City Council - workshop

Let me call to order the July 21st Deer Park City Council workshop. Anyone sign up to speak?

No, sir.

Moving on to agenda item number one, discussion of issues relating to the water and wastewater rate study performed by New Gen Strategies and Solutions.

Good evening, Mayor and Council. So if you all recall, last year we had NUGEN develop a five-year progressional plan, volumetric and meter equivalency structure for the city. about to adopt year two of that plan. That's what's in the budget that is ultimately going to be presented to council to adopt for the upcoming fiscal year. And so just to keep that fresh on everybody's minds and to make sure that we're still continuing on the path that council is wanting to go down, we have Nugent here with us this evening to give an update presentation on that plan and just highlight what that year two of implementation looks like.

Excellent. Thank you. Mayor and Council, Matthew Garrett, partner at New Gen Strategies. Good to be back here. I understand staff has already shared some of this with you, so I'm not going to belabor each slide, but if there's any detail I'm going too quickly over, please slow me down. Generally, our focus is a five-year rate plan, so this year that means we're looking from 26 to 31. We do need to fund about $56 million in projects, so we want to make sure we stay solvent, meet other key objectives for the city as we do that. So some key points here. Again, this is rehashing what you may have already heard. But we do anticipate some rate changes that are needed. We do continue a rate plan that we've already presented to you last year. The council at that time adopted and moved forward with phase one. This is phase two of those increases. What you'll see are about 3.5% year-over-year change in cost. That said, your rate increases, because of different rate design elements, don't have to be 3.5% per year. And so we'll get right into it from there. So generally speaking, we take your base budget, took the 27 preliminary. We're going to add a couple inflation factors to that, general inflation. We looked at personnel costs and a few other things. We want to accurately project what's happening in the next five years. Additionally, we anticipate about 50 residential connections over two years coming up. But there's not a ton of growth that we can bank on here in Deer Park. Capital cost, about equally split, a little heavier on the debt-funded side, but you see we're in a good position in the utility. We are able to cash fund approximately $26 million of that $56 million. And so you can kind of see the light green bar is the cash funding planned versus the debt funding that we've currently anticipated. Overall, again, just to echo what I said earlier, year over year, if you take it and you compound it, it's about 3.5%. You do see we have a big spike. That 2027 figure includes a large capital outlay. So it, of course, climbs above the others. But if you just went from 16.7 to 19.8, that's about 3.5% per annum cost increases, the bulk of which is your O&M. You have some untreated water costs, pretty stable, around 4% from Houston water, forgive me. And then you'll see your debt service does grow as you issue more debt. That's that orange bar. All right, so just to rehash some of the program and the plan design that we changed and introduced, we fully implemented the volumetric tiers. So that's that first band you see there on the chart. So effectively, we've sent a higher price signal for larger and higher volumes of water, more discretionary use. Meter equivalency, however, we have phased in over five years. Last year, we put 20% of that onto the rate payer. So a larger meter pays more than a smaller meter. And we follow the AWWA guidance on those equivalency factors. And so this year, we're implementing 40% of that factor. Here's what that looks like on a scale over time. Again, for the audience and anyone listening, generally a larger meter puts more demand on the system. Water systems are very fixed cost intensive. And so we need additional storage. We need additional line sizes to support larger meters at a greater scale than smaller meters. So our minimums reflect that. We're not alone. We showed you this when we implemented last year, but the story is still true. This is a 10-inch water meter in various communities. You see that others do charge more. Some charge more on the water and the wastewater side. But we answered the question of, do these others use some meter equivalency? It's yes to the majority of them in that right column. Not all do it to the extent that we've recommended here in Deer Park. So basically, this is the impetus for changing rates. We have a strong financial position. That's why we can cash fund what we're cash funding. We don't want to lose that. And so you see the telling story here is our debt service coverage by the end of five years at the current rates is at 1.3. And then if we did not change rates, our reserves would get down substantially. We like being a system with solid reserves, rating agencies like a city that has enough money to pay cash for some debt or offset capital. And so we don't want to stay here despite being in a solid position. So what do we do about that? We aren't putting large increases in. But we are recommending small increases of about 2% per year from fiscal year 28 on water. So if you look at that table, the mid row, the water rate increase is proposed for 27 or 0%. For wastewater, it's 3.75%. And you see the out years. We have 2% for water and 3 and 3 quarters for wastewater rate increases. So here's what happens with that rate plan. As you saw before, our debt service coverage dipped well below two. When we didn't change rates here, we're getting up to two. Additionally, we maintain a solid reserve balance, which helps this city continue to cash fund some of your future capital needs, which saves you a lot of money and interest. So that is why we've set forth this rate plan, and that's what it achieves. So what does that mean to your typical resident? So this is an average resident using 5,000 gallons of water and wastewater. That bill here in 2026 is 79.20, with a 2% rate change overall. It's 1.56 more on the average bill next year. When we implement both water and wastewater, it's overall about a 3% change, with that bill going from 79.20 up to 90.69 in five years' time. So where does that put us around our comparator group? It really doesn't change our relative position. Notably, these are not the rates that they're proposing for fiscal 27. These are their current rates. It's very likely they will be taking rate action as well. So it's a pretty minor increase. It continues the plan that city council set forth last year. On the commercial bill, there is a slight change here. Of course, we are implementing meter equivalency. That does put a bigger burden on meters that are larger. And so you'll see that rate of change is about 6.28% or $21 to a 20,000 gallon consuming two inch commercial customer from 26 to 27. Again, no substantial change to your relative position. Didn't move up a spot. You just charged more relative to the comparator group for that sample bill. And do forgive me. These allergies are killing me. So the voice is crackly tonight. Generally, that is our rate plan kind of rehash from what staff has shared with you. But I am here to answer any questions you may have. Happy to go into details that I glossed over. With that, thank you very much.

Comments, questions, council? You effectively left them speechless.

I trust it was Nicole's original presentation. Thank you, Nicole. Thank you, council.

Thank you. Item number two, the recognition of employee awards for the second quarter.

Thank you, Mayor. It's sad that Jay's not with us for this. This is always one of his favorite things. But he's with us in spirit, if y'all got to see that. But first, I'd like to invite Kathy Cobb up to the podium to recognize the employee of the quarter. I'm not going to spoil it. I'll let Kathy do that. And then after Kathy, James, if you could get up and recognize the IT department as the team of the quarter. So Kathy?

Hi, Mayor, Council. I'm Kathy Cobb. I'm the records supervisor at the police department. And I wanted to introduce my records specialist, Jenny Kreider. She's been with us since April of 2023 at the department. The records unit is primarily responsible for ensuring the proper release of all requested information to the public. And it involves detailed processes, legal requirements, and lots of software systems and procedures. During the quarter, Jenny was assigned the task of creating detailed instructions so that we could add it to our training manual to ensure that future employees that get hired and even current employees have a standardized procedure for how to process these procedures and release information. I had the opportunity to see firsthand how she put so much work into this effort. What started out as a Just a brief set of instructions has turned into an almost 170-page document, very detailed to somebody that just walked into the room could, if they had access, learn how to process the paperwork and the information that we handle with little to no help at all. I'm very proud of her efforts at being recognized today. I'm proud to introduce her as the support staff employee of the quarter. Jenny, if you'd like to come up. And I see you have family with you, if you'd like to introduce them as Chief's heart. Thank you, guys, for coming.

And thank you, Kathy, for the nomination. I'd like to introduce my dad, Bobby. My brother, Bobby Jr. My sister-in-law, AJ.

My daughter, Allison. my son-in-law, Austin, and my son-in-law, Lee, and my son-in-law, Mary.

Yay. Yay. Awesome. Thank you.

Y'all want the whole family? Yeah.

All right.

Hello, Mayor, Council, Ms. Koslow. Tonight, I'd like to recognize our Information Technology Department transition team. And this was a team consisting of Cameron Snyder, Adam Garner, Alex Mahayek, and Anthony Hollister. for their outstanding work in successfully migrating the WatchGuard evidence library system from an on-prem environment to a secure cloud-based platform. I'd also like to recognize our police department, their partnership, collaboration, support, and patience, mostly patience, were instrumental to the success of this project. Without their commitment throughout the process, this achievement would not have been possible. So thank you, guys. This migration required extensive planning, technical expertise, and careful execution to ensure a seamless transition with minimum disruption to daily operations. The team's dedication and professionalism not only resulted in a successful implementation, but also enhanced the city's technology infrastructure by improving reliability, resiliency, and disaster recovery capabilities. So please join me in congratulating the Information Technology Department transition team on this well-deserved recognition. And congratulations, guys. He backs up a little bit more.

all the items we have for this workshop. This meeting is adjourned. Our regular city council meeting will start here shortly.