Board of Commissioners - Regular Meeting

Good evening everyone and welcome to the Mount Juliet Board of Commissioners. Today is May 11th. The time is 5:15 and we will be holding a work session until 6:00 pm and it's to discuss the sewer rate study and immediately following this work session, we will hold our regularly scheduled meeting. So the public is invited to attend and comment. So, if there's no objection, I move that we set the agenda as it's published. Any objections? Hearing none. So, at this point, we'll open the floor for citizen comments. If there's any citizens in the audience that would like to address the board of commissioners, this is your opportunity, and you'll be recognized for three minutes. Please form a line. All right, seeing no one for citizen comments, we'll move on to presentation. Mr. Martin, this is under your sponsorship, uh, you're recognized, sir.

Thank you, mayor, vice mayor, commissioners. Appreciate everybody taking time to come in early today before the commission meeting to get his update. I will turn it over now to Mr. Shane. We'll let Shane give you guys presentation and introduce you to our guests.

Good evening. Uh we've got Buddy Petty and Jack Ellson with rate studies. Uh the time has come for us to reevaluate our rates. The uh current five-year capital improvement plan is winding down and we're setting forth for our next five years. In addition, with the metro contract that's up in 2029, we decided to go ahead and sign Buddy up and he's done our rate studies previously. And with that, I'll let those gentlemen talk numbers. Buddy Petty and Jack Ellen with Rate Studies. Thank you.

Okay. Thanks, Shane. Uh, well, first of all, Mount Julie is very special place to me. Uh, we moved here 1984. Lived here 32 years, raised our two boys here. Uh, back then, Mount J is a lot smaller than it is today. Uh so it's it's a very special place to me and and we this is our third great study uh working with the city and and uh I just want to give you an overview of of what what we've got in this rate stage. You mentioned the uh capital improvement plan obviously very very special uh and it drives a lot of things. uh not only uh does it impact you from capital standpoint but also from a depreciation standpoint and you'll see that in here as we get into it. We look at your past five years and make projection for the next five years. We're projecting growth. We're projecting revenue. We're projecting expenses. And all of that kind of ties into two main analysis that we do. A cash flow analysis uh which most everybody is interested in because that shows how much money you got at the b your bottom line is that going up or going down. Uh and then we do a a statutory change in net position analysis. And this is a little bit different. Uh it's kind of hard some folks to really grasp what it is, but basically it's similar to the uh cash flow, but it also includes

depreciation as an expense. Doesn't include the uh uh capital portion uh but it but it does include depreciation. And uh that is what's driving the rates really other you know you got you got uh you'll see in here where where you're growing pretty good but your expenses is also growing a little more. Uh I' I've had the pleasure of working with with uh with Jack uh for about six or seven years now. uh he was with me when we did the last uh rate study here back in 21 I think so it's been about five years uh and this is not I just want to warn you uh you know you need really need to look at your uh financial positions every year in conjunction with what we projected here we're projecting five years because we want to give you kind of a forecast. Uh, but these are just projections. Uh, hopefully, you know, we're we're pretty close, but I mean, it might be you might need to go up a little bit or if you're seeing you're doing very very well. Uh, you might not have to go as much rate increase as we're projecting, say like in years four and five. I'd say two, three, two, and three are pretty pretty close. But, uh, at that, I'm going to turn it over to Jack. And Jack, take it take it away.

All right. Thank you, buddy. Uh, just as a reminder for those of you who don't know, Buddy, Buddy is a professional engineer who's done this kind of work in engineering, white, water, and wastewater engineering for how long you buddy? A long time.

Long time. So he understands well the infrastructure issues and the needs of this. He he certainly done that. He asked me to join him about five six years ago. I'm a C I'm a retired CPA and so I'm the guy who looks at it more from a financial standpoint in terms of saying okay how do we you know how do we coordinate this data with the financial statements and then how do we look at it in terms of projections too. So I'm going to walk you through some of the con some of the things that make up uh what end up being as you said as you see in the report. I think you'll have copies of the report. Is that true? and I'm going to reference figure numbers to keep us kind of in tune. So, if you want to look at your report, make notes, I'll I'll point up here and hopefully we'll keep these these in sync then. But don't hesitate to ask questions as we go along. Um, buddy didn't say it, but bottom line is we're looking at a a recommendation of 5% per year over the next four years. And we'll tell you how how we got to that. Uh, so it starts out with customer growth. And basically we look at the the customer growth and it's broken down in more detail in our rate study by residential inside, residential outside, commercial inside, commercial outside. We look at the growth of the number of customers. We look at the uh usage of the customers. We look at the revenue of the customers. And we sit down then with uh Shane and with Tim and with Dana and say, "Okay, what do you think's happening? What what's going to happen in the future?" when you look at the the experience, excuse me, the the tremendous growth that you've experienced and our understanding is you're going to continue to experience that kind of growth. So, we look at that in terms of setting some goals. And you can see then as we total it up here, uh we're looking over number in in 2026, a 2.8% growth in in just u customers 39 so forth. the usage is going up similarly and then similarly you got a revenue change of two to three the 394 it's going up and up and up. we start out recognizing that and that's going to that's a good thing because you're going to have all that growth coming in uh

that's going to generate new revenue and uh so that's going to be the thing the next the next few pictures they may not be necessary that just shows you visually uh what's going on in terms of growth and you can see the is inside residential customers that's going up outside residential customers pretty much black there okay uh and the the revenue with each of correspond on the inside commercial customers. Again, you got that growth trending up. You do have a slight slight upward, but I'll say pretty flat on terms of the outside commercial customers. Total customers, you can see this growth pattern going up and that's what we're showing in that page earlier and your revenues going up. So, you're heading in the right direction in terms of your growth on your revenues. Next thing we look at is your operating revenues, other operating revenues. And so that's going to be things like your uh inspections, administration penalties, other operating uh revenues in there. We look at what was represented in the financial statements from 21 through 24. So all the numbers, by the way, from 21 through 25, excuse me. Yeah. 25 actually. You just finished the 25 audit. Those are all actual numbers. So there's there's no question about those numbers. So projections are going to be based on 26. So we take a look at those and say, okay, what do we think it's going to look like? And those that's the growth we see and it's a relatively flat uh growth in terms of other operating revenues. Again, it's mostly based on your your immediate revenue that's coming out. Next, we look, excuse me. Next, we look at your capital improvement plan. That's the big that's the big nut to crack there. As Shane said, you've got a five-year plan. You got a lot in the five-year plan. $49 million worth of city-owned development. And uh there's going to be an additional

37,000 37 million

3 37 million of developer projects that's going to be in there. So you you can look at that and then Shane and Tim have then spread this out over the next five years saying when they expect these projects to come on, what's going to be the capital expenditures then for each of those years. So this is all based on conversations with we've had with the three folks here and by the way it was really great working with all three. We had no problems working with them at all. So we thank you for that. So you know we plug this in say here's what's going then you compute the depreciation and that's again Buddy's going to maybe emphasize that I'm going to emphasize that as well. Tennessee law requires you depreciation to depreciate your assets. Depreciation is an expenses on your financial statement. You must therefore generate enough revenue to cover your depreciation in order for your CMP not to fall. So that's the trick to it. We look at your estimated lives uh for the different assets that's stated in your financial statement report. And then we schedule we show you what the scheduled depreciation is. That's that top line there. And that's basically all your existing assets. And generally that tails off because those are the assets you take for years. In some cases, they're going to depreciate completely. They're going to be written off the book. So that that'll go down. On the other hand, you got new depreciation that comes from all the new capital improvements. Another way of looking at this is to look at this picture in the blue. You can see that's your scheduled depreciation of your existing assets. The orange then represents the new depreciation that comes about by the capital improvement plan. Next thing we look at is general expenses and that's also just comes directly out of your financial statement. We look at five different areas of of uh expenses. We sit down with Shane and Tim and uh Dana and say what do you think's going to happen? What kind of ups and downs we're going to have? Again, there's more details underneath this. We're not showing you all the details here, but basically, we're looking at 7% increase over the

next three years, then 11% 11%. I think that 11% also reflects the uh um the metro, excuse me, the metro report. We don't know what's going to happen in 2029, right? You just don't know. But chances are pretty good it's going to go up. So, I think that's the I'm basing the the factor that it's going to go up to say 11%. It may not. And that's why Buddy said you really need to look at this year to year and see where are you going.

We all we also projected in each year metros they go up every year for you. But in 2029 you're looking at a new contract. So that could change quite a bit. We don't know. But that's why we're trying to be as conservative as we can uh at this at this point in time. Okay, so that's the the excuse me. So that shows you the general direction then of those uh expenses and again remember that the line that we had on our revenue was going up four to 5%. Three, four, five%. We go back to that expenses going up 7%. So we got to have a gap here. All right. Uh next thing we do buddy said there's really two principal uh analyses we do. One is called a cash flow analysis. And the cash flow analysis is represented by this. Think of it and again years 21 through 25 that's actual information from your financial statements but it flows through and basically we take your cash beginning at the beginning of the year. We add in your charges for services your needed services your other operating revenues your interest received. Then you take away from that your general expenses. Then you say okay what kind of grants you got coming in? what kind of contributions are coming in from customers and then you subtract out in this case a ch changes if you will in the past you have had changes in terms of um purchase and sales of investments you see the investments down at the bottom capital expenses that's coming from that five-year capital improvement plan. So basically this is just a running you know kind of a balance sheet showing you start at the beginning of the year you add in the incoming cash you take out the outcoming cash here's your cash position and what it's showing you if you look at the cash ending June 30th um we did not make any assumptions that you would purchase or sell investments. So that's why you can see that investment line staying flat. Okay

that's that's going to be up to you to what you want to do with it. But you can see that in 2026 you got an ending cash balance of $4 million and then it drops down significantly to $700,000 900,000 900 backups 4 million. So you got a little bit of an issue here in 2072 28 and 29 that suggests you're probably going to need some kind of a rate increase. This shows you visually what it looks like. You can see your cash is high now. you're spending all this stuff on the capital improvement plans or on your increased operating expenses and so forth and you can see how cash relates then to your general expenses as well as to your total cash you're in I will say this you're in a good position in the sense that your total cash your total cash is always above your general expenses that's that's kind of a metric we look at especially do you have enough cash operating cash to cover your metric to cover your expenses for one year and you do you're in a good position there. Next analysis we do is called change in net position analysis and that's the one that really is the one that drives rate increases and in fact relative to the Tennessee board of utility regulators that's what they look at it's called statutory change in net position which means it's the name change in net position le any grants they don't take grants in consideration again it's formatted in the similar fashion as the cash or the change excuse me the cash anal cash flow analysis except that this includes depre appreciation does not include your capital your capital payments but it also includes your uh your interest your interest income. So if you look at this without any rate changes what we're projecting for 2026 is a statutory change in their position of 2.2 million then 27 1.1 361 and then we get in this trouble area down in 2930 where we're starting to go red. So what we do is then we take a look at how can

we uh how can we there we there's a graphic of it and obviously you don't want to drop down into that into that red or orange area. So then we look at it in terms of what kind of rates would make sense to keep you in a good cash position and to keep you in a good change in net change in net position. And you can see a line says rate increase. And you can see for 27 we're suggesting a 5% increase. And really just to be conservative and comfortable 5% for the next four years. You may choose again we emphasize do look at this from year to year because you may find we're doing better or we're doing worse. We need to do something a little different. Okay? So you can update this pretty easily. What this is suggesting is if you do with a 5% that's going to give you that ending cash position of 4 million. gonna drop down in 2026 because you got a lot of capital expenditures going on there. Uh you got 11 million coming into into 27. It'll drop down to 1.2 then bounce back up to 2.5 4.3 and then back up to cap. So getting back into that good cash position. You can see them on the on the graph the differences there. So you're still above your your your general expenses as far as net income or net position change in net position. Uh again those those rates of 5% the impact of that is going to give you a statutory net change in position 26 is is excuse me 25 is already done 2.5 we're looking at 2.2 for 26 yeah 26 excuse me 27 1.6 1.4 4 1.5 1.5. Those are good solid positions to be in uh in terms of the sufficiency of the the the uh cash to to run the operation and to support your your change in that position.

Jack, might point out here also that there's not really any uh numbers that you know if you if you're just $1 uh positive in that statuto change in deposition, you're okay. But, uh, we want to make sure that you're more than just okay. And, uh, uh, if you're looking for some kind of rule of thumb as to how much change in that position do we need, uh, I've seen numbers anywhere from about 5% to 10% of your revenue. And that's kind of where we settled on this. you see that you've got a substantial, you know, we're projecting here a substantial amount of change in that position, but you know, you look at your past, that's kind of where you've been. uh you know, you could have uh you know, you're we're showing a million dollars and uh I mean, you could have hopefully won't have any anything like a blood anymore or anything like that, but you could have a major expense over a million dollars easy. Uh so, you know, we're we want to keep you in in a good comfortable position. Uh and and that's that's really what's driving those 5% increases. Looking at it visually, you can see buddy said, we're trying to get you back in that position you were there in 24 where you're in that, you know,$1 to2 million, that safe position. So this translates into what's it mean to the customer? What's your customer going to look at? And what we got here is some sample monthly wastewater bills. And you know, generally speaking, I think your usage runs as an average said 5,000, didn't it?

Yeah. Close 5,000. Close to 5,000, right?

Um, so if you look at the 5,000 line in terms of water sold, 5,000 tell you your current charge right now is $40. You add 5%, they're going to be paying $2 more. So don't think many customers are going to be complaining about that. And then it's going to go up um each year again 5%. So, you know, that's from a customer standpoint. And again, you know your customers better than I do, okay? How they're going to react to it. But that's what it's going to be for your inside city uh customers. You look at the the difference then for the outside or the inside city commercial a little bit higher. Uh but those are going to be the impact. The other thing to show you is how do you look in terms of your your uh nearby uh utility companies? And right now you see the Mount Juliet 2026 you're at 4048. Uh in 27 you would be at 4250. So you're going to be a little bit on the high end. Certainly not near metro but you know if you look at that that line Brentwoodsville Mount Juliet Lever you're you're right in there. You're right in there. So you're not out of line at all with somewhere you go. And I would add here also I I don't I don't know it, but uh I'd say several of those are probably looking at rate increases for the next couple of years anyway. So they're all going to be moving up a little bit. So that's a walk through the the report. I think I've hit every one of the figures. Do you have any questions?

What year is the EQ basin supposed to be complete? this year. This year. Okay. So, in 2029 when our contract is up with Metro and then we renew the contract, how much is that going to save us? I don't or the EQ basin is not going to save us any money. It's just going to make us in compliance with Metro.

If they have some maintenance down the line or if we have a significant rain event that brings a lot of INI into our system or theirs, then we will control the flow going to them. If by chance we have a multi-day, say rain event and our numbers are high from infiltration, then we can control it down to where Metro says, "Okay, you can only send this many gallons a day in a 24-h hour period." So this is a control device that they've required us to have in place. Okay. And then my other question is about the capacity issue on the east side. Are these numbers taken in consideration are what we're going to have to spend to get that going?

If you look at the uh capital improvements, the top one, the Bender Ferry, that number would assist if there was an issue. Um yeah what capacity issue right? If there is a issue u today there's not an issue but if we approve development that exceeds what we have then that would assist the vendor ferry regional pump station and that's the top line on the capital improvements page of this brochure. Okay. So we're good there. We're we're good today planning for that. Okay. Okay,

last Mayor. So, just ballparking. I know you may not know the exact number, but those tiff charges that we were getting hit with from Metro when we would send in too much, is that going to be just ballpark? Do we know what that number is? We don't have a projected cost from Metro at this time. No, I'm saying in years past though, how much will we spend ballpark? Do we know? referred to Miss Hire and you can get back to us on it. Again, it was just a question because I can't say specifically, but I can tell you that on on rainy months, we've seen our bills go from 300 to 400,000. Um, so it's probably $100,000 more in when we have significant rain events.

Okay. And we have to pay Metro. But to back to the commissioner's question, I guess that would be, you know, like another opportunity that where we're saving money by installing this incubation to be able to make sure that we help mitigate the tiff charges. Correct. It will be a significant management tool. Okay. But I don't think that'll fix I in any way. No, it won't, but it will manage our flow if we can reduce our flow in a 24-hour period and expand it to the next day and keep us regulated. Gotcha. Gotcha. That's the cost savings. Your cost of metro may may be the same because all that water's got to be treated. Sure. Whether it comes in all at one time or split out with Okay. Well, we'll be penalized though if we exceed a daily amount.

So, and I guess the other side of this again because that incubation is going to cost for maintenance. I mean, that's just one side of it. Have we added that in these numbers as also or is that operational cost? Yes, sir. Was that added in there? Okay. operational cost is in there. Okay. Just wanted to make sure that those were added or projected as well. Okay. And then Miss Dana, you'll be able to get those numbers to us just like the last five years of what we spent in TIFF charges because again, it'd be great to see if there's uh any savings for, you know, 2027 and on that we could be able to help mitigate that and put that as a cost avoidance, I guess. Not a savings, but a cost avoidance. So, all right. Thank you, Commissioner Heer.

It says contract renews in 2029. What what month? What day is this? January 2029 or December 2029. We know the metro contest. Yes. Oh, I want to I want to say April, but don't hold me to that. Yeah, I've got it on my computer. I don't have my computer. When are we planning to start having conversations with them to try to get a better understanding of where they might be? I'm not suggesting renew it early. I'm just saying we're not going to wait until the last minute to start saying 2028 we would they would basically come tell us the plan. I don't know that we're in a position to negotiate. Yeah.

I don't I don't like that but I think that's the truth. Well, yeah. Too late to build the way too late. Right. The sewer treatment plant. Correct. But hey, I'm I'm open for ideas and they're not issuing anymore. You know, they say that, but now Lebanon is uh exploring that. So maybe Well, did they already have one? They're just renewing it or to my understanding from the media, they're looking to build a additional plant, an additional one, but it may they may take out the existing. I I don't know their plans, so I shouldn't speak for them. I don't know. But in any event, it's ship sale on building a

Yes. treatment facility. We had a discussion, I think in 2026, I mean 2016 about what it would cost to go to uh the York Road property and that time it was estimated 50 million just to reroute the piping. Not not the cost of this of the treatment plant. So 50 million in prep just before you getting this rerouting of the pipe. Yeah, because our our direction of flow now goes west towards Nashville. The toilets would need to spin the other way. Okay, Mr. Martin.

Yeah, sorry to chime in. I just want to answer a question that Commissioner Hefner had. We've been meeting with Metro for years. I think even gosh, I can think 10, 12, 15 years ago with that same question. It's not that they skirt around it. They just don't know yet. As we get closer to it, they'll probably want to give us a final number. I'm ass sure we will talk to them each year going forward. If we can gather and garnering information that's of concern or to share the board of commissioners, we will. Well, I think I think you answer my question. It's not a negotiation. It's this is what your rate's going to be. It's just a question of how early are we going to get that advance notice. Yes.

Well, we we had a few leverage I don't know if you say leverage points, but we had some concessions that were made back according to the conversations with the man who was in the negotiations and that involved us in taking over some failing sewer systems as part of that and that was kind of some leverage to clean up some things around here. Um, that conversation is current. Yes, we all watch the news and mayor, there may be some more information coming on it. Like I said, Mr. Tim and I talked about that today and I had a meeting last week with some reps from that organization. So hopefully be more to come soon. It might be in favor for the city. Yeah.

And we are upstream from their drinking water.

Thank you. Anyone else? All right. I'll move to adjurnn. I'll take that as a second. Any objections? Hearing none. We're objourned.