Board of Supervisors - Regular Meeting

Call this uh March 19th budget work session to order. Roll call, please. Mr. Hoy, yes. Mrs. Null, Mr. Drury, Mr. Ran here. Mr. Shepard here. Mr. Chairman, you have a quorum. Okay. Thank you. Before we move on to the budget presentations, I want to take a moment and have uh our county administrator update us on our IT issues suffered today and the status of the voter registration, voter voting process at our town square location.

Yes, sir. Thank you. So um as the board's aware we notified you today that there were some connectivity issues at the voter registar office and so certainly we acknowledge the disruption uh staff has been working along with their corporate partners in support uh and they have been able to continue to work towards a resolution. Our IT director Mr. Wyatt who's here tonight says he believes that the system will be up and operational tomorrow with the connectivity issues resolved. Uh I would like to point out that the registar is responsible for voting for the voting process and as such I can share with you that the registar the election and the early voting process that we're in today will last until April 21. Uh the disruption I know caused a little angst today, but as I pointed out, it will last, voting will last until April 21. Uh voters had the option to go to Victory Village in the upper end of the county. We are fortunate enough to have more than one voting location for early voting. And they also had the opportunity, should they choose to do so, would be to provote to vote on a provisional ballot. So there were options for voting at Washington Square as well and uh hopefully everything will be up and back to normal tomorrow. That is our expectation. I also spoke with uh our register Leam and asked whether or not we couldn't register voters in Washington Square through our Victory Village um registars's office in Williamsburg utilizing a phone system. uh they will look at that if uh if necessary, but he anticipates voters being able to vote starting tomorrow um in both locations.

With that, I'll move on to I'd like to get some details on what failed, why it failed, how it happened, what the remediation looks like. Well, Mr. Ran, at this moment, I don't think we know all the answers to that. As I said, corporate staff is still working with our own IT staff to run down all the details.

What details do we have now? We know enough to know that it'll be service will be restored tomorrow. We must have some appeal for what has failed and what and what is corporate working on right now. You're not working on nothing. So, what is what's being tackled right now? Well, it as I understand it, it was a hardware issue where we were doing regular maintenance on some hardware replacement and when the systems were brought back up, they did all they all obviously did not work as as intended. So, this was this server, network switches, what what what were we doing maintenance on?

The maintenance was the core switch. So for non-technical people when you plug up to a wire your laptop PC that cord or even you connect wireless goes to a box all those wires connect to a switch those switches it's a little box connects to another box connects to what's considered and called a core box a core switch and that's the hub that's the heart of the network of where all the traffic flows through on our network we have two core switches and those were the switches that had to be updated due to end of life they weren't no longer supported. It was a maintenance issue. We started as soon as the workday ended yesterday. The staff who started that are still working to this moment. Um all IT staff are engaged. Most of the internal services are up. The voter registar if I can kind of give a little bit more detail. The voter registar is a very special network. It's considered critical infrastructure by the uh federal government. We have a lot of extra security and a lot of extra safeguards on that. other networks we can do certain things and get them up quicker. When it comes to that network and the security of the elections and the integrity of it, there are certain things that we cannot compromise. We cannot make shortcuts on. So those networks surrounding that specific network are very meticulous. Um we have gotten very huge key things up. We are finishing the final thing. So I feel confidently that tomorrow morning all services with the voter register will be up without an issue.

So we have two core switches. One I guess is serving the northern part of the county. That's why that is still working. Exactly. Has that one been updated yet? No. Okay. After we moved into service life. Yes. This was a hardware update, not software firmware. Swapping out hardware.

Yep. The old ones ran off of 110 volts. The new equipment runs off a 220. So, we had to completely remove everything from the physical rack where all these devices are stored in, remove everything, redo the electrical in there, put the new hardware in, rewire it. It was one of those situations where there was no extra prep. We did all the prep we could. We hired outside consultants to validate the configuration, even above and beyond the staff. They didn't catch it. And we've been on the phone with our private partners um Cisco since before midnight last night. Cisco. So the Cisco device has failed or is it the the electrical new

Cisco device? It's been on Cisco. So we put a new Cisco piece of hardware in and it failed. The configuration was incorrect that we hired the outside consultants to check. My staff checked. They're very the core switches are some of the are the most complicated pieces of networking equipment we have and these aren't running hot hot so I we can't swap all the network for the boat over to the one that's working correct do we had to pull everything physically out due the space constraints and how long the cables are physical constraints

I guess at this point my biggest heartburn is why in the world are we When that type of maintenance on critical network infrastructure while early voting is active that that it should have been a change freeze. It should have been done before or after the service life is a known date. The the voting dates are known. What's done is done. Understand that. I we're probably going to need to talk about future change windows and window apply change freezes to think harder about when we're making critical infrastructure changes to make sure we don't have service interruptions like this because with the with voting going on it's not the time to be doing this and and know we're taking a hit for it and people are more than just being inconvenience and it's this this rate start going to start raising some integrity issues here, too. So, anyway, we'll talk more about it. Thanks for helping me understand the details.

So, let's be clear on two follow-ups. We do want to see an investigation report. We want to understand what what we've learned from today. And there's also a freeze on touching that second box. I want to detail postmortem what happened, how it happened, so forth. and and from Cisco too I want to hear you know they were supposed to give us work configuration they didn't it was a third party vendor that did the preconfiguration Cisco you our support contract with uh them is for critical outages it was have one case if you're familiar with us okay if you don't mind I think we've had enough

yeah I have two but I I understand that sir all right thank I don't think we need to uh any more of this. Let's uh move on to the budget presentation, please.

Okay. Um well, Mr. Chairman, uh county administrator presented his budget on recommended budget on Tuesday night and we briefly talked about all the different funds that repres uh make up the budget and one of those classes of funds were enterprise funds and of our enterprise funds, we have the sewer utility fund. Enterprise funds generally speaking are designed to be self-supporting. So the fees that we collect uh support the cost of of maintaining um the system. Um and so um before I go any further, I'd like to go ahead and invite um our adviserss from PFM, Christy Choy and Katie Piper um to the table. Um about a year ago uh following adoption of the last budget we started um we kicked off a sewer rate analysis study with our financial advisors. What we wanted to understand was what are the costs of the system going to be maintenance capital over the next several years and what is going to be the rate that is going to be sufficient to cover those costs. And so we've actually um it's hard to believe it's almost been a year we've been talking about this but you know it's a lot of complex information. I don't think the county has done a sewer rate study um in ever. Um and and that's okay. You know, uh we were able to determine what the rates were necessary, but as we start this next, you know, few years, we've got some significant capital projects coming up uh for sewer extensions. And it's always good to just do a rate study just to make sure that the rates are fair and um distributed appropriately based on use. And so that's why we kicked off the study. We've learned a lot about the system and um these ladies have been just extremely helpful. So, with that, I'm going to turn it over to Christie to kind of talk through the study.

Welcome back. Thank you. Thank you. Good to see you again.

Good to be here again. Um, so I will there we go. Kick right off with a little bit of a background. Um, as Susan mentioned, um, we this project have been going on for quite some time. And when we were f first approached uh by the county, one of the first things that we asked was, well, when was the last time you had a rate increase? And so you can see there um the residential rates were were um reviewed and increased back in 2021. That's 5 years ago. Commercial rates uh more than 10 years ago. That's a very long time um for you know and as you know with inflationary adjustments and everything else um you know those commercial users have been paying a very uh low rate for an extended period of time. Um so that struck us as as a long period of time that that you all have went without a rate increase. So kind of coming into this exercise, we expected that there will be some uh meaningful rate increases that will need to occur to keep in mind with the cost of sewer services that continue to rise and and the capital costs continue to go up. You can see there the sewer fund CIP ranges anywhere from 7 million a year to peaking at 12 million a year in fiscal 31 totaling $47 million over a six-year period. Um, and I'll take a pause and see if any um uh anybody from the county wants to chime in on the CIP and and the reasoning for the increase over the six-year period. So, John Cider, deputy director of public works. So essentially we have three lines of effort when it comes to our capital expenditures which are

outlined right here on the slide. Um what you're going to see is that there's a spike specifically in sewer line extension and that is to deal with the whites faulner project extension and the big bevel road extension project. Um we're kind of at a a tipping point as far as our sewer network. What we're going to see is essentially the sewer line extensions diminishing and our rehabilitation costs, specifically pump station and sewer line going up based off the age of our system. The core age of our the core components of our system were put in place during the 70s and generally things last from the 30 to 50 60 year range and we're right in that sweet spot right now to where we're kind of making a shift between extensions. those are going to diminish and moving into basically our rehabilitative um mode um basically in until perpetuity. So that's with this reflex right here. So with that as backdrop um when we began this process with we sat down with the county and and one of the first things we wanted to identify were uh what are the county's goals and objectives and and one thing that um well there's several things on this slide but I'd really um divide it up to two pieces. One is we wanted to make sure that the sewer fund on its own is financially sustainable. And what that means is uh the sewer um system itself has what we call as a revenue requirement. And um what that means is you know the sewer infrastructure um or the sewer system has really two things operating and maintenance expenses and capital needs and and ongoing debt service for any debt that you've you've issued thus far and and those three

things on& and M expenses capital cost and debt service. We wanted to make sure that the system and the rates were generating enough revenues to cover those three components of the system without any reliance on connection fees. And I would say that that is key without reliance on connection fees. And the reason why we stress that point is connection fees can be volatile. They come and go and it's hard to predict what that revenue will be year-over-year. So um in our view um as financial advisors well-run sewer systems uh generate enough revenues from from the ongoing rates and charges without reliance on connection fees. So that's one thing that we wanted to to um in the long run accomplish with the sewer system. The other thing that we've noticed was that there was a little bit of a reliance on fund balance for to ma maintain the those revenue requirements and and some infusion

fund balance from the general fund. Fund balance from the sewer fund and and then on the general fund side there I don't understand that you got a fund balance from the sewer. How do you get a fund balance from the sewer? to the extent that there are revenues generated and year-over-year and the next very point there has been you implied that there was that they were they weren't keeping up correct but so I'm trying to figure out how do you get a balance yeah and but there has also been at the same time money coming from coming in from the general fund there so my answer the answer to the question is through the general fund

ultimately there has been general fund inflation correct because there's been an allocation of meals tax being subsidized to fund into the sewer fund. So all in all, you're correct. There has been general fund support in the sewer fund. Um so all this together, we wanted to make sure that we um come up with mathematical rates and fees for both the commercial and the residential users to cover all the capital cost increases as well as the on&m expenses and the debt service that's about to rise. um and make sure those rates are fair and equitable without reliance on the wheels tax or the general fund.

Correct. In the long term, um you know, the other thing that we were balancing uh was we also wanted to be mindful of um not increasing the rates too much, so to speak. So, we wanted to phase out the use of the fund balance and phase out the use of the meals tax, but not rip the band-aid off right away because that may that that may result in increases in rates that was going to be a lot more than what we have presented. Do you have any correlation on how much the pump station and sewer line rehabilitation costs are being driven by the sewer line extension costs? I would imagine as as we grow capacity that's got to have an impact on those other costs. In other words, if we if we stop right now and didn't do any more sewer lines extension, would that reduce the amount money we have to spend on rehabilitation and and replacement or does that not equal? So when we do extensions, they're they're not necess I mean there there is an impact because you are you are providing additional capacity which has to flow through pipes has to throw through stations but it's not of of the you're you're not impacting at that rate to where you're losing that many years based off the lifespan of the force mains gravity mains vacuum mains and the stations themselves. So, so extending the sewer lines to Lake Whitesfall and other places through FY32 is not going to impact that 13.5 or that $6.8 million.

It shouldn't, but we've had some pump stations, for instance, Barlo Road that's been in our list and that really is driven by expansion. So that case it is essentially because it it's added that that's a capacity issue for the station itself, not necessarily a wear and tear issue. That's we're adding capacity from Fenton Mills essentially which there it's questionable whether or not that pump station can meet that capacity which is causing the upgrade. Do we have others like that or is that a one-off?

Um Baptist Road to some degree because of Rose Hill. Um obviously the the preferential way to treat that is when a development comes and they pay for that expenditure fees which if you look at like Tranquility Waller Mill um Smith Farms they did they had to add pump stations essentially to support the network.

All right. Thank you. Um so just what we've been a bit working through the past year, we we took the approach um that are shown in these four boxes here. We we first spent some time digesting the county's customer information and the customer data uh because I think critical to the analysis is understanding the county's customer base. So that's where we started. Um, and then we went on to review the sewer revenue requirements, the o and m expenses, what's what it's been p in the past and how it's projected to go up. Um, and then we basically did the math to solve for what the rates need to be to meet those requirements both now and into the future. And then we've had a number of discussions with the county staff to talk about the different alternatives and and what those results showed um to to arrive at our conclusions. So in the next few slides, we're going to walk you through the various takeaways that we've drawn from each part of this process that's on the diagram. And so I'll pick up here and just talk um at a high level about the customer data that as Christie mentioned was our starting place as we started looking at this. Um so we have bunch of different charts here but I'll just kind of summarize. Um the first piece is that your sewer usage has been increasing. We looked back over a three-year period and you can see that chart towards the bottom shows that it's really been steadily increasing over those three years. Um, in terms of who your customers are, it's primarily residential. Um, and primarily using a 5/8 inch meter size. Um, over 90% of your customer base. You can see in the chart there in the bottom right.

What does that what does that mean? 5/8 58 inch. That's a standard residential water line. Is it on water or it? So that's based off the uh because we build by consumption on the commercial side. Then it depends your rates go up based off your water line size. That's 58 on your pipe. So that so that that's so that's kind of like set by uh is it set by us or set by u waterworks? So it's whatever the demand is and waterworks will basically it's whatever the waterworks meter is. So essentially it is set by waterworks. Okay. Thank you.

Your your first bullet said steadily increased that means number of connections is steadily increased the usage. Okay. Um so in terms of the that uh drives the amount um of revenues. So what's build based on what what is being consumed by your users. So not connections. But don't but our connections has grown steadily as well. So correct that drives us, right? Yep. Yep. Yeah. Your number of residential unit accounts have grown steadily over the years as well. This bottom left consumption's gone down.

If you look at the trend line, that's what we're focused on when we're talking about growth. Yeah. So you can see the dotted line there. So, it's moved cycllically. Um, but overall the trend has been upward. I mean, it's it's basically steady drop since 2024 and it's way down. So, I'm just not sure how you that line stays that high. Well, it's really only three months.

It's month over month. So, I think that that monthby-month data is a little um hard to read, but if you look at it over over an annual period, it continues to show an increase. Feb February, March, and April of last year were the only months that dotted line just moving average in it.

You're putting in all the you go back to 22. Y um and so in terms of just I have just a couple more here. Um just in terms of demand overall um it's been steady um in terms of your peak ratios. So across all those meter sizes that we talked about um pretty steady demand um over the life. And then in terms of your big users, we always like to look at concentration. and if there's any concentration risk there for you all. Um your 10 largest customers comprise just 13% of your total system revenues. Um so from our perspective no concentration risk there and four of those top 10 users are residential buildings. So actually comprised of various rate payers there. So the next thing that we look

before we go I'm still trying to digest this chart because I would the the peaks and valleys. It got me intrigued. Is this driven by how much water they use going in? Is that how we measure that? That's what that graph is. It's b it's going to it's going to go up and down based off seasons. Okay. That's what I was trying to get. Although like I'm surprised I see a dip in May. I would think I would see an increase in May as people use more water for lawns and so forth. But typically, yes.

And then I see Okay. But but but at the end of the day, it's about water consumption into the house is how we measure it on the commercial side, not on the residential side. But they wanted to study potentially a consumption based fee as well which is why you're seeing this. Okay. So what is this chart commercial or or residential or both? This is both. This is both together.

Yes. Correct. But I think we we looked at that with the focus on should the county um consider a variable rate charge based on consumption on residential. This becomes increasingly important. your current rate structure is 100% fixed on the residential. So, and and the commercial consumption is such a small component that of the overall usage that at this point with your current restructure, I'm not sure Jonathan if you agree that the consumption data is less important compared to if we were to to consider moving residential to a consumption based usage um rates as well. It is I mean to so I think we have what around 900 commercial accounts and 20 21 or 22,000 residential accounts and those are all build flat fee

residential residential but commercial is built on usage. Yes sir. So we're looking here at possibly going to consumptionbased for residential too. We did look at that. We looked at all, you know, all the types of possibilities the way you could we could meet the revenue requirements and that was one of the things that we looked at. So, they're going to be talking about what our ultimate recommendation was and why. Okay. All right.

So, um looking at the revenue requirements, Christie touched on a little bit what this is um at a high level, but this is putting some numbers to it. Um so we have the data 24 through 26 and then what's driving our rate recommendations that we'll go to later is this um projection in 27 as well as 28. Um so I'll just kind of go line by line at a high level. So the biggest piece of this revenue requirement what we're trying to cover with these user fees is on and m expenses. So what you pay for operating and maintaining the system. Um, historically there's also been about five million annually in cash capital. So we've maintained that here as well as part of this revenue requirement. There's some existing debt service that the system pays. And so we're including that in our revenue requirement as well. And then some of the capital projects that we showed a few slides earlier, we're planning to debt finance. And so you can see we're layering on that new debt service as well when we take into account how much revenues we need. Um and then Christie mentioned that um there's a little bit of substitution from the general fund through the meals tax that's going in to support the system. So you can see we've shown that as a negative number. So that reduces the amount of revenue that needs to come from the rates. Um so you can see that there. And then the use of the fund balance, what has accumulated in the sewer fund is that um line eight there that you can see above the total. Um and so in total looking at just over 12 million in terms of the revenue requirement for 27 and then that steps up to just under 14 million in 28.

So looking at 28, I think we're saying to meet that 14 million, we need 23 under $2.3 million from meals tax. That's what we're factoring in. Um, so it it basically steps down the amount that's needed from the rates, right? So we don't have to increase the rates as much, right? And $2.4 million from the fund balance. Yeah. Of the sewer fund. Correct. So over three years. So you need to make up 2.4 million out of increased rates

if we were to not utilize that fund balance. We'd have to come up with 2.4 million more in revenues. In other words, if we can stop funding it from the general fund, you'll have to come up with 2.4 million. And we did look at that and and like Christie said earlier, we we've got a plan long term to kind of wean oursel off that sales tax, but we couldn't do it all at once or it would have been too large of a spike. But how far out do you have to go?

I think in our projections we were seeing around fiscal year 30. fiscal year 31 is when we'd be able to and that assumes that after this we're right now proposing rate increases in 27 and 28. Um but assuming that we can have similar increases in 29 and 30. I think that around fiscal year 31 is what our numbers showed is when we can kind of that off.

So what factors did you take in the consideration? um in determining that this is going to be a this be a good idea. In other words, you know, something something's going to come along here and screw this up. What's going to change? What about inflation? What about uh a drop in home values? What I mean, what or we increase homes? What what what f what factors did you you include here? The the biggest driver is the assumption behind the residential accounts because uh you know we were we're basically sol behind the residential accounts.

Okay. Correct. Be consistent in usage or what

consistent in terms of growth of accounts. So right now the the residential accounts there's uh 28,388 residential accounts. Um, we assume that that continues to grow by around 300 accounts each year because that's the biggest driver in all of this is because we're with the fixed charge, it's a very simple multiply the current fixed charge times the residential unit and that equals the residential. So going back to your other chart that was showing you had combined residential and commercial, you implied that um there were other factors besides just growth in housing or growth in customers that there was some usage that was driving also there driving up increase in consumption. What were those? I mean just normally you just sit here and you say okay I got 10 houses now tomorrow I got 20 houses therefore I got more houses but you implied in the in the statements that you made that there was other factors besides just just um number increase it was something driving usage

usage you correct because what would be driving the usage that you considered that more people I mean more kids in a family or what I mean what number what What are you looking at? It's going to drive up the usage uh significantly uh that we have to consider it o over and above the uh just the number of houses or number of properties being used. The number of new sewer line extensions look at the amount. Where does that come from? That comes from from more houses. We don't just stick a line out there.

Surprised that 300 is so low. Well, I thought it' be about 900 personally, but uh but the uh I'm trying to figure out trying to understand what was driving this uh what factors I'm trying to find out something here that I'm I'm not aware of. What's driving the usage other than number of houses?

I if I may, I think when we were looking at the uh consumption chart, um again, we factored that in because we wanted to look at all methods that we could we could get our revenue requirements. One of those was switching to the consumption method for residents. We do a flat fee now. So flat fee, we care about the number of houses. And so that's where they factored in the 300 gross each year. And again, we want to be conservative. If we bet on a thousand, you know, put a thousand houses each year, um, and we don't get those, we don't have enough revenue to cover our expenses. So that's where the 300 comes from. The consumption piece we looked at to see where is our average consumption on residents and what would we need to charge both maybe a combination of fixed and variable based on consumption to cover the expenses in the fund.

And now you said okay let me just pause you right there. So you're talking commercial and residential. Yes. All right. So we come in we put a um what box? No, put a data center in there and they use water. Okay. Like like electricity, you know, they just start piling up the utilities. So that's going to drive significant could significantly drive up the cost or the consumption. Yes. All right. Which would then drive up the cost for each each uh user.

Well, the commercial accounts paying on consumption basis. The commercial accounts pay on a consumption basis. So they would be paying more of the share of the cost because they're consuming more. I mean I don't know if you Yeah. And and most localities this is very data center specific but data centers use reuse water. So, so localities like Louden, Spennsylvania, Stafford that are getting the influx of data centers are coming up with a complete separate rate structure for data center specific based on their you reuse is driven by the state or driven by the county or the city or what that's driven by c the county each individual county.

So, we would have the authority to do something like that here. That is my understanding. if you were to entertain such proposal. Yes. And that's not unusual because we have other um commercial users that reuse their water um and it never makes it into the sewage system. And so we do have ways to to monitor that to a certain extent. I think water control be an example where they reuse some of the water never makes it over to the sewer system. Um, so we would be able

So we still in residential property, uh, do we still have this thing where you could put up a meter for your lawn lawn maintenance and and therefore it would say you could subtract that water out of your your sewage sewage usage. We do not have that. And we used to do it just Yeah. I mean, right now there's the flat rate. I'm not aware that we have Do we have some accounts that still get that? I think he's talking about HRS. Oh, okay. Yeah. So, not for us.

All right. I'm still back to the number 300 a year. I mean, I've got Rose Hill, Smith Farms, Mill Tranquil, all coming online in the next three, four years. That's that's clearly that's clearly more than a 300 home average. And then uh White Faulner Plantation, Springfield has sewer extensions all coming on in a similar time frame. The numbers kind of be more than 300 homes a year.

Well, and I would say, you know, we've kind of looked at what the rates would be for the next two years. Um the recommendation from PFM is to look at these rates annually at at a minimum every two years. So, we're going to be adjusting those conservatively when we look out. We're doing a lower number and you guys can speak to that a little bit, but that is this isn't something a oneand done. we're going to have to look at this as that revenue um or that cons customer mix changes. Same would be true for a large commercial user. Um as those you know change, we need to kind of look at it again and see if the assumptions we've made make sense.

So so if we do our assessments every year so be you're recommending that or suggesting that it might be a good idea to do our rates every year also. Absolutely. And and I think you know we've seen on the people then would know more about what they're paying for when they see it go up that year and they'll know that that's this is why right and we've kind of talked about why that was solid waste too where we have contractual increases on some contracts that go up you know 3% a year or whatever CPI is. So we know there's going to be an increased cost of doing business. So every year if we just adjust the fees just enough to cover that then we remain solvent. It's when you wait several years to do that that you kind of get into it. So yes. Exactly. That makes sense.

And it follows the model of other utilities too. Dominion and Virginia natural gas. Everything else goes up incrementally every year instead of the shock increases every four or five years. So it would follow that model essentially. Small incremental increases by large. Don't tell me it's small when you talk about Dominion Energy. Okay.

Um, so we've talked a little bit about the different alternatives that we looked at, but just wanted to put those here. Um, so you all know what was evaluated by PFM alongside staff. Um, so as we've talked about it, the current the current um steward rate structure for residential is that fixed by monthly fee. So they pay the same fee every two months. And then for commercial users, they pay based on consumption. And that's currently how your structure works. Um, a few alternatives that we looked at is introducing a consumption component to residential. So in addition to a fixed charge, they would pay based on consumption as well. Um, on the commercial side, we looked at introducing a fixed charge there in addition to the consumption charge that they pay now. Um, and we also took a look at a tiered structure which would charge a higher rate to a larger user um, rather than charge the same volume rate um, to all users. And then on slide eight, you can see what the recommendations are for FY7 27 and 28.

Can we back up for just a second? Sure. said introducing a fixed charge for commercial use. Are you talking about a fixed charge on top of the consumption? Yes. As well. Y way I understand it that would be then to re that would help reduce um the residential cost because of some large business that comes in and uses a has a high demand for water, stuff like that. Right. That's what that's what that would do. You're shaking your head. Yes. So, I'm assuming you you understand my question, right? Yeah. Okay.

Yeah. Effectively, it would um put a little by having that fixed charge on the commercial users, it's effectively allowing them to pay more of that revenue requirement and taking the pressure off the residential side. Okay. What are you recommending? has initially were currently fixed or a fixed minimum on commercial and then they pay they pay on usage if they go above the minimum. Are you still maintaining that basis of a fixed minimum? We're we're recommending that you switch to a fixed charge for everybody all of the commercial users plus consumption base consumption on commercial. Okay. consumption on commercial plus a fixed charge for for

for commercial commercial and residential just commercial commercial okay yeah so you can see on the table we are suggesting doing both on the commercial both combination of consumption base which is what you're doing now but also charge a fixed charge it's pretty apparent from this chart that we've not been charging commercial correctly because they're paying much less than residential Yes, that is our takeaway as well. 11 years last time we my answer is they pay the same the fixed rate is the same across the board and then there's a consumption fee on top of that for commercial user on the same page. Yes,

you're not. They're close. We wanted to get the residential users a little bit more um little more time time. Yes. Given that residential users did get a rate increase last in the five years ago and the fact that commercial users have not gotten anything for 10 years plus they've been paying the smaller commercial users have effectively been subsidized by your smaller residential users who are paying $54 as opposed to $20. Yep, that's wrong.

So, just looking at this here in front of us, 54 57 57 to 60 proposed $3 each year. We're not talking about raising the the fundamentally fixed service charge by $3 every year, are we? Yes. What they're talking about? Yes, that's what the recommendation was. No, no, no. After after fiscal 28. Oh, fo 28 because otherwise 10 years you're you just increase it by 30 bucks every every two months. I hope we're not planning on that type of pacing.

We were planning on anywhere from 2 to$3 increase up until fiscal 2030 20 2031 to wean off of the allocations of meals tax and the use of fund balance. But I think that that is exactly what we will want to revisit when we see assuming you know the account numbers we were very conservative and you got more and if you know the consumptionbased you know projections were also increased to the extent that we were able to wean those off sooner we can definitely look at that again and suggest a lower increase in the residential but I think that generally speaking um best practice would be at least to consider some sort of inflationary adjustment on both residential and commercial year-over-year.

Okay. So, currently this says consumptionbased charge per CCF. It's 361. That's just for commercial, right? But you're talking about possibly going to consumption base for residential. We evaluated that, but that's not the recommendation. Oh, it's not. Yeah. Okay. We're recommending here that we stay with the fixed charge only for residential and then these increases that you see here on the residential side. So the only structural change that we're making to the rates is on the commercial by introducing that fixed charge.

So the commercial then will help us close that gap is it? So by 20 Okay. Okay. So, we got 2.3 million um I don't want to call it shortfall, but it's No, what is it? Non that's a gap. What is that? That's a non operating revenue. So, you guys called it something else. But anyway, uh so we got that the gap. We got close 2.3 million gap. That's going to do be done by the commercial side. It will be done by a combination of the increases on commercial and residential. um between now and that 2031ish that 2031. Yeah.

So that's going to be a $3 a year change fixed on the residential. Okay. And as Susan and that's 31. So we're talking five years. So it's 18 bucks. So how does that how does inflation play? And you did you count inflation in this? Go ahead.

We did. And and honestly, I think that we really focused a lot through what the what do we need to mathematically solve for in 27 and 28. I think we did some analysis on 29 and beyond, but a little bit of that we I think we we wanted to make this recommendation and then re-evaluate those future years. that be we were continuously count as future years beyond 28 29 and beyond. Okay. Yeah. Right.

And and and even the 2028 rates were is is are numbers that we projected today, but these are not the rates that you're adopting today. We're only adopting 27 rates. So I think I'm hoping that with one more year of data and with the increase with with the introduction of the fixed charge on the commercial we can be better informed about the fiscal 28 with more certainty this time next year. So where are we going to go? We're going to go to a single assessment every year assessment in 28. Right.

That's what we've heard from the board that you'd like us to look at. We would start that in January of 28. will of course have, you know, a meeting about that public hearing about the change, but I don't like the idea of doing it yearly on this when we're not yet at yearly on the assessment. I'd rather structure it as a two-year rate pursuer to get them lined up.

So, we do have other fees that we adjust annually um even though we've always been on the bi-ennial um assessment. Solid waste is one of those. We've adjusted that the last three years in a row. Um again just to cover that you know inflationary cost increase. So I would say that we have other examples of this wouldn't be out of line but um the other thing that can affect what 28 looks like is the timing of these capital projects and the cost of them as they come back. I mean a lot of these haven't even been yet. So I would say that we're going to take a hard look at it again in 28 and see what has changed. And I think that's just best practice to, you know, make sure that we're getting the revenue requirements we need, not more than we need, um, but also not, you know, causing a deficit in the fund.

I guess I'd be more inclined to go to a $4 increase and do it over two years instead of $3 this year, $3 again next year, $3 the following. Well, I mean, it's you got to get used to whatever you're going to do. whatever we're going to do, be consistent at it because that's what you know and the problem with these multi-year things, you can't really associate. That's been a big problem is you can't associate what you're doing and why you're doing it. Okay?

Okay. You end up with a huge you end up with these huge bills and people then go, why in the hell is this percentage soc? Well, if you show it on a year-to-year basis, I mean, that's the whole key of going a year to year. You're just just seeing, hey, we got to go, you know, this is what it's going to cost us to do business. So that's why your rates up. Other than that, you don't get any water or you don't get any sewers. That's fair. I buy that. Why are we freezing the commercial? Why isn't it going up in the second year?

Well, the consumption base fee is going up. It's the fixed charge that is remaining at the $60. So, it is getting an increase. It's just on the variable component. They've been paying $10 a month forever. I don't mind asking for more. Why is the resident paying for the commercial? If it's 60 and 27, why isn't it 70 and 28? But then you now you're now okay. So we do that. I'm not saying not to do it. I'm saying if you do that, you you you're boosting both of them, right? Because the whole idea was the variable way you understood this the consumption on a commercial was going to cover the gap. All we're trying to do is close the gap, right? We're not trying to make a profit off this thing, right? So now if we go up with the con we the fixed cost goes up then the consumption would have the charge would have to go down.

The general fund is still paying for it until 2031. Yes, I understand that.

But I don't have any numbers to look at for 31. All I've got is the $2.3 million for uh 28. doing this is having the um classes residential and commercial paying for their consumption. If if you know residents are using 70% of of the consumption, then the revenue coming in from those fees should cover roughly that. It's never going to be perfect because there's variables there. And so that's another thing we kind of looked at um versus, you know, raising one class when actually the our heaviest user is residential. So that was another thing that went into that factor. But that's this is the so the

this is why it took a year.

Exactly. That was what I was going to say is that we can get into uh millions of scenarios because the revenue that we're generating is fixed and it's all about what lever do you want to if you're exactly right if we increase the fixed charge in fiscal 28 for commercial we could reduce that consumption because you can see that consumptionbased charge goes up quite significantly. It's driven by the fact that the O andM expenses from 27 to 28 for the sewer system is going up by 11%. So to accommodate for that increase and to try to wean off of using the meals tax and the fund balance, we needed to make up for that revenue. And we chose to in this scenario show the $60 remain constant but increase the consumptionbased charge. And but we can absolutely change an alter make an alternative scenario where the fixed charge is $62 and the consumptionbased charge is below $5. So we can we can accommodate any version of this that can that that that is more

pal point is you want to get you're saying your recommendation is to get to 31 all even right that's supposed to be the digestible pill and the but the ones we're essentially pushing this on to is our commercial property they've been free getting a free ride here for however many decades. So, um I understand that if you're going to change what your recommendation is going to be, then I need to understand why. Okay, we're going to increase the you're going to increase uh the fixed rate or the consumption rate onto commercial. Okay, we're going to be getting there. Then the only thing is we're accelerating when we're going to get to the close of the um fixing this problem. So, do do we want to do it sooner now? Is that what we're are we saying that or or are we okay with 31?

I mean, that's that's a decision because they're recommending you go pick we can do any kind of, you know, magic with the numbers we want. So, we did we had a lot of discussion about that and I think 31 um made sense because we have some very large sewer extension projects coming. Whites Faulner, Big Bethl Road, Springfield Road is still in the mix. Um and so so wait when you say that we got the big projects. Okay, I got I understand that. Okay, why are you saying that? Because it will be harder to wean ourselves off the meals tax when we have such large capital commitments in the in the short term. Weaning ourselves off the meals tax. Right now the meals tax

12 million. Are you talking about that 12 million? Is that that when that $12 million bill comes due? Yeah, that's uh well that's 27. So I don't know. So I don't we what's the weaning part here? The meals tax component. So you know how is so how are we weaning ourselves off of? In other words, what do we what are we just all of a sudden going to end up with a if we we don't collect that money, we're going to end up with some huge no problem.

Mark, did you want to say something? So gentlemen, so what we're trying to accomplish here, the weaning off is we're trying to get you in a place where the sewer fund is an enterprise fund. It's supposed to be self-supporting, right? What we'd like to see you do, and I'm and I alluded to this the other night in the budget conversation, what we'd like to see you do is be able to apply the meals tax money that you're spending on sewer, which is an enterprise fund supposedly self-supporting, right? Obviously, it's not.

We'd like to be able to see you divert that money back to capital to be used for those big projects that have been identified in the future. on the you know the slides that I showed you the other night. Okay, let me let me ask let me stop you right there. Okay, so the project you're talk I can't remember what you showed us the project but that that change is that going to be a significant enough amount of money to address those projects these these sewer projects are millions of dollars in and of itself the answer is likely no. Okay. Okay. However, that is considerable amount of money. What I told you last Tuesday night was my recommendation was to raise the meals tax from four to 6%.

Right. That 2% would raise $4.8 million over the course of a year. So that's that's significant money. Yes, that is. So and half of the meals tax today goes to sewer. Yes, sir. Correct. Sorry. 2% another 4.8 comes comes into capital if we clean wean it off sewers, right? So, what we'd like you to be able to do

is to accumulate some cash. Remember at your retreat in January, the ladies were here and they showed you what the tax rates could be and they showed you what we should do to raise cash to help pay for those projects. So, that really is the purpose of getting to where we're asking you to get to right now.

So, 31 I mean, okay, I'm okay with that. I mean I'm I'm fine with that but I mean there was some indication that not everybody here was fine with that you know increasing the increasing the user rate or yeah user rate on u commercial or the fix rate on commercial you know which would imply that we're getting to we're getting to solve this weaning bit sooner that rather than later I mean so you're not recommending You guys are not recommending that we push that. That's not a not something we need to do. No. Okay.

That's going to raise all these rates even more. And again, um because we have not only a significant county capital plan, but we have a significant sewer capital plan. That's really the reason we don't want to pull out the meals tax right away. So, we have we have a measured plan to get there and be able to bring that meals tax back to the general fund, but we need to get through a couple of these big sewer projects first. So, in the on so for the man in the street, I'm a man in the street. What's this going to cost me on a bimonthly basis or every two months? What is it? $3. So, all this talk for three bucks. Okay. I'm done.$150 a month. So my question is when we get to 2031 done.

Yeah. Well, when we get commercial 31 and so then we're going to be it's going to be a true enterprise fund, right? That's what the goal is. Yes. So in 32 the rates are going to raise with inflation and 33 the rates are going to raise with they should in Yes. or any weird or any weird requirement that drives up the cost. Correct. Until we have another big CIP that's 20 37 and 8 N and 10. Well, and on the sewer side, I'm not sure that's anticipated outside of normal routine.

I mean, like I said, we're at a tipping point for extensions. We're going to diminish the amount of extensions we do. But we will increase on the rehabilitative side of the house because we have 100 pump stations, about 500 miles of gravity uh footage, you know, force m all that needs to be maintained now, right? And we're at that tipping point with the age of the system. So that's what I'm saying. It's not going to it's not going to fall off. It's not going to fall off. No, it it it's in perpetuity basically. But we will diminish on the extension side as we increase on the so what would be the what would be the downside of just giving all this stuff to HRSD.

I mean so that again that's that it's a control thing. So if you're paying we maintain our system at a very high level. So if HRSD takes it and takes everybody else's collective systems in Hampton Roads, your dollars are going to be going towards maintaining other people's systems that are not maintained at as high level. The the part that hits a nerve is it going to drive our cost up higher if we go to HRSD? No, it will. It could conver back to when No, I don't.

Yeah, you will. Give me a chance. Give me a chance. time Woodward was the director of public works and and prior to that, we had a conversation at the board level about letting HRSD take on part of our uh sewer facilities, right? And and at the end of the day, it was going to cost us more, considerably more. Okay. So, we decided to leave things like they were. Okay. Rob would like it though because then you will call HRSD and not when there's a problem. The other thing is you would lose control of setting your rates. True. that and also like Jonathan said the rates we pay will go to support everybody else's infrastructure it could

well I mean I just I just bring that up for I remember I remember this I do remember the discussion but the the point is um that you may lose control but the point isn't control as we are now doing now is that you got to man up and pay you got to stay with it you can't be letting it slip it's like pushing the CIP off and eventually the building collapses and then I got to go build a new building. So, it's the same way with this. You got to we've got to keep up with it for it to be for it to work. You mentioned earlier missing something here.

You mentioned earlier 11% expense increase. Is that from 26 to 27? Is that 231? What was 11%? It was the increase in the O andM expenses from 27 to 28. 11% increase in one year. What's wrong with that? That's I think is the compensation study. Uh I think about 600 or $700,000 of that is in the sewer fund that's going to be additional. So it's a one time well in perpetuity because it's paid out every year. I know you're not going to have 11%. It should that should level out. Correct. recognize have 11% increase should come back closer to inflation.

Cool. But let's talk about commercial. They've been getting a rate onethird of what the residents pay. They've been getting it for a long time. And you're only suggesting that we come up equal to the residents. Plus consumption. Plus consumption. Wasn't in the past? Yeah. I think that was more of probably more of a an attempt to get more business really. I don't know what else why else would we do something like that. Well, I mean, we give them incentives and grants all the time. Now we do. Yeah. It used to,

right? Well, that I guess that goes back to what Doug's saying. We're we're doing that now. So, how many more of the of those we're going to get? Well, they're going at some point you got to stop bleeding, I guess. So, but they're going from some going from zero dollars by monthly to $60 by monthly. So, yeah, maybe this is a good slide to just sort of Yeah, because I think this is the practical this is the impact to commercial users and we 12.

Yeah, it's slide 12. Um, and we we calculated the bill that 2,000 usage commercial user was paying, they're paying 20 bucks. They're now going to pay $60 plus the consumption. So that puts them at 81. You can see that in that group comprised of banks and drugstores. And so we did this for 5,000 10,000. And you can see that in nominal dollars, I mean this is my my personal perspective is that in nominal dollar dollar figures that those are not unreasonable um for you know a retail establishment to pay $113 by monthly. That that that seemed reasonable. 48 seemed incredibly low for this day and age. That's how much I have to pay for a family of four to eat at Chick-fil-A nowadays. And so that's nominally, I think, dollar amount. That that seemed reasonable. Um, but if one were to calculate a percent increase, it may seem like a big percent increase, but I would say that that is because the rates that we were starting from for the commercial users were very low. So is that like 10,000 gallons a month or every two months?

Two months. Every two months. So it's actually Okay. So it's actually even better for not as bad as it looks. My point of view, I would charge more. They've had a free ride for too long. And when residents learn that they're paying three times more than what a commercial pays for, I think they'd be upset with that. And so asking for more from the commercial user now so that we wean off quicker. I think that's the right answer. So you're saying this $81 a month. Let's just use the 2,000. $81. Two months. That's I'm I mean two months, 40 bucks a month.

And and we're asking the residents to pay 57. Pingo. That's lopsided. I 100% agree. If if you have a bank, just take a bank or a drugstore and they're only paying $81 a month for their water. Two months 40 $40 a month$1 a month for their water in a commercial usage. I need to go get a commercial business and move my house there. You have a recommendation? Why not?

Well, and again, we're trying to look at consumption, who's using it, and what portion of those revenues cover that. And so, because we have such a large residential piece, that's why I think you're seeing this recommendation here because we were cognizant of trying to keep that generally in line. If if commercial users use, you know, 30% of the consumption of the system, then the revenue should be coming in around 30% to cover that piece. It's never, again, it's never going to be right on. And I I to your point, we did a lot of variations of this too. So I I can see where you're coming from. If that's something that you know, rule of thumb, I would say the commercial user should be paying twice what the residential pays. That' be my rule of thumb.

You work and you work the numbers to make that happen. And and large consumers. Yeah. Then so it said so they would pay $81 a month versus every two months is what you're saying. I would take the $60 flat rate and double it. I'm doing a doubling right there. You say I double the flat rate. Yeah. And it would be 60 a month. So we have some commercial users going from 20 to 12. But they didn't belong at 20. That would be my answer because residents paid 60 during that same period, right?

Y Okay. Okay, I understand what you're saying, but I'm not hearing why. What? Just because they're business? Now, I can I I can say that, okay, this would be a reason to say we want businesses in the county because now the business is going to help reduce the the load on our residents. Okay? So, therefore, let's push more and more for business. Um, but I'm not hearing that. Why would So, if you're going to increase it, why not just because of business? Well, you got to come up with something better than that. We've got to wean ourselves off. And should it all be on the backs of the commercial on the residential? No. Yeah. Commercial have to pay their loan and they have not paid.

They've been getting on. They've been getting onethird of the residential rate and it's time that they paid greater than resial. I agree with that, but I don't understand the value. Why? Why you put it that number? I mean, what what's that number going to do? We're just figuring out a number. We can pull a number out of our hat. I said rule of thumb. That's all I said. So, should be double. If we're at 120, that's only $500 more a year. A year for that business. How much? 500 a year. That's it. If the resident is paying three extra dollars a month, why wouldn't the business pay six?

But think about all of the little mom and pop stores up and down all the little shops there. We just We're not talking about just Food Line here. That that that may that little bit of money may be a drop in the bucket. We're talking about some businesses that may be just getting by month to month and we're already going to what is 75% increase and one year go from $20 to $81. That that that's a big shock to the system. I don't disagree that they and it's been 11 years since they since they changed. So they've been uh getting free riding.

I know. And and and we're making a 75% increase here. So which is appropriate. But just saying rule of thumb doubling it and if I were if I was a mom and pop business owner and if a mom and pop business owner came to me and say why did you just double you know what was the justification of saying well double whatever the residents pay I don't know what I would tell them. So here along those lines the if so this is they're not getting the free ride. I don't think they're getting the free ride. I think they were getting what we gave them. So getting a good deal. Put it that way. Well, yeah, it was a good deal which was a promotion of business in this in this community.

So, the thing is how many Okay. So, when you talk about a commercial user here in your mind is are you talking about people with business license? That's banks, drugstores, retailers, the mom and pop stores. We got how many of those? How many of those? 10,000. Well, we're not talking about homebased business. This would 3,000. No, no, we're not talking about any home about 900 commercialifier come from well home based businesses they're working out of their home so they're residents. I think you got that from Stephen from No, I'm sitting here thinking about who we commercial businesses was 900. How was the data presented?

And and I I I just looked at the data. 59% of your commercial users, which is a significant more more than half, is are in the 5,000 or less category. So you all, the county does have a significant number of small businesses that qualify because I'm more used to seeing commercial as defined as 7,500 and above in some other places, but I I'm the county counties major commercial users belong in the less than 5,000 gallons category. So you're the the the those businesses for the most part have been enjoying $20 to $48 and and now are going to see the 81 to13.

So this but I'm I'm going to have to come back to this to make sure I understand what we're talking about in terms of who we applying this to. So the mom and pop the mom and pops that are the h the home residential we're not counting those in this. They're counting as residential even though they have a business license. Correct. Okay. What about the the what I would call them? Time shares or you rental you're renting a house out. Are you renting parts of your house out? Is that considered a home business? Yes. Yes. But not for water usage. Not for water usage. It's considered commercial. No. No. Residential. You're talking about the air. Make sure I get to Yeah. I'm just Yeah, that be make sure who we're applying this to.

We're talking about the bigger box stores and banks and retail. But but she just said 57% are not the big box stores. They're all the little stores you see in all the little shopping centers here and we're suddenly going to hit them with you got to pay double. They're like I'm not using any more water than I did last year. Why? Why suddenly I got to pay double? Now what if we left the flatten rate as recommended but change the consump raise the consumption rate? That way if they make huh what difference does it make? Because well then then they can manage how much they they're paid by how much they use. They can control their own flow, right? They better control their own destiny there. Or maybe we do a little of both.

Maybe a little. But yeah, I'm just struggling that commercial is getting a free ride or has gotten They're not getting a free ride. They're getting what we gave them. That's a free ride. That's a free ride when they're paying. They're not free ride. We give them we got that you you're only required to pay the taxes that the law requires. Yes. Okay. And so that's all we required. So we did it that way. Yes. Now we're going to do it something different. Now they should pay at least I'm not going to penalize them for for paying less in the past. I mean got to be careful here. I'm not penalizing. I'm saying they should be paying their fair share. And that's what I'm trying to understand. I am and I'm trying to understand what the fair share is. You've just given you given you given us a proposal.

Yes. Um, and I don't know what we got to go with other than that. This is sort of Kentucky windage here. We talked about it. You said it's $3 increase for a resident and we're talking a $6 increase for business. Why are we even arguing about it? Because we're going to hear we're going to hear from folks on this. Okay. But isn't it more than three additional dollars? Some people didn't. We're going for 20 20 to 60. I mean, that's more than a $3 bill. It's going on the b on the flat basis, right? Yeah. It's the same as the residential or slightly more. And and then they're in they're in control of what they consume,

right? But I'm saying previously until the 2027 proposal, they were paying $20 flat rate every two months and we're going to recommend bumping to 60. That's more than $3 a month. That's the commercial. That's the residential rate. Right. Right. I'm saying but that's but that's more than $3 a month for those guys. More weight is if I'm a homeowner I should call myself a business and get a get a water rate that's one/3. But remember the businesses we get all kinds of sales tax with them. So

So what do we So what would be the rate then based on what you just proposed? What would the rate be for a 5,000galon user? What would that rate be? based on the increase to the fixed based on what you're proposing here. It was a it's $3 more than the 112 on a on a every two-month basis. On a two-month basis. That's what you're That's what we said. Fix increase the fixed amount by

if it's 76 a month. about 160 bucks. No, currently it's it would be 48.20 and it's going to raise to1290. 4820 isn't even what we pay for res, right? They're paying lower than what residential they they just before they just pay consumption. Yes. But a fixed minimum was 20 for some but there's a fixed minimum for all if the rate was above the they were paying 10 a month consumption

according to here it says currently no fixed charge however a $20 monthly minimum charge some mean they were just paying consumption. Yeah but it had to be greater than $20 by monthly. Yeah, they were paying 24. All right. So So everybody paid at least $20. Okay. Okay. Well, they're paying according according to this they were paying they were paying $2410 a month. They were paying $10 a month. Now they're going to be paying 30 month. That's not by annual. I mean that's I know that's correct. So that' be 60 bucks a month plus

60 every other month. Now we're always paying consumption. The difference here is the consumption has gone up, right? But I'm saying they were paying $10 a month before. Now they're going to be paying 30 a month if using a 2,000 a 2,000 a gallon user is what you're referring to. No, I'm looking at at the old what they were paying. That $20 was a minimum charge. So they didn't have enough consumption to take them. Yeah, they had to pay that $20, right? And now and now they'll be going from 20 bucks to 60. Well, this one says 81. 81. That's what the consumption flat rate flat rate would be 60. They're going from 20 to 60.

Well, we're talking about both, right? Consumption and a flat and a flat rate which would drive it to more than 60. Yes. Right. So, it' be 81. Yes. Correct. Okay. 21. That's what that's what they're proposing right here. Right. It would be $21 of consumption. Okay. Or two if you're using 2,000 gallons, right? Every two. Yeah.

What what did the equation look like when you looked at consumption on the residential side? the when we looked at the consumption integration, what we looked at was lowering the fixed charge for the residential and incorporating the the variables. So instead of the $54 by monthly charge, which equates to 27 per month, we looked at lowering the fixed charge by $10 on a monthly. So I guess it's $20 aggregate. So, we looked at a $17 monthly fixed charge and introducing a $2.71 consumption per kilog. And that

that's $1921 usage based on usage. Mhm. And what's the average usage? Yeah, it's around 5,000 gallons. 5,000 for a household. That's what they don't really calculate the HRPC and like So, so household, typical household use 5,000 gallons of water every month. Every two months. Every two months. It's every month. It's every month. Every month. That's what they use as the baseline for residential year.

Did you look at Did you look at at putting a dollar value amount on per gallon or perund gallon? figure what that value is and just say every 100 gallons you use you get charge that amount. No, no flat rate, just pure consumption. How much you use is how much you pay on the residential side across the board. We did look at that. So who's already like that for commercial?

Okay. But but we know we know the total cost of maintaining the sewer system annually. We know what that cost is. We need to back into that cost to get to to break even. All we want to do is break even. So again, you said you looked at it. You put a dollar amount on per 100 gallons of usage, whatever that dollar amount is, would and and we know the total amount of usage annually and we know um what it costs annually. do a little bit of math and go that's that's the dollar amount per usage and go that's what you pay. So you pay based on what you use. What what does that look like?

Yeah, I don't have the numbers right in front of me but we we did run the numbers. That is not what we typically recommend because there and there is a manual that is best practices for water and sewer systems called M1 manual. And the best practice I would say in general is to have a fixed component to your charge because going to 100% variable exposes localities to a lot of risk. Meaning you know if your consumption drops drops then that revenue significantly can drop and if you have a fixed charge like fixed component of

um your uh um system like that service like capital then you're you're in a bind. So I I think having a fixed component to and that was part of why we recommended introducing a fixed component to the commercial users as well. Having a stable source of revenue um is important. So we we ran the numbers but we that was not u a path that we had re

because the downside is even if there was no usage you're still got to pay to maintain the system right. Okay, we give it a year, see how it's working. Yeah, I mean we're making a significant jump here and just because we decide what we do here doesn't mean the future of you don't change. Um,

I want to mention something that the PFM team, one of the members of the PFM team said when we were on all these calls because we were having these lively debates like for the past year about what is the best way to to skin this cat and I think one of um that was on the team said you can't turn an aircraft carrier all at once. This is a course correction. Let's do it. Then let's re you know assess in a year and two years. And so I really like that analogy. It's really I've probably said it again like a thousand times because it really is that like I don't think we can fix it all at once. Let's you know kind of move incrementally to getting there. So I think that was kind of you know the advice they gave when we were having the same kind of comments like you had um on on what the best approach would be.

I don't see us trying to I mean I I see us fixing this over a period of time. 30 I'm okay with taking out the 31. I mean I think some smart people working this stuff seem to want to recommend the unless unless and but messing with the numbers I say there's nothing wrong with them but if you mess with the numbers then it changes it changes how fast we fix the problem or what I mean that's essentially it you increase the amount of money that's being collected then you are reducing the time frame reducing the time frame I you know I

So do you do really do we think the commercial recommendation here is is unfair? It's got a fixed component to it and it's got a user component, right? And the com and the residential has what? Just a consumption or fixed fixed fixed. Okay. So it's just fixed. So, so they're not going to end up with now some really wild bills going up and down and we're going to have a very consistent uh revenues revenue coming in. So, so I think we've added we've increased the commercial and we've added on a consumption that increases. So, they're not they're not getting the the you know what they were getting before.

The test for me will be a year from now. Are we on track to eliminate the tax? Well, I would hope so. I mean, I'll just come over and step on your feet. Always like, "Oh, gotcha." I always consumption tax. Jonathan, did I hear you say you were go over to come off throttle or not not for new connections, but for sewer replacements? Extensions. Yeah. So I mean based off where we're heading we'll diminish in the extension category and we're going to be increasing in the rehab category. So what's happening white? What's the impact? Well, I mean we're still doing that project.

So we're same same pay same schedule. We're a little bit behind because we revalue engineered that project. Um we're essentially it was looking like a 25 to30 million project. We had to regroup, reassess, and we found an alternate approach that's probably going to save us about $10 million to serve most of that area, which enabled us to put Big Bethl Road and still have the same revenue requirements. It's a big That's a big statement. It is. Yeah. Yeah. We So, I haven't heard anybody use the tap fee word yet. So, we adjusting the cost of the tap fee. I don't think the recommendation at this time is to

We haven't adjusted that number like a gazillion years. We haven't. No, that's a that's a big chunk. Big hunk of money. Yeah. And it's not only that that's just a tap fee. That's not the Yeah, that's getting the connection. That can double triple the tap. Yeah. Okay. We want to encourage as many people as possible to go onto the sewer system rather than avoid it. So they can't avoid it. If we put it, we put it in there. They got to use it. They have to put the tap in. That's They're not Well, they want to have to hook up, right? They don't have to do hook up. They don't have to do the You got to pay for the tap. That's all. Okay.

Yeah. True. So true. I forgot about the You don't want to make it so incredibly expensive that nobody goes on it. Thank you. Spirited debate. Spirits of debate. Thanks for your work. More to come. Nice seeing you ladies again. Good to be here. Pleasure. Yeah.

And I just would want to introduce Amanda Cannon in the back. She's our utility uh service manager. Uh y'all probably met her before, but I just want to give her a shout out because she provided a lot of data for this. and also she's the one that when we have residents with questions about their building, especially during the recycling, um Amanda's just been amazing, you know, talking folks through that change. So, I just wanted to give you a face to the name because I know you've all probably heard me mention her before or she's answered your resident's question. So, thank you. Thank you, Amanda. We have anything else?

Any other questions? Call this meeting adjourned.