City Council - workshop

to start our work session. And tonight we have Geoff Hunsaker, our Public Works Director and guests. I'll let you introduce the guests.

Thank you very much, Mayor. Good evening, Council. So with me tonight, I have Kevin Wood in our Engineering Division. He is our Utilities Program Manager. So he's done a lot of the work into the capital project modeling that we have tonight. Then I also have Deb Gilardi. Deb has been doing financial models for our wastewater system for about three decades now. So she has a lot of history on what we did and when. For my money, she's the best in the business. So very, very happy to have her here. And then we also have Eric Grimstead, our Wastewater Services Manager, and Matt Benards, who stepped out for a moment, but he's been the project manager for the Wastewater Master Plan. So they are here in case questions come up that they're better able to answer than we are.

Okay. Let me pull up my presentation here.

to that request will do.

So tonight we have some, we're gonna do a quick review over what I discussed with you all back in February about the wastewater master plan, then get a little bit more into what our capital program needs are and then review some conceptual funding scenarios. These are scenarios for discussion. These are not options what we're presenting of what the actual sewer financial model is gonna be moving forward, but we wanna be able to share enough information with you all to have a robust discussion as a council. Then we'll be able to compare some of those scenarios. And then hopefully when we get to the bulk of tonight, it will be a chance for the council to have that policy discussion amongst yourselves with staff here to answer any questions that are needed. Really that we don't get to have all of you together all that often in the grand scheme of things. There's a ton of information in our presentation tonight and there's a ton of information in this waste model master plan. There is no way I would be able to explain it all in an hour. I can't understand everything that's in that plan in an hour by myself. expecting me to be able to explain all that is a very tall order, but hopefully we'll be able to share enough information tonight that'll allow you all to discuss with each other what kind of policy you want to see moving forward with this, and hopefully come to some kind of consensus, because otherwise, if I just hear seven opinions, really, I'm just gonna be taking my best shot, and then you all just vote on what that best shot was. But... Ideally, you all would come together to determine what that policy direction is, and then we would develop a financial model for you all to adopt that comes from that direction. So a quick review of the findings, very quick. And just for reference, I'm guessing it's gonna take us about an hour to get through all this information tonight. It is a lot. So bear with us. There should be plenty of time for discussion after, but if there's any clarifying questions you have on the way, please feel free to stop me. So the key findings from the master plan, we obviously have aging infrastructure. There is some regulatory requirements that we know about coming up. We are just wrapping up the update of our NPDES permit. We haven't gotten the official permit yet, but there is some additional regulatory requirements specifically around temperature that we'll have to address. We do have some system resiliency and redundancy needs. that need to be addressed. And there has been some deferred infrastructure over the last decade or so. In addition to the existing system, we also have some growth and development demands. We have existing capacity constraints. So the picture that's shown here shows as of today, these are pipes we've identified in the southwest part of town in red that are at capacity. And in the future with development, which is what we look at as part of the master plan, you can see that the amount of pipes that are at capacity increases. So we know we need to do some capacity improvements to be able to support development in that Southwest part of town. And then obviously there's been escalating construction and operating costs and we'll go over some base assumptions or Deb will hear later tonight to give you some more context there. Now I'm going to pass this to Kevin to help summarize some of the information.

Yeah, so following our series of pie charts that represent a summary of recommended capital improvement plan projects from each plan. The projects are summarized by the project drivers that are included in the master plan documents. On the screen currently is a breakdown of the wastewater facilities CIP. As you can see, the largest driver by far is future growth and development. This represents projects that are needed in both the near term, for example, the offline storage tank and other riverside drive site improvements and other long-term projects like the new treatment processes at the existing treatment plant site. However, keep in mind that a project identified as growth related which is true for both the facilities and the conveyance plans, should not necessarily be interpreted as needed only because of growth. Many projects address existing capacity limitations, reliability concerns, wet weather performance, and aging infrastructure while simultaneously providing capacity for future development.

And to clarify the wastewater master plan is broken into two sections. There's the wastewater facilities, which is essentially the treatment plant. And then ours, our conveyance system, that portion of the master plan. So the portion that we're talking about now is pretty much the plant and that offline storage area, the raw sewage pump station where the old plan used to be.

Can you bring your microphone just a little bit closer? That way everybody online can hear. Thank you.

All right, so similar to the facility CIP, the conveyance CIP is largely based on growth-related projects as evidenced by the project driver categories of growth and existing capacity and population growth. The growth and existing capacity projects are ones that address both known deficiencies in the existing wastewater while also providing capacity for anticipated future development. These projects improve current system performance, reduce overflow risk, and also support long-term growth Example projects that are covered under that that category are the three mile lane trunk sewer improvements Southwest and cosine area conveyance improvements and existing pump station capacity upgrades and the trunk sewer upsizing in the northeast. Population growth projects are required primarily to accommodate new development. and increased wastewater flows associated with future population and employment growth. These projects expand the system service capacity rather than correcting existing operational deficiencies. Example projects from the conveyance master plan for that is new pump stations and force mains in the Southwest and Riverside areas. Another simple way to think about these projects is growth and existing capacity projects solve problems we already have today while also preparing for future growth while the population growth projects primarily are needed when and if future development occurs. This pie chart further summarizes the growth-related projects from the conveyance master plan into the different growth areas. As you can see, the largest growth area by far, which is not surprising given the size of the service area, is the southwest and cosine areas, followed by the northeast riverside and raw sewage pump station area, and the southeast and three-mile lane areas.

So summarizing, we have both existing and future growth needs. So when we say existing system needs, we're generally talking about improvements to our treatment plant, collection system upgrades, our capacity and redundancy at the pump stations, our rehab replacement projects, replacing pipes that have aged out, and then additional resiliency improvements like new radios at some of our pump stations for control and things like that. But when we're talking about future systems, we're talking about expansion to the treatment plant, additional pump station capacity as well. So maybe going from two pumps in a pump station to three pumps or a larger wet well. Then growth related infrastructure and regulatory improvements.

So on the screen currently is a stacked bar chart that shows the estimated capital costs per year. The blue bar represents the projects included in the facilities plan. The orange represents the conveyance master plan and the green and dark colored bars represent the SCADA improvements and wastewater admin and maintenance building expansion. Note that this chart represents all projects included in the plans over the full 20 year horizon. You can see that the facilities plan has two major spikes between fiscal years 2030 to 2033 and towards the tail end in fiscal year 2042 to 2044. These spikes represent the offline storage tank projects and treatment plant process upgrades and improvements respectively.

As an enterprise fund of the city, these improvements will need to be funded primarily by rates and charges that are generated by the system. And while the city can and should pursue external funding from grants and legislative appropriation, the bulk of the improvements will generally fall on the rates and charges. The city has managed the CIP expenditures on a pay-as-you-go basis from current rate revenues. for quite some time. That means using the rates and the systems development charges that are generated in each year to fund the improvements in that year. And that works really well when the capital improvements are uniform from year to year. And as you saw in that chart, there are some spikes. So something to consider. So all of the scenarios that we have developed for illustration tonight assume some level of debt funding. However, because the city's historical practice has prioritized capital funding from pay as you go, the portion of debt that we've assumed for these scenarios is relatively low, less than 30%. It's not uncommon for cities to utilize debt in the range of 40 to 60% or funding capital improvements for the utility systems. So just to begin introducing the concept and to see the impacts that has, we have utilized a relatively lower percentage. The, the other consideration of course, is that we are looking at a 10 year window. The master plan is a 20 year planning document. And you, as you saw, there's another spike that comes later. So in developing the optimal funding strategy, we basically need to weigh the short-term affordable affordability concerns with the long-term affordability issues that debt helps to lower costs in the short term, but it adds costs in the longer. Let's go to the next slide.

And I do want to point out that we looked at three different types of debt. Not all debt is equal. We have different tools available to us. So we looked at revenue bonds, which is you go out to the bond market and you get a loan essentially. And then they'll have you raise your rates to cover interest. what it takes to pay back that loan. We also looked at SRF, which is state revolving funds. Those have some benefits over the bond market because the interest in your payback times starts after the project ends, as opposed to right away once you take on the debt. So there's some benefits to using that kind of debt. And then we also looked a little bit at WIFIA loans, which is a federal loan program. It has additional benefits as well, but there is some limitations to those WIFIA fund loans. One of the biggest being that they would only cover up to 49% of your project or program. So the city would still have to find ways to cover the other 51%. And that can also be additional debt. It just can't be additional federal debt.

Yeah, and so the scenarios presented tonight illustrate different CIP phasing and project prioritization, which Kevin will get into here in a minute. And then we'll talk about the potential impacts on the wastewater system costs and rates. Further consideration will also be given to cost recovery from new development through systems development charges, which we are currently analyzing and we'll come back to the council with those estimates. And also you can have a direct developer funding for extension projects as well. How best to manage risk and balance investment needs with affordability is obviously key to both the financial plan and to the CIP and the system. And I think Evan and Jeff will talk a little bit more about risks associated with different phasing options.

So as we get into those scenarios, again, we're gonna have that policy discussion after, but some of the things we like to keep in mind as we develop these scenarios is what level of impact rates, what there will be to rates, what level of impact there will be to SCCs, Where are those funding impacts going? Are they going to the existing customers? Are they going to future customers? Is it a funding solution that's actually going to impact developers more than the customers and their profitability in their projects? These are all things that we try to keep in mind as we develop these models. So I asked Deb and Kevin to look at five different scenarios and these are meant to show the council how the financial models changes depending on these scenarios. Again, these aren't options necessarily for you to consider. These are just tools that allow us to start working through the process and share information with the council to be able to develop the policy and direction you'd like to see. So the first assumption I asked to look at was the minimal capital investment. So just what we consider to be bare minimum as little financial impact after 10 years as possible. But as you'll see that might have more short term impact to cover some costs, and then it'll be less impact over 10 years and Deb will be able to get into that more. Scenario two really focuses just on our existing system and bringing it up to meet the needs of where it is now. Scenario three focuses more on area on growth and supporting as much growth as possible, but in deference to doing some of the system improvements that we need to be doing now or we should be doing now. Four is kind of a hybrid looking for the right balance of existing system work with growth support, but targeted growth support in certain areas. And then scenario five is the full meal deal doing everything that was recommended by our consultants who did the wastewater master plan. So we wanted to look at a range of options. And we also somewhat looked at a baseline option that we'll put up for comparison, but that's just doing very minimal, just normal annual increases for operational costs and what that would mean for our capital.

This slide just shows some of the national utility trends which provides some additional context for the understanding the projected rate increases that we're presenting this evening. On average water and sewer utility rates have and are expected to continue to increase more than double the rate of inflation as measured by the consumer price index or CPI. This is in part due to the fact that the general indices like the CPI are too broad to accurately represent the costs that are faced by the utilities. And this is true on the local level as well. And as I think was discussed with council as part of the discussion on the 4% rate increase for 2027. And that is what we have identified projected going forward is, and I think the next slide will. So under the baseline that Jeff referenced, this level of cost increases anticipated to continue throughout the 10 year financial planning period with the overall cost increases at current service levels. So this is no additional capital from the CIP per se. It's not designed to meet a certain mix of projects. It's just, if you continue the transfers, and those increase at a rate of inflation, what would that look like in terms of the costs of the system? So this chart shows each bar represents a component of the cost. The green is the personal services. Then you've got capital expenditures, materials and services and non-capital transfers as well. So you stack those bars and we project those forward. And what would it take in terms of the, rate revenue to match that level of expenditure and maintain just a minimum kind of contingency in the operating fund. And that to fit that curve, what is estimated to be 4% because the operating costs on average increase at a rate of about four and a half percent and the capital inflation based on the historical kind of longer term trends is about 3% per year. Obviously it's hard to look in the crystal ball, and know exactly what's going to happen next year. But if we just consider the trends and look back at the rate increases that the city did implement and the two and a half, 3% was not keeping pace with the actual cost increases. So going forward, the baseline is that 4%. and then we'll discuss what additional increases on top of that would be needed to expand the program to fund the additional capital. Because at this level of expenditure, $66 million is what's projected to be available for capital improvements during the 10 year period that we're looking at the financial plan.

So when trying to establish the various development scenarios and which projects are included in each scenario, we landed on a set of baseline projects that we included in all scenarios. These baseline projects include the site improvements at the original treatment plant site. We have been referring to this as the Riverside Drive site, and you may see that reference in other documents. Additional baseline projects include the improvements to the SCADA network and working on the known regulatory compliance projects. The graphic on the screen further shows the projects identified at the Riverside Drive site and includes the large offline storage tank that we have been discussing previously. We included this project within the baseline for each scenario as the proposed offline storage tank and other site improvements, as we mentioned earlier, was not strictly related to growth. In addition to improved capacity, the offline storage tank provides for a greater regulatory compliance and can also be viewed as one of the largest resiliency investments included in the plan. The project provides operational flexibility by capturing peak wet weather flows and reduces overflow risk. It creates buffering capacity during storms and allows the treatment plant to process the stored volume after peak conditions have subsided. You can think of this project as a shock absorber for the wastewater treatment system. And so in terms of organization for this presentation, my plan is to present graphics taken from both the facilities and conveyance plans and to highlight the projects that are included in each scenario. I chose to present the projects this way as I feel that it helps to provide a spatial representation of what we would include in each scenario. Note that the highlighted projects presented for each scenario are in addition to the baseline projects presented in the previous slide. Also recall that each scenario is only representing the projects included in the first 10 years of the plan. Therefore projects that are not highlighted in red are those that are either being delayed or were already not included in that initial 10 year window. And so the graphic on the screen is taken from the facilities plan and represents a conceptual layout of the existing treatment plants with new treatment processes identified as the goal of scenario one is to minimize the capital investment. The additional projects from the facilities plan include only those critical baseline projects. For example, the SCADA upgrades and the regulatory compliance project and the currently planned screening equipment improvement. This graphic is taken from the conveyance system master plan and shows the entire system with the various capital projects identified. In this scenario, we would not be able to include the majority of the named capital projects identified. The one named capital project included is the gateway project, which we are currently working on design. Not shown on the graphic are the general inflow and infiltration programs and gravity sewer repair and replacement programs, which in this scenario one would only be partially funded. This graphic shows the stacked bar chart again, but capped at the 10 year project window. The chart helps to illustrate the reduced level of capital spending outside of the initial seven year window of the plan.

And this chart shows the projected annual funding sources to meet those construction needs for scenario one. These needs include the 117 million of master plan CIP project costs that Kevin just described, which is almost double the current pay as you go funding capacity of 66 million in the baseline scenario. as well as additional costs. So this chart includes additional equipment costs and other costs that are budgeted in the city's construction fund, Fund 77. So while the shape is similar to the master plan CIP graphic that Kevin just showed, the bars are a little bit higher because it includes those additional costs. So in the near term, user rate revenues and proceeds from repayment of internal loans are anticipated to be used to fund the project costs as they ramp up. However, as the construction costs for the offline storage project are added to the mix, beginning with design in 2029 and then construction following, this scenario assumes that existing reserves, shown in the green line, In the chart and debt proceeds shown in the blue bars are used to fill the gaps and allow rate transfers to ramp up more slowly so you can phase in the rate increases as We talked about we do assume some level of debt for each scenario and even in this scenario, it's the minimal of just assuming a clean water state revolving fund loan and at the current maximum for a given project, which is about 23 million. So we've assumed that that would be applied to offset the need to increase those transfers from rate revenue as quickly. The loans, as Jeff talked about, the loans have lower interest rate than a revenue bond and the repayment is delayed till after construction. This chart then shows kind of the position from looking at it from the operating fund standpoint of the sewer system. And in this case, you've got your operation and maintenance costs at the bottom two bars, and then you've got the the capital transfers and the then fitting the rate increase to meet those, those costs. So the baseline scenario recall was 4% projected increases. Looking at this scenario, it's eight and a half percent because of the need to fund the, you know, the additional CIP costs and, and projected other maintenance equipment costs in the construction fund. So eight and a half percent. And then, I've got it dropping to two and a half percent after that. One of the big policy questions for council is going to be to how much of the reserves to utilize. If we go back one slide, the, that reserve line and you know, when the city has been operating under a pay as you go, it's not uncommon to utilize the reserves for a large project and then build them back up for the next large project. it'd be nice if everything was nice and even over time, but that's just not the way the infrastructure projects work. And so part of the question will be how much does it come back up to fund that to be available for that next 10 years based on this cashflow. And we can go back to the next slide because the needs are so acute and really front loaded in this 10 year period. got a steep increase and then it can drop off some, it's just a question of where do you want to end up ultimately.

So as discussed previously, scenario two includes greater priorities, greater prioritization of the maintenance and rehabilitation of the system. Therefore, in addition to the projects included in scenario one, we would be including a few additional projects on the facility side, namely the flow and load and process modeling and outfall capacity CFD analysis, and the urgent and near term maintenance and replacement items. Similarly on the conveyance system, we would be picking up the maintenance and rehabilitation projects that span many of the existing corridors, but are not including the growth related areas discussed previously. With the addition of the rehab and maintenance related projects, we see the spending increase across the board, but a noticeably higher increase over scenario one occurs beyond the first seven years of the plan.

And we show the same two charts for the financial aspects. This chart shows the projected annual funding sources again to meet the construction fund needs for scenario two. These include 160 million of CIP projects, which is almost two and a half times the current pay as you go funding capacity in the baseline scenario. As with the prior scenario rate, revenues and proceeds from repayment of internal loans are first used for the near-term costs, and then debt and reserves are added to the mix in 2029. Because of the higher overall CIP costs, we did assume a larger debt amount, 41 million in this case, which is about 25% of total CIP costs, this time from a combination of the clean water SRF which again is capped at about 23 million and then adding some WIFIA funds for the offline storage project. You can combine SRF and WIFIA to do that match that Jeff talked about that WIFIA can only be used for up to 49% of the project costs. And like WIFIA, the debt is delayed until after construction, which is really beneficial. In this case though, because we have a much higher capital costs, 160 million, the, uh, the rate increases not surprisingly are also higher. And, um, in, in this case, it's the nine and a half percent and then dropping to the 4%, um, in the outer years. But at, at this point, the, And if you go back one slide, it's kind of helpful to sort of toggle back and forth. You know, those capital needs really drop off in this scenario. And so, but we also have additional debt to pay as part of those needs. So then go back to the next slide. So at this point, this is the nine and a quarter and then dropping to the baseline after that.

So where scenario two is primarily maintenance and rehab focused with little to no growth accommodations, scenario three is the opposite with growth accommodation being the primary goal and rehab and maintenance being deferred. Therefore on the facility side, we are not adding additional projects, but are removing the urgent and near-term maintenance and replacement items. On the conveyance side, we would similarly be removing the maintenance and rehab related projects and would begin building out the growth related areas of the Southwest three mile lane and Northeast slash Riverside areas. The growth related projects have more variability over the maintenance and rehabilitation projects. Therefore, instead of the more steady spending that we saw in scenario two, we start to see bigger spikes in the conveyance costs related to some of the larger build out projects within the Southwest and Three Mile Lane area.

So while scenario three has almost the same amount of CIP costs as scenario two, we assume a slightly higher debt funding, 28% instead of 25%, which it's about, uh, the difference is about $4 million in additional debt. And with the higher debt, the needed rate transfers are slightly reduced each year. Um, assumes existing reserves are funded for the program in the short term. SDCs are assumed to increase. In this scenario, by 50% of the current budgeted levels. Under this scenario, the CIP costs also drop off in the outer years and slightly higher rate transfers are assumed to partially restore the reserves, as you can see in this chart. So what that means in terms of rate increases on the next slide, basically the line is just brought down. It's still steep in the first part. And then, but everything is slightly lower compared to scenario two. And this is how you start to see the impacts of taking out the larger amount of debt. It was a fairly small increment, but it really does start to have a noticeable dampening effect on the rate increases. And you end up with a slightly higher reserve ending reserve as well.

So scenario four is meant to represent that balance of the maintenance and rehab and growth. And therefore on the facility side, we are re-adding the urgent and near-term maintenance projects back in and picking up the expansion of the existing admin and maintenance building that is currently in design. Keep in mind that the growth included in scenario four is a more targeted growth as we cannot account for all growth in a balanced scenario, but are having to limit or defer growth somewhere. In this scenario, the growth is being deferred in the Southwest, but is included for the three mile lane in Northeast. However, this depends on the priority between residential development as is being planned in the Southwest or commercial and industrial development as is being planned in the Three Mile Lane area. To balance out the growth, we are bringing the rehab and maintenance projects back in as well in the conveyance side. And based on the deferral of the projects in the Southwest, we see a reduction in the conveyance capital spending. However, we are picking up the admin and maintenance expansion in the first five years and increasing the spending associated with the conveyance and facilities plans in the outer years.

So in this scenario, overall CIP costs are increased about 30 million. We're looking at about 190 million in this scenario, and the debt is assumed to be 34% of the total CIP. So that's about 70 million from a combination of SRF loan, a higher WIFIA loan, plus introducing a revenue bond. Obviously as more debt is assumed, the complexity of the funding package increases due to the fact that some of them are capped and we've got the maximum, you know, the local share component. But you know, with, with that, there does come a benefit in terms of the rate transfers are slightly reduced initially due to the lower cash funding and then transfers increase in the later years because of additional debt service costs. And in this this plan or this scenario debt totals about $4 million by the end of the plan. So it is not an insignificant cost. SDCs are assumed to triple because we are also funding, providing funding for that growth. And the outer year CIP costs drop off and reserves are assumed to smooth the rate increases and transfers. So interestingly here, you can see, again, the benefits of issuing debt. in that it both brings down the line, you know, it's going to lower the line initially and bring up the outer year. So it it's smooths allows us to address that spike in the CIP without having a similar spike in the rates. Um, so overall it's going to add costs to the plan, but it does provide some rate relief in the earlier years compared to the other scenarios.

So scenario five represents the fully funded scenario. Therefore, in addition to the projects included in scenario four on the facility side, we would also add in the dewatering process improvement at the treatment plant. Being the fully funded scenario, scenario five keeps the maintenance and rehab projects and growth from scenario four, and then also adds the growth projects from the Southwest back in while also picking up some additional operation and maintenance reduction projects associated with some pump station decommissioning projects as well. The biggest financial impact between scenario four and scenario five is the increase in the conveyance capital spending across the board.

Overall CIP costs are increased about $40 million compared to scenario four, and debt is assumed at almost 40%. So now we're at a total of 229 million, again, compared to the 66 million. We've ramped up the debt, but the debt, instead of buying you reduced rate increase is buying you more capital, basically. So if we go to the next slide, you can see that These rate increases are the highest of any of the plans, but the amount of capital that's being funded is significantly higher. And what the debt does do is allow you to smooth that out over the planning period. As Jeff said, the scenarios were developed to illustrate the impacts of the different CIPs and capital funding assumptions on rate increases and customer bills. Rate increases reflect both the projected 4% baseline cost increases and the additional funding needed for the CIP projects within the planning period associated with each scenario. In comparing across the scenarios, scenario one has the lowest total CIP costs, but similar short-term rate increases as scenario three, because only a small portion, 20% of CIP costs are assumed to be funded with debt. And so the rates need to ramp up more quickly to generate sufficient cash for that online storage project. Both scenarios four and five utilize higher levels of debt, more than 30% and existing reserves to smooth the rate increases over the 10 year period. However, both options result in significantly depleted reserves, which you can see in this table. The current monthly bill is about $65 for a typical customer using about six units of water during the winter average month period. With the baseline increases, the monthly bill is $95, projected to be $95 at the end of the planning period. Scenarios one through five add $15 to $60 additional to the projected 2036 monthly bill to fund the master plan CIP costs.

So this is just a simplified example table from the past slide. Again, going to just looking at the rate increases that are projected for each of these scenarios. And it's really broken up into what happens in the next five years, then what happens in the second five years, and what the projected total bill would be at 2036. Again, as we're assuming that the projected total bill with just keeping it going with the same model we've been doing with the 4% increase is $95. And then each scenario adds additional costs. This is just a more visual representation of that and where those costs would land on a graph for people that like to see it that way. Then the SDCs, so, This is a very simplified way of just talking about SDCs. Now, Deb mentioned that we assume additional SDC revenue in the models. That comes from the combination of more growth, so more SDCs being paid and the SDCs going up. We haven't done the STC methodology. What the methodology does is determine the maximum STCs that the city could assess to help pay for growth. After that, it's the council's policy direction on if it's a full cost recovery or if it's lesser. And so we're not... Deb can give some preliminary ideas of where the STC is gonna land, but we haven't done that methodology. This was just put up there by myself to show that we're at 4,185 now. A tripling of the STC puts you into the 12,000 area, quadrupling in the 16,000. I don't think our methodology is gonna be able to even get us that high, but this is just a tool that the council can use to discuss STC impacts when you talk policy. This would be for a single-family residential home. It would be different, obviously, for... multifamily versus commercial versus industrial. And we would likely have a tiered methodology, which is the new best practice in Oregon. So larger homes, larger single family homes would pay a higher STC than a small single family home to reflect the quality of what the actual usage would be. So again, kind of summarizing some of our preliminary observations, that debt does allow that rate increase to be more gradual. And then balanced funding approaches, so utilizing debt and rate increases can help reduce that volatility. Really the two things I wanna very much hammer down, this is a 20-year plan and we talked about a 10-year financial model tonight, but a lot changes over a 10-year period or a 20-year period. So staff's gonna recommend that we continue to do financial modeling as we move forward to check in where we're at. Historically, the city has had Deb do us, do additional financial modeling updates for us every two to three years. So very much wanna recommend that the city continues to do that to make sure we are staying in line with what we're trying to get accomplished. And in conjunction with that, there should be master plan updates, not at that same two to three year mark, but maybe more like five to six years to make sure that we are understanding how much growth and capacity is still in the system so we can help prioritize projects and delay any that might not need to happen. We don't wanna increase rates more than needed. That doesn't help anybody.

Oh, wrong direction.

But there's always flip sides. Obviously the council's gonna have to consider impacts to the community. There's obviously a residential utility burden on everybody if the rates increase. We didn't include any regional comparisons. That is information that can be provided to the council. It's something that you're looking for. But where you land in relation to other communities in the region is important information that usually councils wanna know. You're gonna wanna consider impacts to development costs. SDCs are gonna impact different developments differently. How they impact a single family home, which its price is set by the market is gonna be a little different than how they're gonna impact a commercial development or how they're gonna impact a multifamily development that has to recoup its costs through rent. You're also gonna wanna consider your economic competitiveness in the area. Obviously we want as much growth to be choosing McMinnville over other communities. And then you're gonna wanna think about equity considerations. So somebody that's in the bottom 5% of income, rate increases are gonna affect them very differently than somebody that's at the 50% mark for income. you can consider policy that makes sure you limit to help that bottom 5% by lowering it for everybody or you could also consider raising it a little bit for the other portions to help fund programs that help that bottom 5% or 10% or whatever it might be residents in need of assistance. There are risks for differing. Obviously, future costs are gonna go up. We like to say they can go up or down, but historically, we've all seen prices only go up, not very down. There is concern for regulatory exposure. Back in the 90s, the city was putting about 20% of its sewage directly into the Yamhill without being treated. So we were exposed for regulatory stuff at that time with DEQ. We also had concerned citizens in the community that came in brought their concerns to the city and why we needed to do that. And that's really what triggered that new plant, which we call it the new plant, but it's 30 years old at this point, being built in the 90s and the subsequent large rate increases that came at that time. We're also going to want to consider the system reliability. If things get older, they go down. We have to bring staff out and be able to handle those repairs or pump restarts or whatever it might be. There's obviously capacity limitations that have to be considered and then that could delay growth opportunities. The city being able to fund stuff might not be the only approach. Developers might need to front load some additional money to help programs and then look at setting up reimbursement districts, for example. So that is the summary of all the information that we wanted to give you to helpfully have a robust discussion tonight. Obviously we have the staff here to answer any questions that you might have that can help with that discussion. But what we really need as staff is to start sussing out what that council policy is for the body. So I have a set of two slides with policy discussion questions. Obviously the council can go whatever direction it would like with this discussion, but I have these two slides as prompts if it'll help you out. And with that, I'll give it back to you, Mayor.

Okay. Let's start with some questions first that might need to be answered. Councillor Chenoweth.

Thank you, Mayor. I guess I'll start with assumptions so that I'm clear in my mind what assumptions were at play here, because it doesn't look to me in looking at these in that, you know, we went through things really quick. So just the general feel that I have, I'm not sure I'm convinced that growth was taken into account on the cost side. And what I mean by that is if we expand out growth, just picking one of the big areas of growth that we're looking at, if we expand out on Three Mile Lane and we bring in a bunch of commercial and industrial space out there, it just didn't feel to me like their new payments that will be coming into the system were factored in as part of the monies being generated from the tax base or the fee base. Is that assumption accurate?

So it shows up in two ways in, in the 10 year plan, we have assumed a higher account rate growth in the 10 years with the, the CIPs that have a growth component. It's not huge. We talked about it internally and came up, you know, with the recent trend has been about a half a percent per year and growth in accounts. And so what we assumed in those months, I think like scenario four and five is more like 0.75%. And then where it really shows up is in the SDC revenue that's assumed to be for three or four times what it is budgeted now. Still, you know, that's like, I think 750,000. you multiply that and it's a significant increase. It's not when you're looking at 190 or $230 million of capital, it's not a lot. Could growth go quicker? Absolutely. And that's partly why, you know, you look at reevaluate the plan every two or three years to make sure that if things are happening at a faster pace and absolutely then that those additional revenues mean lower rate increase because the costs aren't going to increase proportionate to the additional accounts.

So I'm going to try to pull out what I heard in there. What I heard was the average has been 0.5 and you figured 0.75 in scenario four and five.

Yeah, I think it's still conservative. If you saw really, you know, past growth, you have to build the infrastructure before the new accounts start coming.

Of course.

So it's always going to be a little bit of a lag in terms of when the growth and the additional revenue is realized from those new customers. So in the 10 year period, we've still been pretty conservative with respect to the growth rate, but as new accounts get added, they help pay that debt service and pay-as-you-go and SDC revenues, all of that gets added to the mix. We've assumed some increase, but have tried to be measured in terms of the additional.

Right, and this question applies both whether we're talking about expanding out on Three Mile Lane or expanding out on Southwest Area Plan. Either one of them are going to result in a at some point in time rather large increase in paying customers on the system. And so I'm just trying to factor in what that results really look like. Are we being accurate? Are we being conservative? And I appreciate you using the word conservative multiple times in this to make a clear picture to me of what you've done in your projections. And that's what I needed to know for the assumptions. Thank you. The other question I had is in looking at the other assumption, it sounded to me, if I heard you correctly, that the largest single item on that capital improvement plan you assumed in all scenarios.

Yes, that's correct. So the MPDS permit dictates that we're supposed to not have sewer overflows in a five-year storm or larger. We had a five-year storm back in December, and it overflowed at that location. And so the consultant looked at various ways to handle that. If you only do a... some small improvements there and reduce that bottleneck down, it creates a bottleneck in another place. So this large project is the one that provided the most cost efficient way to handle these bottlenecks that would occur during a five year storm. But we did assume that it is included in every single one because it impacts our existing system as well as every growth scenario.

And remind me again what the price tag of that was?

In the master plan the conceptual product cost was 80 million roughly We've been already looking at value engineering that does it have to be 80 million we're looking at some different scenarios Getting some other opinions on it But for now we're assuming it's an 80 million dollar project and we can keep working on that as we move forward Okay, since I've asked you questions.

I'll pass off to others and come back. I

I have a question in regards to that. So it's based on the storm and the water in there. Does the storm water project that we still have to do affect that? And would that make a difference? So you don't want to build something here. If we're still going to have to do this over here, it would decrease this need.

Correct. So... The big peak that happens during the storms is through inflow and infiltration, and it's mostly infiltration, so groundwater getting into the system. They're old pipes. They leak a lot. When I say a lot, we, in the summertime, have about 3.5 million gallons a day going through our treatment plant. During that five-year storm, we were having 35 million gallons go through the treatment plant in a day. So that additional infiltrating groundwater accounts for a tenfold increase over the amount of sewage that we have to treat. Now we treat it slightly differently because it's very much more diluted, but that's the kind of capacity we're looking at. When you consider the stormwater program, it will repair stormwater pipes that might be leaking into that groundwater, but groundwater is already really high. in the winter time in the region because of our clay soils from the glacial flows in the past. So we have pretty saturated ground that's gonna get a little better, but not completely better. That's also why we have targeted I&I rehab projects that go and replace existing pipes with new via hdpe or other systems that have much less joints and have a lot less leakage but they're still hard projects to get done and that's what the focus was in the last 10 to 15 years there was a big focus on doing those types of ini projects and last master plan and while they were successful and the the community did as many as we could, we weren't getting the return on them as we hoped at the time. So you still have beyond our pipes, you have the manholes, you have all the laterals that go all the way up to the people's homes. And there's lots of potential weak points where a lot of groundwater can get into the system. So to summarize, that's a very long answer for no, the stormwater utility will not significantly help with this issue.

Are you gonna be coming back to us though to do stormwater and have a similar fee structure? concerning how much are we gonna charge our customers?

Yes, so we presented the recommendation from the PAC on the stormwater program that looked at doing a initial $9 a month stormwater fee that would increase to $15 a month, I believe, over a five-year period. We can bring that back for council discussion and consideration at any point. The last direction I got was to hold off until council wants it brought back to them.

I have more questions, but I, again, will let somebody else if you have questions. Nobody? Councilor Peralta.

Thank you. First, really interesting and detailed presentation. This kind of project is one of those things that people never see, right? It's so critical to the livability of the city. It's one of those things that I think, you know, we, we as a council have really focused a lot on forward facing services and only in the last few years have started to address some of the capital needs. So it's a little daunting for me to see these numbers. I'm sure others feel the same way. Um, I have a couple of comments and then just one question. Um, the first, well, two questions actually, um, I'm not sure this is a question for you two so much as for Heather. I believe it's accurate right now that we are growing more slowly than our planning documents would indicate. Can you hear me? Is it accurate that we are growing more slowly than our planning documents have suggested or what the estimates have been?

Yeah. So we are growing more slowly than the population forecast that we use for the housing needs analysis and the economic opportunity analysis.

And so my question for Jeff then is, you know, given that we're growing more slowly than what our estimates have been, what, how does that inform what your recommendation might be among these plans to if we wanted to prioritize existing systems and not spend a lot of money building out, given that the growth might not be what we're expecting.

Yes, absolutely. So the master plan looks at that 20 year growth horizon, which is essentially the build out of the UGB that we have now, because the UGB is meant to be an expansion to handle 20 years of growth. So if it built out in 50 years versus 20 years because growth is slower, then yes, you wouldn't have to build as many projects in that timeframe. Now, things like setting the STCs would stay consistent because the amount of dollars needed for that full growth is still the same. You would just be bringing that money in slower. And then after that, it's really a policy discussion. If we do not think that there's gonna be aggressive growth in parts of town, we can avoid doing some of the improvements that the master plan calls for in those areas. So that's again why we suggest to continuously look at that. But what the master plan did assume was that that full growth would happen in that 20 year timeframe.

And I guess, can I just add to that counselor? I'm going to add to my answer to your question. The presumption of why we're growing slower, you know, if the presumption is we're growing slower than what was anticipated because the demand is less, I would suggest that's not true. The presumption that we're growing slower is because we don't have the supply to respond to the demand is what, most of the data is pointing to. So if we, as a policy decision-making body, decide that we're not going to support our growth areas, then that's a policy we're making, right? But I wouldn't suggest that we make that policy based on assuming that we are not growing as much as originally forecasted because the demand is not there. Does that make sense?

Yeah, it does, Heather. And I guess my perspective on it, just to share with the community, I suppose, is that I think that is true, what you're saying, but I think it's also true that we're growing more slowly as a state than we had thought over the last five years. And I think that also affects the community. And that's also housing related, I'm sure, but I think it's also immigration related and other things. Okay, so comments. And then I have another question. So my preference would be that, and given what you said, actually I have another question related to this comment. The scenarios that you had had different, rate increase estimates for SDCs based on the build out timeframe. But it seems to me that just because we're going to grow over 50 years, say doesn't necessarily mean we would want to have a relatively lower SDC under one plan versus another. If the goal is to keep rates low for community members longterm, I mean, it's almost like a choice between housing costs upfront or, community members paying it after they live here. Those are the choices if we're going to do the work. So, um, so my question is, does the, does the fact that you made different SDC assumptions in each plan in terms of the increases, what extent is that tied to limitations of using SDCs to apply to projects in the time window or maybe what's the basis for, for choosing different numbers for each of those models?

Well, for purposes of the financial modeling, I assumed the multipliers are applied to the revenue. So the assumption is that council will have a policy discussion about what is a uh, politically, you know, reasonable, uh, optimal level to raise the SDCs to, as Jeff said, we'll bring you, here's the maximum that you could charge for the entire CIP, uh, master plan CIP based on what is growth related that we can defensively allocate to growth. Um, and, whether it takes 50 years or 20 years or whatever, that won't change the cost per unit. It will change the amount of revenue that you realize over the next 10 years. So those multipliers are on the revenue, not just the rate. It's just assuming slower growth in a couple of the scenarios, higher growth. but also sort of making some assumptions too about what council might be willing to fund or set the SDC at to, you know, if you're, um, going for a, a CIP that includes supporting that growth and development in those areas.

Yeah. So again, it goes to the theory that growth pays for growth, um, which is a great, um, model for your existing customers, but there is also a breaking point for growth where it no longer pencils for growth to occur. So you can't just exponentially raise the SDC rates and assume the revenue is going to go up forever. There's going to be a point where you're going to have less growth because it becomes too expensive to develop for sure.

Right. Okay. And then just to finish up with the comments that I had. Um, so my preference would be to take what steps we can to keep user rates low and put more of the costs into system development charges. Um, Of those two, that would be my preference. I would like to see the regional comparisons of what other cities are charging so we have an idea of how to set our rates so they're somewhat competitive with other communities. And then I would suggest that when you do the scaling, when we've looked at SDCs or any of these fees, I think we should really, it seems to me that almost everything the city does is broad-based and somewhat regressive in terms of tax policy. So the more progressive you can make that in terms of burdening the poor members of the community less and the wealthier members of the community more would be my preference. I don't know what extent that's possible. So, thanks.

Councilor Cunningham.

Thank you. a lot of different scenarios and a lot of different percentages out there. My question has to do with when we looked at limiting the amount going towards growth, we chose to look at kind of three mile lane in Riverside. I assume we did look at our model Southwest area versus that.

Yeah, so we have the numbers. It would just be an additional scenario if you chose to focus on, say, the southwest area over Three Mile Lane, we would just swap the numbers. I will say, though, as you recall, the southwest area was the most expensive of the areas to the city to make capital investments to support that growth.

But I'd assume that that would also mean that it'd have the greater possibility for a higher SDC. Is that correct?

I haven't calculated what the exact SDCs would be. We could do that if that's something the council would like to consider because you're going to see obviously more single family homes and multifamily, whereas three mile, you're going to see more commercial or industrial development. Yeah.

You don't even have a suggestion on here, do you?

No, there is no. None of this is a suggestion.

These are all just... Well, I mean, something to look at. Is it on here?

Yeah, we could... There isn't one there. We could calculate it, but it is more expensive to develop in that area. And again... It's the combination, you're gonna be getting money back from SDCs, but when we build infrastructure, we have to build it in jumps or large projects. So we have to build the capacity first and then receive the money back. that you can't get the money up front and then build it. So that's why you take on debt. And so you're going to be taking on, while you might get more growth dollar back out of the Southwest area, you're also going to be taking on more debt to pay for that or increasing rates higher to help pay for that. Does that help?

Yeah, I'm just wondering, just because I know that Southwest Area Plan is... probably got a significant amount of density when we talk about uh residential houses uh i don't know what the comparator of that is with like three mile lane like how much commercial equals x of residential um obviously it kind of depends on what type of commercial you have out there i mean some of it might be a you know a major water user and and we'd get more from that

Yes, and there's another factor with the three mile lane area because of the distance from the Yamhill River. A development could choose to get its own MBDES permit and handle all of its treatment on site if it's not particularly polluted water. There are industries that do that and they'll get their own permit to discharge wastewater and not go into our system. So they wouldn't, in that scenario, they wouldn't be paying an SEC because they're not using our system to account for that. But commercial and industrial development could be a wide range of things. So we can do assumptions, but it's going to change every project that comes in.

Okay. uh why the when you went to that scenario why was riverside left on there though is it because it's so close it's it's kind of lower hanging fruit if you will uh when you say riverside do you mean the the large 80 million dollar project or the riverside no it was oh

Yeah, I think like he said it was kind of a low-hanging fruit item where the the amount of work that was Already budgeted in that first 10-year window was relatively small in comparison. And so it just was another way of us Including kind of that additional growth in a portion of the city Versus you know all the growth that Jeff mentioned in the southwest and how expensive that was we're just trying to do kind of a balance of

Can I ask a quick clarifying question? And I apologize, I wasn't involved in these discussions, but I may see where the counselor is going with this. When you describe Riverside, are you describing what we describe in the UGB expansion areas as Riverside South, that residential neighborhood?

Correct.

We don't see that developing. That's the last expansion area I see developing in McMinnville.

I guess I'll make my comment then at this point, because I don't think I have any other questions. the meetings that I've been in with our business stakeholders time and time and time and time again is that we need more housing so that they can attract people to, um, to live here, to work here. Um, and so I think we would be remiss if we did not put some effort behind growth. Um, but I would not necessarily, um, focus solely on growth. I think we need to have a balanced approach. I agree with Councilor Peralta that I would support going more with the debt scenario in order to continue lower rates to our citizens whenever possible.

for the riverside one you guys were talking about that was 18a project is that how you had that labeled just see the riverside jumping around a lot to make sure i'm looking at the map

And I know we're talking about specific projects here and there, but I will state that that is much less helpful for staff at this stage than having these larger policy discussions. We could add projects, take projects away and all that, but getting into the weeds about let's do this project over that project, we're avoiding the general discussion of what kind of rates can the community absorb, what kind of SDC increases the community can absorb. So I'm gonna ask the council to try to stay up at that higher level policy because we can do all this analysis, but it doesn't really get us to the point of delivering you what you feel the community sees as the right financial approach for our wastewater system.

Councilor Carey.

Well said. So when looking at the starting from here going forward on a investment model and taking into account the risk we want to take in how and when we want to grow and pay for that growth. This is a pretty hard question to answer, but we set ourselves up on a path that has led us here to be able to have a good system now. We're pretty well equipped for the problems we've had so far, and we're looking down this planning horizon for 20 years. how well suited are we now to sort of bridge this gap? Are we sort of immediately needing to be jumping into heavy investment or are we set up to bridge on a smoother, I guess, how much of a running start do we get on this risk analysis with the work we've already put into the system to date?

have a good glide path dollar wise because we have the 40 million roughly in money saved up when you look at what we have in the bank plus the loan repayments that are coming in the next five years but I wouldn't say that the system is in a the system has been good up to this point we're bringing forward a the system has already reached capacity issues and there's not There's really not a glide path that can smooth out. Like the system, I wouldn't say it's like it's fair and we can go down to like poor. I would say in most cases we're getting close to poor already and continuing to defer is going to put you into regulatory and infrastructure failure issues. That's how I would characterize it.

That's a helpful answer. And then, so I guess I had one assumption and then there was some questions and comments that made me unsure. When you say SDCs in your models of assumptions, are those residential only or are those commercial and industrial as well for this?

That assumes we continue to charge SDCs to all development as we do now. So it's for the impact of the system. So sewer SDCs, pretty much every development project that comes in pays sewer SDCs, whether it be industrial, commercial, or residential.

Okay. And then this may sound like a wild hair, but when we talk about... most if not all of this are construction related projects in the high dollar amount. It makes me curious how local the people are that we're hiring to do this work is. You have a way of kind of, you know, I know you can't, if you try and eat hyperlocal, you can't get seafood within 10 miles, right? So I get it. that there's going to be contractors out there that are big and are come from far, but how local, you know, if we are over the next 20 years going to put 60, 40, $60 million back into the ecosystem, how local would that hit?

I'll break it into two groups. Consultant-wise, local means really the metro area and Salem. We don't have engineering firms in town that can just period, let alone ones that could handle these kind of designs locally. So most of those dollars would go to the local area of Salem and the metro area. And there's plenty of firms that can handle that work. And so we're not seeing people doing design from outside the state. Construction-wise, There are plenty of large enough contractors in the state of Oregon. When I talk about an $80 million project, I don't think there's a local construction company in town that would bid on that as the prime, but they would probably subcontract to people that are local. It's going to be a lot less expensive of a MOB cost to do somebody that's here in town. So... Contractors are looking to do it as cheap as possible, so they're going to utilize every available resource they have here in town. But then once that reaches capacity, then they're going to go out to Metro and Salem area and then go out further. Yeah, please.

I just have a follow-up question to that. Are any of the projects done by wastewater employees? Are any of them small projects or is everything going to require a contract with another company?

So we do some design in-house, although if we had a capital program that was this aggressive, we're not going to have the capacity to do in-house design for many of this. And then our wastewater staff does not do construction projects. One of the biggest reasons is the depth of wastewater pipes requires shoring, and we don't have shoring. So we couldn't build these safely ourselves with our staff, and they're pretty much topped out on just the maintenance work.

So another, another real large questions, but so just some general feedback. I think I'd, I'd, I generally fall in sort of the scenario three area and my comfort with going towards the scenario for adding in more broad existing system growth would be hesitant on understanding where exactly, and I think that's where that conversation around either Three Mile or Southwest, I would bias my preference to growth to be more in the residential areas, and so I think that would be more in the Southwest area. I think that should be the priority over other commercial growth, and then debt models, I'd generally be in line with where Councilor Peralta and Cunningham were on those as well. And then specifically about data come back, the regional comparisons, but also when you do that with the SDCs as broadly as we can for a whole SDC package, right? I'm going to go in and develop this thing. It's not in a wastewater vacuum. It's in the entire check I have to write to get this development done. Context would be most helpful.

Mr. Tchaikovsky, do you have any comments, questions?

Yeah, thank you, Mayor. I've been taking a lot of notes along the way, so bear with me. I have a number of questions. So first of all, if I had to pick a scenario that you presented, and I'm going to try to stick to your policy discussion questions in front of us here, I would, if I had to pick one of those exclusively, it would be number two. However, I would ask, I kind of want like almost a 1.9 I'll make it easy on you. The reason is because the $79 million offline storage tank seems like a significant cost in the entire plan, and I'm not exactly sure what alternatives have been discussed and what alternatives may exist that could perhaps, if not minimize the cost further, even just phase it over a period of time.

Yes, that is something we've already started looking at. Kevin knows because I keep bugging him to do more, do more, do more. We would try to do the smallest project possible that meets our requirements because I'm in agreement that an $80 million project is a lot, but we're at the conceptual point in a master plan and we haven't gotten into that value engineering yet. Okay.

One question I had on the same note. If you have an offline storage tank, it's my understanding that storage tank exists for your five-year overflow, your large storms. And you mentioned earlier that the inflow and infiltration of our system causes significant rainwater to enter our system because you also said that had diluted it significantly, therefore you treated it differently. If we... changed the, or let's just say that if we funded, further funded or fully funded our inflow and infiltration system, would it reduce the need or perhaps eliminate the need for that $79 million tank?

So the master plan documents There's assumptions that are built into this related to the inflow and infiltration that we need to achieve a certain amount of reduction in that INI over the time period of the plan just to reduce the capacity deficiencies that we currently have. So there's already a built-in assumption that we need to be doing I&I projects further to get the reduction down to 35% or 65% to meet those kind of capacity needs in the system. So by doing the I&I, it's not necessarily going to be eliminating these critical projects.

Okay. You said that was calculated in already? That's already a factor. Okay. I didn't understand that. Thank you. Okay. Your first bullet point talks about what level of growth does the city want? I have consistently seen that our models are overestimating the amount of people we're going to have, the amount of families we're going to have. And even in my time on the planning commission, the models usually over-predicted what was going to happen. Realistically, I don't know what a great number would be. Director Richards may know historically what we've not met on our population, but I mean, starting at like an 80% forecast, perhaps, and then if for some reason we do have an influx of poor people, it seems appropriate that we would react to that rather than forecast and build out at the expense of the current taxpayer. Along that, I had another note that said, it addresses your last bullet point, looks like number five. You ask, should infrastructure be built ahead of growth? Getting back to what I was just talking about, can the major projects be broken into phases that can be triggered by actual growth instead of the projected growth? I personally didn't see that. That doesn't mean that it wasn't in there. It just means that I didn't see that. So I guess I'd ask for clarity there. Is the phased approach in there?

Yes, it is phased to an extent. Like, for example, with the offline storage project, we've talked about what happens if instead of building the 4 million gallon tank, you just built a 2 million and then build a 2 million later. Phasing for pipeline projects can be pretty difficult. If the entire pipeline needs to be upsized, you don't upsize to 15% and then come back and up to a 15 inch from a 12 and then come back later and do an 18, you kind of just go with the size you're gonna need. And often these pipes last a hundred years now with the current models. So we are somewhat considering that these are gonna, these pipes have to handle what growth is in the 20 year, but we do know there'll be future growth beyond that as well. And is that cost increase of going from a slightly, from one pipe to another, is it worth it?

I understand why you're responding that way. I don't think I communicated as clearly as I could have. The flow of your system is dictated by the smallest bottleneck. So what I'm asking is, are there phases that we could phase certain areas to where you're not creating those bottlenecks that have to be created in the future?

And that's really what the plan itself is, is it's already phased. So you tack one area, then the next area, then the next area. It's hard to do smaller phases of the single area attacks. It's more, you can do this one area, this one project, and then are you doing the next project next year or two years from now, whatever. The phasing is more built into the plan holistically than on the project level. Yes. Okay.

All right. Bullet point number four. Sorry, I'm jumping around a bit. Notes are all over the place.

Oh, and I have another slide of bullet points.

Oh, I didn't get those.

There's plenty of policy discussion for you all to have.

Brace for impact. I don't want the existing rate payers to be burdened with the cost of new development. The new development's not something they've specifically asked for, or they may not even potentially benefit from it. Now, if it's recreation or commercial or industrial, obviously that's different. But if we're burdening them with infrastructure for future residential, I would ask that we don't do that because... they're burdened enough with their own. I would just like to see that we are not making them pay for tomorrow's residents. And I know somebody paid for my way. I'm sure somewhere in town years before I was here. So I asked that we just consider that, but not try to burden them fully. So I didn't, I guess one other question is I didn't see a, like a lifetime cost to an existing rate payer. Was there, in the scenarios, is there, like, you had a nice graph in there that shows, like, 2036, I believe.

Oh, yeah, so what the rate would be at that time, but you're asking for a, what would be the increase of total cost over 10 years that you'd pay, not just what the final number is, but... Yeah. Okay.

Yeah, so, like, I think, what was it, a 20-year cost, or a 20-year, yeah. What does it cost that taxpayer over that time period?

saying we could put that together. Deb, we can put that together, right? Okay, we can put that together.

I figured. All three of you got really excited. I think that's what I have for now. Thank you, Mayor.

Councilor Chen, if you want to give more information.

I do, thank you. So I'll start by saying I can't possibly give you policy thoughts, or at least not a lot of them, based on what you've provided me, because I have no idea what you're charging businesses and commercial and industrial users. what their increases are going to look like based on what you've put in here. What I see in here are residential rate increases and the industrial and commercial rates are not tied the same way, right? So I would need, I don't, to me, I don't see clearly what it's going to, for instance, just picking a top of the hat, how much more is Cascade Steel going to pay on these rates based on the need to raise this kind of revenue across this period of time. I need more information to be able to evaluate what this is really going to be doing to those users. Does that make sense?

Yeah, it does, and we can pull together conceptual customers and how it would affect them.

I don't need specific users. I'm just saying my understanding was based on pipe size, right?

It's based on water usage, which we assume is the amount of water coming to the system. So, yes, these rates are kind of based on a typical house. So if your Cascade Steel pays...

20 times i know it's larger than that but say they pay 20 times it's going to be a 20 times increase obviously and i need i need to understand what this is really doing to business and commercial users before i say yay to anything because i don't i don't i don't know what i'm looking at i'm i get what it's going to do the home user and i don't like that at all But I'd like to have a better understanding of that. So I would need that more information to add to the stuff that council president asked for, which was great because I need that as well to help me make good policy decision. Number two.

And I do want to say, we're not asking you to make decisions tonight. We're asking you to discuss the policy with each other tonight. No decisions are being made at this point. But I can't even, I mean, you can talk policy without having the final numbers. Like what are the levels you think a commercial industry can handle for an increase? Things like that. We're not asking for decisions by any point, but what we really need is for you all to talk with each other about what you think this community can handle. We'll bring back as much information as possible. Thank you.

Number two, I'm involved in CIP projects across the state, putting together a list of wanted CIP projects. And I understand that these are often a combination of needed and wanted. So, you know, that just because the list that's provided is not necessarily this has to be done. We could defer some portion of this or we could not defer. There's some stuff we cannot defer no matter what, right? We've got pipes that are failing. We've got to fix those. You know, I kind of look at it this way. If I went to my children and I said, what do you want for Christmas? They're going to come back and give me this list of everything. And I understand a master plan is theoretically everything that we need to do. In a perfect world. We're not in a perfect world. We have a finite amount of money that we can tap into. We've got a bond that's going forward already. We've got a city services fee that's already been assessed. We've increased our property tax revenue substantially over the last three years. We're going to be coming back with a wastewater. So I'm from the... grand scheme of things, people are tapped and tapped hard. So I need, in order to make a good policy decision, I need to understand what can we not do? And to bring these numbers down into something that's more reasonable. The numbers that you're providing to me, from my perspective, dollar-wise, I would say the most I'm looking at that I'm comfortable with is two. However, on a policy side, I really disagree with one of my fellow councillors who said we don't need to be doing more for industrial and commercial. We have a severely rent-burdened community. And one of the reasons we have a severely rent burden community is we do not have the high paying jobs we need in our community for the people that live here. You can either address that severe rent burden by opening more land. That's not happening because we have constraint on our land supply or you provide higher paying jobs so that they have more money so that their rent burden isn't so high, right? Those are the two ways that you can go about doing this. So unlocking the industrial portion of that development to me is crucial to helping our citizens be able to afford to live here. Um, so from this Paul counselor's perspective, I do think that that needs to be one of our primary focuses. Um, And I also think it's going to have the net effect of increasing the revenue coming in on our fees much quicker than the residential side will. That's my take. I could be wrong. That's a feeling. So level of growth, I'm with two different councilors' comments here. I don't think we're going to grow as fast as people think, or if we had the supply, it's going to build out as fast as people think on the residential side. I have had across the street from my house for a year and a half now a sign that says, now leasing. And they still have a sign that says, now leasing. I take that as anecdotal evidence that things are not filling as fast as people, new stuff's filling, because it's new, but older stuff maybe not so fast. So anecdotally, and I know that's not statistically, that's not hard evidence, I don't think we're going to be growing as fast as the projections think we are for a whole bunch of reasons. Council President, a good job. So level of growth on the residential side, not so much. What level of reliability and redundancy does the council expect from the wastewater system? I'm not a wastewater expert. Don't have an answer for you on that question. I mean, I don't want to be dumping raw sewage into the river. Does that answer the question?

It does. That's a good answer. If we do, if that happens, because that's not the intent and we get a lot more leeway from DEQ.

I had no idea what I know now. I mean, you told me something three months ago that blew my mind. I had no idea. I live in here as long as I have. I'm not going to say it, but I get it. So I would like to get to the place that we're not doing that. Is $80 million worth that?

I have the same thoughts and I'll give you some, what goes into our thought process for that. And it kind of gets into that needs versus wants. So we know that that's what the type of project that would prevent that from happening. If we didn't move forward with that, it's a risk. If we start to get overflows, we'll get DQ coming in and telling us, you had overflows, here's your fine. And you need to come to us with now a plan of how you're going to get it done.

So that question I meant to ask and I didn't ask. I hate to ask this question. Forgive me for asking this question. But I know we've done this as pay as you go. But stuff like that, can we do as a bond and knock it out in a one-time bond, be done with it? It's built and it caps off. People quit paying it. They see what they're buying. They understand it. It's not an ongoing fee.

Well... Yes, that's what the model showed, is we take a bond, but you have to increase your rates to cover that cost.

It's a hidden bond that way, in terms of a capital bond going straight to the voters.

So these are revenue bonds. They're different than general obligation bonds. Correct. You could do general obligation bonds, but they are not directly... Then it's just based on people's... home value so you could do it that way and they could vote on it but if they voted it down and we still had the overflows deq would just force us to come in and find a way to pay it um and then we'd probably end up going to a revenue bond because we know it has to be done um so we'll keep trying to find another option as counselor to call security talked about Yeah, that's what makes your all's job hard. You're the ones that have to get into the details on this stuff and understand it much more than the voters. That's what they've voted.

And I need to get to less need and more want. What level of infrastructure risk is the community willing to accept? I mean, I can't answer that question. How should the cost of future infrastructure be shared between existing rate payers and new development? I think we need to make sure the SDCs are not so high that they're preventing, I think you did an excellent job Geoff, or Jeff, however you want to say that. of analyzing the reality that we're pushing the barrier on when we're going to prevent growth from happening in our community, and when we're getting ready to unlock 180 acres of flat industrial land, the last thing we want to do is make it so expensive that nobody ever develops it. So we need to be careful on the pricing there, and we also don't want to do the same thing to residential. We can't keep jacking the price of residential so high that when property values eventually come down, which they will given population expectation, over the next 50 years, as that starts to drop, we don't want to have the cost so high that now suddenly the market gap isn't protecting us and we can't sell houses, can't build houses. Should infrastructure be built ahead of growth? We don't have a choice. That seems like it. I answered that page. I'll stop there because everybody else stopped there.

Okay, some comments, and then we'll kind of try to put them together for you.

Yeah, and again, I have these additional questions, but again, they're prompts. You all can have the discussion that you'd like to have.

Right. So anyway, my concerns are I do think that growth is probably not as great as we may think, so we need to be cautious of what we're building out. Um, I know that this is eight and a half percent. Let's, if I'm just looking at scenario three, just for the community to know it's eight and a half percent this year, eight and a half percent the next year. So the compound is pretty large and I appreciate the fact that you're going to bring that back for us to actually see what that cost is at the end.

We can provide that for each of the scenarios.

That would be great. That would be great. Um, I am a little, I want to keep rates reasonable because again, the economy right now is really hard. People need to be able to pay their monthly bills, their gas, their food. And then the more we add, it's just really hard. So I want to be cautious of the rates, both residentially, but also commercially. I mean, we're talking about something like a Cascade Steel. There's a lot of fees that we're not involved in for that company. We don't want that company to leave. So we need to think about that and really determine what is it that we have to accomplish right now. And like, again, kind of like Chris said, is look really hard at what are the things? Is there something that we can finagle or have a different choice for? When it comes to housing, yes, we need housing, but affordable, we always talk about affordable. All these fees don't make it affordable, and I don't know that we can ever make anything truly affordable. we need housing, but we need jobs. Um, and so again, putting a lot of costs on new construction, the amount of fees, if you talk to someone that just built a building are extreme right now. So I am concerned about all of those things, but I know we need to have SDCs and I know that we need to have some rate increases. I just want to be not at the top level of offering these because I think it's a hard time to do it. Um, I don't agree with going to a bond.

Yeah, sorry. I don't think that's a good idea.

And I also think that whatever we do needs to be fair across the board because it's not our place to determine just because you make more money than this person over there, I don't know what your expenses are or what your needs are. I think it just needs to be one fair price across the board based on a metric of whether it's consumption or what. So do you want us to, do you have any general idea what we want?

I have six ideas. I don't have a body's idea. So again, If I took what you all gave me tonight, I would come back with what I think would have the best shot of meeting everybody's. I wouldn't say that is going to be the best policy because you all haven't decided something. So you would vote on it. It may or may not pass. I wouldn't say that would be the best policy you would all want to.

I'm not sure I'm ready for you to actually bring back something to vote on.

And I'm not definitely, but so the more discussion you have to come to a conclusion as a body just helps me out. So, um, I'm starting to get an idea where individuals are, but not the body.

And I, we can talk a little bit more. I still feel like there's more information needed to get a little bit. Council Peralta.

Okay. Yeah. I mean, just by way of starting to kind of narrow down the choices, um, I appreciate your perspective on kind of the one rate. The problem is like when you do that and apply it to say a multifamily housing, it stacks up so much on that one project that when we looked at SDCs and when we looked at as well the public safety fee, city services fee, we did a fair amount of analysis on we did a fair amount of analysis on the costs or multifamily residential and the, the, it just seemed so out of proportion when you compared the cost to a multifamily residential versus say a, a single family home. Because if you have the same rate on the multifamily, you're stacking it across, you know, 30 users or 50 users on the same building. And it just didn't seem equitable. At least I think that was the sense of the board at the time. And that's why we did the fee that we had. Similarly, when you talk about impacts on the community, you know, the analysis that we did was larger homes have a bigger impact on the community than smaller homes, basically. And so that's why when we did the SDCs and when we did previous analysis, we did have differential rates based on the property tax. When I was saying a more progressive model, I was meaning to kind of stick with that.

I just didn't want to base it just on what we chose as an income level. No. I don't think that's our place to do that.

That's why I wanted to clarify it because I was using sort of shorthand for big house, small house, multifamily, you know. So I just wanted to clarify that so that we could at least knock that point off. And then I think another thing that we probably need to just – come to agreement on or reach consensus on is the question of increasing rates versus taking on, um, debt, right? Because that's essentially, uh, so, so if, if, if you're, if, if one person's view is higher SDCs than we have now, two and a half to three times was what you had in there. And I don't know what the number is. I need to see it compared to other cities like the mayor was saying. Um, But knowing whether or not a majority of the board would prefer to keep the rates lower versus other options. Because it seems to me the choice is keeping the rates lower and having higher STCs and taking on more debt or charging our residents more and then having less debt and lower STCs. So kind of getting a sense where people land on that question I think would be important for Jeff and the team.

Yes, Councillor Chadwick.

So that wasn't my understanding. And so I just want to see where I'm missing it here. My understanding in what I was looking at in the numbers, whether we take more debt on or not, it's still being passed. Eventually on to the consumer to be paid in their fee either way The difference is do we pay it higher at first and drop it down or do we balance it out over the length of the time?

Is that yeah, so okay? Thank you really? really simplistic way of pay as you go is if you have an $80 million project you want to build in three years, you just increase the rates to save up 80 million in three years. But it's a very significant rate increase, as opposed to the debt model where it's the same as when you Yeah, same as when you go buy a car. You know, am I going to be paying $50,000 out of my pocket now? Or am I going to be paying 500 a month over seven years?

I think people have a concern too. I know I would is like we have an eight and a half percent and how are we sure it's not going to go up another eight and a half percent. Cause we have, even though right now it says it would only go up for that particular year.

Well, again, it sets the direction of where we're going, but that's why we say always. So rate increases, even if you give us the general direction of, say, do 8% rate increases the next 10 years, I cannot do a rate increase every year without coming here.

Without coming here. I realize that.

So you're going to have to.

Is that perception?

Mm-hmm.

Councillor Chenoweth.

So I guess I kind of feel like I appreciate trying to narrow this down, but I really am going to be struggled to come to an answer other than my gut, which is going to be based on my preconceived biases before I ever walked into this room. To be fair, that's as honest and transparent as I can be. So... Would I be wrong to say, can we have you come back, give us 15 minutes of the data we've asked for, and then reintroduce these questions to have this policy discussion again, giving us time to ruminate on what you've given us, if that's the right word, on what you've given us, marinate, whatever. Let that sit and gel and have us come back And then you present at the beginning of another hour, hour and a half session, 20 minutes, 15 minutes of the extra data we've asked for, and then we can have this policy discussion then? Am I wrong to ask for that?

No, you can absolutely ask us to bring back more data if it helps your discussion points. Again, it's... your time that we have all of you here that you can officially talk about this stuff is just so rare. I mean, we're having three work sessions a month, so we'll fit it into the schedule and we can absolutely do it, but you just gotta give the direction to the city manager and we'll come back.

He's grinning. Mayor. Councilor Tucholsky.

Yeah, I just wanted to say, well, first of all, I have a statement, then a question for the council as well. But the statement's for the body here. I hate to say a debt model is preferable, but what I would say is that consistency in your bills every month is much more preferable than volatility. And so if the debt model brings consistency, I would have a preference toward that so that people have consistency in their monthly bill. I don't like that personally, but that's the way it is. Yeah. Second, with the council, We've asked our body to bring back more information so that we can make more financial decisions. Are there topics here tonight that don't require further data? Are there things that we can discuss tonight that would help progress this even one or two bullet points?

I think I, uh, counselor, anyhow, I'll let you.

Yeah. I, I, I, Thank you for that question. And I think some of it just straight up comes down to what our community can take, right? And it is, we see it in every single corner of our community right now. And I think that what we're asked is to come back with the most equitable, balanced, efficiency in all this as possible. And so I guess the, the, the, the thing that I look at is if I, if I'm leaning more towards a certain amount of growth and I'm, you know, I, I understand that some of my counselors are looking at, you know, a scenario to, um, and seeing that at least at the project ending funding bill of 2036, that at the end of the year, the difference between scenario two and scenario four is a total of, I believe, $103. $103.80 is the difference between those two scenarios for a year. And so I guess the question is, is that $103 spread out over the course of 12 months something that we can stomach and get growth? Or do we really feel like $103 is too much to ask for that growth?

Councillor Chenoweth?

I'll take a stab at that answer. The difference between two and four is, for me, not the issue. The issue is the $79 million we're starting as a baseline. Because what you're actually looking at is an increase of $70 a month from today, from their current bill, which is a total increase of $840 a year. So when you're adding $103 on top of 737, which is what it would be at that point, yes, that might be the hair that breaks the camel's back because you're starting with such a high baseline.

Councillor Chenoweth, Councillor Peralta has a question he would like you to answer.

Yeah, I mean, I definitely hear where you're coming from, Councillor, or I hear where the Councillor's coming from in terms of the cost. I mean, and I think you're really good at articulating the costs for rate payers. It's one of the things I really appreciate. But like, what's the alternative to doing the work? I mean, you're not saying don't do the work. So, I mean, so my question is, because it seems like you're not comfortable with the lower base, the lower number, right? The 80 million or the higher number. And none of us really are. It's a lot of money, right? It's a big increase on our rate payers over a decade. But what's the alternative?

Well, that's what my first question, I think, out of the gate was, was what's the needs and what's the wants? Because I'm sitting in decision-making process right now where I'm putting forth projects to the Oregon Transportation Committee, and they are trying to decide what they're going to actually fund based on limited dollars available. And so there comes a point where we have to really start nailing down what's needs and what's wants. And I feel like what we've been presented is the Christmas tree list. So now can we pare that down or is it parable down? And that's the initial point of my question.

Yeah, so the Christmas tree would be scenario five. That's everything needs and wants to get us to a very pristine wastewater system. I will say there's, on the lower base levels, there's very little wants as part of that. We can do more analysis and more value engineering, but the moment I saw the numbers in this, we already started talking about how can we get that down, because I do not think the community is going to be able to afford this. For a couple engineers and a financial analyst up here, we're about as cheap as you can get. for this stuff. And I know that cost is a big concern for this community. So I can get into the specifics for each one in these projects at a time if you'd like to set up a one-on-one on why their needs versus wants. But I would say there's not a lot of wants in these baselines. If you've ever been out to the... wastewater plant or anything like that, you know, we can run a very tight ship and there's, um, we're not, we don't want the rates to increase either. I would love to have a 0% rate increase and be able to run this system. It's just, we're to a point it's not possible.

Just so you know, I've done two tours and enjoyed both of them. So yes, I've been out there.

Councilor Tarkovsky, did you have something?

Yeah. Uh, yeah. Thank you, mayor. Uh, I wanted to address Councillor Cunningham's numeric value that he threw out and it was a hundred and some odd dollars. I don't remember what it was, but it wasn't significant over the course of a 12 month period. It was like $8 and 93 cents a month. But when you combine that with the city service charge and you combine that with increased, it seems like everything's increasing right now. And I'll use the, it's just the way it is right now. I understand. Um, No, I don't have a great alternative for it, but what I'm saying is it'd be nice to look at this holistically to make sure that we're understanding the burden that we are pushing to the taxpayer. I'll use the analogy that I love to use with Director Richards, the traffic impact analysis. If it's right below the threshold, but it's right below the threshold over the entire city, the city's traffic is a mess. So if you are... just below the threshold of an increase on every fee within the city. All those fees certainly add up and all of a sudden your monthly bills are perhaps not manageable. So I would just like to perhaps holistically and fully understand what we're pushing toward the taxpayer because it's not insignificant in totality. Thank you.

Okay. So we're back here. So I think we know we have to do something. We want to be cautious of rates and stability in rates, I guess, is what I would say. We want you to think about true growth to the community and not maybe go too extreme. What can we do that maybe we can add on to later? Not necessarily right now. I think we would consider different options of funding, but trying to be, again, fair across of who's using it. SDCs are, if somebody's putting something new in, really they need to pay for the new, not the people that are already in their home. But we need to be cautious that the people will build. You know, so there is, it's a really hard place to be. Okay. What else am I going to, what else did I miss? Does that give you a pretty good idea? Give me something else that you need to know.

We're getting there.

I'm trying to bring it together.

You've given us a general idea of where we're going. I don't see it. I'm hearing a lot of the things I would always hear when we talk about reincreases. Have you looked at making it cheaper? Things like that. And we know those things going in, so we do the best we can. I hear you on the overall costs. That is a very large body of work for us to look at all this. These are multi-year plans. We're just starting the TSP. That looks at transportation growth. It doesn't even account for all the pavement maintenance costs that we're putting off right now, the stormwater costs, all this. I completely understand this community, and just from my time here, this community has done its best to keep costs as cheap as possible for as long as possible, but nothing can give indefinitely without being refilled, and we're getting to the point that we're gonna have to start making some really tough choices, and that's on you all. and just what it is. But if they're looking at more holistic, all the rates and fees, that's something we can do, but that's a very large body of work. And I hear that consistently in various meetings I'm in. And so that's a great discussion for when you're doing your next goal setting with the city manager, I would suggest.

I think you could take a project and take a project that's recently been done, and if this fee would have been posted on there, how much would it have cost them?

Would you like me to do that with every single potential fee that could be out there, or just this one?

Let's, for example, Haworth Construction is just finishing a building. And we look at what their fees are right now, and then you can kind of use that building for telling us what an SDC for wastewater would be. How about that?

Yep, we can absolutely do that. Seems simpler. Well, yeah, we can make this as complicated as you want.

And I do think we need to have an idea what we would be looking at industrially and commercially.

Yeah, and what I'm hearing is to make general policy direction, you want to see final numbers. And so we can do that. It's a lot of heavy analysis on the front end, but we can do that for these kind of things.

And maybe if we were to kind of get an idea on a scenario for them, if you looked at these, would we be leaning more towards the middle, more like a three? Just again, to give some guidance here. You're not voting on it. Or does somebody want a full meal deal and going with five? That's a lot. No.

No. I definitely did not hear full meal deal in this discussion. I didn't either, but you know.

Can I ask one more thing is city manager Garvin, you have been involved in discussions with wastewater. Do you have any input that you would like to share with this council at this time?

no input on a direct direction to go. I would like you guys to arrive at that yourself. But I think if we could leave this meeting this evening with the consensus and some alignment from the policy body around your comfort level with bonded debt, which would have to have rates to support that bonded debt. And you guys did get into some of that discussion here recently in your conversation. But I still feel that there's some of you that haven't weighed in on exactly where that comfort level is, debt versus SECs versus rates. And You could use the scenarios that Jeff and his team presented as basis for those discussions. I think, you know, two, three, and four really speak to kind of some different scenarios there. And when you looked at how those graphs leveled out, when you have, to Councilor Tucholsky's point, how when you take on some of that debt, it levels out the rate increases. So they're consistent year to year. And if you look at the historic nature of our wastewater fees back in the 90s, early 90s, the policy body had very similar conversations and had to make uncomfortable decisions to make sure that we have the sewer rates we have now and not the sewer rates of some of our comparable cities. So the more work you do now and the more difficult conversations you have right now, the better runway that leaves you into the future.

Can I...

Councilor Peralta first.

So in response to city manager Garvin's comments, my preference in the, in the, in the scenarios would be existing system focus plus some targeted growth. So, so you might call it a four minus, you know, like leaning towards two, but with some elements of four, But my preference would be not to use the multiplier for SDCs from scenario two, but a higher multiplier depending on what we see from other communities. And then bonding to level out the rate increase. Hopefully it's something less than 7.7% over the life. So, I mean, my preference would be to have the lower, you know, if possible, a lower annual rate increase than in scenario four higher SDC increase than in scenario two. And then essentially focusing on existing systems focus plus some targeted growth.

Mm-hmm.

Councillor Chenoweth.

So I'm sorry to do this, but can you remind me the difference between two and three on bonded debt?

So two and three, outside the dollar amount that's shown there, the 41 million of debt, which is we assume would be more, we'd prefer SRF and WIFIA first over going out for a rate bond. You still have to increase rates to cover your loan payback, but the differences were... between two and three were three and a half million in total debt.

So in my look at this, it looks like you're getting more done in three than you are in two.

Are you seeing that right? We're getting different stuff done in three. Two focuses on addressing our existing system issues as much as possible. Well, not as much as possible. It's focuses on existing system issues, the needs for sure. Three, looks at we're going to delay some of those existing system concerns and focus on bringing in more growth. So doing a lot of the pipe upsizing, for example, needed as opposed to replacement in the older areas of town. That's the difference between two and three.

But it does about 17 million more in work? Because at the end of the day, I only have 173 remaining worth of work to do in two and 156 remaining in three. So I have a net gain of 17 million. Am I looking at this right? Yes. And that one bonds, three bonds more or less?

three bonds more, but you're also assuming because you have more growth capacity after doing the projects in three, you're going to have additional SDC revenue. So that's what an additional customer base. So that's why you can get more work done in scenario three is because you're bringing in more growth to try to increase your SEC revenue and your customer base to help pay for it.

So if I had to fall somewhere, I'd fall closer to three. And for my fellow counselors, the reason for that is a $2 difference between one and three, a substantial increase in work being done and bringing growth online to help offset the cost at a greater rate. So I feel like that, if we're going to give you a direction, that general picture to me makes more sense because I'm bringing in stuff to offset the cost. So I would lean more toward three.

Councilor Cunningham, can you just tell us where you're leaning?

Oh. I want to make sure.

Let me come back to you. Yeah.

Yeah.

Okay.

Sir, Gary, you know, I was leaning a little bit more towards scenario three as a little bit more of a midpoint, but I, and I sort of alluded to it earlier, but I think Sal articulated it much better that it's, it's really existing system focused with some specific targeted area growth. So I think for brevity's sake, I would just be in alignment with what Sal was saying. What Sal said.

I can elaborate. I mean, I'm not saying, you know, that we need to time one ahead of the other. I mean, if bringing in targeted projects adds SDC revenue in, And doing that sort of earlier in the process makes sense to help facilitate the cost. I'm totally fine with that. I just thought that it made more sense to fix what we have and then not build out if we don't know we're going to get the bodies moving in.

And my comfort level there is... because it would require descending into the particulars, which we didn't want to get too far down into now. And so depending on what some of those are and what those projects look like would be how far my comfort goes.

Okay.

Are you good with that, Councillor Tchaikovsky?

Yeah, that's exactly what I'm asking for. I had a few other questions, if I may. So, Director Hunsaker, the... table you have in front of you says estimated ending fund balance i think this is a rhetorical question for me but if you could provide clarity which fund are you talking about uh the the wastewater capital fund so fun

77 yes, thank you.

Is that the one we borrowed money from?

That's the one that money has been borrowed from historically to help pay for some general fund costs.

You don't do that anymore.

I said no more because I knew these numbers were coming and others agreed with me on the executive team.

I see I have cost commotion over here, so that's good. No, I just wanted to be clear. I thought it was. Yes, I understand we're not.

I know.

It's not our piggy bank. Because that is our fund, I would prefer scenario two because it does draw it down further. And I think that's appropriate given the fact that we've used it as a savings account for this purpose. It feels as though we've budgeted for that goal, and therefore we should use it for the goal.

And so since it's not an... operating fund it doesn't necessarily have that you know two month operating balance reserve that you want to keep and we haven't really set a balance or a target with the council that is another policy question you don't have to answer me tonight but if that's something that you know, you just feel like, Oh, we should always have at least 5 million in there as an emergency. That's kind of thing. That's the kind of information we can use to help build these financial models moving forward. If you're uncomfortable getting down to a 2.5 level, we know, okay, we need to try to bring that up. Uh, that's a great policy discussion for the, um, body to give us feedback on.

And if I may, and that, that is your reserve, um, It's basically- We don't have anything else elsewhere for you specifically, right?

We have a reserve for wastewater operating that is separate from that. This is just money that goes to capital.

Okay, let's just say we have a large challenge of some kind in our wastewater, and this is at two and a half million. How long does that last and what happens?

It does not. Two and a half million, we could spend that in one project very easily. That's like a pipelines in neighborhood type project.

I thought so, yeah.

It really doesn't do anything for a project at the treatment plant or anything like that.

Okay. So that doesn't seem responsible for our people. I understand. Okay. If I may, for just one moment further, I did write some things down. I said, I do believe our priority should be maintaining regulatory compliance, which is, I think, significant. We don't want to be dumping into the river untreated. That lends itself to the existing system focus, which is number two. We should also be protecting the reliability of our existing wastewater system, which also goes back to number two. And I do want to see us investing in rehabilitation of existing systems, the I&I reduction, and also critical infrastructure needs. So I'm leaning more toward a two-ish, tending toward a three based on the funding that we need for critical projects that are unforeseen. So that's kind of where I'm at, if that helps anybody.

Okay, and Councilor Cunningham was kind of in Am I correct? You were okay with what we were... Go ahead.

Yeah, I mean, I think that really two and three are two very different things in my estimation. I mean, you know, the dollars at the end of the day, you know, whether that's in rates or in SDCs, don't get you the same thing. So... To me, and I know that the bulk of kind of the beginning of the project is the $79 million storage that we've been talking about. And without being able to greatly... without being able to move that out, we're looking at a pretty significant amount. And so again, I'm gonna lean more towards a scenario four in the sense that I think it gives us a balanced approach. That we're both taking care of the infrastructure that we have, but then also looking towards the growth that we are going to have. That not leaning entirely to three, which is focused more on growth than taking care of the infrastructure that we have. I think we run into some of the scenarios that we currently have with some of our buildings that need a lot of deferred maintenance and that type of thing. And people asking about why didn't we take care of the infrastructure that we had? So the other thing that I would say, just cause I know we've talked about is growth can be growing as fast as possible or as fast as it's been possible. I would also ask, I don't know if it's John Olson or Heather, that we get some sort of ideas to our major employers and where their employees live currently. Because if I remember correctly, I think like empower and some of those other people have people living, have more people living outside of our community than in it. Um, and so to me that tells me we need more housing and more growth, um, to be able to get those people to be able to live here. Um, and I could see, uh, like my fellow council were saying is if it's new, people are going to move into it and that's just going to free up the space, you know, the older houses below it. And so I, I see that really being a benefit and the overall affordability because yes, the new is probably going to end up costing more than what, the older is going to be at that point in time so hopefully that just slows down the overall cost increase that we've been seeing over the last decade or so here uh and and at least plateaus that so that the affordability may come back into play for future generations um And I do also agree that having that bonded debt allows for that very gradual, I mean, it's not, it's a big rise. So, but it's gradual as opposed to seeing a big bump in the beginning and then it's slowing down a little bit. So, but it's a big ask.

Yeah. I would say, and Kevin kind of reminded me, when we're talking the difference between scenario two and three, scenario three, yes, you're focusing on growth areas. You're going to be taking on some risk in your existing system at that point. And Deb probably did this on purpose because she's much smarter than me. But you can see that there's that estimated ending fund balance has a larger contingency in that scenario three. You're going to probably be expecting some emergency type projects that will occur. The system, similar to your house, will decide what breaks next and you're just going to have to deal with it. So. We would have to take that in consideration if you follow a growth supporting model over existing system. There's a level of risk you're accepting early on that you would address later on in the 20-year time frame.

I think that's well said. I think on the analysis side of that, the reality is understanding that if you can offset some of that with the cost being borne by new growth, then you're not putting as much of that cost on existing... And as a result, yes, you have emergencies you have to deal with, but you've helped to offset some of that by putting it on the backs of the new development. And I think we're making a mistake if we don't consider that in our process.

I think we all agree with that, that we know that we just want to be cautious of how much growth we're putting out there. Okay. Okay. So we know that we're okay with possibly some thing outside of rate increases. Consistency would be nice with rate increases. Watch our growth, fix the existing and some growth. Legislative we haven't talked about, but I know, I mean, we've been through that a lot. And if there's something to be put together to take, and I'll certainly do my part of going over there, it's when you're prepared to have something to ask for.

Yep, absolutely. And any kind of legislative grants you can get, it's gravy. It will lower the amount of money you have to borrow or the amount of rates you'd have to increase. And so we'll definitely be going after those and those projects that we think are winners. Yep.

I think we should. And wastewater seems to be the very top of everybody's ask. It seems like. Okay. What else? Are we good? Are you good to bring something back with what we've given you?

I'll have some discussions with the executive team and the city manager on Thursday. It's recorded. Don't worry. But yeah, I think we have some start of some good direction. I think I definitely heard from at least one counselor that bring more information. Well, I guess you said the same thing, Mayor, bring some more information and do another work session. Happy to do that.

think we need to it's a big ask it's a big thing i mean i read this packet um but again without having you explain it it's you know and so it's right here in an hour and i don't want to make a choice yeah completely understandable and i try to balance the amount of information i give to you all in this time when you're all together because again that's rare if you all want to there

But if there's ever time that you all would like more information, I can always do one-on-ones, two-on-ones, three-on-ones where I can sit down and share more information with you as long as we don't pass that quorum point. So if that's ever something you all need, please just ask the city manager and I will make the time to help explain things because I fully understand it's very complicated to spend $300 million. Okay.

So we're good for right now? Okay, anything else from city manager that we need to add?

No, appreciate you guys having the conversation and we'll bring back some updated stuff for you guys. And from what I heard, it looks like, you know, somewhere in the two to four range is where you guys ended up. You eliminated one in five, so you did something.

You're welcome. Did you have something you wanted to say? Okay, I'm going to adjourn the meeting and it's 8.20. Thank you all three for your time.

Thank you.