING AT OUR RESERVES.
WE WANNA MAINTAIN 90 DAYS CASH ON HAND.
UH, THAT IS ANYMORE, THAT'S ALMOST THE MINIMUM DAYS CASH ON HAND THAT WE SEE FOR UTILITIES IN CERTAIN CASES, DEBT RATING AGENCIES WANNA SEE YOU HAVE A YEAR'S WORTH OF CASH, 365 DAYS CASH.
UH, WE HAVE TO, WE HAVE TO BE CAREFUL HOW WE BALANCE THE INTEREST OF THE UTILITY AND THE INTEREST OF CUSTOMERS.
SO WE'RE USING THAT 90 DAYS CASH ON HAND POLICY TO ASSESS THE ADEQUACY OF OUR RESERVES AS YOU SEE THERE SLIGHTLY BELOW WHERE WE NEED TO BE.
SO AS WE IMPLEMENT RATE INCREASES GOING FORWARD, WE NEED TO MONITOR THOSE RESERVES AS WELL.
SO WITH THAT SAID, WHAT DOES OUR RATE PLAN LOOK LIKE? AGAIN, AS WE LOOK AT WATER AND WASTEWATER, WE ARE LOOKING AT THEM STANDALONE TO MAKE SURE THAT THEY ARE FINANCIALLY STABLE ON A STANDALONE BASIS.
WE WANT WATER TO PAY FOR WATER.
WE WANT WASTEWATER TO PAY FOR WASTEWATER.
AS WE PUT THIS PLAN TOGETHER, WE DID PRACTICE WHAT I REFER TO AS RATE GRADUALISM.
WE ARE LOOKING AT RATE INCREASES SPREAD OUT OVER SEVERAL YEARS, TRYING TO GRADUALLY IMPLEMENT THE RATES WE NEED, UH, GIVING OUR CUSTOMERS TIME TO ADJUST TO THOSE PRICE INCREASES BECAUSE IT DOES IMPACT THEIR MONTHLY BUDGETS AS WELL.
[00:10:01]
WE DO HAVE SOME LARGER RATE INCREASES PROGRAMMED IN HERE IN 2025.SO APRIL, 2025 WOULD BE THE NEXT RATE INCREASE.
YOU CAN SEE THE 9.9% INCREASE ESTIMATED TO BE NEEDED THERE IN APRIL, 2025.
SO THIS PLAN IS, IS, UH, HEAVIER, HEAVIER WEIGHTED 2 20 25.
BUT THAT'S DRIVEN BY OUR CAPITAL PROJECT NEEDS.
YOU SEE THOSE, DO THOSE INCREASES DO MODERATE THERE YOU IN 26, 27, 28.
THEN IN 2029, YOU SEE WE START TO BUMP UP A LITTLE BIT MORE ON THE SEWER SIDE.
AGAIN, DRIVEN BY OUR CAPITAL PROJECT NEEDS.
WE ARE CONTINUING TO EMPLOY THE CITY'S CURRENT RATE DESIGN ON THE WATER SIDE.
THAT DOES INVOLVE AN INCLINING BLOCKER CONSERVATION BASED RATE.
WE'RE ACTUALLY TWEAKING THAT VERY, VERY SLIGHTLY GOING FORWARD ON THOSE RATES TO TRY AND CONTINUE TO ENCOURAGE AND SEND THAT CONSERVATION SIGNAL.
YOU'LL ALSO SEE AS WE, AS WE GET INTO OUR RATE SCHEDULES, WE HAVE A COUPLE OTHER CHANGES THERE FOR OUR LANDSCAPE CLASS AS WELL AS OUR COMMERCIAL WATER USERS.
BUT AGAIN, TRYING TO MAINTAIN EQUITY IN THOSE CHARGES BETWEEN THE CLASSES AND GENERATE THE REVENUE THAT IS NEEDED.
UH, AND WHAT I'M GONNA DO IS TALK YOU THROUGH HERE IN JUST A SECOND WHAT THE IMPACTS ARE TO CUSTOMERS RELATIVE TO THIS PLAN.
SO WITH THAT SAID, WHAT YOU SEE HERE IS A, UH, SAMPLE MONTHLY BILL IMPACT.
THIS IS FOR A RESIDENTIAL CUSTOMER USING 6,500 GALLONS OF WATER AND WASTEWATER.
SO THAT WOULD BE THE AVERAGE MONTHLY BILL.
IF YOU LOOK AT YOUR, YOUR RESIDENTIAL CLASS AVERAGE CUSTOMER OVER THE COURSE OF A YEAR IN THE SUMMER, IT WOULD BE HIGHER.
IN THE WINTER IT WOULD BE LOWER.
SO WE'RE LOOKING AT THAT AVERAGE CUSTOMER, 6,500 GALLONS OF WATER AND WASTEWATER.
RIGHT NOW, THAT CUSTOMER PAYS 79 51 A MONTH FOR 6,500 GALLONS OF SERVICE IN 2025.
OUR RATE PROPOSAL, OUR RATE PLAN THAT WE HAVE IN FRONT OF YOU, WOULD TAKE THAT BILL TO 87 POINT 35.
THAT'S $7 AND 84 CENTS A MONTH.
THAT'S THE INCREASE THERE ON THE AVERAGE USER.
AND AGAIN, WE DO HAVE A PLAN IN PLACE TO HAVE ANNUAL RATE INCREASES.
THOSE RATE INCREASES DO MODERATE THERE IN 26 THROUGH 28 BEFORE THEY BUMP UP A LITTLE BIT MORE THERE IN 2029.
SO AGAIN, THAT'S THE AVERAGE RESIDENTIAL CUSTOMER.
A COMMERCIAL CUSTOMER, 25,000 GALLONS OF SERVICE FOR A ONE INCH COMMERCIAL CUSTOMER.
THAT'S THE CURRENT MONTHLY BILL FOR WATER AND WASTEWATER.
OUR RATE PLAN TAKES THAT TO 3 44 34 IN 2025.
THAT'S A $31 AND 83 CENTS INCREASE A MONTH FOR 25,000 GALLONS OF SERVICE.
AS WE LOOK AT A LANDSCAPE CUSTOMER, AGAIN, 50,000 GALLONS OF WATER.
THIS ASSUMES A TWO INCH LANDSCAPE METER.
THAT'S A, THAT'S A LARGER METER.
IT'S PUSHING QUITE A BIT OF WATER THERE.
THAT WATER BILL 4 13 76, UH, PROPOSED TO GO TO 4 65 50.
THAT'S 51 74 INCREASE A MONTH.
IF YOU'RE USING 50,000 GALLONS OF SERVICE AGAIN DURING THE WINTER, SHOULD NOT BE WATERING 50,000 GALLONS A MONTH.
BUT AS WE COME IN AND WE ASSESS THE ADEQUACY OF THE RATE PLAN, WE LOOK AT THE WATER SIDE.
AGAIN, WE'RE MEETING DEBT SERVICE COVERAGE UNDER OUR RATE PLAN, WE'RE IN A REVENUE SUFFICIENT POSITION.
WE'RE ALSO IN THAT REVENUE SUFFICIENT POSITION, MEETING DEBT SERVICE COVERAGE.
AND THEN ON A COMBINED BASIS, AGAIN, REVENUE SUFFICIENT.
WE'RE MEETING DEBT SERVICE COVERAGE.
WHAT I'D NOTE FOR YOU HERE IN THAT UPPER RIGHT HAND CORNER, OUR RESERVES, WE BUILD UP OUR RESERVES A LITTLE BIT, THEN DRAW THEM DOWN A LITTLE BIT AS WE GO INTO 2029.
THAT'S, THAT'S TO HELP US IMPLEMENT THOSE CAPITAL PROJECTS, GENERATE THE MONEY WE NEED, AS WELL AS EXECUTE ON THAT CAPITAL PLAN.
SO WITH THAT SAID, EVERY COUNCIL I'M IN FRONT OF WANTS TO KNOW HOW DO WE LOOK COMPARED TO OTHER CITIES? HOW DO WE LOOK COMPARED TO OUR NEIGHBORS? SO I, I BRING THIS CHART TO EVERY COUNCIL I'M IN FRONT OF, BUT I SAY PRACTICALLY THE SAME THING.
I WANT YOU TO KNOW WHEN YOU'RE LOOKING AT THIS CHART, THIS IS NOT AN APPLES TO APPLES COMPARISON.
EVERY CITY IS DIFFERENT, EVERY UTILITY IS FUNDED SLIGHTLY DIFFERENTLY.
UH, THERE ARE SOME CITIES OUT THERE THAT SUBSIDIZE THEIR UTILITY WITH THE GENERAL FUND.
I WOULD NOT RECOMMEND YOU DO THAT.
UH, BUT THERE ARE CERTAIN, CERTAIN CITIES THAT DO THAT IN ORDER TO KEEP RATES LOW.
BUT WHAT YOU SEE HERE ARE A GROUP OF COMPARATOR CITIES, BOTH FROM A GEOGRAPHIC STANDPOINT AS WELL AS A POPULATION STANDPOINT.
AND FROM A CAPITAL IMPROVEMENT STANDPOINT, WE FEEL THIS ADEQUATELY REPRESENTS A COMPARABLE GROUP FOR THE CITY RIGHT NOW.
THAT'S 6,500 GALLONS OF SERVICE.
THIS IS THAT RESIDENTIAL CUSTOMER GOING TO 87, 35 IN APRIL, 2025.
[00:15:01]
SO AGAIN, THAT WOULD BE THE BILL IN APRIL.I WILL NOTE THOUGH, I AM SHOWING YOUR FUTURE BILL AGAINST EVERYBODY ELSE'S BILL TODAY.
COMMUNITIES GO THROUGH THIS RATE EXERCISE ALL THE TIME.
THEY ADJUST RATES ALL THE TIME.
SO IF WE LOOK AT THIS CHART IN APRIL, IT'S POTENTIALLY WILL, IT POTENTIALLY WILL LOOK DIFFERENT AS CITIES MAKE DECISIONS ON THEIR RATES.
THAT PROPOSED LEAGUE CITY, THAT'S THE 2026 RATE OR THAT, THAT RIGHT THERE, THAT'S THE 2025 RATE.
SO YOU HAVE YOUR CURRENT RATE AT THE 79 51.
THE 87 35 IS WHAT WE HAVE FOR APRIL, 2025.
CAN, CAN WE JUST GO BACK TO SLIDE ONES AND SEE WHAT THE 20 29 1 LY WAS AGAIN? SO THE 20 29 1, LET'S GO BACK TO THE, OH, THERE IT WAS.
THE RESIDENTIAL, UH, THE 1 0 7 0 4.
AND AGAIN, YOU'RE COMPARING, I KNOW WHERE YOU'RE GOING.
YOU'RE COMPARING TO EVERYBODY ELSE'S RATES TODAY.
UH, YOU WOULD BE SLIGHTLY ABOVE CONROE IN 2029 BASED ON WHERE CONROE IS TODAY.
BUT, BUT THEY'RE NOT GOING TO STAY THE SAME.
WE'RE NOT PUTTING OURSELVES AT THE TOP OF TODAY.
NO, I MEAN, AND SOME OF THESE WHO ARE AT THE TOP ARE AT THE TOP.
IF THEY COMPLETE SOME PROJECTS, THEY CAN BE LOWER.
UH, I DON'T SEE THEM GOING DOWN.
UH, THEY MAY NOT GO UP AS MUCH BECAUSE AGAIN, THEY'RE ALSO USING DEBT IN MANY CASES TO EXECUTE ON THESE PROJECTS.
WHEN YOU ISSUE DEBT, YOU'RE MAKING A 20 OR 30 YEAR COMMITMENT THAT YOU'RE GONNA HAVE TO PAY THAT DEBT.
UM, I'VE BEEN AT THIS NOW 22, 23 YEARS, I'VE SEEN RATES OR I'VE RECOMMENDED FOR ONE CITY TO BRING RATES DOWN ONE TIME.
UH, RATES DON'T TYPICALLY COME DOWN BECAUSE AGAIN, WE ARE USING DEBT.
WE'RE MAKING THOSE PROMISES THAT LAST MULTIPLE YEARS.
SO FOR, FOR COUNCIL MEMBER CHADWELL AND MAYBE SOME OF THE OTHERS, JUST KIND OF A REMINDER, I'M SURE CHRIS IS GONNA GET TO IT, BUT RIGHT NOW WE'RE FOCUSED ON FUNDAMENTALLY THREE BIG PROJECTS DRIVING THE COST.
SO WE'RE ABOUT, IT'S NOT UNDER CONSTRUCTION, BUT WE'VE INVESTED A LOT OF MONEY IN REPLACING THE LINE FROM THE SOUTHEAST PLAN IN HOUSTON DOWN TO THE HIGHWAY THREE PUMP STATION.
YOU KNOW, TOTAL INVESTMENT FOR US IS ABOUT A HUNDRED MILLION DOLLARS, MAYBE A LITTLE BIT MORE AS TIME GOES BY.
THE SECOND BIG PROJECT IS THE WASTEWATER TREATMENT PLANT EXPANSION.
AND AGAIN, YOU HAVE TO FRONT THE DOLLARS AND SOME OF THAT GETS RATE REPAID BACK THROUGH, UM, CAPITAL RECOVERY FEES.
THAT PROJECT IS JUST UNDER A HUNDRED MILLION DOLLARS.
AND THEN THE THIRD ONE THAT THE COST, YOU KNOW, REMAINS A LITTLE LESS FIRM IS AN EXPANSION OF THE SOUTHEAST HOUSTON WATER PLANT TO TAKE US, TO GET US AN ADDITIONAL 20 MILLION GALLONS A DAY OF WATER, WHICH TAKES US TO, TO BUILD OUT, WE'RE ACTIVELY WORKING WITH HOUSTON ON KIND OF THE COSTS AND STUFF.
AND THE BIG COST TO THAT START ABOUT 2029.
AND YOU, YOU KNOW, RIGHT NOW I THINK WE SHOW THAT TOTAL PROJECT INVESTMENT NORTH OF $150 MILLION.
BUT THAT'S, YOU KNOW, KIND OF A EARLY ENGINEERING, UM, ESTIMATE ON THAT.
AND AGAIN, AS WE GO THROUGH, IF THOSE NUMBERS CHANGE DRAMATICALLY, EITHER GO UP OR GO DOWN, WE'LL KNOW A COUPLE YEARS AHEAD OF TIME AND HAVE TO MAKE ADJUSTMENTS TO THAT.
BUT THAT'S THREE OF, YOU KNOW, WE TALKED ABOUT NEARLY $500 MILLION WORTH OF IMPROVEMENTS.
THOSE THREE PROJECTS ALONE ARE ABOUT 70% OF THAT.
NO, VERY GOOD, GOOD, GOOD DISCUSSION.
MAYBE Y'ALL DIDN'T LOOK AT THIS.
UM, BUT THESE ARE BUILT BASED ON AN ASSUMED COLLECTION OF CAPITAL RECOVERY FEES, RIGHT? YES SIR.
UM, HOW DOES THAT ALTER IF, IF THE PACE OF THE BUILDING SPEEDS UP OR SLOWS DOWN COMPARED TO WHAT'S EXPECTED? OR DO WE JUST TRY TO TIME THE PROJECTS APPROPRIATELY REGARDLESS? SO WHEN WE, YOU KNOW, WE, WE ANTICIPATE A CERTAIN AMOUNT OF GROWTH, THE PROJECT COST ISN'T GONNA CHANGE.
BUT IF WE GROW INCREMENTALLY FASTER THAN ANTICIPATED, THEN WE'LL HAVE A LITTLE BIT BETTER REVENUE STREAM IN ORDER TO APPLY TO THE PROJECTS.
WHETHER WE SELL LESS DEBT AND JUST PAY CASH OR WHETHER WE LOOK AT, YOU KNOW, USING THOSE CAPITAL RECOVERY FEES TO HELP OFFSET THE OFFSET THE, THE DEBT PAYMENT.
IF THE GROWTH SLOWS DOWN, WE'LL HAVE TO REVISIT RATES TO MAKE SURE WE HAVE ENOUGH REVENUE.
SO OUR, YOU KNOW, WE WORK PRETTY HARD ON PROJECTIONS AND I'M GOING TO GET IT WRONG.
UM, BUT YOU KNOW, WE, YOU KNOW, ESTIMATE ANYWHERE FROM 800
[00:20:01]
NEW HOMES A YEAR TO UP TO 1400 I THINK.AND WE USE, YOU KNOW, CAPITAL RECOVERY FEES.
WE, I THINK A LITTLE MORE CONSERVATIVE IN THE RATE STUDY, MORE LIKE 1200 MAX IS WHAT WE'VE USED TO JUST, AGAIN, TO BE CONSERVATIVE, YOU KNOW, AS YOU KNOW, WE'VE BEEN CHALLENGED ON THE CAPITAL RECOVERY FEES.
YOU KNOW, I THINK EVERYTHING WE'RE DOING TODAY, PARTICULARLY ON THE BIG PROJECTS, SUBSTANTIATES THOSE, THE MAJOR COSTS.
AND I STILL FEEL PRETTY GOOD ABOUT THAT.
BUT, YOU KNOW, THAT REMAINS TO BE, TO BE SEEN.
IF IN FACT WE HAVE TO GO BACK AND REVISIT THAT, THEN WE WILL.
WELL, AND I, I WOULD SAY, AND AGAIN, I'M GONNA GO ON RECORD SAYING THIS, PROBABLY GONNA REGRET IT, BUT THE WHEELS ARE REALLY GONNA HAVE TO FALL OFF, FRANKLY, UH, FOR, FOR SOME OF THESE PROJECTS TO BE DELAYED SUBSTANTIALLY ENOUGH THAT YOU WOULD HAVE TO COME IN AND REVISIT RATES.
UH, I'M THINKING A 2008 TYPE ECONOMIC EVENT.
UM, SO AGAIN, HOPING SOMETHING LIKE THAT DOESN'T HAPPEN, BUT, UM, AS YOU LOOK AT THE MODERATE LEVEL OF THESE RATE INCREASES, WHERE YOU ARE RIGHT NOW, THE MODERATE LEVEL OF THESE RATE INCREASES, YOU'RE GONNA HAVE TO HAVE SOME BIG DOLLAR SWINGS, UH, TO, TO REALLY HAVE TO COME IN AND WHOLESALE REVISIT THIS, IN MY OPINION.
SO I'VE
SO YEAH, SO THAT SAME COMPARISON CHART HERE, WHAT WE'RE LOOKING AT IS A ONE INCH COMMERCIAL CUSTOMER.
THIS IS THAT 25,000 GALLON CUSTOMER, UH, 3 12 51 GOING TO THE 3 44 34.
UH, AND I KNOW THE QUESTION YOU'RE GONNA ASK.
SO THAT 2029 BILL FOR 25,000 GALLONS IS 4 25 33.
SO YOU'D BE RIGHT ABOVE WHERE BAYTOWN IS RIGHT NOW BELOW PAR LAND.
SO YOU'RE STILL NOT AT THE TOP, UH, EVEN IN THAT COMPARISON.
SO AS FAR AS NEXT STEPS IN TERMS OF RATE ADJUSTMENTS, UH, IT IS ANTICIPATED THAT JANUARY 28TH YOU WOULD HAVE A FIVE YEAR ANNUAL RATE INCREASE ORDINANCE IN FRONT OF YOU WITH A SECOND READING OF THAT FEBRUARY 11TH.
UH, THE GOAL AT THIS TIME IS TO HAVE NEW RATES FOR IMPLEMENTATION APRIL 1ST.
SO AGAIN, WE HAVE ASSUMED, UH, THAT APRIL, 2025 IMPLEMENTATION DATE.
IF I CAN, LET ME TAKE YOU PAST THIS JUST VERY QUICKLY SO I CAN ADDRESS SOME OF THE OTHER COMMENTS.
I DO HAVE ALL OF THE RATE SCHEDULES FOR YOU IF YOU REALLY WANT TO DIVE INTO THE NITTY GRITTY.
WE'VE GOT ALL OF THAT THERE FOR RESIDENTIAL, FOR COMMERCIAL IRRIGATION.
UH, BUT WHAT I REALLY WANTED TO FOCUS ON JUST RIGHT QUICK IF I CAN GET TO IT, UH, ARE THOSE PROJECTS AS WE LOOK AT IT, AGAIN, WE'VE BROKEN THOSE OUT, UH, BASED ON THE DEBT ISSUANCE.
YOU SEE THAT 2025 DEBT ISSUANCE THERE, THAT'S THE EXPANSION OF THE SOUTHWEST WATER RECLAMATION FACILITY TWO SIX MGD.
THAT RIGHT THERE IS THE 28.5 MILLION.
AS WE LOOK AT 2026 THERE, WE GET INTO THE, THE, THE, THE REMAINING PART OF THAT EXPANSION, THE 43 MILLION.
UM, AND THEN ON THE NEXT PAGE YOU'RE GONNA START TO SEE SOME OF THOSE OTHER LARGE DOLLARS THERE.
THAT 2029 ISSUANCE ON THE SEWER SIDE, THAT'S WHERE YOU SEE THAT $160 MILLION ISSUANCE.
SO AGAIN, THOSE ARE, THOSE ARE THE BIG PROJECTS.
UH, AS WE COME IN HERE AND JUST LOOK AT THE TOTAL CAPITAL PLAN, WE PULLED OUT THE TOP 10 PROJECTS THERE.
UH, YOU SEE THOSE LISTED, UH, YOU KNOW, IT JUST KIND OF GROUPED A LITTLE BIT DIFFERENTLY THAN ON THE DEBT ISSUANCE SLIDE.
UH, BUT YOU CAN SEE THERE ARE SOME FAIRLY LARGE DOLLARS THERE ON THAT CAPITAL PLAN THAT WE HAVE TO EXECUTE ON.
CAN YOU GO BACK TO SLIDE? YES, SIR.
DALLAS SALMON WW TP ADMIN LAB AND OPS BUILDING THAT IT'S THE, THE MILLION DOLLARS? YES, SIR.
COUPLE OF QUESTIONS JUST REAL QUICK.
I WOULD ASSUME WITH THE 6,000 HOMES COMING ON COMING ONLINE, YOU HAVE THAT CALCULATED INTO IT? YES SIR.
WE'VE, WE'VE BUILT THAT GROWTH IN HERE.
UM, SO IT'S, IT'S A DOUBLE-EDGED SWORD.
IT DRIVES CAPITAL BUT IT ALSO RESULTS IN REVENUE.
SO YOU'VE GOT BOTH SIDES OF IT.
THE OTHER QUESTION I GUESS MAY BE TOWARDS JOHN OR TO JOHN ON THE CAPITAL IMPROVEMENT PROJECTS, IS THERE ANY WAY TO EXPAND SOME OF THEM FURTHER YEARS TO KEEP THE WATER RATES LOWER OR TO CASH, CASH, UH, FUNDED? SO ONE, SO, UM, WE LOOK AT THAT AS WE
[00:25:01]
KIND OF SET THE CIP.UM, WHEN WE, IN THE EXAMPLES, WHEN WE ORIGINALLY LOOKED AT THE SOUTHWEST WASTEWATER TREATMENT PLANT AND WE LOOKED AT GOING FROM 4 MILLION TO 8 MILLION, NOW WE'RE LOOKING AT, I'LL CALL IT AN EXPANSION LIGHT, WHICH IS SOME ELEMENTS OF IT WILL ONLY GO TO 6 MILLION IN PHASE ONE AND THEN THERE'LL BE A PHASE TWO THAT WILL BRING IT TO 8 MILLION AND THEN ULTIMATELY A 12 MILLION PHASE.
AND IT'S BASED ON DIFFERENT COMPONENTS EXPAND DIFFERENTLY.
BUT FOR EXAMPLE, THE BIG DOLLAR NUMBER, THE SOUTHEAST WATER PURIFICATION PLAN IN HOUSTON, THAT'S GONNA EXPAND INTO 20 MGD MODULE PERIOD.
AND SO WE HAVE NO CHOICE ON THAT.
WE HAVE NO, WE HAVE NO CHOICE ON THAT.
AND SO, YOU KNOW, SOME OF THE THINGS, AND I WOULD, WOULD SUGGEST WE'RE ALREADY DOING THAT.
WE TEMPER THAT DEMAND A LITTLE BIT, BUT YOU'LL SEE LIKELY JODI SITTING OUT IN THE AUDIENCE AND HE IS, YOU, YOU'LL SEE US PERHAPS IN THE SUMMERTIME HAVING TO USE WELLS TO AUGMENT OUR SURFACE WATER SUPPLY AND IT WON'T MIX AS WELL.
THAT BUILDS UP SOME DEMAND BEFORE THAT PLANT COMES ONLINE.
UM, YOU KNOW, WE'VE TRIED TO TARGET 2030 FOR THAT EXPANSION TO BE DONE.
AND AGAIN, WE'RE WORKING WITH HOUSTON AS WE SPEAK, AND SO WE'RE STILL TRYING TO ESTIMATE WHERE THAT'S GONNA COME IN AT.
SO YES, WE LOOK AT THAT AND WE, AND AGAIN, THAT'S ONE WAY FOR EXAMPLE, WE DELAY THE EXPANSION BY AUGMENTING IT WITH SOME OF THE WELLS WE'VE INVESTED IN OVER THE YEARS.
YOU'RE SAYING ABOUT 500 MILLION ON PROJECTS NOW IN THE BOOK? UH, IS THAT WHAT YOU SAID? I HEARD EARLIER, I THINK, I THINK IT WAS 400 AND SOME CHANGE, JUST IT WAS SLIGHT, YOU KNOW, SLIGHTLY UNDER THAT FOR, WAS THAT THE FIVE YEAR PLAN? THAT WAS THE FIVE YEAR PLAN.
WE HAD 468 MILLION OVER FIVE YEARS.
AND OUTTA THAT 4 68, HOW MUCH IS CAPITAL RECOVERY FEES ARE WE RAISING FROM THAT TO PAY FOR? I, I CAN GET THAT NUMBER FOR YOU.
WE'RE GONNA HAVE TO LOOK THAT UP, BUT OKAY.
YOU, WOULD YOU HAPPEN TO HAVE A PERCENTAGE? UH, YES SIR.
YEAH, WE'LL, WE'LL GET THAT FOR YOU.
YOU KNOW, IT'S A, YOU KNOW, IT'S, IT'S A, IT'S A THOUSAND HOMES.
THE CURRENT CRF RATE IS, UM, AROUND $15,000.
SO THAT'S, IT'S YOU'RE GONNA LOOK IT UP THOUGH.
CAN YOU, SHE'S RUNNING THE NUMBERS ON IT RIGHT NOW.
CAN YOU ALSO TURN BACK TO WHERE IT SHOWED THE RESIDENTIAL RATES BROKEN DOWN? ABSOLUTELY.
SO, UH, I THINK IT'S MORE THAN THAT.
I THINK IT'S, UH, DO YOU NEED THE FIVE YEAR PLAN SHOWING? YES SIR.
I THINK IT'S 15 MILLION A YEAR.
IT THAT HIGH MATH IN OUR HEADS DECIMAL POINTS.
SO $15 MILLION A YEAR OVER FIVE YEAR IN SOME, IN SOME OF THAT, SOME OF THE OLDER DEVELOPMENT THAT HASN'T FULLY BUILT OUT PAYS AT A LOWER RATE.
BUT THAT WOULD BE THE, THAT WOULD BE AT A THOUSAND HOMES A YEAR.
ON THE END, WHERE IT'S BROKEN DOWN IS THE INCREMENTAL RATES, SO THE ZERO TO 3000 GALLON.
I JUST WANT TO 0.1 THING OUT TO THE COUNCIL.
SO THIS IS THE PROPOSED, UH, WATER RATES AND DOWN THERE ON THE VOLUMETRIC CHARGE, UH, WE USED TO, I'LL SAY SUBSIDIZE THAT, BUT KEEP THAT PRETTY LOW AND WE'VE SLOWLY INCREASED IT.
SO YOU'LL SEE A 50 CENT INCREASE FROM APRIL, 2024 TO APRIL, 2025.
AND THEN IF I'M NOT MIS, AND THEN JUST 25 CENTS PER YEAR.
SO THAT RATE PIECE RAISES AT A FASTER RATE THAN THE PUBLISHED PERCENTAGES.
AND AGAIN, IT'S, IT'S TO MAKE IT MORE CONSISTENT WITH THAT TRUE COST OF WATER.
IT'S STILL, I WOULD SUGGEST BELOW THE TRUE COST OF WATER.
BUT, AND AGAIN, IT'S EVERY CUSTOMER PAYS THAT, INCLUDING THE ONES THAT JUST USE A LITTLE BIT.
AND SO I WOULD ASSUME ON THE RESIDENTIAL SIDE WE'RE IN BETWEEN THREE AND 10,000, RIGHT? 6,500 IS THE AVERAGE.
AND, AND RIGHT QUICK ON YOUR PRIOR QUESTION.
SO ROUGH NUMBERS IS ABOUT 68, 60 9 MILLION TOTAL IN CAPITAL RECOVERY FEES AGAINST THE 4 68.
UH, BUT ONE THING I WOULD NOTE WITHIN THE PLAN, WE DO PAY SOME DEBT SERVICE WITH CAPITAL RECOVERY FEES.
SO IT'S, IT'S NOT A ONE FOR ONE OFFSET THERE BECAUSE AGAIN, IT IS, IT IS KIND OF THIS CASH FLOW EXERCISE.
WE HAVE TO BUILD THE CAPACITY BEFORE THAT GROWTH CAN COME AND PAY THE CAPITAL RECOVERY FEE.
SO THERE'S A, THERE'S A TIMING PIECE TO IT.
AND THEN, AND THEN BECAUSE YOU SELL DEBT AND YOU SELL 30 YEAR DEBT FOR THE BIG PROJECTS, THE NEXT INCREMENT OF CUSTOMERS THE NEXT FIVE YEARS WILL BE PAYING CAPITAL RECOVERY FEES.
AND THEY'LL BE TIED TO SOME OF THAT DEBT PAYMENT TOO AS WELL AT GOING INTO THE FUTURE.
YOU GET TO BUILD OUT TO ABSOLUTELY THE NEXT 20 OR 30 YEARS.
SO YOU SOLD DEBT ON THE EXPECTATION THAT YOU'RE GONNA CONTINUE TO GROW AND BUILD OUT TO THE 200, 220 $5,000 NUMBER.
[00:30:01]
YOU KNOW, THE THING AND THE, YOU KNOW, THE ONE THING I ALWAYS TALK ABOUT, YOU KNOW, AND YOU KNOW, I LIKE TO JUST, YOU KNOW, MENTION IT, WE BRING WATER TO YOUR HOME FOR LESS THAN A CENT AND A HALF A GALLON AND WE TAKE IT AWAY FOR THAT SAME CENT AND A HALF.AND SO WATER'S STILL CHEAP AND, BUT THE WATER'S GOING UP AND YOU CAN SEE HOW IT IS COMPARED TO THE OTHER COMMUNITIES EVEN ACROSS THE NATION.
RIGHT NOW WE'RE SEEING, UH, WE WERE RUNNING ABOUT 4% WAS KIND OF THE AVERAGE ANNUAL CHANGE THAT'S RECENTLY BUMPED UP TO CLOSER TO ABOUT SIX TO 7%.
UH, YOU GET INTO HIGH GROWTH COMMUNITIES THAT HAVE SIGNIFICANT CAPITAL PROJECTS AND THAT'S WHEN WE START TO SEE THAT BUMP UP EVEN MORE.
UH, SO EVEN ACROSS THE INDUSTRY, WE'RE SOMEWHERE BETWEEN THAT FOUR AND 6% AVERAGE ANNUAL CHANGE.
SO ANY OTHER QUESTIONS? SO WE'RE, SO WE'RE BRINGING A RATE ADJUSTMENT ORDINANCE, UM, TO COUNSEL.
I THINK WE MIGHT MAKE THE NEXT MEETING I'M LOOKING AT ANGIE, SHE'S HIDING BEHIND THE, OKAY.
AND THEN IMPLEMENTATION IN APRIL IS WHAT WE'VE BEEN DOING, SO.
ALRIGHT, WELL HEARING NO OTHER QUESTIONS, THIS MEETING'S ADJOURNED.