City Commission - Regular Meeting

Commission Water Department Budget Briefing Workshop and Agenda Review Workshop Meeting. Can we get a roll call, please?

Commissioner Davis?

Here.

Commissioner Dollison? Here. Commissioner Birdsong? Here. Mayor Pro Tem Mercer? Here. And Mayor Yates?

Here.

Thank you, Mr. Mayor. I'll start off this evening by extending appreciation to the five men and women of our Water Department who have come out this evening to offer any technical advice that may be needed within the budget presentation. We're going to tag-team this this evening between myself and Assistant Director of the Water Department, Mr. Mark Bombard. I'd also like to recognize we have a special guest in the very back of the room, a future legislator, I'm sure, and one Brady Yates. So welcome. So this is a continuation of the budget presentation I did for you in mid-July. All of the information that's contained in this presentation this evening was part of that in its total. This is simply to give you a little further breakdown in some of the insights into the water department specifically.

And I say that because you may recall

that when we looked at the total budget for the city as proposed for fiscal year 27, that budget totaled roughly $372 million. And of that, just over $194 million lives within the water and sewer fund. So it is by far your largest fund. And all of the numbers that we're going to share with you this evening and the projects are reflected in that $194,267,910 budget that was part of the original presentation. Of that $194 million budget, I'll start off by saying almost $141 million of it is in capital improvements. I've said this a few times now. This commission has the fortunate or unfortunate role of being seated at the time that legacy decisions for capital infrastructure have to be advanced. not too dissimilar to the commission that would have been sat in the early 1970s. Contrary to popular belief, Commissioner Birdsong was not on the commission at that time. He was just a few years out from being elected. But they had a similar situation as they brought on Wastewater Treatment Plant 3. Over the years, we've added some water treatment facilities, but we're at that point where now it's the next wave of large investments. So I'm gonna start off, if I can get my clicker to work, there we go. A couple things that I just wanna highlight that are within the budget. So again, major focus is on capital investment. This includes the new water resource facility in One Water Complex at Pollard Road. So that is the existing wastewater treatment plant three that is being rehabilitated and expanded to account for new growth, to account for advancements and much-needed repairs for the longevity of the facility, and also to receive the flows that are presently going to Plant 2. Water production and treatment facilities, we have two of those that are slated to move forward this year. One is at Pollard Road. adjacent to the wastewater treatment plant or water resource facility that is expected to be a six mgd facility it will also be the receiving facility for the water that comes to us from the polk regional water cooperative so commissioner birdsong sits on that prwc is actually the chair of it at present time and as they work to finalize the construction on the southeast wellfield project that water will come to winter haven and come into that facility not only what comes to us but some of the water that will actually all the water that will go to some of the other cities to include auberndale i believe lake alford as well correct will get wheeled out of that site so we will be it's shorter to get the transmission to us and then through interconnect projects we have with those agencies, we will wheel that water or transfer it to them via that process. Also, replacing the cypress wood water production and treatment facility, that is a one MGD facility that again replaces an out of date facility. the new water administration campus that is the admin and operational center for olive water that will be constructed on the uplands of the Bradco Farms project off of Buckeye Loop Road. the Bradco Aquifer Recharge and Wetland Restoration Project. This is advancement of the 370-some-odd acres that were purchased in 2023, plus adding additional acreage to that through land transactions with adjacent properties. We actually hope to be able to add about 100 acres to that project when it's all said and done. So we talk about a aquifer recharge and alternative water source site. the nature park component of that that we envisioned to be a smaller version of a circle b type facility we're hoping that these additional acres will be able to add will further enhance it uh... project that i understand is very near and dear to mr bombard is a direct potable reuse mobile demonstration pilot project that is actually on your agenda for us to get a liaison to it And this is a, well, I'll save the description of that. I'll let Mark do that when we get to that point. The budget anticipates new debt issuance of approximately $76 million to advance these projects. uh... the timing of that is yet to be decided certainly will look at you know where the interest rates are working with our our bond council in advisors to position city uh... for the the best options there when it comes to be could be later this calendar year or early next we're also in the midst of uh... moving forward with an update to our utility user rates in our connection fees Unlike years past where we did this on a five-year horizon, this will now be done on a 10-year horizon and contemplates the removal or the allowance that municipalities have had for many, many years to do the automatic surcharge to customers that are within our water system but outside our city limits. So we're having to balance that back in. And then repair and replacement activities, And we'll close here on this slide just highlighting that the operations are with 139 employees. 135 of those are full-time employees, and that includes four new employees that we discussed previously.

Next slide, please.

So when we talk about the revenues, You can see at the top approximately $76 million is anticipated to come in in the form of new debt issuance. That is what guides those projects. If for some reason that gets delayed or pushed out farther, then that delays the advancement of those related capital projects that would fall within that debt issuance. connection charge reserves uh... as you know we collect collection connection fees when new development comes in that is a restricted revenue it can only go towards the expansion of the system so we have capital projects that allow their the contemplate expansion of our services we can use those dollars and because of some of the projects that we are undertaking were able to use about forty seven point five million of those reserves The next two biggest categories are obviously what comes from user fees, so that's your water sales and your sewer charges. Grants that were slated to receive in the form of about $12 million, and we continue to pursue grants at every opportunity. Again, new connection fees, and then some of the smaller amounts that come in thereafter for a total of $194.267 million. In terms of expenditures, capital, capital, capital. That's the best I can do in describing what happens within water in the coming year. $140.8 million just towards capital. Operating services make up about 12% of the utility or the water sewer funds expenses. Personal services about 6%. If you go to the second to the last line there, you see a contribution to the general fund of $6.5 million. That is in line with the Commission's policy that was adopted in 2017 that restricted that transfer amount to 12% of the revenues from the year prior. So we had to work to get that number down to 12%. It escalated significantly during the Great Recession. And some of the guidance that we had received was to get that number down. We reduced it by, I want to say, $300,000 each year until we got to that 12%. And we have been operating at that for, I believe, about the last four or five years that we've been able to get it down and hold it at that level. Next slide. In the, within the fund, the main takeaway here, this is showing the current year's budget for fiscal year 26 to next year's proposed budget for 27. And you can see total expenditures just up from the bottom reflects an increase in total expenditures of just over $100 million. The capital increases year over year. There are about $99.5 million of that. So what that means is that within personal services and operating expenses, it is a relatively flat amount. So operations aren't going up in crazy amounts. In fact, they're coming down. The personal services that you see increasing there, there are four new positions that are added, but that also speaks to the proposed 3 percent cost of living adjustment and the continuation of our STEP program. One thing I want to point out, and I do this in full transparency, if you look at the very bottom of the ending cash fund balance, so for many years I think we've looked at that fund balance at the end. And if you just look at fiscal year 26, you see it's at $44.7 million. A significant amount of that is actually in restricted revenues. It is not just available to put towards anything that may come across. It's restricted revenues tied to connection fees. And you can see in fiscal year 27, the second line from the bottom, we're proposing to expend $47.5 million of those connection fees towards the expansion projects. That's what it is intended for. That's what it needs to be used for. So it leaves a fund balance of $5.7 million. That seems like a relatively low number. But in comparison to everything that's not capital, if you back the capital out of it, you end up with about $53.4 million is the budget, absent capital. That current fund balance represents about 11% of the total non-capital cost for the water and sewer fund. My recommendation, and this really came from earlier discussions with Mark and our CFO, Mr. Reeder and other staff, was we should work to mirror that in alignment with what we do in the general fund of a minimum threshold of 17% and a target goal of 30% so that we build that fund balance up going forward. It's really there to be your rainy day fund in the event that you have some type of catastrophic event that you need to draw on. However, the most likely catastrophic events you face within a water sewer fund are going to be natural disasters, aka a hurricane that comes through. And our pursuit of how would you recover from that is through our insurance providers with FMIT and their programs. to help supplement whatever those costs would be. If you had a major wall blowout at one of your tanks at a wastewater treatment plant, that's why we have those programs in place with FMIT to help you through those. You hope you never have those, and you do everything you can to protect against it. But I think as we look at our rate study, that Raptellis is embarking on now, one of our objectives is to raise that amount to a minimum 17%, ideally a 30%, so it mirrors what we have within the general fund. Looking at the divisions, so these are how the water sewer fund is broken out. Water treatment, obviously, that's our plants that are producing the water and treating it prior to being distributed. The wastewater plants are where everything is going back to for treatment. You can see that of the $194 million, About $98 million lives within those two operations. Again, the vast majority of that expense is tied to the capital investments that are going to be made there. Engineering. at $41 million, 41.6, that includes the investments that we're making in the Bradco Farms project as well as the new water administration campus. So those top three have a significant amount of the capital that will be advanced in the coming year. Next slide. This does a year over year comparison between THE THREE PRIMARY CLASSIFICATIONS OF EXPENSES, SO PERSONNEL, THAT'S ALL THE EMPLOYEES OPERATING, THOSE ARE THE DAY-TO-DAY ONGOING EXPENSES, AND THEN THE CAPITAL ARE YOUR ONE-TIME INVESTMENTS. YOU CAN SEE THAT PERSONNEL SERVICES INCREASE BY ABOUT 688,000. OPERATIONS ACTUALLY GO DOWN BY ABOUT 1.9 MILLION. That's because there are certain O&M projects, operation and maintenance projects, that are really one-time expenses but live within an operating account. And the biggest increase is solely within the capital investments. I mentioned new positions. So this is one of those special operations that we have that operates like a business. Love being able to tell people when they say, why don't you operate more like a business? We do where we can, where it makes sense to operate as a business, and the Water Sewer Fund is certainly one of those. So in operating like a business, one of the positions that we've added for next year, or we're recommending be added, is a business analyst position. uh... as we do more and more grants as regulations for water and sewer change both at the federal and state level a compliance officer to make sure that we're staying on top of grant compliance and regulatory compliance and then as the system expands the addition of two assistant superintendents within utility service maintenance and then lift stations and wastewater maintenance The long-term goal is some right sizing within that department to make sure that we've got single superintendents over very specified areas and then they're supplemented by assistant superintendents who are helping those crews in the field navigate the challenges that come up and streamline the work processes. And at this point, I'm going to turn it over to Mark to go through what's within our significant items and some of the capital that is outlined for next year. Some of these projects you've seen, particularly when we get to the bigger capital, because we've had agenda items on them in recent months. But Mark, if you would take it from here, please, sir.

Good evening, Mayor and Commissioners. So this is our operating budget. T highlighted it earlier that these are projects that happen, just normal maintenance. You do them from one year and there's different ones every year. ones coming up for this coming year uh... some of the larger ones are our water plant ground storage tanks uh... all of our water before it goes out to distribution uh... wastewater treatment plant uh... solids handling that's that's our sludge handling process that we have to do it's in some need of some repairs uh... wastewater plant tree three generator maintenance it we gotta make sure that uh... plant stays in operation through through the uh... the development of the new new system lead and copper replacement we bring that to you every year that's a continuing thing uh... hopefully we'll have uh... we have made significant progress through that and i would expect for the next couple years it'll still be on our own Gate valve replacement is kind of throughout the whole system. As we learn more about our system, we realize that we cannot separate our system well enough if we have a break. So by adding some strategic areas with gate valves, we can isolate sections so less of our customers are without water if we do have a disruption. Lift station rehabilitation. These are in-house O&M things. This is a material purchase, and our staff does the upgrades to these. In our capital projects, we have it also listed there, but that's actual replacement projects where we do big projects. But this is one that we do.

Mark, how many lift stations do we presently have? We presently have 250. Thank you.

Sewer slip lining, we budget for this every year. It helps some of our deteriorating pipe by lining the inside of it. It extends the life of it significantly and it's a lot cheaper and less disruptive to do this method. Reclaimed distribution improvements. So that's our reuse system. We're trying to complete a loop around the city so we can supply irrigation and wetland augmentation to anywhere throughout our service area. And advanced metering infrastructure, our AMI towers, we should complete that this year with all of our towers, which we're hoping to get a goal to be between 95% and 100% this year of used AMIs. Our capital improvement program, like everybody said, it's really heavy this year. You can see our water plants are the big cost this year between the Pollard Grove plant and the Cypresswood plant. Our engineering projects, the two projects, the Bradco project, which we have an agenda item coming up later on, and also our admin complex. wastewater treatment plant three, the water production facility, that's an ongoing project. You'll see that ramping up over the year. We're getting very close to having early out packages and a GMP where construction will probably begin, I would say, after the first of the year on some items. Lift station maintenance and waste water maintenance. That's the item I said before where we sub out or bid out lift station replacements. Reuse distribution, again, that is the capital portion of new structure for our AWS transmission. Utility replacement or repair, those are some of the smaller projects we have that we're working with DOT. We're doing some work out on Havendale. Any project that DOT identifies that we have infrastructure that needs to be relocated. Wastewater treatment plant number two, that's a small project that we have separated out for a disc filter in that area. Utility maintenance and water distribution, these are normal extensions that are capitalized for water main extensions in areas that we do not currently have service. Meter services, those are our AMI meter boxes and meter assemblies. And administration. Sorry, I've got to ask.

Candace, do you know what the administration capital is? Yeah, it's just capital .

And then customer service is the same way as capital depletion.

let me uh... i'm a kind of cruise through the the cip we gave you a copy of this and i think it's important that you see what the five-year cip looks like this is broken out by cost center you'll see at the top for example in this one water treatment plants uh... cost center three oh one We just want to highlight a couple things within here. Really the top three, the treatment plants, the design permitting and wells at 5.5 million. The cypress wood, same thing, design permitting and wells at 2.9. And then the third line is the actual construction of those at 43 million. But if you look out to the far right, you'll see what the total cost of those will be over that five year window that we'll spend on the construction of those, about $93 million to bring those facilities fully online and operational. Go to the next slide if you would. In engineering, again, the aquifer recharge and wetland restoration project. This is the Bradco Farms project. $22 million to be spent in this coming fiscal year with a total five-year window of just over $68 million. The administration facility is about $12 million this year for a total build out over five years of $24 million. A little further down, plant three, this is the elephant in the room. The water resource facility there, you can see it's a $31.4 million investment this coming year, and that increases significantly to build it out to the full capacity to just under $500 million is what we'll end up spending on that long term through all the improvements. The next slide. Septic to sewer, these are ongoing projects slated to spend about 1.8 million in 27. Long term over the five years, just shy of $10 million will go into our septic to sewer investments. And then under the reclaimed water, about the third one down, the direct potable reuse mobile unit is the biggest expense for this coming year at 2.8 million. Under repair and replacement, a project that we've been pursuing for a number of years in collaboration with our congressional members is the North Lake Ship Drive project. We talk about improving that roadway, which is so needed. That's, I think, out for design right now, if I'm not mistaken. Brittany's shaking her head yes. These are the utility aspects that go with that. that total out about $3.1 million with about $1.1 million invested in fiscal year 27. The number at the bottom there, $131.6 million expended in fiscal year 27, that does not include capital depletion. So we fund every year the replacement of vehicles. We put so much aside based upon the lifecycle of that vehicle. Land acquisition. is we look to acquire additional parcels of land, either to add to the Bradco project or other parcels that are strategic in our delivery of services, as well as new vehicles that we may purchase. And so, Mark, if you'll take on the major capital projects without the end here.

Yep. So this is this year's biggest project with the biggest expense. It goes for our water treatment plants, two new water production treatment facilities. We've decided to use lower fluoridine aquifer for our wells. We've drilled four to date, two at each of the sites. They are both producing quality water with two more additional wells for redundancy coming up in the future. The Pollard Road water production treatment facility is scheduled for six million gallons. It'll serve the PRWC receiving facility. We'll be wheeling water to Auburndale and Lake Alfred for a total amount of 2.44 MGD a day to start with.

As their demands go up, obviously we'll be wheeling more.

Water treatment plant at Pollard Road needs to be operational by the fall of 2028. per the PRWC receiving facility to be coming online. Cypress Wood is replacing our original facility that we bought during the Garden Grove acquisition, and it's just well past its replacement period. It's going to replace that plant with a 1MGD at a new location further to the south of the existing plant. Water resource facility, this is the big elephant in the room. The system of reclaiming water wastewater facilities currently include wastewater plant number two is permitted at 1.7 million gallons a day, and wastewater plant three is 7.5. The facilities were commissioned in 1970, so they're pushing 50, 60 years old and in desperate need of upgrades. The new water resource facility will combine two plants into one. uh... at the current location we were going to plan on reusing some of the existing facility at wastewater plant three and building some green field structures east of the existing facility on vacant land that we own Currently wastewater treatment plant wastewater will be redirected to the master lift station through a new force main coming down through the Willowbrook area, down through to Dundee Road and then down through the Cypresswood area and ultimately ending up at wastewater plant three. A new lift station equipped to manage the flows. So we have, in 2019, we commissioned the master lift station at the Channel Lakes Complex. Then two years ago, we commissioned the one at Harmony. This, we plan a new master lift station located on Dundee Road to help support the moving the flow from that eastern half of our service area and the flow from wastewater plant two down to the new plant. The progressive design build contract was awarded to Warren Smith in January 2025. We are working towards 60% plans and start the design process and hopefully we'll have some early out packages coming in early next year, January, February, where early construction packages can start. In conjunction with that, the city will plan on doing direct purchase of major items for the cost savings of taxes. And the new facility will handle current and projected flows through 2045 of 12 MGD preparing for expansion to 24 when the need is required. The Bradco Aquifer Recharge and Wetland Restoration Project, we've seen this quite a bit. It's one of our signature projects that we're doing. For one water, the project envisions adding approximately 100 more acres to the north to expand it to about 470 acres. In February of 25, we awarded the contract to RES, HGS LLC, better known as RES. 60% design and permit packages anticipated this coming October for wetland construction to begin in the fall of 27. Recharge well permit has been received from the Florida Department of Environmental Protection in October 24. We're constructing the managed aquifer recharge well on the site right now. We anticipate that the well will be completed and testing will begin in this coming September. Like I said, the total 470 acres site will include wetland restoration, future nature park, flood mitigation potential, upper floor recharge wells, and interconnected trail system. The water administration campus located on Buckeye Loop Road, this is a 10 acre parcel that is adjacent to the Bradco property that is uplands. It's about a one mile north of Dundee Road and next to the Recharge Wetland Restoration Project. The project will include owner represented to oversee the construction of the facility by a design build construction manager. Construction is anticipated to begin in January 27 and expected to take approximately one year to complete. The facility will include 36,750 square foot of administration building, which will be administrative offices, customer service, and water education center. Also included in there is about a 24,700 square foot warehouse facility, inventory warehouse, and operations center. And the last project I have, like T mentioned, this is kind of near and dear to my heart, that our direct potable reuse pilot, mobile pilot, is a process that takes reclaimed water and highly treated wastewater to drinking water standards. In 2025, in partnership with SWFMUD, we completed the DPR's feasibility study. As a leader in the One Water efforts, utilizing a style approach to the future of DPR, the city is pursuing a one-of-a-kind DPR unit. The unit will provide basic bench scale testing for the future DPR for the facility at the One Water Complex at Pollard Road, the production of five gallons per minute of drinking water that meets primary and secondary drinking water regulations, We'll be using it for public education to improve the perception of DPR at water festivals, schools, community events, water conferences, and we hope to have it take delivery of it in about a year, in October 27th.

It's kind of an interesting project. We talk about DPR, and I think that we're still a little ways out of erasing the stigma of DPR, direct potable reuse. It is not a foreign concept. In fact, Polk County in recent years did their own pilot project with DPR. not to distribute the water back into the system, but to demonstrate how it could be achieved. This is a similar component that basically takes your reuse and gets it treated to a drinkable standard. It is the country, not just here in Central Florida, but throughout the entire United States, addresses water challenges, shortages tied to droughts and other things, development issues, This is kind of an early approach to what does that look like in trying to educate people on it and refine the processes associated with DPR treatments. The last piece for this evening is just to kind of highlight some of the major initiatives that are being undertaken or proposed to be undertaken in fiscal year 27 via the water sewer operations. Continue advancement of our AMI or automated metering infrastructure. So that's where your water meters are being read through a communication system versus having to put a person out in the field to go and read those. We're at about 85% now. efforts underway to get to that 95 plus percent. Some of those will never get fully on AMI just because of unique circumstances with a handful of them, but that is the long-term goal. That also It ties directly back in about the fourth bullet down. We talk about smart energy water technologies. When you have AMI, our ability to monitor what's happening with somebody's meter at their home, if they've got a leak, we can see that. And we get alerts that tell us, hey, you've had a continuous flow for X number of days. You may have a leak in your system. That is a wonderful service to be able to provide so that people aren't going 30 days until they get their next bill only to realize that they had a leaky faucet or something that was on outside of their house or a busted pipe that ran their water bill up significantly. The water meter replacement program, water meters don't last forever, and they need to be changed out to maintain the integrity of the system. So our goal is to replace 10,000 meters per year. That was a goal that Director Gary Hubbard had set. We're currently in year three of that five-year program of getting that done. the lead and copper revisions. We are, I think, ahead of schedule and the timing for completion of this by EPA is in mid 2030s. I wanna say 2037 rings a bell for me for some reason. We expect to be there probably around 2030 or shortly thereafter, if not sooner. You can see we completed over a thousand of our verifications we exceeded our goal by august 1st of 2026 and continue to pursue that we'll continuously provide you updates on those efforts i mentioned the smart energy water technology Revenue sources of exploring, again, the updated utility user rates and connection fee study. Hopefully that will be coming back to you sometime later this fall, as that work has now been awarded out to Raftelis to do so, and will align directly with our revenue bond issuance. and then continued repair and replacement of aging infrastructure. Asbestos cement water mains continue to be an issue. Those are very frail systems and a lot of that exists within some of the older portions of the community or within the Garden Grove water system that was acquired in the 90s then when you see you know continuous water line breaks a lot of that ties back to that ac pipe and so strategizing to do significant water main replacements throughout the community and then the ongoing rehabilitation of our lift stations That is a snapshot of what your water sewer budget looks like. I pulled this out separately the past few years because I think it's important to know this is a major business operation of the city. It is something that touches every resident and every business in one form or another. It is an extremely valuable asset and something we need to make sure we are giving full attention to. As I said, the investments that have to be made at present time for the long-term capital integrity and sustainability of the assets are very unique, hence the significant amount that's going into this. When we look at where our citizens express the most concerns we talk about infrastructure that's one of the biggest areas this i think speaks to the commission's recognition of that in continued efforts to invest in improving those A lot of times the residents are speaking more so on the transportation and traffic side when they mention infrastructure. And that's because when they turn their water faucets on in the morning, water comes out. And when they flush the toilet or take a shower, water goes away. But if you don't make those investments, those things don't happen, and that creates an even bigger problem. So with that, we will certainly stand for any questions you may have. As I said, these numbers are fully reflected in the overall budget that was presented to you in July and that we based the tentative millage recommendation to you on. Although, again, millage does not impact this. This is all fees and charges. Somehow I knew Commissioner Mercer was going to do it.

You had said something about a member on a committee. In Clearwater, we happened to do a replenishment project, which was taking reclaimed water and cleaning it up enough to put it below the upper Florida aquifer and have it percolate back up. We ran, for a year, a small-scale model of that. Actually, we had DEP and SWFMUD on site almost every week, looking at the data, looking at the quality of the water, things like that. So I'd be interested in seeing how this differs from something like that.

And that's, I think, Mark, the intent is with the managed aquifer recharge wells at Bradco, being able to take reuse that's treated to a quality and reintroduce that to the aquifer as a means to achieve credits for your water use permit withdrawals. Certainly our water, our reuse water is treated to a level that allows for its use back within the system. But that's the intent is that when you have that reuse, if you're just pushing it out into the Peace Creek to flow down to Charlotte Harbor, it's basically a valuable commodity that you're just throwing away. If there's a way to recharge with that, either through a recharge well or even through rehydration of historic wetlands and hydrologic areas and let that perk back in and Mother Nature do her thing, there's a benefit to it.

Like I said, we were... looking at that when i left all they had to do was build it so but they waited about five years before they started on it but it is uh... like ours was a replenishment i've seen the samples the testing of the water and how clean it was some of them had negative values which made it highly corrosive in which you have to add back we had forty one acres at our northeast plant so we were going to have like three four wells to recharge and replenish ours was clean water we put in perfectly treated clean drinkable water down into the florida aquifer commissioner burton i have a couple questions uh... the first one is that uh... as far as a

a fund balance in the utility fund. All the years that I've been around here, I don't recall a strategic initiative to generate or have a certain level. And it's just amazing that over the years that that fund balance It just grew, grew, grew, grew. And so my question at this point is, given the climate that exists and what we're doing, are we going to actually be able to grow that farm balance? And will that come out in the Ratelis? study, will they address that?

So one of the things that they'll do within the rate study, and I'm going to ask Mr. Reeder and Mr. Bombard to weigh in as well, is they are looking at what do you need to be, what's your operation cost that you have, your personnel in O&M? What does your capital improvement program look like? And what are the revenues that you need to generate to be able to advance those as well? is designed here. So you set a rate, and you're going to have dollars that are coming in that you're putting into reserve to fund those projects as they come online. I think when you do that, you're building up a reserve that's intended to be used for future capital. And I think that it is completely feasible to suggest within that you want to achieve a fund balance reserve within there to have some resiliency should you need it. And I think, again, Commission years ago set that at 17% for the general fund. Given the fact that you have other means to address emergency situations, and I wouldn't rely solely upon those in the form of insurance and the like, but to have it set aside that you build that up. The amounts that I calculated based on the current budget as proposed 17% would be about $9 million. And so you're at about 5.7 now. So being able to build that up to, you know, another three plus million dollars I think is realistic within the rate setting.

Okay, I have one more similar question, a tag on question to that. the amount that we transfer out of the utility fund, how is that factored in to this whole process? Because we're, we don't, we have, I think we said we had a targeted amount that we were going to get to.

12%. Yeah.

But that 12% is the 12% that we're going to need. I mean, we're going to need that money. And so I'm just saying, it's all of the things we're doing, is that incorporated?

It is. It is factored into this full budget. It shows up as an expense of the utility fund. for this coming year, $6.5 million. You can see it about fourth or fifth line from the bottom. So one of the things, we have to keep in mind that municipalities such as winter haven don't operate in individual silos that while we're we have individual funds everything kind of works together at the end of the day and as you look at other means to uh offset potential revenue losses as we're going to talk about this evening and looking at fire fees and the like that can reduce perhaps some dependency on other revenues and could ultimately bring this number down. The other thing is the state legislature for four years now has pushed to eliminate utility fund transfers to your general fund. If that should come to be, then you really don't have a choice. You've got to find an alternative revenue or cut some other service within the general fund because of that loss, and these dollars would stay within the utility fund. So I've got some thoughts that I'm not prepared to share this evening on how we may be able to address that to some degree that I'd be happy to share at a later date.

Okay. I have one more question. The deep wells, did... that we are digging, will that water increase our permitted consumption?

No, it's a pulling water from the upper end of the lower aquifer. It's more of a lesser regulated water. I'm not going to say it's free water, but it will not impact our water use permit.

Okay. All right. Commissioners?

Along those same lines, so if we've got to take, I can't remember, 6 million or 3 million gallons from the PRWC, we're going to decrease what we pump out of the ground, right? because we don't necessarily need to take that six, but we've got to take the six.

That's correct, yeah. Initially, it probably will offset because we're obligated to take that, I think, 1.2.

Yeah, it's not six. MGD. It's like 1.25 MGD.

I thought I saw six in there somewhere, but I could be wrong.

Yes, so that will actually, because we're obligated to purchase that water and use that water. Our consumption still stands at 10.5 to 11, and that's pumpage wells, so that's going to go down because we're going to have that other...

And they wouldn't come back and say, okay, well, now you've got this other source, so we're going to lower your permitted amount. Or could they do that? Oh, yes, they could.

They can.

They're thinking about it. we're wondering whether or not they're going to do what they threatened us with. And that's what they did. I mean, that's a fact. They threatened that they were not going to allow us, they were going to, we weren't going to get any additional permitted capacity. It was going to be frozen. I think it was the 2025 levels.

That's correct. Yeah, we may be restricted to our 2025 demonstrated.

So even though we, that's what was, but we couldn't fight it, is if you were not at your level, your permitted capacity in 2025, whatever level you were at, that's what you're going to be permitted. It's probably going to be some lawsuits.

But I guess what I hear frozen, but... if as we continue to pump more and more through the PRWC, will that frozen number potentially decrease further?

It could, but that's not on the agenda at present. So it is what your demonstrated demand was at 2025. So let's just say you had 12 MGD water use permit, but you were only pumping 10. Is your demand in 2025? You're stuck at 10. That's the maximum that you're going to be able to take. Additional water would be through alternative water sources, PRWC in their lower Floridan. And as Mr. Hubbard has shared, the water use permit that we have is tied to your upper Floridan aquifer withdrawals. The water plants that we're doing at Cypress Wooden and Pollard are the upper level of the lower floridans so they are outside of that permit considered an alternate water supply yeah it's still considered an alternate water supply and then also through the recharge efforts of what we're working to do at bradford it will not be a one-to-one gallon recharge, gallon withdrawal, but if you're able to demonstrate you're putting so much recharge back in, some calculation of a credit towards that. And in our case, like we said, I think we're at 1.25 uh... is or one point five is the is the total amount we expect to receive from p r w c and i think initially it's like half of that based upon how their their wills come online it's not at full capacity when it first opens up and of course that will be taking additional water from them that is assigned to lake alfred in auburndale to wheel to them so water still remains an issue uh... it's Where it's going to come from in the future, I think we have a pretty good sense of that. The costs associated with it, though, are going to be very eye-opening.

And we've still got interlocal agreements that are set up, but we're still not selling any water to other municipalities at this point?

Just on an emergency basis.

I mean, how often is that utilized?

Two months ago, Eagle Lake had to do a shutdown. They're doing some plant expansions there, so they took water for two days. And then Lake Alfred did the same thing, I think, last month.

So on an emergency basis, I can get that. But I don't want to get to the point where...

we're selling off our water so that they can grow and expand and yeah and those agreements have been structured um we we never got to to finalization with the one on haynes city but it was structured as such that you know while we have the capacity to do it but when we need it We keep it. So you can't grow and grow and grow as an adjacent municipality based upon water that we have available and have an entitlement to that until the end of days. While we have it and we can provide it to you, that's great. But when we need it, we don't have it to give to you.

My last question is from page 12, line 316. So on the $493,857,000 total budget for that project, is that based upon today's dollars, or are you factoring in today's dollars with an increase year over year to account for rising costs to complete the plan?

So I asked Wharton Smith that same question, and they told me that they have contingency monies built in there for escalation for primarily cost materials.

Do you think that those contingencies are enough? I believe it's enough.

It seems enough. We believe that the plant, when it comes down, if we could just go and build the thing right now, we could probably do it for... under four, probably in the 350 range. So I think there's contingency built in there enough to get that done and hopefully funds that we won't have to use.

So that was my next question. So if we don't use the funds from the WIFI alone, we don't have to take those. Right. Do they recast that note at that point? So if you sign a note for $400 million and you take $350 million, your payment is going to be structured at $400 million. But if you take $50 million less, will they recast what your payment is over the life of the loan?

So if we're talking specifically WIFIA, it's a loan. So if we're approved for $200 million, we go to them and say, okay, we need $100 million. And then we come back and say, now we need another $25 million. We only borrow what you need. So it's not that we'll be having forgiveness and get money back. We're only going to be assessed for the money that we actually request from them.

Yeah, the reason why I ask the question is because if we – Just use round numbers for a second, okay? If we have a payment that's set up to be $500,000 a month and you take $50 million less and now your payment's $400,000 a month, then the increases that are being added to this study over time don't necessarily need to be as high. So, number one, I was asking for the point of will that payment be adjusted down if we don't take the full amount of funds? And then at that point, I would assume we would do a new rate study or come back and do the new calculation to determine if we can lower water rates at that time. Not to get into the weeds, but I mean it's, sorry, I've got the financial side of it, so.

So in WIFIA, you're getting a loan for 49% maximum of your total project cost. Correct. uh... what you take from them you won't start paying on for i believe it's five years until completion of the project and i can't remember off the top of my head mayor what their their repayment of that loan is but it's going to be based on how much you actually take for your project it's going to be a locked in number you can in in once you sign into that year it doesn't see it's not doesn't start until you take the money commissioner birds on the way on this i believe the way p r w c did there's was that they did a supplementary kind of free uh... loan from a financial institution because they could do a one-time reset on the loan interest rate with with you the whole uh... bang with with you

you actually there's a window once you start taking it and so basically it locks you in so what the prwc did is we got a Even though we got approval from with you, we got a almost a loan from, actually it was, I think it was from Truist. Yes. Like a bridge loan. Yeah, a bridge loan of over, in fact, I signed paperwork. It was like $300 million or something like that.

You had to personally guarantee it?

I personally guaranteed it, and they were happy with it. Yeah, right. Yeah. But yes, that's the way it works. And then once you start, you finish your project and you borrow the percentage that you can borrow, then you have so long to start paying it back.

It's probably wishful thinking, but just I think it's something that we should keep in the back of our minds that if we can come in under budget, maybe that... puts it easier on our citizens down the road.

I think we've got to take the most practical approach, what's feasible, fees, everything. And in looking at WIFI, we've had that WIFI opportunity on the table for a number of years now. And those interest rates compared to what you can borrow with may not be enough incentive to pursue the WIFIA pathway because with that also comes a tremendous amount of regulatory compliance and reporting that can be overwhelming at the same time. So I think that those are all things that are in the back of our mind as we approach this of how best to tackle it.

Commissioners, any other questions?

I have one. Yes. On page four, when you look at the contribution to the general fund, it's 3.37%. And it is of that total budget. But the 12% that you were talking about?

It's 12% of the audited revenues from the year prior.

OK.

is what it comes down to. It's only 3.3% of the total. All right.

I think we're good. Yes, sir. We'll take a brief recess in maybe five minutes, and then we can circle back into agenda review.

Wonderful. Thank you.