City Council - Regular Meeting

my irrigation laid out, thousand gallons. Ready, Susan? One moment. Make sure. Okay, it's connected. Okay, so we're just uh going to call our notice of work session meeting to order here. We only have one item on our agenda and that's the agenda. That's a presentation from Matt Stuff from PFM on water and sanitary sewer rates. So, we'll turn it over to you, Matt.

All right. Okay. I am Matt Stuple. I am with PFM. We are the municipal advisor for the city. Uh so one of the things we do as part of our scope of services is we model the finances for the water and wastewater utilities and recommend um rate increases as necessary. So, um, so right now we're looking at really the rate increases the city needs to put into place for the fiscal 2627 budget. And, um, I try to balance a lot of information with meaningful information to really help you guys make a decision on why we're recommending what we're recommending. Um, you know, the city's utilities are in in relatively good financial conditions. And so two of the things that we we look at are uh debt service coverage. So your coverage ratio and then your liquidity. And so you know as you stand today and that um you know you've got good coverage, you've got good liquidity. Certainly there are a lot of capital needs on the water and wastewater side. Uh on the water side, you've recently done, you know, quite a bit of capital projects locally. the water tower, you know, is one that comes to mind. Your buy in for Central Ale Waterworks is another one, you know. So, in terms of like debts locally, you are on kind of the the backside of the debts for the the water utility. Um, you know, Central Waterworks, you are a member of um they have a billion dollar CIP. you know, there's a lot of rate pressure coming with the expansion of those uh of those, you know, capital investments there. On the sewer side, you're you're part of the, you know, I'll get into kind of the details of how the different entities work. Um, but you're, you know, in terms

of the capital, you haven't made a bunch of local capital investments on your on your wastewater side, but you've got quite a bit of big trunk sewer projects in your CIP. So you will have quite a bit of local pressure coming up. The WA also has a capital improvement program that's in excess of a billion dollars which you are part of. And so I'm going to get into these um certainly ask questions as I go. This is more as much of a um kind of question answer as anything but I tried to put a few kind of slides together. Um but then we really build these financial models which have a lot more detail. Um, you know, so on the water side, we're recommending a 7 and 12% increase. This is a little bit lower than we had anticipated kind of leading up to the financings of the water tower and central Iowa waterworks buyin, but you know, one of the things that we try to do is we try to make these rate increases as low as we possibly can and still preserve your financial flexibility as you move into the future to be able to borrow for the things you need to borrow for. So currently the the central Iowa waterworks rates for 2026 they set their rates based on a calendar year. Uh you buy your water from them at $2.39 per thousand gallons. And then you know one of the fixed costs that you have is $226,348 per million gallons. And that's based on a 5-year average of your max day demand. And those two rates are uniform rates for Central Iowa Waterworks. So everybody in the region pays those two rates regardless of the community and then you it just depends on how much water do you buy and what is your max day demand in terms of what are your fixed costs are.

Okay Matt, so can you help me understand that max day demand calculation it coming off? So, one of my concerns was we structured our rates based on the De Mo Waterworks structure, which at the time, I try to quote you as much as I can. Uh, you you said how they calculate our overage days, we couldn't charge. There's there's not an increase that we could uh not justify on our irrigation. That seems to have been less true on those over uh your max days, but it's still it still manifests here with this. Correct.

Yeah. So, when you were buying water work buying water from De Mo Waterworks under your previous agreement with your purchase capacity contract, you had purchased X amount of capacity. I can't remember off the top of my head what that was, but if it didn't matter until we went over it,

but if you exceeded that purchase capacity, then you had to buy water at a much higher rate, not just for that day that you went over, but for the whole next year, right? And so the penalty for going over that, you know, was significant for going over under this under the central waterworks that, you know, penalty structure isn't necessarily there. I mean, you still do have an allocated capacity, which you're not close to to exceeding at the moment, but for now, you know, your your peak day will will be 120th or sorry, 15th of the max day average. So, if I just go to the two slides down, if you go to, you know, slide six, you know, this is your max day and your average day from 2019 through 2025. And so you can see that in 2019 you were at 1.3 MGDS. We put that pricing structure into place and you almost immediately saw your max day start to come down. Um and then it started to kind of creep back up as people kind of normalize that. Um and then last year 2024 was a little bit of a of a wetter year and then last year there was the irrigation ban, you know, in July and August.

Okay. So it wasn't it wasn't the calculation for the what? Sorry, what what is MGD again? Million gallons per day. Okay. So So the math is it isn't a max. Maybe I misheard you then. It it is a it's so central water set these uniform rates and then everybody pays the uniform rates based on your own metrics. And so your 5-year average max day demand gets multiplied by this 226,000 and then you pay that. So, okay, you know, if you the the lower you keep your max day demand, it blends over a 5year period,

you know, so it doesn't it doesn't it's not just the one year's max day demand. Okay?

And so it's a little bit more muted than it was under Central Waterworks. Um, but really what's going to where the increase, you know, as you if you can't control your peak, you're going to have to continue to buy capacity. That capacity is going to get continuously more expensive. And so there's going to be a lot more long-term rate pressure, you know, and so um, and and I've got some, you know, some things in this slide deck about, you know, like what is the right pricing for irrigation? you know, I think you're appropriately priced right now and I think you're going to see more of the metro kind of move your direction. You know, could you come down a little bit? Yes. But then you're going to have to go up a little bit higher, you know, on your domestic rate. Um, and so the hard thing about, you know, irrigation water is like you can't count on it, right? If you have a wet year, you might not sell that that water. And so it's really hard for me to kind of like pin down exactly what we need to charge for irrigation because even if you charge 100 times it, if you can't sell it, you're not going to end up with any dollars to to to use it to offset the cost. And it's almost like if you're going to, you know, whatever your your peak day is, you almost want to sell that at that level all summer, right? you don't want to have like, you know, three or four days where you're up here and then the rest of the summer you're kind of down here. So, it's a really it's a really difficult thing to kind of pin down. Um, you know, previously you used to produce part of your water and used to buy part of your water. Now, you essentially get reimbursed for everything you're producing and then you buy essentially all the water back. Um and so you get 2% you know as part of as part of the

agreement um for just managing some of the the assets of the utility. Uh you have three bond issues that you're paying out of water currently. So the 24bs is uh a portion of the water tower. So you use some LMI money to pay for some of the water tower and then you broke the water tower into two loans. one paid by TIFF, one paid for by water revenues, and we did that really intentionally to try to keep your your water revenues or water rates as low as we could. Um the 1.7 million that you borrowed was for the Central Iowa Waterworks buyin. That number certainly would have been higher if you hadn't had assets that you brought to the table. So that was a relatively low buyin cost for what you got. And then the 2018 geo bonds um you know that was to buy capacity. So I think you bought the Burwick capacity potentially in 2018

you know and so part of that loan really provided you more assets which would reduce your your buy in for Central Waterworks as well. So So Matt Yep. Um I have a question on something you said earlier. Yeah.

Um help me understand this. So we we produce a certain amount of water ourselves. We sell that to Central Iowa Waterworks and then they reimburse us for technically sell your water to them. You get reimbursed from Central Iowa Waterworks by 102% of your production cost. So part of your public works employees are paid by Central Iowa Waterworks like all your electricity to run that. um any operational expenses and you submit a budget to Central Iowa Waterworks, they reimburse your budget essentially. We don't produce any water anymore. We sold that to them. So that's their Well, you pump out of the well

operate. Yeah. You operate some water facilities that go into the big equation and it's like 1% of the regional production or so. So they reimburse usund well 102% of whatever the cost is to generate. So if if it cost you $100,000 then you get reimbursed $102,000. Okay. Yeah. But all the water is going into one big kitty essentially.

Yeah. Your your production costs are blended with West De Moines's production cost and Grimes production cost and then De Mo Waterworks production cost. And then there's kind of one rate that everybody pays. It's considered just a large pool of water even though the water that's produced here never actually like leaves town. Yep.

Okay. So, you know, when we look to the future, this is expansion. Um, and so I'm going to get in the weeds here, so forgive me. But, uh, when you do an expansion, the expansion is divided into two components. uh one 9% of the expansion costs are based on your current allocation of the system. So when you guys currently uh started uh central waterworks, you had 1.681 MGDs. The region has 134.5 MGDs. So you make up 1.24% of the region at the beginning. the Sailorville expansion. They're doing a 10mgda expansion at Sailorville. This was part of the 2080. You guys signed up for about 174,000 gallons of water a day based on that expansion. So, you're paying 1.74% of that expansion. You take 9% of the 1.25% and 91% of the 1.74% and then that comes together. So, for expansion number one, you're paying 1.69. 696% of that expansion. That expansion is estimated at $160 million. So your investment into those assets is about $2.7 million. So that's expansion one. Expansion two is building a west plant and built in and expanding Grimes plant. So at 12 MGD expansion or 12 MGD West plant expansion, Grimes is estimated at 3.3 MGDs. That project is estimated at at 418 million. So you will make an investment and you can see your investment is smaller in this one. This was recently approved or agreed to at the Central Ohio Waterworks board

meeting is is this allocation of this of this expansion. So you will pay 413% of that 418 million which is still $1.7 million. Expansion number four is just out there on the horizon 2035 time frame probably that's estimated at over 500 million. Um and and you know just based on your growth that you submitted to kind of the regional consultants you haven't agreed to this you haven't committed to this yet but currently what we have in your model is that you would you would take 6 MGDs of a 25 MGD expansion. Um and so you would take 2.4 46% of that. So you would pay 2.34% of that 59 million. And you know, a lot of these costs aren't even showing up in the modeling right now, but they're out there, right? They're they're coming and so we've got to be, you know, prepared for them. Um, so just real quick, so the difference between expansion two and three and and four is the projected use in the future, right?

Yeah. It's it's based on your population projection, how much per capita demand um people will use per day. So that will adjust. You know, expansion number one won't change. It was part of the 2080. Expansion number two and three essentially was just agreed to by the board. So that likely won't change. The costs are still very much up in the air in terms of what those are. None of these, you know, even expansion number one, most of the projects haven't been bid yet. So, we don't really know is 159 million the right number. Um, so what are the dates for expansion two and three?

Yeah. So, they're they're trying to secure the land right now and um and they're they've got planning and design loans already out. They're trying to design these improvements. They're hoping to have these this water production online by 2030 2032 time frame. Um, which usually the debt service starts to show up. You know, you pay interest only until the projects are in service and then the debt service will show up in the future. So, you know, we build it in as soon as we know about it, as soon as we know a decent timeline. And typically what happens is we build it in, things get delayed, we push it back a year or two years, you know. Um, so okay. So um you know the irrigation premium is I know I know we've been talking about this since 2018 when we did the first rate study for these you know and and you know my math you know based on just recovering the cost of what your your max day demand can cover um you know I think you could you could easily justify between 156 you know so when I think about your irrigation rate I think of it as a percentage of your domestic right? You know, so how much extra do you have to charge? And it really comes down to how much irrigation water are you going to sell, right? Because if the cost if if the costs are $200,000 extra for having that peak, then you know, how do you recover that cost is based on how much water you can sell and how much you charge for it. Um, and so, you know, I looked at it multiple different ways and I kind of come up with a range between 156% and 214% is where you could justify that. You know, the more water you sell, the less uh the less premium you have to have on it because there's more water

there um to sell. But like when we've got a year like last year, I mean, fiscal year 26 isn't over yet. We still have May and June, which are typically, you know, the beginning of the irrigation season. Um, but you're you're down 40% on your irrigation sales this year because of July and August last year where people just couldn't water. Um, you know, so, uh, but then, you know, September recovered, you know, and was a pretty normal September in terms of the irrigation sales. Um, so I mean, I put this slide together. Andrew and I have, you know, talked a lot about this. you know, I don't think the 170 is out of whack. Um, you know, there's it's certainly, you know, different communities have different approaches to this. This is very much a policydriven thing. You know, some communities are putting in place like a tiered structure where, okay, your first 5,000 gallons of irrigation could be at maybe 125%. And then, you know, between 5,000 gallons a month and 20,000 gallons a month, maybe it's at 150%. And then it goes, you know, so that not everybody's paying that 170%. Because at some degree, once your max is set, you want to continue to sell water, you know, in that in that interim range. And so it's a really even if you look at irrigation policy throughout the country, it's like there's a science to it, but there's a lot of policy around it, too. and they and they kind of come together and you got to do what's right, you know, for for the city. So,

yeah, I I agree with that. I I guess and if we could get some more and I don't know if this is you or Andrew and and I'll acknowledge that a dumber guy challenging a smarter guy and a smarter guy has more information usually isn't going to work out but right now we're the justification for our rate is based on an old structure that's no longer applicable. So if we change the logic but from from de mo waterworks to something that that is based on the variability and the the the questions that bakes into our budgeting. I'm fine with leaving the premium that we have but just need something more there because I get a few questions. There are I've seen stuff posted and I I want to be collectively be able to better explain why there is the premium for irrigation water than what we like. So the the number may change or the number may stay the same. And I agree with some of the reasoning. We just need to be able to to better defend that with some sort of you know bullet points or or formula.

Yeah. And I would say when we when we put the 170% in place,

the city couldn't have charged enough on irrigation to recover the cost, right? And so 170 was like all there was political will to do at that, you know, point, you know, trying to recover most of the cost. even under a new, you know, cost structure, 170 is still right in the right ballpark, right? I think that you're going to see the rest of the metro continue. I mean, uh, Clive just, you know, Clive just did a a tier rate structure, you know, in one of their irrigation rates once they get over like commercial businesses get over 200,000 gallons a month, they charge them 425% of the domestic rate, right? That's the that's the extreme where they're at, you know, and De Moines's charging 200%. Tier one rate, you know. So, you're not the highest, you know. I would have said, you know, 2 years ago, you're probably the highest in the metro, but you're no longer the highest in the metro. And I think you're going to see everybody else that's in the 125% start to move your direction. Could you come down a little bit? Yeah. But it's going to then you just need to generate their revenue from the other But and maybe it is our but that option is just the general domestic rate, right?

Yeah. You're going to force the people without irrigation to pay more for the people that have irrigation. And so I'm recommending the 7 12% increase on all your water rates, right? Which keeps the 170. If you wanted to go to 160% like irrigation premium, you would have to do a 9% increase on the domestic rates and then it would be a 4% increase on your irrigation rates. It would start to bring that down. Um, so that's interesting that Clive chose that model because um those businesses are what put so much stress on the system. Yep.

When they're excessively using water.

Yep. Yeah. And there's a tiered structure to it. I mean, that that rate doesn't go into effect until you get to 200,000 gallons, which is an enormous amount of water. But you really have to I mean, to do a true rate study, you got to take every single bill for the whole city and figure out who's using it, how they're using it, when they're using it. Um, and I do think that, you know, they're the Central Waterworks is doing a pilot study with Aqualytics, which is trying to just install smart meters on on really bigger irrigators to try to coordinate, you know, even if you can everybody I think everybody knows don't water on Monday, odd even, you know, you know, every other day throughout the week.

Not everybody. Well, yeah, not everybody, but anybody who's been paying any attention to to irrigation, but there's times where it's like if you can just delay your water usage a day or two days, regardless of which side of the street you're on, you know, you can help with that peak, you know, and and so um you know, and there's a lot of smart irrigation meters out there. people have to kind of opt into them, be willing to buy into that. But I feel like irrigation is going to drive a billion dollars worth of cost. If we can invest hundreds of dollars or thousands of dollars in smart meteoring technology and coordinate that, you know, hopefully we can keep those, you know, hundred hundreds of millions of dollars of cost. If not prevent them, at least delay them so that we don't need to expand expand water. So, okay. So, you know, for those of you who have have seen th this sheet or these sheets in the past, this is essentially the the water models that we build. We took we look at three years of historical. We look at the the current budget, the proposed budget, and then five years of projections. Uh we've got your rates kind of up top there and then we've got the average monthly bill, you know, and if you look at your average monthly bill, it's it's relatively competitive. It's, you know, what I would consider kind of right in the middle. You know, I usually think when I see a a utility bill, if it's under $40 a month for water, it's it's on the low end side. Once you get above kind of 60 to $65 a month, it's it's on the higher end in terms of domestic. You guys, you know, this budget would would say the average bills at $49.58. It is a $346 increase. So that's lines five and six.

And that's this is not irrigation, right? This is just the domestic portable water for 4,100 gallons. um you know, you have been growing. So, we've got 75 meters per year kind of built into the performers and you've kind of been hitting that pretty pretty regularly. And then we do have 1% sales growth built in through through March. Um you know, your domestic water sales are up about 4 1.5%. you know, and so we don't typically try to adjust the year-to-ate numbers until we get the full year of data built in. Um, you know, but my hope is that, you know, like last year we were at 8%. My hope is that, you know, we're recommending 7 1/2% this year. we can come back and you know hopefully 7% and start to get closer to that you know four 4 and a half five is kind of industry average industry normal in terms of like what utilities rates are going up across um and on the water side we're on the other side of the water tower the central eye waterworks buy in and so that's part of the reason we could come down is we always build in some some conservativeness for um the interest rates and all of that. So,

but do we need to take in the long-term considerations of those expansions that we're going to have to pay for in whether or not we're able to bring down those rates or whether we're going to need to move them in the other direction,

right? Yep. Yep. And that and this model does that. So, this you know the um so then we've got how much water are you selling? You know, typically we model 75% of the three-year average is what we sell do for irrigation. Um you know, you've got your water sales there. um that CIWw cost recovery is the money you're getting back from Central Waterworks to help pay for your that shows up as a revenue for you. So that that helps. Um the next page, you know, this gets into the the costs. Um, so you've got, you know, your local cost, which this includes your distribution, you know, all of your city budget, uh, for the water, your purchase water cost, which is really just the two rates, the mandatory rates that you pay. Um, and then you've got your pump station cost. So, you know, we've got your cost there. You've got your your two revenue debts, um, which, you know, are fixed. They won't change. So, as the city grows, um, you know, it'll be easier to cover those costs. The geo bonds we we look at, you know, pretty closely with your, um, with your debt service levy because if you don't transfer the money out of water into the debt service levy, you have to raise your taxes or you have to cover those with property taxes. But if you've got capacity within your property tax levy without having to change that, you can provide some relief to the water fund here. And so you can see in the budget for 2027, you know, we're only transferring 132,000 out of water. Uh and that debt payment is closer to 202 uh,000. So we're even there we're we're making a you know a slight tweak to help provide some relief to the water rates. Um,

how long is that geo bond? It goes to 38 20 year. Okay.

Yep. Um, so your revenue available for debt in line 39 that that has to be 1.10. So that's not your primary constraint. You can you can see there's under no scenario out there. You're you're not hitting the 1 uh 1.1 times coverage. The line 40 is covering the geo bond and the the the revenue debts. And you can see when you're below one like you do in 2028.9 that means you got to take money from the bank to pay your operating cost and your debt, right? So there's not enough money coming in in annual revenues to even make the debt payment. So, so when we go to the next line, you know, one of the things that I look at this is line 41, net cash flow from debt. You know, there's $52,000 negative there. So, you've got 1.8 million in the bank. So, that's fine from one year to the next. But you certainly can't have a sustained operating deficit, you know, because that's that works until you run out of money and then essentially you see the that the the rates have to swing higher to to make up that structural deficit. So, you know, we're intentionally kind of setting these rates to to bring your cash down to about between 50% of your onm and 100% of your O andM. So, that gets down to about 1.6 million when you look out in the future. you know, line 44 is where you will look to kind of see where um the cost related to the central Iowa Waterworks expansion capacity comes into play. And as you if you go out, you know, further um you know, that continues to grow and that is going to continue to grow. It won't affect your coverage. It'll it'll primarily affect uh your cash position. And so we've just got to continue to set rates uh so that

you can maintain your liquidity into the future. Okay. And then the last page is just you know really we break out your capital into what's being reimbursed by central Iowa waterworks and what is just has to be paid for by your rate. So any distribution related capital improvements have to be paid for by you. any production related capital gets reimbursed uh one for one, you know, directly from Central Ohio Waterworks. So that's water. Any other questions?

Yeah, before we move on real quick, Matt, would you go back to line seven and eight? So I'm curious just because you know obviously we talked about irrigation meters are the biggest um contribution to water usage just on these numbers for like 26 27 maybe. I don't know if if Nick or somebody else could answer this. Was the last time you prepared this data, is this kind of accurate? We had roughly 499 irrigation meters and based on the number of rooftops coming in. I'm just trying to understand as we project this out, does that scale accordingly to what we anticipate? Um, you know, a community like ours, we we're seeing more irrigation systems going in than not, right? Which is going to continue to drive that up. So, do you feel pretty confident in these projections on irrigation meters or is it

uh not really? I mean, there's a little bit of weirdness in the irrigation meter data because I think you're billing if if if a irrigation meter shows up as a zero usage. It doesn't always get picked up in the bill register account, but you don't charge a availability fee for irrigation in any way. So, it wouldn't factor into the financials. Okay. per se. Um, but I mean, Johnston is the only one in the metro, but I do like this about their rate structure. They charge kind of a like $6 a month per irrigation meter whether they used it or not, which then helps them lower the irrigation rate, and it provides them fixed revenues, you know, in years where they don't sell as much irrigation. So, that is another rate structure that you could look at. Um, but I would have to go into the the Excel spreadsheet and I it seems like if I look at irrigation meters to your regular meters, about 30% of your houses have irrigation. But I would bet of the new houses that are coming online, probably more than 50% or more are are adding irrigation. But it wouldn't factor in the financials unless you charged availability fee for those irrigation meters. Does that I don't know if that answers your question.

Yep. Thanks.

Yep. Okay. Water. All the questions for water. We're good. Okay. Sewer. Okay. So, now we're switching to the RA. Um, you're one of 17 community members at the Ulyt. recommending a 5 1.5% rate increase. Your sewer rates are some of the highest in the metro, you know, and and um you know, part of that was, you know, I don't think anybody really realized how much the city had to pay to connect to the RA. I mean, it was a $17 million investment to do the Rock Creek sewer. That falls off in 2040. And I honestly believe your rates will be some of the highest in the metro until that Rock Creek sewer, you know, pays off. Um, and so it's just it is what it is. But the the annual payment to that is is almost $560,000 that you pay to P County as for your portion of that debt. That's more than what you'll pay to the for all of the debt, all of the operation, all of the capital in 2027. So, currently, and this is probably the last year, the Rock Creek will be more expensive than the um the RA cost did go up 3.8%. Um and your budget, you know, once the budget there is set, it's fixed. It it won't change. You will pay exactly that dollar amount. um the 549 and if you overpay then they will credit it to you in fiscal 29 which is essentially how that how that works. Um of that about $100,000 of that is to operate the WRF. So the WRF stands for W the wastewater reclamation facility. So

that's the physical plant that treats the waste. The is the authority which includes both the plant and all of the collection system. Um debt service is is the primary uh focus there. You know pretty much borrows for everything they do. We've started to try to turn that ship where we collect more uh cash through the like the capital insurance and reserves to try to prevent the debt payment from going. Um, it's currently about 30 39 million and it's projected to go to $88 million with a $30 million operating budget and a $88 million debt payment, which starts to feel a little bit upside down to me. Um, oh, I thought I heard something. Okay, the city's capital plan, you know, these trunk sewers are going to be a big point of emphasis as we go. And one of the things that I was talking to Andrew about is, you know, as we get into TW, you know, the second part of this decade and into the 2030s, you know, do we do a 20-year loan? Do we do a 30-year loan? Can we wrap some of this new debt around that that Rock Creek sewer to try to prevent us from having to grow grow grow and then you drop off this 560? So, can we take, you know, a little bit more of a graduated approach um to spread out some of those costs? Because a lot of the times when you build a trunk sewer, you know, you're trying to transfer some of that burden to those future people who will benefit from that trunk sewer. And it takes years and sometimes decades for those trunk sewers to totally fill out. Um, but you can see here there's, you know, over $10 million of trunk sewers. And we're trying to push some of that to tiff where we can. Um, but we'll we'll see what this legislature does with, you know, our ability to leverage TIFF if that if that changes here. Um, and so so that's a good point and and I

know we're not talking about approving a trunk sewer, but um I do want to emphasize that point. the the closer we can get, and I don't want to change your words, these are my words, but the closer we can get to 2040 and minimize debt, we have a lot more flexibility just on the sewer side after we get past the Rock Rock Creek uh payment window. Yes. Yeah. Yeah. And I and when we run the financing scenarios, I'm very tuned in to that.

Okay. So, so I know we're recommending a 5 and a half% increase. Is there any way to isolate what that portion of these trunk sewers would be? Uh, yeah. I mean, I I can try to get there.

Okay. Yep. Yep. Okay. All right. So inputs um you know flow is a very important understanding for uh just all things because essentially every year all the debts all the operation all the capital gets reallocated based on your three-year average flow. Um for 2027 you guys re reduced your flow. Your physical flow didn't re reduce but your percentage of the RA went down by 3.6%. And so you make up 0.67% of the WRA. This has ranged from as high as 13% increases to 13% decreases uh over the years. And so you know one thing we always do is we try to build in uh a little bit of conservativeness. So for for 28 27 we know the flow. It's set. We know what it is. 28 we're building in a 9% increase. and then we're building in 5% increases out in the future, which starts to compound all of the RA cost. Um, but if we don't do that, it sets us up for failure if we do have a 10% increase. Um, we're trying everything we can to keep the WA overall budget to stay below 10% increases per year. And this is something that the finance committee continues to talk about, but to fund a billion dollars of capital and 600 million of that is in the next six years. Um, you know, 10% is about as low as I feel like we can go. Um,

just real quick, man, so the 67% that's of all members sending, right? Uh, the flow you said that our flows decreased by 3.6. That's Yep. That's makes up everybody's flow going to the Yeah. And if if we just go to the next slide. Okay. Sorry.

Um that's all right. I know this is way too small to see, but if you look at the far right hand corner and each of these numbers is a three-year average that makes up the fiscal year that sets the budget. You guys sent 177 million gallons to the WRF. the total system was 26.3 billion gallons and so you make up 0.673% of the core flow. Um and then there's expansion which some of the communities are not expansion members. You are an expansion. So you make up 1.4% of the expansion communities. Then you essentially you take out Johnston GR uh Johnston, De Moine, Pleasant Hill, Greenfield Plaza, and Pulk County I think are the three in Windsor Heights. Um not three, that's more than three, but those are the communities that come out of that. But what you can see here is if you kind of the percent changes down at the bottom, the top one is how did the W change in total. So the WA increased by 6%. If you look at the next group, how did Pulk City change, you changed by 2.1%. So your net change for the fiscal 27 budget was a 3.6% decrease. Um and and you can see if you look back historically, you know, over the last seven years, you know, you've been, if I just go back to 21, you're a 13% increase, a 9% increase, then 1.5, then 5, then 6.2, then 1.6, then -3.6. So if the WA budget goes up 10%. and then your allocation goes up another 5% it's it essentially

turns into a 15% increase to to Pulk City. So it's why we try really hard to plan the way we plan in terms of building in some flow growth. Um and so that you know provided a little bit of relief to the budget this year. Um does that Jeeoff did that answer your question? Yes. Thank you. Okay.

Okay. So this is you know this is the projections of the RA you know this is just stuff but you know if you can look 28 we're expecting an 11% increase a 9 12% increase and Pulk city is actually the percent of your budget that is made up of the is actually one of the lowest in the whole metro and part of that is because you have this huge rock creek payment you know which makes your overall all budget bigger which makes the RA portion of your budget smaller. I mean, if you look at say like Urbandale, 77% of Urbanddale's budget is just to pay their bill, you know, which so you guys are just different in that in that regard in terms of smaller

and it will because we joined much later than they did or

not really. Um, not really. I think it's more because you know, you've you've had to connect. You're a growing community. You're still paying for potentially trunk sewers. I mean, it's more than anything, it's the Rock Creek sewer. You know, Grimes would be similar to you. They had to build a $30 million sewer to connect to the But you didn't you didn't get an advantage or a disadvantage from joining in 2012 as opposed to joining in 24. I mean, the calculation on your search charge was essentially to make you even. It wasn't to make you pay in extra or pay in pay in less. It was just to you would have paid in the same amount if you would have joined in 2004 as opposed to joining in. You wouldn't have had to operate your plant during that period. So you would have you know saved there. But um

you're around for that decision. U how many other cities are on this Rock Creek silver system? you and Ankeny and P County and you are by far the most cuz you've you had to you know Ankeny and P County don't pay for anything past where they pay but anything south of of them you're paying a portion of that as well. Does that make sense? Yeah. Yeah. No opportunity to try and negotiate that down. I don't think so. Yeah. Just asking. Hard to ask.

Yeah. No, I mean there were some savings. You know, the loan was taken out at 3.25 and then it got refunded for 2%. And you saw that benefit. There was a period where I think we talked with PK County, you chose to continue to pay that same amount and to shorten the debt. So instead of it going out to 44, 46, now it's going to be paid off in 40 instead. So that was you know a decision that was made a while ago but um okay so the you can see the average monthly bill here is I still think that the 40 to 60 range kind of holds in sewer your average monthly bill is 80 almost $82 a month for 3900 gallons and the 3900 and the 4100 I mean those are intentionally different because we typically look at the average uh we take the amount of gallons build per month and divide it by how many how many customers pay it. Um but you've got your O andM um WA operating expenses um revenue available for debt and then if we go to the next page you've got all the WA debt um and you can see the WA debt and this is this keeps me up at night for everybody but on line 31 you know in this year you'll pay 322,000 by 2032 the projected RA debt is 840,000, you know, so more than doubled. Um, and part of that is flow growth, right? So, if you don't realize 9% and 5% every year, that number wouldn't be as big. Um, and then part of it is just the amount of of debt that's coming online.

But that's their their debt for their projects that you pay 6.642% of. Okay.

Yep. And then so uh I forget if it was Rob or Jeff that asked this but um proposed 2026A and proposed 2029A I mean that's essential those two lines are essentially the the trunk sewers and the debts that that's coming um you know and so you know delaying those projects or structuring those projects differently these are structured as you know 20-year level debt once the project you know I typically assume 18 to 24 month construction window for those projects and then you pay interest only during that period and then you start to pay the full amount. So more than anything, I just kind of wanted to show in 2032, if we don't structure it that way, you know, you're this 1.1 times coverage starts to become an issue. You know, I mean, it starts to get down to there. And then if you look at line 50, the surplus deficit, I mean, that's a structural deficit we cannot get to, right? So, I I didn't feel like we needed to increase the rates more than we had already projected from the 5 1/2% now because I don't honestly want to recommend any higher of a rate increase in the sewer fund than we have to because it's already, you know, as high as as as anybody else. But as we start to do these, you know, any connection fees you can get from developers up front to help pay for those costs, you know, there's a lot of things that the city will have to continue to work through. Um, you know, and typically WA projects don't happen as quickly as they have them on paper. You know, I mean, I think phosphorus is getting ready to go out to bid and and will will go to construction this year. I mean, this was supposed to go to construction in like 2020. So, so Matt, real quick, lane 32 and 33 are the debt associated with the

three CIP trunks or project. Okay. Yep. Yeah. And those are just those are proposed. Those don't exist that, you know, we've got a little bit of interest built in there for this year. If you if you did um if you do the the north trunk sewer, but

um you know, and like I said, your cash position is strong in this fund, right? So, you've got some, you know, and your coverage is strong and your coverage has to be strong until you pay off the Rock Creek portion because you've got to have enough revenue after you pay your debt to make that. So, as long as that Rock Creek is out there, you're going to have a huge debt service coverage number, you know, and so that gives you some flexibility from one year to the next, but you're not, you know, you're not doing a 5 12% increase today just because of the 27 budget. you're doing it so that you don't have to have a 20% increase at some point down the future, you know. So, the more you do today, the help the lower that'll take the pressure off. And I constantly try to solve for what's the lowest number we can do, you know, year after year after year and still meet all of the obligations. So, so Matt, not to hurry you or anything, but how many more slides do you have?

Okay. So, I just have one. Okay.

Okay. All right. You We're recommending a 7 and 12% increase in water and a 5 1/2% increase in sewer. You know, and you know, kind of outlined here just you know, there's city's in good shape with the utilities financially, but the the amount of capital investments that the city will have to make both locally and from a regional perspective, you know, simply can't be understated. like this literally your participation in $2 billion worth of infrastructure. Um, and it's what's required for the the metro to continue to grow at the rate it's been growing and for, you know, you guys don't ever have to think about a capacity issue for sewer. Like, do we have the capacity to serve developments, right? And that's that luxury comes by being part of the RA and having the Rock Creek sewer in place, you know, and so there's trade-offs there, but um and and on the water side, you've got plenty capacity to grow into as well. So,

you just have to figure out how to pay for it. That's right. Right. One year at a time. So, any that's that's all one final thought. So I think it's you said many important things but the thing that stuck stuck with me was what you just said a minute ago and that is that we are making the investments now and having to raise the the fees now to not have a 30% increase or 20 like a astronomical increase in the future. Yeah. Right. So that's well that's why I still think we're going to have some based on what we're projecting some pretty big increases right

this but but we're mitigating that risk more so by uh yeah and we try to build in everything we know about so that you can see it years ahead of when you need to see it right but could you do a 2% increase today in your sewer you could but it would probably likely start to compound, you know, you're falling behind and then, you know, it's harder to do those 15 20% increases than it is to do the 5 1.5% increases from one year to the next. And every year that I come back, I try to make the number smaller, right? But the the data has to support it, you know, and the financials have to support it. And so,

thank you, Matt, as always. This is really good stuff. Couldn't do it without you. Okay. Thanks, Matt. Um item number two is adjournment. So um I'll ask for a motion in a second to adjurnn. And yep. Okay. All in favor say I. Any oppose? Same sign. Ajourn until 6:00. Everybody.