City Commission - workshop

For a workshop on budgeting, it is 3.04 p.m. on Tuesday, July 14th. If you'll please stand and do the Pledge of Allegiance with us. I pledge allegiance to the flag of the United States of America and to the republic for which it stands, one nation, under God, indivisible, with liberty and justice for all. Thank you. City Clerk, will you please do a roll call?

Commissioner Marriott? Here. Vice Mayor Robinson? Here. Commissioner Causey?

Here.

Commissioner Maldonado?

Here.

And Mayor Tate?

Here.

We have a quorum.

Okay, we have an agenda here which is all about work session and we've got a series of presentations, so I will hand it over to city staff. Topic is reclaim water, I understand?

That's correct. So good afternoon, Mayor and Commission, Devon Schmidt, Finance Director for the record. This afternoon, we're very excited that we have Raftelis with us to present to you our enterprise fee studies. And so with that, I will turn it over to Sean. I did want to just give a quick shout out and thank you to our public services for the information that they pulled, our finance department, and the city manager's office, Kathleen Murray, for all of her work in getting these fee studies pulled together. There's a lot of data that goes into that. So without further ado, I'll pass it over to Shawn.

Thank you. Really quickly, I think there's a note from our speaker that we are muted. If I could get some technical assistance. Sean, can you hear us now? Yes, I can. Can you hear me okay? Yes, we can. Can you hear us okay? Yes, I can hear you now.

The introduction was

You have been introduced so you're up and running and would you like to share your own screen or do you need help on our end?

I'll share my screen OK. OK, is it coming through OK for everyone?

Yes, you're you're good.

Good afternoon. My name is Sean Ocasio. I'm a senior manager with Raftelis Financial Consultants. I've been working with the city when it comes to the reclaimed water, stormwater and wastewater utility efficiency study, as well as wastewater connection fee study. And I've been overseeing the analysis and working with the city's finance and management team in order to develop the financial forecast and everything that we're gonna be talking about today. just as a quick overview of the study itself in the presentation again we're looking at the revenue sufficiency of the reclaimed water system the storm water system wastewater system we're also looking at some weight design on the wastewater system side as well as an update to the city's wastewater connection fees in terms of overall goals for the presentation today that's going to be an overview of the major tasks goals and considerations for this various type for each analysis and then a review of the summary findings and recommendations associated with each analysis. One thing I do want to mention, if there's any differences in between the handout that you're viewing and the slideshow on screen, there were a couple of minor updates that were done to the slideshow on screen. So there may be just a couple of slides of difference, but overall the content itself is the same. So we'll first start off on the revenue sufficiency side. One thing I wanted to mention here is presently the city's reclaimed water, storm water, and wastewater revenue funds are reported as enterprise funds for financial reporting purposes. So what's the important statement there? Well, according to GASB, essentially a utility enterprise fund, any enterprise fund has to be operated in a manner where the rates and charges for that fund and service provide for the covering of all the cost of operating. health and in this case when it comes to your your um your different utility funds um but anywhere between 95 and 99 percent of the revenues associated with those different enterprises come from your normal recurring utility service rates so why is that important because what that means is that's the main uh lever that you have to pull when it comes to improving the overall financial position of the various utility systems it's adjustments to rates rate really uh your cost structure for the various utility funds is a fixed type item. So again, the biggest tool you have in order to improve the financial position overall is a rate relief theater. In terms of the major study tasks and our overall approach for the revenue sufficiency analysis, essentially what we're doing is we're trying to develop a forecast to project operations for the various utility systems. That's including I'm thinking of rate revenues, any connection fees and other fees balanced against the cost of operating the system, any debt related costs, capital in order to maintain and improve and expand the system, as well as any fund transfers and so on. So that's kind of the dynamic of trying to be balanced here. And what we've done is develop financial projections in order to review and fund future capital improvement projects, evaluate cash reserve targets and financial performance requirements, at existing rates to cover your costs. And then as I mentioned before, one of the other tasks we looked at specific to wastewater is designing an alternative rate structure, which we'll get into more about as we move through the slideshow. So that's just an overview of our major tasks. In terms of major goals and considerations, what we're trying to do is, but there's a few main goals here. If I were to think of it as three main items to balance in a financial plan, to your cash flows. Are they sufficient to cover your costs? Cash balances, do you have an adequate amount in reserve to cover contingency events and other issues? And your coverage. Coverage is a financial metric that's required by your loan agreements. It has to do with a certain margin that you make over your debt payments to ensure overall financial health. So when it comes to items that we're considering as a part of the rate studies, what we're looking at is for your utility systems, that it's also achieving and maintaining, you know, solid targeted reserve cash levels for your various funds, aiming in this case for 90 days of revenue for the reclaimed stormwater and wastewater systems. And then also maintaining compliance with your debt service agreements for stormwater and for wastewater specifically, because you have certain coverage requirements there that are required to be met based on your loans. And so we've accounted for those things as we develop these plans. So moving in from the general more into the specific, we'll start with the reclaimed water system here. An overview on system customers, growth and rate revenues and other revenues. Currently, the city reclaimed system provides service to approximately 2,900 accounts billed on a bi-monthly basis. In terms of the forecast, as we look forward in time, accounts per year, so essentially flatline their stable account base. In terms of system rate revenues at existing rates, so that's the rates you have today, those are projected to be approximately $1.1 million in 2026 and projected to be generally constant through the end of the forecast period, 2030-2031. Again, this is the rate revenues assumed just based on the minimal growth assumption and no increases in the rate, so that's Revenues of the system, there's some minor items. There's a miscellaneous income that comes to about $16,000 annually that's comprised of some connection fee revenues, permitting revenues, disconnects, and other miscellaneous type items. Additionally, there's about 13, almost 14,000 per year in estimated interest income on the fund as well. So one thing to mention here is that the 2026 budget, Essentially the the budgeted revenues for the reclaim system are not sufficient to cover the operating costs. Are there sufficient to cover the operating costs in the general fund loan payment in part, but not enough to cover any sort of capital reinvestment in the system? And so that's important to know, because again, like you mentioned earlier, we want to make sure that the enterprise funds are self sustaining. Switching from the revenue to. um just a quick overview of operating expenses and debt service for the reclaim fund historically one thing to notice your operating expenses for this fund have grown on average roughly at about 16 per year since fiscal year 2021 so the bills have been going up and the operating expenses are projected for 2026 to be about 1.1 million and to increase to about 1.3 million by About 4 1⁄2% per year. The way we get that 4 1⁄2% per year is as a part of the analysis, we look at your detailed line item budget for the fund, and then on a line item basis, we escalate certain costs based on their nature or their character. In the case of labor-related costs, those are escalated at 4% per year. Health insurance at about 10% per year. Other items that are more linked to inflation in their nature, about 2.2% per year. Percent per year and then a purchase reclaim water expected to increase about 5% per year. So all of those various line items of the reclaim system and budget escalating at those various rates comes to an overall composite of about four and a half percent per year on average. Now with that, in addition to the operating cost of the fund, the fund also has a loan out with the general fund and is currently repaying that with a payment of $61,000 made repayment of that loan to the general fund will be in about 2039 so those are the the main recurring type of outflows for the reclaim system when we we move to the the capital side because it's in addition to just operating the system there's also the capital improvement component and the multi-year capital plan that's a part of the forecast is a plan of about four and a half million dollars worth of projects um you see the the graphic period of time. It comes to an average annual amount of about $676,000 worth of projects per year. And it's comprised of two main projects funded by rates. The two main projects are lateral service pipe replacements and big port installations. Those are the two main items driving that capital plan. So when we take then the operating costs that we talked about a moment ago that are increasing at about 4.5% per year, well, that's scheduled to go through 2039. And then we layer atop that those capital improvements that are planned in order to maintain your reclaim system and service and everything. What you'll see on this graphic here is the sum total of those annual cash outflows are represented by the bars on the chart here. So the red component being your operating costs, the orange being the debt payment to the general fund, and the light blue being the capital cost on an annual basis. And then the black dotted line represents your revenue. So what you'll see in this graphic is that based on the projection of revenues and the projection of increasing operating expense and your capital needs, the existing reclaimed system water revenues are projected to be insufficient to cover the projected what we'll call revenue requirements for the forecast period. In terms of, if you were to try to think of it, how's the pie broken out between all those costs on an annual basis, if we sum total it all together, Revenue requirements is operating expenses. About 3% of the cost is the debt payment to the general fund. And roughly 35% is associated with capital projects, those $4.5 million of annual projects that I had mentioned before. So what are some of the main drivers in this situation? What's the story here? So it's an environment where there's not a lot of material growth in customers. You have inflationary increases on your operating that increases in your wholesale rates to provide the service. You also have a need to invest in maintaining your existing assets and take care of those to provide service as well. And then also a goal here, like I mentioned before, ending the reliance on general fund transfers to fund utility system operations here. So those are the major drivers of what's affecting the rates themselves. So with that, rate adjustments that are identified in the forecast would be then an increase in fiscal year 2027 of 50% in the rate, followed by 8% per year for fiscal years 2020 through 2031. That would be a total cumulative increase in the bill of about 104% over that multi-year period. So that would go from your current base service fee of $25 would increase to $37.50

So long up to 5102 by 2031.

What this rate plan reflects is it's based on the projected revenues we talked about, but making sure that all expenses, all your debt payments, and all the capital improvement plan as presented in the prior slides are fully funded. It also assumes no additional transfers in from the general fund. So this is just a when we account for then the revenues at the projected amounts or the proposed amounts, you'll see then that over the forecast period, projected revenues are then sufficient to cover your operating requirements as well as to help build some reserve in the fund as you'll see on the next slide here. This slide here just represents your estimated ending cash balances at the end of each fiscal year in the fund and then what we're trying and that's achieved by 2031 here. So that's again a good health metric to maintain in the system so that there's adequate liquidity to handle any unforeseen contingencies or other sorts of unexpected operating events. If we look at a bill comparison here, this would be an average bill put on a monthly basis for a reclaim. compared to the average of some other communities we surveyed comes in just above average the average of the survey being about $20.53 with the proposed increase for 2027 that would increase your position your bill to $37.50 on the higher end of the comparison here one thing I'll mention when it comes to some of these comparables I believe the city of Treasure Island gets its service from Pinellas County and as the analysis which is uh adjacent to you here but what i wanted to mention is that since your bill is a fixed amount because you don't need it for service presently that depending on the usage level will determine how you fit in the comparison so if we were to look at a comparison of a higher irrigation amount say 25 000 gallons what you'll find is your bill remains the same whereas these other comparables start to increase so it becomes a function then for comparability of what Two trucks we wanted to show you two different usage levels to give a sense of scale. Moving to the stormwater utility system analysis will be a very similar setup in terms of the slideshow and presentation method. You know, first system customers, growth and revenues. The stormwater system bills about just under 7700 parcels are billed via is roughly about 7,738 equivalent residential units, which is the units by which you build stormwater. Again, for stormwater, it's minimal growth assumed in the forecast. So system revenues at existing rates for stormwater are about $1.4 million and are projected to be essentially constant through 2030. Again, that's at existing rates. There is some interest income assumed as well at about just under $28,000 per year on an annual basis. for the stormwater fund is balanced through the use of some existing reserves. So on the operating expense side, historically operating expenses have been increasing as well on this system too, roughly at about 7.7% per year on average annual basis since 2021. And looking forward, the operating expenses are projected currently for 2026 at about 1.3 million. $6 million, that's an average annual rate of just under 4% per year. Again, same general theory like we talked about on the reclaim side, that it's a composite based on certain costs being escalated by a labor factor, a health insurance factor, or an inflationary factor, and so on. So your costs on the operating side are projected to continue to increase. You have a capital improvement program The capital improvement program in its totality is estimated about just under $141 million in projects. However, what I would note is about $133 million, just under $133 million, and that is currently budgeted as associated with the resiliency fund. So $8.1 million is what's budgeted as currently from the slow motor fund, and that's what our rate plan right now is designed on funding, that $8.1 million 1.4 million per year in projects to be funded from utility rates and also it's assumed that the city would issue some some additional debt in order to cover certain projects uh roughly about 3.4 million from rates and about 4.8 million in additional debt here so with that this particular utility system also has some existing debt service obligations there's the stormwater revenue note series 2015 that's an annual here as represented by the blue bars that you'll see on this chart and that loan will be paid off or excuse me that note will be paid off in 2030 so you'll see the blue line disappear by 2031 as that pays off then as i mentioned on the prior slide there's a few million dollars in projects about 4.8 million projects that are anticipated to be funded through the issuance of some additional debt uh through srf and those loan payments would then come on around the 2030 2030 currently anticipated to come on at the same time, and that would be an annual payment of about $353,000, phasing up to it in the tail end of the financial forecast period. So looking again at a familiar chart, but this time for the stormwater system, again, it's the same display, operating expenses, existing debt service in the orange, yellow represents the new debt coming, then 2030 there as it splits and then goes to solid yellow by 2031 and then the blue component being capital funded from rates and what you'll see here is again just like the same story on the reclaim side the your revenues are not sufficient or projected to not be sufficient to cover your projected revenue requirements over the forecast period and just by the middle of the forecast they're not projected to be enough to cover just your operating costs so yeah definitely In terms of the composition of the cost overall, it's about 63% operating expenses, about 8% existing debt, about 4% proposed debt, about 25% capital funding from rates, if you would think of it as a breakdown from a dollar standpoint. The major issues affecting this system are very similar to what's affecting the reclaimed system. It's a low growth environment. operating costs, there's a significant capital program in order to improve and maintain the system, and also as a part of maintaining that system and funding that capital plan, there's an increase in annual debt payments associated with the borrowing to do those projects. So when your operating costs are going up, the debt's going up, you have a significant capital in here. So in terms of the percentage rate adjustments identified, Yeah, 15% per year for the first three years. That would be fiscal years 27, 28, 29, followed by 6.5% in 2030 and 2031. It's a total cumulative increase of just under 73%. In terms of what that represents for a single parcel of 20RU, if you want to think of it that way, that would be a current bill of $183.75 for the year, increasing to 211.31. increasing to $316.97. And one other thing to note on that slide also, again, this is based on the full funding of all your operating costs, your existing debt payments, the proposed debt payments, as well as the capital portion that's not associated with the resiliency fund. So here's the projection at the proposed rates. You'll see that with And with this system, we're able to phase them in a little bit more because this particular fund has some cash balances to it that allow for some phasing of the increase as opposed to being more front-end heavy like the reclaim side. So you'll see that while we're still projecting some deficiencies in the early years, by the, you know, 2029 roughly, but early 2030 and 2031, the proposed revenues aren't projected to be sufficient to cover your operating and capital requirement. Like I mentioned, the first two years, there's a bit of a deficiency, and that's represented, you can see that in the ending cash positions here, that in 2027 and 28 and 29, the cash position is declining slightly, but then by 2030 and 2031, it stabilizes and starts to increase by just a bit. Again, the goal being you want to maintain about 90 days of great revenues in the operating fund here, again, for liquidity, future capital, unforeseen contingencies, those sorts of issues. And thank you. it allowed for some phasing of those increases. Again, like I mentioned on some of the introductory slides, we're trying to balance a few different things, the cash balances, your cash flows, but also this thing called coverage. And that's what this slide is about. Debt service coverage, it's a financial metric that essentially is a measurement of your system net revenues to your debt payments. So how much of every dollar of revenue after the payout In the case of the stormwater system, the 2015 note has some requirements to it that you have to meet based for a metric like this and essentially the way the metric is calculated is it's your revenues of the system so that $1.4 million roughly in year one minus your operating expenses gives you a net revenue number and then that net revenue number is then compared to your debt payment number you know, in this case, 115%, that has to be met in order to be in compliance with your loan terms. So with this rate plan, what we're doing is we're making sure that as the rates phase up over time, that you're in compliance with your required coverage. And that's what you'll see here on the senior lien chart, the upper left quadrant of the slide, that for 2027, 2028, 2029, you're in full compliance there. And the reason in 2015, With the subordinately debt, that's the BSRF loans proposed to fund your capital, a proportion of your capital plan, those debt payments are anticipated to come online right as the existing debt comes off. So that's why you see that the first four years are blank and then it steps up in 2030 and 2031. In all years here, for the projection period, you would be in compliance with the proposed So then in terms of a build comparison here, this would be an average residential stormwater fee comparison for one EDU of service. The survey utilities that we looked at averaged in at about $158.48. Your current fee is 183.75 per one EDU. That would be increasing to 211.32. So it'd be an upward movement there. that I still wanted to mention. I believe Madeira Beach fee is $120 per year. So they're a little below the average. And then Treasure Island, I believe is about $311 per year. So they'd be on the upper end of the average year. So with this one, one thing I'll mention is this isn't, I wouldn't consider this a report card on operations by any means, because there's so many moving parts to this. What the comparison can't show For instance, is there any sort of level of subsidy that any of these other municipalities are providing to the stormwater fund and so it's not recovering the full costs in order to operate it, whereas the rate plan that we're talking about is based on funding the full costs. So there's different moving parts. When was the last time one of these other places had a study to look at this? Are they actually including all the costs of providing service in the enterprise fund? There are some municipalities that'll put some of those water doesn't adequately show what it actually costs to provide the service. In any event, I'm just trying to say there's a lot of variability in these and also there's been a lot of interest as of late in communities updating their still water fees and what we're finding is they're moving upwards and upwards as they try to make sure to cover their full cost of operations. Some other considerations and issues, as I had mentioned, significant than the 8.1 million dollars that's built into this rate plan as you may remember about 133 million dollars in capital projects that are shown as being funded from the resiliency fund so what i want to mention is there can be some issue as to how the projects are categorized so if those projects were considered to provide a city-wide benefit to all properties and if about $133 million, then that would increase the rate plan up to 800%. Again, if you think about it, your current rates are generating about $1.4 million, and $133 million is a lot to fund. Even if you fund it through the use of debt, that's an annual debt payment of like $7, $8 million or more. So that would increase your cost to operate significantly. However, there's some caveats. to certain specific areas, then they may not be includable in the base fee for service just because of how assessment rules are in Florida. If that is the case for some of these projects, it could be a potential funding option to use debt to fund some of those projects by zone and then potentially create a special assessment by zone to link to that that would then be tied to those properties that benefit. Or that sort of method would require additional analysis to confirm projects and their nature, what they're benefiting, which properties they're associated with, and then linking all those projects to zones and financing. So anyway, just wanted to mention that $133 million in projects could have to be dealt with in a different manner.

And that's what this slide is intended for.

Moving to wasteful. uh the wastewater system provides about 3 600 accounts built on a bi-monthly basis again minimal growth here as well existing rate revenues are projected for 2026 at about 8.1 million dollars and it's essentially anticipated to be constant throughout the forecast again that's at existing rates in terms of other revenues that there's no real significant of the revenues projected aside from interest income of about just under 92 000 per 400 per year when it comes to the budget for the wastewater fund it's in part balanced through some general fund transfers into the fund as well as some grants as well in terms of your revenue requirements historically the operating cost for this particular fund have been growing between 2021 and 2024 at about just under 12 percent per year the expenses then are projected from 7.3 million in 2026 to about 8.7 million or about just over four and a half percent per year. Again, same idea. We're looking at your detailed budgets and projecting them based on the nature of that line item with the addition of the purchased wastewater treatment from St. Petersburg, projecting the rate to increase there about 5% per year as well. In terms of get service for the wastewater fund, payments are about 1.2 million dollars however that's anticipated to decrease within this forecast period to just under a million dollars that's comprised of two existing srf loans that you have one of them is anticipated to pay off 2026 and the other one is anticipated to be paid off in 2042. you also have a wastewater system utility revenue note uh sealer's 2020 that's also a part of that so that all that's represented in the blue bars that you see on the chart that's kind of And then the red that you see coming online is associated with the funding of projects in your capital plan. It's currently anticipated annual debt service payment of about two and a quarter, almost a million dollars per year starting in 2029. And that's associated with about just under $35 million worth of debt funded projects, which I'll talk about in the next slide here. So in terms of It's a large plan, rather front-end heavy, of about $58.4 million, of which that $34.7 million number I was referencing on the prior slide is anticipated in the plan to be funded from debt. That's about 60% of the plan, about $10.4 million in grants, and about $13.3 million in grants and other sources. The two largest projects in this plan are the Master Force Main 1 and Compton million and about $8 million respectively. And those are the big spending items in 26, 27, and 28. And that comprises the majority of your capital plan because that right there is about, you know, 43, $44 million of projects of the 58 million. So in terms of adequacy of rates, again, the existing wastewater revenues at existing rates and based on the current growth are projected to be insufficient to cover value insufficient to cover what's projected to be operating costs as the costs escalate over time. In terms of the composition here, about 72% of costs are operating expense related, about 10% are debt, existing debt, about 6% are proposed debt, about 12% of the costs are associated with capital being funded from rates. So, all three systems that you know wastewater inclusive again it's a low growth environment you have inflationary increases on all your operating costs you have a significant capital plan here in order to improve and maintain the system as well as expand capacity in this case your transmission system there's the increase in in-depth payments associated with the borrowing needed to fund those capital projects and also a need to improve the cash position of this particular fund that we're identifying in the forecast for wastewater would be 16% per year for 2027, 2028, 2029, and then a 5% in 2030. That's a cumulative increase of just under 64%. And you'll see the impacts to what would be an average bill go from $95.34 by the end of 156.24. And again, this is based on all the projected expense fully funded in this plan. And it ends any reliance on assistance from the general fund. Now, one thing I'll mention here is that, like I mentioned at the beginning of the presentation, we have some rate design that's associated with the wastewater system as well. So consider the 16% per year increases and the 5% in the last year as how much rate revenues need to increase to the rate design in a moment. But think of those as your revenue targets. With these revenue adjustments in mind, you'll see that wastewater revenues are then projected to be sufficient to cover your operating costs, your debt, your capital needs over the forecast period. That same rate plan is designed to get you to just about 90 days of cash in your operating reserve. important for liquidity unforeseen contingencies also creditworthiness if you're going to borrow money they want to make sure you have adequate margins on hand debt service coverage again you'll see it's projected to be pretty solid throughout the forecast window 27 28 29 are all very solid the subordinate debt it goes up and then it goes down that's because as your rate increases go up 29, 20, 30, when those new debts come online, it pulls them down, but still, by then, it's still a very solid level, projected about 150% when the requirement is 115 for that type of loan. If you were to take all your debts added together and compare them on that margin that we're talking about, it would still be very solid. This is not a required minimum level. This is just an overall health metric target of about 153%, and by then, projected to be very strong on this margin. In terms of residential bill comparison here, you'll see your current bill reflected. If we compare it on a monthly basis to some neighbors in other places, the monthly bill will be shown at $44.65. That would be increasing to $51.79. The average of the survey here is about $50.17. One thing utility rates considering the cost environment that we've been operating in especially the past five six years and so a lot of communities are doing studies in order to assess the um the adequacy of their rates to cover their costs and so it's it's it's likely that as your position moves upward in this chart for any rate adjustments that are done so would a lot of these other places like uh city of old smart is doing a study right now there's some others as well um and so I believe Madeira Beach is provided by Pinellas County, which is represented here about the middle of the chart. And City of Treasure Island is provided service by City of St. Petersburg. So they're reflected in this by where their service is provided from. One thing I wanted to mention here on these next few slides is just, you know, this is not an issue that's unique to St. Pete Beach. especially of capital and capital improvements have increased in the past five, six years at an unprecedented level. And to that end, many other utility systems across the state and everywhere are having to do more significant increases than maybe they had to do in the prior years. Some examples are then notated here on this slide. For instance, the city of Winter Garden, for instance, where it's wastewater fund, they had a 17% increase in 2025. and then a 7% in the two years thereafter. City of Palm Coast has eight percenters. City of Groveland just did a 40% increase, followed by 10% per year thereafter. Wilton Manor, 30% increase in 2025. City of Bell had some very significant increases on the wastewater side in recent years, 80% 2025, 50% 26, and projected for 25%, 27. You know, 9% in Lake Worth, 7% in Clay County Utility Authority, 9% per year for the City of Oviedo, Fort Lauderdale, 7%, two 9%s and 5%. So again, I'm being a bit hoarse at this point, but I just wanna note, this is something that a lot of communities are experiencing because capital needs are so, have increased so much and the cost of them have increased so much, you know. Construction costs are up, you know, 50% more double depending on the nature of the project. We see this in all aspects of municipal government as well. Just to use an example, when we're looking, I do some work for fire departments as well. And, you know, a standard fire engine, you know, five, six years ago might have been a half million dollars, $600,000 depending on how it's set up. Those same trucks over just six years are now double, you know, pushing 900,000 to a million dollars. All sorts of municipal government services have been increasing at an unprecedented rate, and hopefully they're slowing down now, but it was still a very big hit in the past few years that utility systems are having to absorb. So with that, like I mentioned before, there was some wastewater rig design that we also looked at for the system. So not just what do the revenues need to increase by in order to cover your costs, but how could you structure a wastewater and other goals for the city. And so what we looked at is your current wastewater rate structure, and currently all customers of all classes and meter sizes pay the same monthly base charge. And that base charge includes a minimum flow built in of 6,000 gallons on a bi-monthly basis. Your multifamily accounts are built per unit, but otherwise everyone pays the same base charge regardless of the meter. So that's me. They charge $95.34, and then first 6,000 gallons are included, no extra charge, and then above 6,000 gallons, you pay a rate per 1,000 gallons of $15.73. So that's your current structure. But what we noticed with that, when we looked at some of the costs, and this was brought to our attention by the city manager that we then looked into and did an analysis to see, is what we found is that commercial customers capacity costs or readiness to serve type costs. One thing that's very common in utilities is to have base charges for service that increase in amount based on the increase in size of the meter associated with that account. So a larger meter account would have greater service potential, right, but more potential demand, and to place larger demands on the system. And so the availability to serve type charge is then priced according to that Harder base charge is a very common practice in utilities that can be based on the American Water Works Association, AWWA published hydraulic capacity factors are a very common method to use to scale the base charges upwards in order to try to recognize in that charge the relative increase in potential demand that each meter size can generate. So this is a common approach. The public service So what we looked at was, when we look at your accounts, and we break them out by class, residential, multifamily, commercial, and then just the overall average of the system, what we find is that if we were to take the total rate-related revenues, base charges and flow charges for the total system, and then divide it by the total wastewater flow that's billed, gallons of flow, right? So that average cost per gallon for the system is about $33 per thousand gallons. So we did that same calculation or analysis, but looking at it by class basis. So why do we do that? Because that sort of analysis can help bear out whether there are some inequities in the system and maybe one class is subsidizing another and that there's some equity issues that you may want to address. So when we looked at that same calculation, who's divided by the residential flows that got us a cost per gallon cost per thousand gallon of $34.62 when we did the same analysis for your multi-family accounts um we got a cost of $45.42 for one thousand gallons and when we looked at commercial it was about $25.42 so what does that mean it means that in in comparison to what the average cost per thousand gallons is on average about 105% of that. Your multifamily customers are paying about 138% of that, and your commercial customers are only paying 77% of that. So what this illustrates is that presently your commercial accounts are getting quite a benefit here that's borne on the customers of your residential and multifamily classes, particularly the multifamily classes. They're the ones picking up the brunt of it. So there's some... So that's what we found when the city manager asked us to look into this because she had a hunch that there was something in balance with your system. And when we looked at the numbers here, this is what we found. So this is something that we want to address. We want to see if we can pull all of these percentages closer to 100. You'll never get it perfect just because there's so many moving parts and customer behavior and so on. But to the extent we can, we want to try to pull these in a little bit closer. And that's what the rate is. So then the proposed rate design is no structural changes to your residential class. So that rate structure is to remain the same and the same holds true for multifamily as well. But for your commercial customers, the base charges would scale by their meter size based on their hydraulic factors or capacity related factors. And then that commercial would pay for all of its bill flows as opposed to just the flows of over 6,000 gallons. Generally, to try to recognize the fact of essential indoor usage. It's not discretionary, that sort of thing. So this rate structure where the base charges scale by meter size and all the flows are billed, the idea is that the base charge would be phased up to a full amount over a three-year period of time, that the usage charges would be fully billed starting in the first year. And then the result of this is that this new rate structure would then, of course, generate And the reason is, again, we're trying to recognize that their capacity and related readiness to serve costs need to be captured in their monthly bills or bimonthly bills. But this would also generate additional revenues from that class because we're going to be charging them more now to address those issues. As a consequence of that, because the additional commercial-related revenues are being brought in, that can help lower some of the rate increases on the residential and multifamily classes. between 12 to 26% over the forecast period. So essentially by trying to address this inequity, this subsidy that commercial customers have been getting, you're addressing that issue, you're trying to treat your customers a little more fairly on an average cost basis, and it allows for a reduced impact on your residential and multifamily paths. What that structure would look like for commercial is what this slide represents here. Again, your base charge is the same regardless of the meter size. So whether you're a 3 quarter inch account or you're an 8 inch account, you would pay $95 a month under the present method and you would get your first 6000 gallons at no charge because it's built into the base charge and then you would pay $15.73 for 1000 gallons thereafter. What we're proposing is that between fiscal years 2027 and 2029 that those charges start to phase upward again, their potential capacity demands and readiness to serve component. So using, I'll use the largest on the board here, an eight-inch account. And personally, you don't have any eight-inch accounts, but just using this for illustrative purposes, that charge would go from $95 and, excuse me, $95.34 for a bi-monthly bill. That would increase to just about $5,000 change until about 17,000 over the phase up period. For more common smaller meters like one inch, one and a half inch, that's where the bulk of your commercial class is, is three quarters, one and one and a half. Looking at the one inch, for instance, $95.34, the first incremental increase to phase up those base charges would be to go to $192.42. Then that would increase in the next year to $256.56. 2030 is just the 5% adjustment in the last year. So again, the intent here is to try to phase this in over a three year period of time. The reason we picked three years is it allows for enough time for adjustment and implementation and not so much time, if you try to spread this over five, six or more years, what can happen is partway through the phasing plan, there may be a change in direction. with a longer type of rate structure change program is that it gets lost in the weeds over time and you may not fully implement the plan, in which case the design then doesn't achieve what it was originally intended to because it was never fully implemented. So we feel that a three-year implementation is enough to phase it up over time, but also still be manageable to implement and make sure it's done successfully. So you'll see that's over time and then all the flows being built starting in 2027 for your commercial class. So what would an average bill of your most common meter sizes look like then? The most common meter sizes you have for the commercial class are three quarter inch, one inch, and one and a half inch. So even though we've designed rates for anything potentially larger than that, the bulk of your commercial customers resided in these brackets. Cats, for three-quarter inch commercials, about 8,900 gallons. For one inch, it's about 18,700 gallons, roughly. And for one and a half inch, it's about 35,000 gallons. So what do those bills look like under your present rate structure? Again, because there's more usage tied to these bills, your existing bill would be $141. For one inch, it'd be $294 change. For one and a half inch, it'd be $560 change. three quarter inch account would increase to $385. The one inch, you'll see a more pronounced increase because there's a larger base charge scaling to account for. So it goes from about $295 to $872. And for one and a half inch, it goes from about $560 over time to just under $1,700. So that's kind of your average account of This schedule here is quite a lot busier. Essentially, it's more drilling down on the one-inch account, year one, year two, and year three. And at various usage levels, you know, 3,000 gallons going to 24,000 gallons is the first column of each chart here. What your existing bill looks like and your proposed bill and the change in the bill. And so what you'll find 16% increase in overall system revenues for your wastewater system because we're redesigning the structure for commercial in order to address those inequity issues to try to address the subsidy that residential multifamily is providing this class. The increases that this class is then going to feel as a consequence of the redesign is then more pronounced. So what you'll see, depending on the usage level, you'll see increases in the depending on the usage level for one inch could be between 160% down to 66%, but then the higher the usage gets, the more that's diluted. So you'll see that decline over time or over usage rather. You know, between about 30% and 20% for year two for one inch, about 40%, 25% by year three. Similarly for the one and a half inch customers, you know, significant increase is a bit less from what could be the highest of like 200 plus percent to 58% or 51% to 27% in year two, 53% to 29% in year three. Again, depending on the flow associated with that account. This was just meant to be a bill comparison that again illustrates the impacts by more ranges than just your average over the class, like the first slide was. So with that, the proposed rate design, again, there's additional revenues that are generated by this structure change, and it would allow for reductions in the overall revenue adjustment needs from your residential and your multifamily classes. So whereas, again, like I said, we were targeting 16% per year for the first three years, because of this structure phase-in for commercial, it would allow for the residential class to only go up by 13% per year, year for the first three years instead of the 16th um so whereas before if we retreat everyone uniformly there's going to be about a 64 percent increase in this case residential would only get about a 52 percent and multi-family would get about a 38 percent increase uh cumulative so when we when we look at this um this structure and we talked about that in equity issue we were looking at uh on the kind of one of the introductory slides of about 105 percent of average cost multifamily was paying about 138 percent of average cost and commercial was paying 77 percent of average costs under this design you get residential to about 99 percent and change of system average cost so you tighten that one up closer to 100. for multifamily brings it from 138 percent down to 119 percent of average cost um so about an 18 percent pull in closer to 100. an increase of about 15% on our per dollar per thousand gallon type basis. So essentially what we've done is we've tightened each class closer around the average such that we're trying to treat them all a little more fairly on a cost per gallon basis so that it mitigates some of the subsidies. Can this be made perfectly 100, 100, 100 across the board? home because you're always going to have moving parts and you know customer behavior is a part of this usage characteristics and so on but this is a essentially a you could think of a first major step in trying to address some of these inequity issues between your classes and this could always then be addressed in some future study where you look to try to if it can be tightened up further you could always look at it again but at least for this first pass that first major three year phasing this would pull address to at least a large degree that subsidy that your commercial classes currently receive. So again, major observations on the rate design. Again, we're attempting to rebalance the average cost per thousand gallon by class so that they're closer to the average with the goal of trying to treat customers more fairly and equitably across classes and trying to mitigate cross class subsidization to the extent we can. This will address some equity issues and customers. And it also as a consequence of this, it also creates a reduced base charge for your multifamily customers that comes in at about 91% of the current residential rate, which is also a very common design in utility rates. Oftentimes, multifamily base charges will be reduced compared to single family to recognize that on an average basis, a multifamily account uses less than a single family account. So all these different kind of this rate structure here. So with that, I've done 62 slides worth of talking here. If there are any questions on the revenue sufficiency side of the slideshow or the rate design portion of the slideshow, I'd be happy to field them.

Thank you, first, Ms. Acasio, for your presentation. We appreciate it. I suspect you should keep yourself at the ready, because I think there might be a number of questions coming your way. I'll look over at my commissioners to start with. But again, thank you so much, and I will hand it over to Commissioner Maldonado, please.

Sean, again, thank you for a lengthy and detailed briefing. Can I get you to go back to slide 27 with the stormwater slide rates, please? And while you're doing that, when is the last significant rate increase we've had in the stormwater? Can you tell us that?

The last major increase in the stormwater I may have to defer to staff here, but I want to say it's beyond 10 years plus. I know on the wastewater side it's been at least 10 plus or more years since that was looked at.

Okay, and same question for reclaimed.

It's been looked at in quite some time from my discussions with utility staff.

Thank you.

Commissioner Causey.

Sean, thanks again. I think this logical approach is exactly what we needed. And it seems like a great study you've done here for us. It seems you talk about the unprecedented cost that we've seen over the last four or five years and it seemed like the increase that we saw in our opex was about 16 per year from in most of the funds i know in uh in reclaimed water 16 per year since 2021 uh stormwater opex was eight percent and then in wastewater 12 per year so I guess what one thing I wanted to understand more clearly is we are predicting or we're planning to for looks like 8% on page 14 or our next five years so and then on stormwater I see we're planning for 6.5% steady-state in the last years after we make up I think for the uh lawn and then uh in wastewater it looked like a going down towards five percent so uh based on the 16 increase that we'd seen over the last four or five years I don't understand why we wouldn't be planning for more Could you address that? Why did we have a 16% increase over each year for the last five years?

So the average increases in operating costs that I addressed on the front of each particular Enterprise Fund slide show, that's the average across the past few years. But in some instances, it wasn't necessarily uniform. may have been, let's say, 16% per year on average. Some years were higher and some years were lower. And based on what we were seeing in the more recent couple of years, as it then relates to what your projection of operating costs were and what city staff feels is appropriate for labor costs and other types of items in the capital plan, that's where those numbers bore out. So while The plan that's been developed is based on the premise of what your current 2026 budget is, and then escalating from there. And to some degree, some of those inflation type items have been starting to stabilize. So it's essentially linked to that premise that the past, since 2019 to 2024 was a very, very expensive period. In the past couple of years, that's started to stabilize a bit. And so that's why the projections are at a lower rate of climb. But one thing I would note is that those rates of change are just on the operating cost side. They're not reflective of your capital costs over that window of time or your debt payments. So in some of these forecasts that we were looking at just a moment ago, we might be projecting, let's say, costs, but that's not accounting also for the increase associated with your new debt payments coming online. So I was speaking more just to the operating costs on those percentages historically.

OK, I'll stop for there. I may have another question or two in a minute. Commissioner Robinson.

Hi, Sean. Thank you so much. That was very informative and unfortunately not a surprise. What I did find was surprising and informative is on the wastewater side with the commercial aspect. And I thank you for enlightening all of us to that. I have a question, actually I have two, but I don't know if they're actually to you, they could be to staff instead. But do we know when the last time we did not have to use general funds to supplement any of these?

One moment, Ms. Acasio, we've got a staff member coming up.

Hi, good afternoon. Devon Schmidt, finance director for the record. The last time I would have to confirm, but I would say it was around 2022 or 2021. I'd have to confirm that, but I could certainly do a follow up with the commission.

Thereabouts? Yeah. And then the two special assessments we have writing on our tax bills right now, I believe both of them say stormwater, but I don't believe, are they both truly stormwater? They are. And that's the debt service that we're looking at. Yes. And then we're looking at going in again for a more debt service. Okay. Just wanted to clarify that since those are on there. Thank you. That's all the questions I have.

Commissioner Marriott.

Thank you. And thanks for everyone else's good questions. That got some of mine, but I still have a whole bunch. So my first question on reclaimed water, and this might be a question for staff, is do we know if that 2,900 accounts for reclaimed water? been steady over the last 10 years? Is that a post-storm number? Is that significantly fewer accounts than we used to have? Have we worked into the equation if we raise the rates that some percentage of people might cancel their service? Has any of that been worked into the math or the projections?

This is Sean here. As far as growth in accounts and change in accounts over the past 10 years, I can't speak to that. I'd have to defer to Utility Staff there on that one.

we'll have to follow up i'm seeing that we don't have that information okay yeah yeah i would be i would just be curious as to see if you know since the hurricane we have a third fewer accounts because of all the houses that got torn down and we anticipate that those people will rebuild and reconnect or if that's not at all the kit you know i mean that 20 i feel like that 2900 accounts could easily turn into 1800 and it could probably just as easily turn into 3800 and i'm not sure we know that know that number, taking into consideration the situation that we have right now. Also on the reclaimed water for the capital improvements of about $675,000 a year over the next through 2031. Do we anticipate that that will be kind of an ongoing amount for capital improvements that will continue to be required? Or do we feel like once we've replaced all the laterals and done that other work that we might have a period of time where we don't have those capital costs in the reclaimed water system?

Can I ask the public services director to answer that for you?

Good afternoon. For the record, Camden Mills, Public Services Director. For the reclaimed water, the big bulk of the capital need is replacing the laterals. I don't have an exact idea on the number that has been replaced historically. We received that recommendation from the Finance Committee at the last meeting, so we're trying to gather that data. What we do know is it's going to be more than five years. So what we're looking at in this study is that's not going to change. The question is, is it going to be 10 years? Is it going to be 15 years?

So five years isn't going to get it done. That's just the number for the next five years? Correct. OK, perfect. That makes all the sense in the world. And while you're here, this might also be a question for you. When we talk about the reclaimed water, and I know at the finance committee meeting there was some talk about having the system metered or charging different rates for different kinds of customers. And do we have any thoughts or ideas about how we could start to transition to a bit of a metered system? You know, it's, it's, it seems to me that like long term, it's crazy to be providing water that's not metered. And so I don't know if we have and I understand there was some discussion about the cost of transitioning to a metered system would potentially cost more than you would ever recoup. But is there any way to like over time transition into a metered system or start to transition to a metered system?

Potentially. I think, you know, my recommendation would there maybe target the larger customer or like larger commercial customers and start there. I think that was an idea that was floated around in the past was looking at like some of the resort district areas.

And there's no there's nothing that prohibits us from doing that. There's no state regulations that say you can't You can't meter some people and not some other people or anything like that. We can probably do it however we want.

I would think so. I think we just have to update our code.

OK, perfect. Yeah, thank you very much. The other question I have is regarding wastewater. And do we know when we're talking about the rates for commercial customers, do we have any idea? I mean, I think we must to have done the study. How many of the different meter sizes we have in St. Pete Beach or how many? I mean, I'm assuming we probably don't have any eight inch meters. That would be.

I don't think we have any 8-inch, but we do have the data available. OK. We could share that.

OK. And then, yep, go ahead. This is Shawn here.

To that question you were just asking a moment ago about number of customers. you have a handful of four inch but the bulk of it is um three quarter inch one inch and one and a half inch that's probably uh more than two thirds of your customer base that right there on the commercial side i'm sorry what were those uh what was the the max on that one you said

three quarter one and one and a half.

Three quarter one and one half, okay.

Yeah, thank you. And then again, on the wastewater side of things, just like on the reclaimed water side of things, have we factored anything into the equation of projected revenue of if the rates go up, people may conserve and use less? Was that factored into the projections anywhere?

I don't believe so.

So in terms of Okay, in terms of what you're speaking to is price elasticity here. Your average usage on the bulk of your, around your minimum threshold of flow anyway. So there's not really a projected material impact to any increases associated with multifamily or single family. Could there be some behavioral change in commercial? Maybe. You know, again, on the wastewater side though, it's, you know, we like to think, you know, when it comes to a commercial enterprise is that they already have a built-in incentive to try to be as efficient as they can with their usage because they have the profit motive Potential for changing behavior, of course, in this particular analysis where we're not looking at too much of a difference in the usage side because the bulk of the increase that's being experienced is on the base chart side.

OK, thank you. And then I guess my last question would be for Devin. And that is that as we've gone through those slides on the reclaimed system and the stormwater system and the wastewater system, and there was talk of potential additional debt coming online further down the road and the debt servicing requirements. and I'm assuming I know the answer to this question, but I just wanna make sure, are we confident that those debt servicing amounts all added together are still a manageable number for a city this size, even if we have a potential future economic downturn or something like that? Or have we not looked at it quite that holistically yet as far as can we take on all this debt in all these different places? Is that the smart thing to do?

So part of what Sean shared in the presentation and what he discussed was that we do have debt coverage ratios. So when we're looking at any one of our different funds, we're looking at that different coverage ratio per fund. The areas where I believe it was slide two or three that he pointed to when we're looking at the governmental accounting standards board and the reason why you don't want to continue to supplement those funds with your general fund is because it can down the road impact your bond ratings because what you're essentially doing is you're showing that you don't have sufficient rates to meet that debt coverage ratio. And so when we're thinking about some of that bonding that's certainly a component of it And then I would just say if Sean if you want to add anything to what I've shared Please feel free to do so

uh sure so you're right about that um the other thing is it uh it can be very appropriate to use debt as a part of a financing plan for for utility enterprise funds because you know a lot of the projects that you're doing have very long useful lives um so it makes sense to match the utilization of the asset that's being constructed let's say um across its useful life if you were to try to fund all of your product over time, what would end up happening is you're making your current customers pay for something up front and not stretching it across all the units of growth that you may have over time. Also, you're paying for the whole thing at once. It's no different than like when we try financing cars or homes and so on. We're here to a large degree matching the utilization of the asset over time and its cost through the financing. So it can make a lot of sense Obviously, you don't want to use too much because then you can run the risk of over leveraging yourself. But in the case of the borrowings that were anticipated here as a part of the stormwater analysis and the wastewater analysis, we've tried to be mindful of your financial metrics as a part of that. Just to make sure they're in compliance with requirements as well as city financial targets and so on.

Thank you very much. I appreciate that. And then my final comment is just on the commercial rate, the proposed commercial rate change. And first, I want to say that I think that's wise to do. I think it's crazy that we've been charging the same rate for every meter size. And so I think we definitely need to address that. I would be a little bit cautious on the smallest end of commercial business with the smallest meter size and the lowest use that with the proposed changes, we're potentially looking at, for the smallest of small businesses, we're looking at increasing their wastewater portion of their water bill you know we're looking at like tripling that um and so for a really small business on eighth avenue or a small business on corey or our small restaurants um you know uh an extra for six thousand dollars a year can be you know very important to them and and i think something that we've heard from the community repeatedly is that you know one of the things that people appreciate about st pete beach is that we have small businesses and we have local independent businesses we we're not all starbucks and mcdonald's and big chains And so I think those are the people that I think we need to try to protect when we're orchestrating something like this so that we encourage more businesses like that to come into St. Pete Beach. So my initial feeling on that would be that maybe on the 3 quarter inch size of meter or the 3 quarter inch and 1 inch size meter, we reduce the base rate maybe just a touch or we make the first 3,000 gallons included in the base rate just to really take care of those people that are really on the lowest use small business side of things.

Thank you. Commissioner Causey again, please.

Sean I've got a question about ERUs relative to stormwater. I guess that's the way we figured out how to apportion stormwater since you don't have a meter for that. I've noticed you came up with 7656 parcels 7,656 parcels and 7,038 you are you so I'm wondering if you could walk us through the formula of how we figure out your use.

Sure so you are you it's a it links back to an area associated with. I'm trying to look up real quick what your impervious area is per unit, but essentially the difference is you can have a parcel and then depending on the amount of, you know, the footprint of any structure on that parcel, that's the portion of the area that's impervious. The water runs off of it and goes off into the ground to your stormwater system. And the, Sorry, I have another screen open on my side. I'm trying to find your definition of ERU to know the square footage right off the bat here.

So is this something you had found for us, or you calculated this yourself? And you are cutting out quite a bit. So when you're trying to explain a detailed formula, we're missing some of it.

OK, I apologize. Essentially, the way a number like that is derived generally is there's a sampling done of all your residential properties or some significant percentage of your residential properties to come up with what's an average amount of impervious area associated with those residential properties. And that's done because the way you build is then in terms of an equivalent residential unit. So for example, if let's say one equivalent residential unit, which I'll call the Let's say that's 2,000 square feet of impervious area. I'm going to use that number to keep the math easy on me. When you then are pricing, let's say, commercial or other land uses, and let's say an easy example, a big store of some kind, a supermarket or something. Let's say that's 50,000 square feet of impervious area. Then the way you would build in is you'd go, okay, well, it's 50,000 square feet of impervious area. thousand square feet so that particular structure is worth 25 erus so whatever the rate per eru is you would take that rate times 25 and that would be the the charge for um for a property like that and it scales accordingly so you know if it's a larger property they'll pay more fees um again because it's it's trying to um it's trying to put everything in equivalent units so that then you can uh abortion the cost uniform

So let me let me interrupt you for a second then because I we have a difference in. Between parcels in the use of less than 80. So I'm a little concerned that how we're figuring that out and mean we have some very large properties here with a lot of impervious and it seems like you would be far too small of a not difference between parcels and you are use.

You have a fixed parcel rate and then you have the tier two, which is the portion of the bill that's ERU based. So when we're talking about the increases that we're looking at, it was based on the premise of just talking from the standard one parcel, one ERU to keep it simple. But to the extent you have accounts that have more ERUs to them, that tier two portion of the rate would be the one that scales.

Yeah, I don't understand why in your presentation, though, we're using 7738 ERUs and there's 7656 parcels. So I still don't understand that.

Because you can have some parcels that have more than one ERU worth of impervious area on them. Oh, okay. Because that's a function of the size of the structure.

Okay, I understand now. And while I'm on it, there's another question I have. So if we were to take wastewater, for example, the comparison slide that you have for us with other cities, is that, I don't think I've put that page down there. It's probably about page 50, if anyone wants to see that. So for us, for example, we were thinking $51 versus for St. Petersburg, they're at $60. And Pinellas Park, they're compared at $75. And you have other islands listed there on that slide that showed about $75. Considering how much damage we got out of the hurricanes, it seems like we would need to have a lot of work done around here. And I know we have force main one, which reached the end of its service life. So this is a giant project that we're looking at. So I don't understand why we wouldn't be thinking about having equivalent rates, at least with other cities. And this actually applies to the stormwater comparison as well because you've got us at 183, whereas Dunedin, also located on the water, is currently at 240. And St. Petersburg, right next to us, is at 275. So just on the face of it, and this is rates per ERU, so it really should be roughly apples to apples. It seems like we're still underfunding ourselves

One thing I would mention here is each one of the respective rates that's shown for, let's say, any of those stormwater comparables that were on the survey. You know, for one, what we don't know in that comparison is what level of costs those particular It's time they looked at their rates for service. So we don't know, you know, are they charging a fully burdened service rate? We don't know who is it, who isn't, what level of grant funding or subsidy or other sorts of items they're getting. So to fully, there's no way to fully know what's in there just to compare in that sense. So what ends up happening is for, let's say for stormwater here design with staff is based on the full funding of your projected operating costs, your projected capital needs and your projected debt service payments, fully specific to your community. And that's based on how your system is configured and set up and it's required capital needs as determined by city staff. Any of those other comparables in there, we don't know if they're fully funding their program in similar fashion. You guys are under funding by comparison to some of the ones on the higher end. There's so much variability in the structure of the costs of each one of these places, it's hard to make that kind of determination.

Yeah, and if we were to think about the stormwater, for example, where we're at 183 in St. Petersburg, right next door is at 275. and we know we have $100 million in capital projects that need to be done, but we're not even addressing those here in the 183. So I just wanted to highlight that I feel like we might be underfunding ourselves here. Commissioner Maldonado.

You know to commissioner causes and Sean you can probably comment on this as well as that we just we need to remind ourselves so that certain projects are going to benefit certain specific areas and those should not be included in the basic service fee so there's going to be a requirement to look at this holistically without including certain things so I think that if I understood your question you're trying to capture everything in one. Some But at the same time, we have restrictions that prohibit us from doing that with the basic service fees. Well, I think that's a good point.

And maybe Sean could address this because I did have a question about that. So I'm confused as to why say wastewater when we do lift replace a lift station, for example, in a specific neighborhood that is funded across the board, whereas stormwater seems to get segregated into zones for some reason. And really, it would also apply to repairs in our reclaimed water.

other utilities for that matter Sean let me take the first stab at this so I because this is a really complex technical question and so and I'd like the city attorney to weigh in as well but before we would spend money on major capital improvements for stormwater we would be having bond council as well as our city attorney weighing in specifically on prior city documents we have evidence to show that we have treated the storm water system as one unit or one basin that's a better term over the past several decades for the city. So those are evaluation techniques we need to look at. I would agree that we have not done that assessment yet. So you don't have a rate study that has taken into account the tens of millions of dollars of projected either new infrastructure. The one you have today is looking at current infrastructure. and what would it take to maintain just the current stormwater basin as it sits today part of the approach that was taken was because we are recommending major policy shifts right now for you to consider which is a lot so sometimes you got to take you know small bites out of I don't like to use an elephant sorry thanks small bites out of the big hamburger that you can't eat all at once and so that's one of the strategies was we have a lot to do so let's take this first sort of rip the band-aid off and then there's going to be a second piece with multiple studies going on city-wide right now on storm water that we can certainly address in a future consideration. Now, if you have a different approach you'd like us to take, we can consider that and bring it back. You just saw though, we did ask Sean to say, what would it cost to fund all of this? And it's an 800% increase on top of what we're proposing. And we didn't think that would be very palatable. So...

tasty burger why we didn't come in with a fully loaded study on that piece yet okay thank you I don't see other lights on so I'm gonna I do have a series of questions and I apologize I know we've been at these questions for a while so miss Acasio if you'll just give me a little bit more time please and this may involve some of our city staff or folks as well so I'll run you back. If you don't mind, I might point you to slides, although I think our slides are gonna get out of whack pretty quickly. But early on, I think maybe slide four, you talk about GASB and how enterprise funds should be used to account operations, right? And you go through all of this, and I just wanna ask the question very overtly. GASB is intended generally to include capital spending in the future. Is that correct? We should be thinking about our capital spending as we do this accounting for enterprise funds. I just wanna make sure that I'm correct in that assumption.

we should have been thinking about capital improvement always for gasb just to be clear um and then

I'll jump you quickly, and I think this is, it's my slide 11, but I'm not sure, you know, maybe we're close.

I know at some point our slide numbers started getting out because you mentioned you made some updates. So jumping to slide 11, I'm looking at the adequacy of existing rates, please. And I believe this is on reclaimed water. Thank you so much. Okay, so this might be a question to city staff as well as yourself, Sean. So, if we should have been accounting for capital improvement projects. And I'm looking at just the 2026 rates that are sitting here in front of me. And so I'll ask that blue capital improvement piece that's sticking across the top, How long have we known about these capital improvement projects that are due? I assume we didn't learn about them this year. I assume they've been known for a number of years. Is that maybe? Maybe. Yes, sir. I see you standing up. If you'll come up and answer for me. I'm sorry. I'm going to ask a series of what I hope are quick questions, and then I'm trying to lead somewhere. Thank you. Camden's coming up. You might stay close, Camden, too, after this.

Yes, sir. You are correct. That would be capital improvements that we would have known before due to the condition of those reclaimed laterals and the amount of maintenance that we put into that on an annual basis. Okay.

So they were known before the 2026 budget was put in there, right? And so I think I heard earlier in this conversation that 2021 is the last time that we've not borrowed from our general fund. And so I'm asking, maybe rhetorically asking the question, that we've got a history of underfunding our cities operating in capital costs to the point that as I look at this chart and it and it and this is just an indicative chart across the entire set of enterprise funds they all show this we fund barely at operating and and maybe a little bit of existing debt but we've never funded for capital improvement project I mean not never sorry in the last I'm imagining five years we've not funded for capital improvement projects at least by that the conversation that we're borrowing from general funds for the last five years and I just I You know, I am perplexed, is probably a nicer word, as to why we've been funding our city at a rate that didn't allow us to invest in our capital infrastructure for at least five years now. And now we, this commission, get to be the ones to try and put things right and actually do what I would call fiscally responsible rightsizing of our cost rates. And I'm frustrated by that, to be frank with you, because I've got four or five months into this, and I'm walking in and saying, hey, let's raise the rates across the board on every one of our enterprise pieces. And I am, again, frustrated because this could have been done. These capital improvement projects were known. These could have been done over preceding budget cycles, and they weren't. And I think that's unfortunate for us sitting right here to have to go and resolve that. I'm going to keep moving, though. And we've already talked about this piece in just one moment. I'm just scrolling through my comments that I've already created. I think you're recommending in certain scenarios that we take on additional, this might be for you, Sean, please, that we take on additional proposed future debt. And my question is, rather than taking on additional debt, why don't we right size our systems now? with the right cost structure that means that we don't have to keep doing this borrowing from either general fund or borrowing from some third-party bond fund to try and get ourselves in a situation that, again, I'll call fiscally responsible, where our fees and our revenue incoming equals enough to run our city plus invest in our long-term future. i would generally be of the mindset that i don't want to see any future loans coming through here unless they're absolutely necessary and yet i know that they're kind of baked into at least a few of these enterprise funds uh from your from your at least analysis and so i would ask maybe ms acasio um What is your rationale for baking in proposed loans already into this system? I get the one on, frankly, I'll be upfront. I get the one on the resiliency, $130 million. I get why you would say that is not there. But let's talk about the other ones where we're proposing loans to be dropped in just to kind of keep us moving and being able to invest in our capital. Why wouldn't we raise our rates and bite the bullet now and be done with it?

That certainly is an option.

What we're trying to balance is the immediate funding of these capital items to the extent that these are long lived. So finance them over time. That way you're not creating an undue burden on the customers in the near term in order to fund a project that's gonna last the next 30, 40 years, pay it over the next five years and hit your existing customers for that additional. So it can be prudent to finance certain long lived capital type projects over time. But again, you don't wanna over rely on that because that can be something that can also have a detrimental effect to the utilities to be had there. uh when it came to for instance the stormwater fund it you may recall that the debt roughly speaking was about a clean swap from your existing debt to the proposed debt so it's it's not necessarily a full addition on top of because some of your debts paying off there um so the idea was that as the some of this debt comes off you have some flexibility in the rates to handle borrowing for these projects because the rates would be set to that level to fund it if you were to theory you'd have higher rate increases and also like you said you would be biting the bullet i guess the question is um you know what caliber do you want to absorb

That's an interesting phrase for the question. I appreciate that. All right.

I'm going to jump to what I think is page 36.

And this might be, Kim, then a question for you. So just be prepared. I'm not sure what your slide number is, but I call it 36. And then it's about your revenue requirements capital improvement. And it notes a $58.4 million capital improvements. You know, it's the very first thing. So if somebody could please... Jumping to again, it's my slide 36. It's probably not in that deck.

It's like 35 on that.

Yeah, I think we got it in front of us. Well, at least I see it on the screen here. Okay, this is probably a question for staff. I know about a month ago, we got kind of a spreadsheet. Now I'll acknowledge it. So it's a working spreadsheet. I'll acknowledge that. But it listed Among other things in that spreadsheet, it listed, among other things, the cost for 2027 and then a seven-year projected cost for all of our various capital improvement projects. And that total seven-year cost, as I saw it, around, I think we're looking at wastewater here, but I'm not sure. But it was significantly less than $58 million. It was like $43 million as I added the numbers up. And so that's a huge jump because I think that spreadsheet last I got it was about a month old. And so now it's about a $15 million jump in a month. And maybe this question is for you, Camden. What did we learn that jumped that capital budget from $43 something up to $58 million? And what is new and what is driving that number, please?

The 58 number would have proceeded that previous spreadsheet. So this would have been based off of data we provided to Ralph Telus at the very beginning of this study. So I could dive into that 58 to kind of refresh on exactly what that was to see what has changed. But that was a snapshot in time of what we provided back when we did our data request a year ago.

Okay, so theoretically, then the spreadsheet that I'm referring to might be even newer than the data that correct. Yeah, a little more dialed in. And I would hope less.

This is Sean here.

Yes, please.

Um, I was just curious, if it's looking at, let's say, 27 and beyond or something like that, there's a significant amount of projects shown there for 2026. So I don't know if the time horizons were apples to apples. I don't know the document. But like Camden said, this is what we originally provided.

That's a fair statement. I think factoring that 26 makes a difference. And just looking at this slide, too, like the force main one, we've gotten an updated cost estimate on that since then. So there is some changes. Okay, so. In our current spreadsheet in this data.

And if our current spreadsheet, and Ms. Koski, I realize you don't have that spreadsheet with you, and I've just been looking, asking Camden. If I look at the spreadsheet, I would have more confidence in those numbers than what might have been given to Raftelis at the time.

Correct, but as Sean mentioned, when you factor in the 15.3 million of 26, that kind of makes up the bulk of that difference there.

Yeah, understood, understood. It took a while to build this analysis, I understand. I was trying to right-size the numbers in my head, and I couldn't quite get to how we grew that much, but we didn't grow that much. The numbers I'm looking at, 43 million, at least out of that spreadsheet, is more accurate. Correct. Okay. I want to speak... I'll jump into... Again, my slide, 51, maybe a little bit different, but it's the rate structure alternative. It's where we started talking about, you know, three-quarter-inch pipes, quarter-inch pipes, and one-inch pipes. And if you could roll somewhere into that area, it's probably around 51, maybe 56, if I had to guess.

I think you started at, yep, yes, right here. Thank you so much.

Actually, no, it's the rate structure alternative I think is where I'm more interested in, at least my title.

That's page 51, yeah. Three more back, Sean.

i apologize sean if you just keep keep scrolling it's where you said this one gets really complicated it's got uh commercial rate structure alternative commercial building comparison um i'll tell you what i rather than rather than having you jump around i'm going to cut to the chase right so there it is all right i'll tell you what let's just start stop right here this is good enough so the question came up as to uh you know uh What you said was the bulk of our commercial properties are, I'm just gonna say, less than one and a half inches in the piping size. And so it really does us probably very little good to talk about eight inch input pipes. The vast two thirds you said were one and a half or less. And so I'd like to understand, to Commissioner Marriott's question, and this probably is not something we're gonna answer today. It's maybe a question of the city staff. um i agree with commissioner marriott we need to be very careful what the impact is as we go through something like this that we don't end up uh just destroying all of our small businesses and our in our commercial spaces because we're trying to quickly get to a space that is equitable i i am frankly on the right side of becoming equitable but not at the risk of changing the character of our city by some dramatic moves. And so I would ask the city staff to just really help us understand. In my head, I'll characterize them as either your mom and pop shops, or it might be a restaurant, or it might be one of these big hotels and resorts. but start to think about how many of each fall in each of these sizes of three-quarter inches or an inch and an inch and a half and start to help us understand how many of businesses are falling to each of those categories so that we can then start to understand i'll make a number up let's let's say 200 and fallen in three-quarter inch size and we're going to change their rates from 95 to you know to something significantly higher to commissioner marriott's point we need to understand that we're affecting materially 200 businesses right there with one small crack and i and i don't want to do that i'm just going to be up front i do not want to see this happen and so i'm reticent to do any kind of change in this area until i understand what the impact is going to be and i and i see this chart is trying to get me closer to that but i really need to understand what that means to saint pete beach so i'm going to just ask for more work from the city staff to help us understand You know, what kind of businesses are we talking about? How many of them fall into each of these pipe sizes? And then we can start to figure out, you know, is this really going to be fiscally detrimental, you know, long term to these businesses? Because I don't want to see it happen. Sorry, I got a few more.

I can't speak to the types of businesses, but I can tell you when it comes to the distribution of accounts across these three particular meter sizes, it ends up being roughly about 175. 39 that are one inch, about 43 that are one and a half inch. That's roughly about 86% of the class.

One more time, please. You cut out through there. I'm sorry.

Oh, sorry, it's raining here and some of my stuff turned off. So I apologize. The three quarter inch is about about 174 accounts. One inch is about 79 accounts. One and a half inches about 43. Okay. Um, So that three quarter inch is about 50% of commercial class. Well, one inch is about 23% of the class and about one and a half inches, about 12% roughly of the class. So in total, roughly about 86% of the class resides in these three meter sizes.

Beautiful. Love it. That was great. I don't need it from staff at all. Okay. That's really helpful.

That helps a lot Maybe to clarify and Camden Can you do you have information to give them types of businesses? That would require a three-quarter versus a one versus a one and a half No, but why why would a certain building require a different meter size I

I'm trying to understand are we impacting our mom and pop shops? Are we impacting the resorts? Are we impacting the little restaurants? I'm trying to understand who we're impacting. I imagine there's no experts on this panel about pipe sizes into each of these types of businesses. I'm trying to understand who we're impacting and what kind of cost we're considering as we do these things. Miss Acasio, again, you had a very complex slide. And again, it's my slide. 53, but it's essentially you've got year one, one-inch pipes, year two, one-inch pipes, and year three, one-inch pipes all in one slide. I'm hoping it's pretty close to where you are right now. It's going to be three big charts all in one slide. If you can just quickly just scroll and see if you can find that for me. It's probably below this if I had to guess. While you're pulling it up, this is where we saw some pretty dramatic jumps. I'll just leave it right here. This is good. Right here. right so uh one inch pipe year one year two year three right and so pretty big jumps um if we kind of look at it you know we go just on the on three thousand uh three thousand gallons of flow on a one inch pipe year one it went from ninety five dollars i'm just looking at the very top row on your very top left it went from ninety five dollars up to 247 bi-monthly right which is kind of to commissioner marriott's point and so i'll ask again um How does this compare to our neighboring properties? And what's Treasure Island doing in a similar situation? What is Madeira doing? And very specifically that I'm most interested in is St. Pete proper and Pinellas County. Because we're talking about dramatically raising our rates on our users here. And I would want to know if we're in line with what unincorporated Pinellas County does similarly. Because if we can't get close to what unincorporated Pinellas County is doing, uh then that would tell me that they're far more efficient at what they're doing and far better with their economies of scale and uh and I would want to know why we can't get there um so I don't know that that's an answerable question maybe it's a again a conversation for city staff um and maybe uh miss Acasio you understand um you know how we compare with this chart in front of me against what what County rates would be and I'm talking about your your proposed commercial bill your very first column of your very first top left slide, how would those 247 down to 630 compare in a county scenario? Do you have that data or is it something we can give to the staff at some point?

that's something i can uh compile and put together um a comparison there uh the and um you know definitely put that together to show for you um what i will say is when we look at this particular one so this is a one inch account here um while the increases are very significant on the very low end and you know they're they're still significant on the high end of the clothes um they're just a little more medium the average flow characteristics for this class it's it's going to be more in the the middle now that i know what slide you're on so for instance an average uh one inch account um in the city is about 19 roughly 19 000 gallons of of um build flow so that would put them somewhere around the the 83 73 increase marker um in the first portion of the phase in it again that's still very significant i'm not trying to get Thank you, this is just showing. You know, if there's minimal absolute minimal usage, that would be the impact of that sort of structure thing. But going back to can that comparison be put together that looks to how some other neighboring communities handle this class? Yes, that's something that's doable.

OK, ideally for me again, Treasure Island, Madeira, Saint Petersburg proper and Pinellas are the ones that I think. are most directly impactful to us and would be good to kind of understand how we get within our peers. And I want to make sure I point something out. So you just mentioned the average is about 19,000 in these one inch pipes, right, the average use. And so to be clear, if I look at your three charts here, within three years, they'll go from $284.10, which is the existing bill, up to $637 within three years. $814. $814. Thank you. $814. So these are dramatic changes, bimonthly. This speaks to Commissioner Marriott's point that if we're not very careful about this, we're going to run all these businesses out of here, and I do not want to see that happen. So I am very reticent in this area. I'm just going to leave it at that, and I think it's going to need a lot of how do we compare against others and what are we trying to get to here. and can we be as efficient as the county because i'm i'm still at the mindset as i've said over several commissions that i i don't know that we can do the economy scales on our on our waste waters as the county can and i'm in that mindset but we'll figure out what we get to i just i just don't like what i'm seeing with these dramatic jumps um all right i'm almost done i apologize for the extra time um uh slide 63 for me existing assets and level of service and you don't have to jump there but essentially um the city's total conveyance system capacity is 3.194 mgd adf is the is kind of the main thing and then at the very bottom it says 18.8 of system capacity is available for new growth and i just wanted to clarify because i hear it i want to make sure i understand what's being asked here i've heard that we don't have the sewage capacity uh to grow anymore and if i'm reading this slide correctly it tells me we've got 18 of capacity still available for growth and i want to make sure i'm understanding that right and not inferring it incorrectly hamden can you confirm the mayor's question

Yes, I think as related to capacity, we don't have the capacity to build out our city to the full density of our comp plan as it currently stands. So there may be the window that 18% we still may have capacity, but not to build out our full comp plan.

Right, but as of today, we've got 18% capacity remaining. And it may not let us get to where the comp plan wants us to, but we have 18% capacity remaining. Am I correct? I'm asking, not telling you.

I believe so, yeah. Okay.

I'd be beating a dead horse if I went into, we've consistently got a lack of capital investment planned over previous years. And I think that's it for me. Apologize for the lengthy question to all in the room, but thank you.

Okay, Mayor, I just need more direction because I've only really heard definitive direction from you and Commissioner Marriott. So I'd like to hear from the other three on what you need from us and what our next steps should be to either proceed, come back with a presentation, don't do anything with this. I need some definitive direction because it takes multiple steps to put these rates in place. Any rate changes take extensive outreach and mailings, et cetera.

I think it's the first.

I think it's a great point that we've brought up about how these rate user fees can impact businesses but I will say that we have basically an inequity right now between the different classes that we've looked at that's very significant where we're at 138 percent for multi-use for example if you live in a condo you're paying a hundred and thirty eight percent whereas if you're in a single-family residence you're at about 119%, but if you are a business operating here, you're at 77% of the rate, according to the rate study. So essentially, bringing us back to equity is very possible you're going to create a hardship and i wonder if for the class that is going to be affected the most if we could look at a hardship relief based on their need for example their cash flow may allow for Variance of how we bring that particular property back into because obviously we want to shoot for equity and it's an injustice to leave things inequitable so I Would suggest we think about possible Variance procedure for how to implement user fees that are considered to be fair across the board and

No worries, Mr. Mayor. Thank you. I agree with the comments expressed by the Mayor and Commissioner Marriott. We need to be very mindful of unintentionally impacting small businesses. And that's a great point that you brought up with that. I'd also like to say that My intent and our intent should not be to overwhelm the users, but it's time to stop kicking the can down the road. It's very clear that we have not, as a city, gotten ahead of things and that's where we are today. Now we're picking up the broken pieces and we have to do it very strategically, very methodically, but we do have to reduce the inequity across the classes based on the businesses, the commercial versus the residents. It's not fair. that you know one class has been subsidizing another so I do think that we have to right size that adjust it accordingly but at the same point just be very mindful that we don't do something that's going to impact or hurt our small businesses also like to say that I think that To try to scale that to come up with a relief system is going to be very challenging and very difficult. So I'd rather we take a strategic scaled approach and then, if necessary, adjust or look at options then. But we need to take actions. This is not going to be something where we're going to cover all of our expenses, but at least it will get us closer to it. So it's the right start and the right step in the right direction. And I'm very, very thankful to the, not only to Sean and his firm, the city manager for pointing out the inequities, but also our finance board for all the work that they've put into it. If you sat there and watched it, they really thoughtfully made this the easiest digestible presentation. Believe it or not, theirs was even more brutal. So thank you to them and to all the folks that volunteered their time. So thank you.

Okay, I'm sorry, I'm not sure you can whisper. Oh, okay.

Yeah, I just wanted to reiterate that I'm absolutely in favor of the right-sizing our enterprise funds and like others have said, it's high time that we fund these appropriately and that those funds be self-sustaining. To Commissioner Maldonado's point, I don't think we need to overcomplicate trying to make sure we don't have unintended consequences for the smallest businesses. I think really, I may be oversimplifying things, but I think we can really look at the smallest of the small and the lowest users of the low users of water and probably, I mean, I hate to say that we should meet with the businesses because we'll get in trouble for having secret meetings with the businesses. But if each of us made a couple phone calls to some businesses and asked them to look at their water bill and tell us what their usage is and what size their meter is, I can tell you for my business, under this proposed plan, in three years our water bill, our storm water bill will triple. We use 3,000 gallons of water per billing unit. And I have a 5-8 inch water meter because I went and looked at it today. So for us, it's not a big deal. We are a big enough business that that amount of dollars is absorbable. It's not a big deal. My concern is for the businesses that might only gross a couple hundred thousand dollars a year. And then a $600 or $1,200 increase in their overhead in a year is really

really affects them and so um you know i don't think we need to over complicate it i just think we need to make a little bit of an adjustment at the lowest tiers of use mr robinson i i hate to be on this commission that's going to do increases on everything this is just sad and i hate to see that um unfortunately it hasn't been um properly adjusted or even considered an adjustments. Um, although I will say I've been on this commission over a year now and last year we knew about this. We knew that the rates weren't going to weren't covering the costs. So we did know about this. Um, so now we're actually making an adjustment for that. Um, so I'm good with the reclaim the storm and I'm fine to look at what staff can come back with for the wastewater if we have time for that. To evaluate that, I would hate to turn into a cheesecake factory and franchise only type town. I'd like the idea of us having boutiques and having smaller, you know, non-franchised uh businesses here so i don't want to put anybody out of business but there is an um inequity here um and it's fairly large maybe we look at something and we see you know instead of doing a 92 we look at 85 we look at something you know that's not so it's going to be so impactful or hurtful to a small business so yes i think we can dive a little bit more into that but i do feel that there there has to be an adjustment on that for equity's sake that would be my two cents okay i'm gonna i'm gonna repeat just one last time for you please um i think we've all kind of said uh that we'd like to see

us right size our revenue income so that we are not constantly borrowing from general funds. I think that's some direction to the city staff. I think it applies across all of these funds. I think in general, as much as we'd hate to be the bearers of bad news and the implementers of the right sizing, you know i i can't imagine that we keep kicking this can down the road forever and ever so i think you've got direction there i think as we go to do this um i hear some consensus in in making sure that we understand what we're impacting in each of these uh in each of these areas you know i'll just speak off the bat on on the on the uh the reclaimed water i think it went from 25 to 50 i mean i think that's not something we need to study the impact of but when you get down into those commercial pipes and those kind of things i think we need to understand it And it doesn't need to happen over three years if we need to take a little longer to right-size it and make it equitable. I think we want to get equitable, but it doesn't need to all be born right away. You consider drawing it out, consider different ways to get there, but I think we do agree that we want to be equitable. And I think for me, again, I see a lot of these large, large costs and these pieces are still in the wastewater side. I'm putting aside the stormwater for now because I think that is a much broader, bigger conversation to your point, city manager. But the next big pieces are the wastewater. And I think we need to fully understand what our options are beyond just jacking up our rates. Because if we can't get ourselves into rates that seem palatable to the communities around us and to our big neighbors of St. Pete and Pinellas, then we should look for other alternatives rather than jacking up rates that are insurmountable. And so that's why at some point, Ms. Acasio, I'd like to understand how we compare against those around us to see what we're doing to our rates. Because I think if we can't get competitive, then we need to consider, again, looking for a way to offload that system into somebody that can be competitive. And we'll get there, so. Does that give you direction, Ms. City Manager?

Yes, thank you.

Okay, thank you.

And this is Shawn again here. Your comments are very well taken. At the risk of potentially talking out of turn here, I'll still risk it. When it comes to the wastewater rate increases and also the structure issues and the overall concern about impact Those are very important ones for sure. Another angle that you may have is also, as you may recall, what we're trying to target for wastewater are the increases in revenue need are significant in and of themselves. Again, remember we talked about about 16% per year for the first three years, followed by a 5% in the last year of the forecast. Another thing to potentially consider could be a uniform dissimilar from how we're approaching reclaimed or stormwater at the present and then in such time when the increases are projected to be smaller for instance in 2030 and i'll say hopefully beyond where they're at a more manageable level potentially there could be the option to address design type issues like we've been talking about today at that point because one of the things that does occur when you're redesigning structures is any increase that's you know magnified because of the nature of the structure change so it could make sense to um you know because i thought i heard some sentiment about you know maybe addressing this over a longer period of time it might make sense as an idea to address the the structural type issues and the equity issues once the the the heavy hit of the rate increases are are borne out and then redesign thereafter there would still always be significant increases because just the nature of that type of change So that was just one thought that that occurred to me there. You know, in terms of comparability with your neighbors, again, that can that sort of comparison of bills can be prepared. You know, there is going to be differences again, like you had mentioned, you know, economies of scale and differences in how they handle things. Does someone have a treatment plant versus someone purchases wastewater treatment capacity and you know, those sorts of issues. So we can. here in St. Petersburg proper. So I just, I wanted to mention that I hear the comments and that was just a possible thought of an alternative there to mitigate some of the impact, at least in the near term. But if your goal is to address those structural issues, there will be a higher impact at that period of time.

Thank you. City Manager, you've got direction that you need?

Yes, thank you. Thank you. And Sean will be in touch.

Okay, I will, just real quick on a matter of just a timeframe. We are gonna break in about 30 minutes to 35 minutes, if possible, to start preparing for the next meeting. So I'm not sure we'll get through it, but please be as efficient as we can. Thank you.

All right, my only comment here, we covered the revenue sufficiency, I can just jump to the end of that just to at least address the overall change if desired.

Oh, Devin, can you explain what more he needs to talk about? I'm sorry, I thought we were. Yes, so this was the first section where we talked about the sufficiencies. He does have a presentation on connections and what he was offering was to jump to some of the end of the presentation.

Okay, and Sean, how much time do you need for the remainder?

I can do that in five minutes.

Okay, let's go.

If that's acceptable, I can speed run it. So if that's OK, then I'll just jump to that. We were also tasked with looking at your wastewater connection fees. These are fees that are paid by new connections to the system or any sort of redevelopment that takes additional capacity from the system. The idea being that growth and expansion pays for growth related costs. So that's what these fees are used for. at least a small benefit in terms of remedying some financial burden on rate payers because you have existing rate payers not subsidizing growth as much. So that's kind of a very high level overview of connection fees and who pays them and what they're for. With respect to then the analysis here, I'll just jump to the end to keep it simple. Essentially to design a connection fee, what we look at is your existing investment in wastewater infrastructure, and we look through those asset records and see what is includable and what should be excluded the bulk of the fixed assets of the system are includable in the case of the city we also then look at the the multi-year capital program 58 million we're talking about and what projects from that listing are associated with new assets versus um replacement type assets or expansion assets and to the extent that assets are new or expansion related we can include those costs in the fee analysis as well so based on the includable current investment in wastewater infrastructure today and plan near term future expansion in wastewater investment through the forecast period. We take those costs that are includable and then divide them by your overall conveyance system capacity to get a cost on a per gallon basis of capacity. And then based on your level of service, which is 250 gallons per day, we take that cost per gallon and scale it based on that. And that's what you see $3,216 per ERU are essentially $12.86 per gallon of capacity at that 250 gallon level. Based on the analysis of the investment that's been made to date since the last connection to the analysis and then the planned future investment that's includable, when we account for all of that and the increase in capacity that that generates for the system, that increases the cost per gallon from $12.86 to about $18.60. And that takes us from a, So $4,649, an increase of just under 45% or about $1,433. So that's kind of the short version there. These fees then scale by meter size. That's how your code is written already. That's one of the reasons why we also like some form of design approach on the rate side, but I won't get into that. So this is how your fees would then scale by meter size. Again, these are paid by just new developers. And if it's a replacement of the meter, it'd only be paid to the extent that it's an expansion. If someone was going from a three quarter inch to a one and a half inch, then it'd be some difference between the two fees there as opposed to the whole fee amount. In terms of comparability, your fees are right now on the upper end of comparison. But again, that's a function of just your capital cost as it relates to your capacity. into the $4,600 and change level. So again, try to speed run that one without getting into the minutiae, but essentially, it's a fee that's based on your capacity related cost to provide a wastewater conveyance service, your existing investment to date in your plan near term future investment as it relates to that capacity and then apply it on a per unit basis to accounts. Again, it's about just under a 45% increase on a per unit basis there.

Thank you, Sean, I appreciate that. Any questions from the commissioners? Not on that. Okay, I just want to repeat what I think I heard. This is only borne by new stuff coming into the city. This is not anything new on any of our residents or businesses, right? Okay, and will you go back one slide for me? Just literally one slide. Right there. Okay. Our current fees are the light blue on the left. And we're projecting to go to the light blue on the right. And this is about connection to our wastewater systems. I'll only just make the comment that again, we're higher than the county and we're projected to go even higher with this. And so I don't think we have the economies that we need to get get where we need to be. So thank you unless there's any other, you know, questions. I think we're ready to move on city manager.

Thank you, Sean.

Thank you. Yes, thank you. Thank you for your time.

Good evening, Mayor and Commission. Devon Schmidt, Finance Director. For the record, I'm going to try to take us somewhat quickly through some of these slides here, as I know we're short on time. I'm just waiting for the slide presentation to pull up. So this next section, we'll just be focusing on our ad valorem property taxes. We'll take a look at what some of the revenue history has looked like, how the millage rate has moved, where some of those residence tax dollars go to, and what the rate options are before you for fiscal year 2027 that we received from Pinellas County. And IT, I need a different presentation, please. It's labeled number two. Excellent. Okay, so as the Commission can see, this is our ad valorem revenue from fiscal year 2020 through fiscal year 26. The solid dark figures are actually our audited actuals, the government-wide from our financial statements, and the 2026 is what we're projected. You can see here that we have received more, but the key point is while our rate has remained flat or falling, that's rising taxable value at work. So I'm looking at this from our rate history. The city has held a millage rate flat of 3.15 mills for nine years from 2015 through 2023.

Excuse me real quick. I'm sorry. Is this something we can get rid of? I guess I just don't ignore that. Please. Oh, yeah. It was just distracting me. Thank you. Thanks.

Yep, absolutely. And so the commission actually reduced the rate in 2024 down to 3.0913, which is a cut about six hundreds of a mil. So when the revenue is growing for the city, that's not because of the rate, it's because of the taxable values that rose. This slide answers a question that we receive from residents. Where does the property taxes actually go? So using an illustrative $500,000 taxable home, the total bill is around $8,135. The city of St. Pete Beach keeps about 19% or $1,546 and the other 81% goes to schools, 40%. Pinellas County at 29% plus EMS and any other special districts. This slide models out what the new Senate bill impacts, should it pass in November. And so you can see here that the Senate bill reduces some of the ad valorem by about 1.1 million, or about 7.2%. Applied proportionally, the average, looking at that same $500,000 homes, the city portion drops from 1,546 down to about 1,000. 434 or 112 in annual savings. The point is that you would see a modest reduction should that pass in November. so these are the three rate options before the commission so as you can see here our taxable value that we received from the pinellas county is 5.17 billion the rollback rate that is proposed is 3.075 and so by statute that generates the same revenue as a prior year and is legally a no tax increase The current rate keeps what residents pay unchanged and it yields about $80,000 more than the rollback rate. And then you can see there we have the two thirds maximum, which is a 3.8330, which requires a super majority vote and would generate approximately 3.8 million. So this narrows it to the average homestead. So if we were looking at our average homestead, the current rate a homeowner pays is around $1,478 a year or $123 a month. The rollback rate saves them about $7.50 a year. The two-thirds max would add about $355 a year. And these figures are based off of just the current homestead value standard with the $50,000 exemption that currently is included. For context, how our rate compares to our neighbors, across the 24 incorporated Pinellas Municipality, St. Pete Beach ranks 15th at our 3.0913 mils. So that's below the county median. You can see that Bel Air tops the list at seven mils, St. Petersburg and Clearwater are well above the city as well. This does, just to note, exclude our county and school districts, any of those special district levies. This slide is showing where that actual tax base is coming from. So non-homestead properties, hotels, investor owner, occupied units make up about 71% of that taxable value, or roughly 3.48 billion, generating 10.75 million of the levy. Homestead whereas is 29%. And so as you can see here, when we're looking at some of what that base is, you can see where it would apply to the different areas. It's a different view of the same base. This is looking at our residential versus commercial use. So how those properties are classified on the tax bill. So about 79% of our taxable value is residential units across the 7,000 parcels. 21% is commercial or about 850 parcels. Here's a detailed breakdown of property use type. So as you can see here, our single family homes is the largest single category. Where we're looking at 39%, then condominiums at 25.5%, and hotels and condos at nearly 16%. And then all those other buckets with commercial, multifamily, and the smaller categories fill out the rest. This is a very detailed impact table where we're looking at our average city tax parcel by parcel type in each of these three rates. I'm not gonna go through every row of this, but you can see that the rollback rate versus the current is nearly a wash while the max is a increase. And finally, when we're looking at a 10-year cumulative view to make these small annual differences tangible, for the average parcel, you can see the rollback rate saves about $100 over the 10-year versus the current. The two-thirds max adds about $4,773 per average parcel over that period, and the city rollback rate costs on average about .8 million over those 10 years, while the max rate would generate 37.9 million. So just wanted to propose and show what that 10 year look back is. And with that, I can take you back to what our options are before us for this year. Oops, sorry. And I can answer any questions.

Just give an opportunity. Any questions? Just looking around. All right, thank you. I thought there would be.

I just wanna be clear that we actually need direction from the commission tonight because this drives the entire development of the budget and the legal process to actually adopt your ad valorem rate.

Understood, thank you. Commissioner Robinson.

These are our only options?

You could, I'd have to confirm and maybe Ralph can help me out with this, city attorney. I think you could do something between any of the rates. I don't think you have to go to the full two thirds max, but I'd wanna confirm that with our city attorney.

You can pick a different millage number.

And I think they can always lower it.

You can also lower it.

You can lower it below the rollback.

Similar follow up question, can we adopt a storm and a non-storm rate?

no you have to pick a rate and have a contingent rate you cannot have a contingent rate what do you mean by storm or not let's say we we get hit with another major storm would it could we roll up to a higher village rate well I'm thinking of what the storm season is so we're in the storm season now and I think it goes to October October November and that's about when we need our final You can pick one now and go lower if you don't get a storm. Yeah, okay.

So yeah, maybe go with a higher in the event of a storm and then lower to a non-storm, non-emergency.

We have to figure out the budget for both, so I don't know if you want two different budgets.

I see raised eyebrows. It sounds like I'm overthinking this.

all right well we'll continue that next year if there's a storm we'll definitely go to the reserves okay yeah okay just trying to be creative without we do also have to send so if this commission decided um any rate we do have to let the county know so that those trim notices would go out to the residents and so um we do have to do that by the end of july so just to clarify we can go with a rate and then drop it if necessary

Can they, after we adopt the budget?

After trim rates, notices go out.

Trim will be the preliminary. It goes out, I believe you can go below that in your real one, but you can't go higher.

Okay, so the initial trim notice could be higher, and then before we adopt the budget, it could be lower, but then we would need direction, because we have to build a budget, so we would need to know OK what portion of that do you not want us to budget and put into reserves is essentially the only probably easy way to do it. Do that.

My concern here would be just that going with a much higher as this is demonstrating that 3.8 on top of the assessments we're looking at is big. It's huge. So that is my big concern on that. What is the number if we cover what we potentially are gonna lose with this homestead exemption?

Do we have that number again?

It was somewhere here I think at 1.4, what was it?

It's 1.1 million in fiscal year. That would be for 2028, so that wouldn't be for this tax roll. So it's 1.1 and then it goes up to 2.2 million, assuming exactly everybody who's homesteaded now remains homesteaded and we don't have more come into the area or changes in those property uses.

So 2.2 instead of this, you said it is 3 point something? It's about 4, essentially.

3.8?

0.8.

OK.

So, similar to Commissioner Robinson, I think that raising the millage on top of raising all the fees is a hard number to swallow. We just talked about just some quick math that I think I did right, but I might not have. The rates that we're talking about changing are gonna, over a couple years, cost all of our households around $800 a year. So my current feeling about it is that I would be most in favor of leaving our millage rate the same, leaving it exactly where it is. I think there's still some unknowns as far as what property values are going to do on St. Pete Beach as we continue to recover from the hurricane and how quickly. I would imagine that by the time it's all said and done we actually have more revenue than we're projecting because I think things are gonna you know property values are gonna recover a little quicker than then maybe we're Anticipating that they are and then also that gives us room to raise the millage later if we feel like we need to if if this ballot measure passes and if a bunch of people then homestead their properties that aren't and if the the dollar consequences to saint pete beach are a lot more than we're anticipating that they are right now that gives us room later to raise the millage if we need to where i feel like particularly if we go to that that max millage now we don't have a lot of room to do anything later if we need to so so that's my current uh my current thoughts on that

The two-thirds vote isn't a total maximum. It's just the level you would require two-thirds. You could go even higher than that, but then you would need unanimous. If the legislation passes, they also say it'll be a two-thirds vote to go to the rollback rate. So it says two-thirds vote, that'll be shifted over to the rollback rate. But that's not now. That would be in the future if it passes.

Commissioner Causey.

I was wondering Madam City Manager if you could highlight the difference impact wise that we would see between assuming we need a certain amount of money increase revenues to do things in the city with recovery from the storms user fees versus millage rate increase is there some reason why we would prefer one like keep rates lower

no so well yes you would prefer your top priority in my professional opinion should be to right size and correct your enterprise funds so if you were going to take this in an order of operation because those need to be independent and they need to pay for themselves and you if we need to borrow money the commission can by a majority vote authorized that financing and you don't have to bond against fees so it's very specific spend the money collected by rates for those particular enterprises cannot cross-pollinate with any other fund in the city so when we take in money for that purpose we spend it only on that purpose So they're very, very protected funds. And you only charge for what you need for that service. So there's nothing discretionary about it.

What was the point you were making about not bonding or can or can't?

Because bonding, if you're gonna bond against your ad valorem, you need a vote of the people. So that would require a ballot measure, a whole process that could take, typically takes about 18 months. So it takes quite a bit of level of effort from staff and yourselves. And so if you do raise ad valorem, you can bond against it. That's just a separate process. Once you establish that regular revenue source, that then we could go to the people to vote for, and typically you would pick specific projects for that bonding.

Versus if we have higher fees and our utility funds are self-sustaining You're saying we can borrow money against those We can borrow money for those specific purposes against those specific

Fees, that's why you saw the projections were including those loan options. We would still have to bring it back to you, but that's why they were showing there is a way to sustain those individual enterprise utility funds.

Well, I noticed the finance committee recommended to raise the millage rates. I think they were just thinking that the city is underfunded right now in the recovery mode. I know I would comment that we have been severely financially impacted by the storms that we had, and we've drawn our savings account down to as low as we can draw it. So somehow we've got to recover back to a good financial position. And besides that, there's a lot of things that need to be fixed around this place still. And there's a lot of work that needs to be done. So somehow we've got to think about that. I would say if we're not gonna raise our millage rates, I don't know that we would want to raise, I notice in the future slides here we have increases of millions. in some of the funds budgeted. So I feel like we would not, we would have to look carefully at whether we're gonna increase departmental funds and not increase the millage. Because how would we be funding that?

Commissioner Maldonado.

Yeah, I would say that this is another scenario where we're kicking the can down the road. I think the last, you said 10 years, 2015 to 2023, we've had the same millage rate. I would go with the current flat rate, comfortable with that, and if necessary, scale that down at some point. But there has to be a slight adjustment just for the scale of economy. And it's not very impactful. Essentially, it's $80,000 difference. The same rate, basically, for the unchanged from the current year.

So I'll, I mean, we've talked about kicking the can. We've talked about how we've historically not funded our capital projects. Knowing that we weren't funding our capital project, we actually dropped our millage rate and made our situation even more untenable over the last few years. And I think that's just really put us in a bind. And again, I hate for us to be the ones that have to go right sides and fix everything. This commission here has to go and right the fiscal wrongs of the past. But I think we've got to do something, but I also am cognizant that the fee impacts that, you know, Commissioner Marriott talked about are going to be impactful, and we don't quite understand those impacts yet. And so I'm probably leaning towards flat rate and then seeing if we need to adjust, you know, from there personally. Understanding that we've got significant investments to do, I get that. And I think personally if we stop borrowing from our general fund over and over again by right sizing with the adjustments to our fees, our general fund will actually have some revenue in it that we can then use in the right places rather than sending it off to every enterprise fund that we have. And so the bites of a big hamburger or whatever the right phrase is, I don't want to do all of this at once and then find out that we've crushed our city in some way that's that that's not what we intend so I think personally my mindset is to make the fee adjustments that we've agreed to notwithstanding the one that we said we'd like to really understand what the impacts are make those fee adjustments keep our rate flat see how that impacts our our our revenue in the ad valorem side of it, the general fund, because frankly, we'll quit borrowing out of it and we'll have more money to kind of actually do the things out of it that we want to do with the same revenue that we had previous years. And so I might be of the mindset to raise it back up to where the prior commission dropped it, but I also understand we're doing a bunch of other fees, so I'm more in favor of just a flat, personally, is where I'm at right now.

I would go with the flat as well, considering all the other fees that we're looking at.

Do we have a third flat? I don't know if we do or don't.

Yeah, there's four of them.

I just want to make sure I heard it. I know city managers are looking for direction. I just want to make sure.

The emphasis here is that the residents pay is unchanged from the current year. Sort of. Kind of. It's in the shadows.

Well, the user fees are what's going to... Well, then they'll get some relief, theoretically, potentially, in November as well. Yeah.

We can always scale it down. Right. Okay.

All right. Thank you.

Unless you can do something in five to 10 minutes on the last piece, which is your, feel free.

Okay. IT, can I get the next slide presentation up? As they're pulling that up, so this next section, I'll take you quickly through what the Finance Budget Review Committee recommended, similar to what the commission decided, other than they did not take as deep of a dive into the wastewater connection fees, so that'll be something that staff brings back. So here with the reclaimed water was looking at the alternative, storm water was looking at that as well.

Back up, I'm sorry, you went really quickly through reclaimed, but it wasn't in front of us. Sorry. Now it is, thank you.

Okay, great. Stormwater was similar to what the Commission recommended as well.

No, I'm sorry. I'm really sorry. You started with reclaimed, but I didn't see the slide. It was kind of... There we go. Here we go. Sorry. Start with your phrase. Start with your statements.

So perfect. The Commission and the Finance Budget Review Committee, you're in agreement here with your board on that. You're in agreement with Stormwater on your board as well. For wastewater on this one. It sounds like we'll be bringing back So I'll just touch on on that but they agreed with the alternative The rate structure alternative as we're looking at those connections That is also an area. Sorry. I was still in wastewater So an agreement there, but we'll be bringing back that wastewater section and then the connection fee was just again where we're looking at some of those newer connections as they come online and The finance budget review committee did recommend going with the full 3.833 mills. And they did have some areas where they wanted some recommendations from staff as we're looking at our operating budget. And so some of those areas they wanted us to review would be looking at our current spending, looking at some of those fee studies and what we spent on fee studies. what our asset maintenance impact plan is, what our staffing versus contracts are. They wanted to look at a visualization and reporting, and so some bubble charts around how some of those are playing together. First quarter balance sheet, they did want us to look at some county bed tax equity, and then, again, looking at some of that beach permit and amity pricing as we're looking at that. So this next section will take us through the preliminary operating department summaries. And so just looking for just some very general feedback here on what our operating budget looks like. And so as we had met at the last workshop, we were looking to hold our FTE counts flat. So this is what our city managers directed us to do. Modest CPI growth. Look at phasing in some of our balancing and operating and maintenance budgets first. Right now as we stand, so this is a picture, and I will say this until you all stamp the approval of the adopted budget, but all of these numbers will continue to shift and change. But you can see here when we're looking at our total revenues versus total expenditures, this again does not include any of the enterprise funds or what we just looked at for the millage. You can see that we're looking at about 73 million in annual revenue and 88 in some of those expenditures and outflows. with an ending fund balance of 26.5 million now again open items that we still have so what we're looking at what we factored into our budget is a 3.2 percent cost of living adjustment we have anchored to our may cpi as that's as that's what we looked at last year insurance for employees is looking at about 3.5 percent and that's based on our claims experience We're still waiting though on our workers' compensation for renewal, property casualty, and then our capital will continue to shift as Camden's team is working on projects every single day. So running, I'll take the commission quickly through some of what our current budget looks like. And so when we're looking at the commission last year, there was a proposal from the Finance Budget Review Committee to raise the salaries that each commissioner makes. So this is putting that back to flat and what is actually occurring. For the city clerk, we just had a modest 1% increase with our staff holding. For the city attorney, this just reflects a slight operating and some contractual reductions. Everything else remains the same. For code enforcement, this is driven by required training and development, but staffing is remaining the same as there as well. For our city attorney, we did include as well some additional special legal counsel as we're looking at our personnel rules and regulations and then any other special counsel that we may need to contract with. For community development, this is primarily around any areas where we had some changes as it relates to operating professional services for planning and permitting. In information technology, this is really consolidating all of our systems that maybe were in other budgets and we're looking at recouping that by way of cost allocation. So an example is our iWork system historically was in the building fund and so just bringing those all into one housed IT function. In human resources, this is just looking at with our new NeoGov system that came online, as well as some of our benefits allocations there. In finance, this is just modest operational growth, primarily driven around that CPI. Law enforcement, we received this contract from the Pinellas County and with that, they provide us what that next percentage increase is going to be. Fire suppression, I did want to note that that is not a plus one FTE increase. I apologize for that. Primarily the increase that we're seeing here has to do with the benefit and what they are looking at for their union negotiations. So just the increase in what this commission has already approved. Emergency Medical Services, the major decrease is the capital of $750,000 that we're not spending this year, since we did purchase some capital equipment in that prior year, and this is primarily recuperated by Pinellas County. Public Services, we're just showing some lower operating costs around some reduced beach maintenance and partially offset by some rise in streets, but those staffing stands. In the library department, we are seeing some higher costs for materials and programming. Again, our staffing stands there. In resident services, this is just driven mainly by the aquatics program and some growth in participation there. And then a non-departmental, this large swing has to do with any of the transfers that we're looking at for fiscal year 26 versus 27. I'll take you quickly through the enterprise funds. This is primarily due to the capital projects as we're working through some of those enterprise funds. You'll see, again, these numbers will just continue to shift until you receive that preliminary budget book. Reclaimed water, pretty essentially flat. Stormwater fund again. This is just looking at the changes around how we're seeing some of that capital Projects and then the biggest swing you'll see with our parking fund is we're utilizing any of those new revenues that we expect by increasing those parking fees to offset capital projects or general fund and So with that I have received the millage rate direction and then just any feedback on the operating budget as we're continuing to build this out

Mr. Causey.

I would like to ask the staff if they could take a look at the resident services budget. I notice we're increasing about 200,000 on that for the aquatics. But then when I look around the city, I see that we're doing some restoration in some of the parks, which I feel like are widely used by the public. at the same time we're not doing some of the parks that are very popular and I did a lot of feedback for that right now and I almost feel like we would do better to put budget into restoring our city parks back to pre-hurricane uh... status from a landscaping and other uh... state so that'd be my request uh... relative to the departmental budgets is that you understand what i'm asking can i ask maybe maybe uh... mr mills can you come back up here please and and uh... or maybe you know our capital plan improve uh... capital

projects, I believe, includes some of that, some or much of that fixing of those parks, I think is also part of the capital piece versus the parks and rec room. I'm asking, not telling.

Mayor, with 10 minutes to go, is there appetite to maybe move this to the next meeting discussion so that you have time to reset for this meeting?

Yes, that sounds great.

Okay, yeah.

Thank you. All right, so we'll adjourn right now and I guess we'll pick up next meeting with a few questions. At 6 p.m. At 6 p.m. Sorry. Thank you. City Attorney.