City Council - Regular Meeting

So, whenever I do a rate review, I look at the full package of your costs and your revenues, and I compare your existing rates I think the rates need to be in order to recover the full cost going forward. We did a full rate study last year. That was the study that determined the need for this rate change. This study was a little more abbreviated. Basically, I just looked at changes from last year's study to this year's, looked at what changes came about in your costs and your usage, and then updated the rates. When I did the rate study last year, I projected a 7% rate increase for fiscal year 27 for next January. As you know, if you read through the report, you know, I'm projecting a little bit higher rate increase. I will go through the reasons why I'm projecting that higher rate increase. So since last year, we have a little more clarity on where means rates are going. They proposed another rate increase in April of this year. Probably the bigger issue, longer term, what I've seen over the last few years is what's going on with your WAP allocation. You have two WAP allocations, one from Loveland Area Projects, which are East Slope projects, and then you also have an allocation from the Colorado River Storage Projects. I live in Nebraska, and it's hard for me not to even see information about the drought, what's going on, particularly in the West Slope. And the way their project is set up, the way your contract with them is set up is, if they don't have the water, they cut back your allocation. And that's probably your second lowest cost resource behind your lab resource. So when you cut that energy resource, you're replacing that with mean. you're replacing energy that's two cents a kilowatt hour with energy that's more than four. And so we've seen that trend over the last few years of that allocation not being delivered as much and having to replace that with means. So those two factors have affected the rates and affect what you need to recover from your ratepayers. So the last item is capital improvement needs. There were some capital projects that were anticipated last year, but we didn't necessarily have a final number on what those would look like. This year, you're funding some projects out of Excel. Is that right, Doug? And that's really depleted some of your cash reserves going forward. There's money in the water fund and other utility funds that can fund that internally without borrowing money. But nonetheless, you'll need to replenish some of that cash in the electric side going forward as well. So you have two components. You have a power supply charge. That covers your mean and WAPA piece. And then you have the delivery charge, which funds everything inside the city limits, your wires, paying Doug's salary, paying part of Brent's salary, paying for your IS, your IT systems, et cetera. So both of those rates are going to, I'm recommending an increase to both of those components next year. If I don't do anything, if you don't do anything, my projection is that you'd have about a $2.4 million deficit this year. By the time you get to fiscal year 2030, that's going to increase to about $7.2 million. Now, a lot of that's the purchase power expenses for me, which you really don't have control of your long-term contract. And they're a good, low-cost provider of service. I'd rather have them than some other wholesale suppliers in the region. But nonetheless, their costs are going up and they will continue to go up. And then you have that capital program. I say this all the time. If you don't spend money on your capital improvement program now or as you plan it, it's going to be way more expensive to fix those problems as they occur. You have a big windstorm blow through and takes out older facilities. It's a lot more expensive to fix those when it's laying on the ground than if you have a chance to look at it, plan it out, acquire the get your materials, line up your labor. And I've seen cities where their pole inspection program, their preventative maintenance is basically they wait for a windstorm, and they see what blows down, and then they fix it. And that's not a good way to run your system, and that's not the way you run your system. I want to make that absolutely clear. You have a well-run, reliable system compared to many municipal utilities I work with. To fund those things, you have to have funds. The rate increase in 2027 will fund not only the increases for mean, but also fund a portion of the revenue you need to cover some of those internal operating expenses. And if anybody has a question as I'm going through this, please feel free. I will say that if I had looked at it just in a vacuum, and I could impose any rate increase I want without concern for citizens, and I just cared about the bottom line, it would be more than 9%, 9.5%. It'd probably be more on the order of 17 to 19%. In talking to staff, I don't think that's reasonable. I don't think, given the cash in the utility fund, I think all the other things going on, I don't think an 18, 19% rate increase is appropriate. I am recommending, though, a 9.5% increase, which is the upper end of where we're talking in terms of limits. That will basically take care of the cash flow deficit in 2027. It'll fund a lot of the capital improvement projects. some of those will still be funded from rev from reserves in 2027. by 2028 you get to a point where you basically cash flowing all those projects from the from the electric fund as you go and i will say another thing i want to point out is you're one of the very few larger electric systems i work with that does not have any debt I'd say, I have one other client that's of a similar size as you that doesn't have any debt. That saves you a lot of money. When we look at your rates where they're at right now, not having that debt outstanding and covering things as you go has resulted in long term low rates. But again, part of that issue is then you're funding capital as you go, which I think is appropriate for a system of your size. And I do think, though, that That's a very important factor, though, is you're not passing the cost of these improvements that you're doing. You're not passing those to people 40, 50 years. You're not passing those on to your grandchildren like the people in Washington do with the federal debt. So I think you've got a really well-run system. You've run it well financially. But again, you have to keep the rates at a level where you can fund these things as you go. So there are three elements to my recommended rate changes. The first would be a million dollar increase in the energy rate. That's passing through the increase in cost for mean and WAPA. That's just a straight pass through of those costs on a dollar for dollar basis. remainder of this is to fund your internal costs that capital and your own expenses recommending a two dollar a month increase in your customer charge that increases revenue about 150 000 you last year when i did the study you had the lowest customer charge of any utility in the state other than yuma i had just done a rate study for them and increased their customer charge to more than ten dollars so this one is and it's IT'S VERY IMPORTANT IN MY MIND TO HAVE A HIGH ENOUGH CUSTOMER CHARGE TO COVER THE BARE COSTS OF SERVING A CUSTOMER. I LIKEN IT TO, I THINK ABOUT, LET'S SAY SOMEBODY GOES TO, LET'S SAY YOU HAVE A SNOWBIRD THAT GOES TO ARIZONA IN THE WINTER, BASICALLY SHUTS THEIR POWER ALMOST OFF, MAYBE JUST HAS A COUPLE KILOWATT HOURS JUST TO KEEP THE, YOU KNOW, RUN THE FURNACE ON GAS. You're still incurring probably $20 a month in cost just to have the lights on for that customer. You've got a meter. You've got a wire coming into the house. You've got a part of your system that's needed just to give power to that customer. You've got to send out a bill. do all the accounting associated with that. And your other customers that maybe use more energy that live in a larger non-energy efficient house are subsidizing that customer. And a lot of times it's people who have older houses that can't afford weatherproofing and all those things. A lot of times it's low income people that are subsidizing the folks that are going to Arizona. and and so i think it's important to have that customer charge be appropriate level it also helps prevent subsidization of folks who have solar panels or other behind the meter generation net metering customers because if they get the So here's the distribution of the proposed rate changes. And again, residential gets a larger increase because they're smaller users. That $2 a month hits them a little harder. But nonetheless, these are all based on the cost of service. All customers are going to see a pretty significant rate increase in the range of 8% to 12%, 8% to 11%. Overall, 9.5% proposed rate change. A typical residential customer has a bill of around $105, and that's just taken by dollars collected by residential divided by the number of customers by 12. I know there's smaller and there's larger. But that typical customer would see an increase of about $10 per month with this rate change. You still have the lowest rates in the state among municipal utilities. You have the second lowest rates overall among all utilities in the state, even with this rate change. And here's a chart that shows that. I can also tell you that I looked at this chart. I do work for several of the ones that are higher than you, and I know that a couple of them for sure are seeing rate increases this year. Pretty much anybody on that list that buys from me is probably seeing a rate increase this year as well. With regard to co-ops, you're well below most of them. There's one co-op, I don't know how their rates are so low. I've wanted to do some research and find out why their rates are so low, but it's a very small co-op, I think up in the mountains somewhere. Your rates are lower than Xcel Energy as well. So I think you've done a very good job of keeping your rates low, but I think long-term to make sure that you can have competitive rates and you're not building emergency repairs, I think it's important to make sure that you have sufficient cash flow to cover your operating expenses and this capital projects. Any questions on this slide?

No.

OK.

So my recommendations, I've gone through this already, is just the 9.5% rate increase. I think you should plan on rate increases in 28, 29, and 30. We're not proposing to implement any of those at this point. My recommendation would be to study those next year, see where means costs are, see what's going on with your capital improvement projects, and then make a decision at that point whether to implement future rate changes. So this is one that I like it a lot when the attorney does this, but I've had a couple of attorneys just say, hey, do you just read this to me? And I've done this in the past as well. So if I say anything that is incorrect, I trust that legal counsel will correct me. You have regulatory authority over your electric budget and your rates. So you don't have to go to the PUC, the Colorado PUC, for rate changes unless your rates are different outside the city than they are inside the city. And you charge the same rates to outside the city customers as you do inside because you don't want to have your rates subject to PUC authority. So under state law, your rates need to be just reasonable and sufficient, which is why you hire a consultant to look at the rates. You can have preferences, but you can't have unjust discrimination. You can have a different residential rate than you have an industrial rate, but it has to be based on cost of service. You have the authority to determine if your rates are reasonable and if there are any differences in the cost of service. And that's why you hire me. I told you where the rates need to be, where the customer charge, the energy charge, and the delivery charge need to be. So you have a requirement under state law because this is not a pass-through adjustment. You're collecting additional money to fund your internal costs. you have to get a 30 day notice and you have to follow the public hearing requirements under a Colorado state statute. So Mr. Attorney or Ms. Attorney, I'm sorry. Did I screw any of that up? Or is she on? Is she even on here?

I am doing some brief research now as you're talking.

Okay. All right. And this information was probably given to me by your predecessor city attorney. So if there are any things that are incorrect, please let me know.

Of course, now it sounded right to me, but I'm just double checking.

Okay, thank you. So here's the scheduling process. I'm presenting this today. The goal would be to set a public hearing at some point in the future. At that public hearing, you would solicit public comments on this. And then at some point after that public hearing, you would take final action with the rates to go into effect after approval. we drafted the rate schedules the rate ordinance and the rate schedules such to be effective october 1st of 2026. that'll be after the summer season after your high air conditioning usage when usage is starting to come down so that's usually my preference on electric rates to implement them after the summer season and that concludes my presentation subject to any corrections from legal counsel appreciate the opportunity to be here happy to answer any questions you all might have

Anybody have any questions? Yeah. Are you proposing any more increases on customer charge rates?

the clicker it doesn't there we go we'll use buttons all right so um we just um for those of you who don't know us i think i see a lot of familiar faces so it's great to see you all and then a few new faces so great to see you as well and we are a team that designs aquatic centers for a living it's one of our specialties we love to do it together with our consultants and our sub consultants we have designed over 500 projects together We probably are currently working on four or five pool projects right now, at least. So many, many, many pool projects. We're constantly working on pool projects. We work with Councilman Hunsaker. They're our aquatics engineers. I think some of you may remember them from the feasibility study we did and all the survey work that we did in outreach. So that was a great effort and great community input from everyone so we're happy to see that and then we also worked on the field house before we had the aquatic center we worked on the field house so that was in 2019 if you all remember so maybe some of you do I hope you do so we are very passionate about aquatics we love designing aquatic facilities there's a lot of technical aspects that go into aquatics projects so That's why we build the team that we do with all the consultants that we have. I think it's really important that we have a team of experts that understand all the complicated issues with pools because there's a lot of moisture, humidity, chemicals that we're dealing with. So we want to look at all of that. So with that, there we go. That's great. Little overview of the schedule of where we're at. So we've made it through schematic design. That was completed in March of this year. And then after that, we sent it out for a CMGC, which is Construction Managers General Contractor. And so we wanted to reach out and get the contractors involved as soon as possible to track the pricing with us. We are simultaneously tracking pricing with our cost estimator that does a great job at cost estimating. And Dane will get into that in a minute. And so now we are in the design development phase. So that's the next phase of design and documentation. And right now, that is slated to be completed in just a little bit. June 8. And then by the time we get pricing updates, it'll be July 6. And then we'll move into construction documents. And the goal is to complete those by September 29 and then move into permitting and construction shortly thereafter. So we're still on schedule, on task. We're moving ahead with everything. We had a great meeting today, actually, with everybody. So we've had an all-day Fort Morgan meeting. And we work really closely with the staff to get a lot of this done, a lot of the decision-making and everything else so that we can make sure we're tracking with everything that you guys want this facility to be. And then keeping in mind, we also want to think about the feasibility study and the surveys and always think about, you know, what did everyone vote on for the bond? So we're trying to keep our eyes on that as well. as we go through the project. And then after that schematic design set, we had GH FIPS. We selected GH FIPS with the team. We did a very rigorous process, I would say. And we sent out RFPs for solicitations for contractors to do preliminary bids on the project based on the early phases of design. And then narrowed it down to a few different teams and then had interviews after that. And then we had a very... SPECIFIC VOTING TAB AND EVERYTHING TO MAKE SURE THAT WE LOOKED AT ALL THE ASPECTS OF THE CONSTRUCTION TEAM AND WHAT THEIR BACKGROUND WAS, IF THEY HAD DONE POOL PROJECTS BEFORE, ALL OF THAT KIND OF THING. SO THERE'S A LOT OF CRITERIA INVOLVED IN THAT. AND THEN WE SELECTED GH FIPS WHO DID THE FIELDHOUSE AS WELL. SO THEY HAVE A LOT OF FAMILIARITY WITH THE PROJECT. THEY HAVE FAMILIARITY WORKING WITH US. WE LOVE WORKING WITH THEM. We're excited about the team, and now we're working with everybody to work through all the details of the project. So I'll hand this over to Dane.

So this is just a little snippet of our overall budget based on the initial cost feedback that we got from GHFIPs. actually this is based actually this is based on our cost estimate so Phipps did give us some numbers with their proposal but these numbers are from our cost estimator so this is an update you may recall we had cost estimate in the conceptual design phase which was the basis for the vote and setting the budget but long story short here costs have increased and it just gives us an awareness that we need to be a little careful on our design choices as we're moving forward obviously we don't want to compromise the quality of the project or any of the elements that were that the community wants in the project so the items that are unchanged in the design are the site elements we still have everything in the site that we were proposing the outdoor patio the indoor outdoor slide the East parking lot and the connection to East Beaver Avenue so all of that is is still in the design as planned And then inside the building all the aquatic elements are still there that were in the conceptual design and all the Spaces that we had previously proposed and all the uses You'll see that this plan looks very similar to the conceptual design We had gone through a fairly rigorous process with that conceptual design. So it has not changed substantially we're just tweaking it here and there we well I'll get into some some of the reasons we we needed to tweak the design but the design elements that are under consideration that we can save some money to keep the project on track budget wise are the operable roof changing that to fix skylights of course there are maintenance issues involved with that as well as the initial cost the East parking lot potentially changing that to something other than asphalt the gravel lots similar to what's south of Kiowa Avenue right now but still keeping all the curbs and gutters and extending the Existing parking lot along Kiowa and the connection to beaver keeping that all asphalt And then we identified some energy savings items that we were putting into the design that had really poor return on investment So just taking those out and simplifying the system and then the meeting rooms we had two two meeting rooms that could function as party rooms directly adjacent to the pools and we were proposing having big sliding doors that could just open those rooms up to the pools and we're looking at removing those and just having glass storefront with a swing door and that way everything inside those rooms doesn't have to be rated to be in a pool environment When you have the sliding glass doors essentially becomes part of the pool environment with all the corrosive chemicals Which changes this back on all the lights on the ceiling and the materials in that room? So by isolating those we can save money both in the sliding glass doors and on everything in the rooms So We did I identify a utility conflict and the back of the building with the existing transformer we're trying to avoid moving that and then also with the playground when we got our survey back the playground was in a little different position than we anticipated so we've adjusted the building a little bit to accommodate that it resulted in obviously saving the cost of you know moving the utilities but it actually improved the interior function of the building by shifting things around a little bit. And we've also fully conformed the plan to meet building codes. So I'll hand it back to Krista to go over some of the design updates.

All right. So as Dane was saying, we had a lot of, you can see some of the technical details we're getting into, looking at it with our engineers, looking at it with our landscape architects, our civil engineers, all the site work. And then as we go into the building, we start to look at the details and what it's going to look like. So we had a workshop, we had a few different workshops with our interior designer where we go through the process of picking out finishes. What does that look like? I think there was a lot of discussion about tying in with the existing field house to make it look like it's always been there. The new aquatic center was kind of meant to be part of this. It was our goal to kind of capture those colors and maybe enhance them a little bit, make them a little more fun and exciting because it's a pool in an aquatic environment. But you can see up here, this is one of the interior design boards. It has actual finishes on it. There are acoustic panels, there are things like the waterline tile, different like the LVT flooring, if you haven't heard of that, it's luxury vinyl tile. It's like plank flooring. And just the different materials you'd be seeing in the project. We also have had a number of engineers workshops. Today we had all the engineers on the call in addition to the contractors. So we had everybody on the call together, which really helps talk through technical details with the staff and with what they're looking for. So it's really great to have those meetings. We also have had aquatic systems meetings we went over more of the landscape concepts today mechanical electrical plumbing systems so we're looking at all the systems of the building and getting into all the very minute details. And then here just a few renderings so you can see, this is looking out from the party meeting rooms into the pool area. So you're kind of standing in that meeting room and looking east to the pools, if you remember from the floor plan. And you can see there's a lot of daylight. We're still working through light fixture selections and specific things, but this is just to kind of get a feel of how big the room is. what they might look like. You can see they're operable partitions. I might point with my, not with my finger, but the mouse here. There we go. They're operable partitions, so you can divide this room up into four, or you can divide it up in half, or you can have it divided up in many different ways. So you can have really smaller party events or meetings, but then you can also expand into a really large meeting space for a full kind of team meeting. So the goal is to have a lot of flexibility so that you guys can do a lot of different things. It could be rentals, it could be for city meetings and events. So all sorts of flexibility is what we were looking for in the layout of this space. This is the locker room keeping with kind of the warm, you guys have warm wood tones and kind of the lockers matching the lockers that you have now. That was one request to tie in with what you have. So looking at those items and having the same kind of partitions, those are called HDPE partitions. We're getting into the details, but that's, they're very great with vandal resistance. They're just, they hold up really well and they're really easy to clean and maintain. So we like to look at those things. So that's just kind of a feel for that space. And then here's the best part, right? This is the pool. And looking at the acoustic panels, we've done a lot of studies and we've been working with acoustic team members to look at really helping reduce the noise in the pools because there are so many hard surfaces. We're really starting to look at this carefully in our profession. We have done it for a long time, but it's getting more and more important for lifeguards to hear and for everyone to hear the lifeguards for emergencies and everything else, and just for the noise levels in the pool to keep that safe for everybody in that environment. So you can see the lap pool is the one in the forefront there. the mouse there so you can see it and you can see kind of a shadow of this wibbit element if you're all wondering what that is it's it's like an obstacle course so there's been a lot of discussion about that and then in the background you see this is the zero depth pool and the leisure pool that would have a large like fun play feature for kids of many ages And then some sprayers that come out. There's also a lazy river that happens in here. And then there's a climbing wall way beyond. And then there's a tower slide and a drop slide that you can't quite see in that view. And then here is the warm water pool and hot tub. in that area tucked back in this lower roof area something else you'll notice this is part of the pre-engineered metal building system that we're working on that would tie into the existing pre-engineered metal building that was part of the field house so a lot of the same character and feel and just kind of we we kind of brightened up the colors just for the fun pool environment so that is the end of the presentation does anyone have anything any questions anything to add matt well i'd like to point out too obviously we start off and it's hard to get past some of the big numbers when you see the