May 02, 2024 Utilities Commission

[00:00:03]

THE MEETING'S

[CALL TO ORDER]

[PLEDGE OF ALLEGIANCE]

ALLEGIANCE.

KEVIN TUTU, KEVIN UNITED OF THE UNITED STATES OF AMERICA, AND TWO REPUBLIC RELIGIOU STANCE.

ONE NATION UNDER GOD, INDIVISIBLE, WITH LIBERTY AND JUSTICE FROM.

THANK YOU, KEVIN.

[ROLL CALL]

LISA, PRESIDENT RAINEY IS ABSENT.

VICE PRESIDENT MCGUIRE.

HERE.

SECRETARY SCOTT.

PRESIDENT.

COMMISSIONER SHANNON.

COMMISSIONER CORDERA HERE.

WE HAVE A QUORUM.

OKAY, WE HAVE A BRIEF AGENDA TODAY.

UM, FIRST I NEED A MOTION TO EXCUSE PRESIDENT RAINEY FROM TODAY'S MEETING.

DO I HAVE A MOTION? MOTION TO EXCUSE, UH, PRESIDENT RAINEY.

DO I HAVE A SECOND? SECOND.

ALL IN FAVOR? AYE.

AYE.

THE MOTION CARRIES FOR OUR REGULAR

[1. 24-53130 Recommendation to approve April 18, 2024 Board meeting minutes.       Suggested Action: Approve recommendation. ]

UM, OUR FIRST THING ON THE AGENDA IS TO APPROVE THE BOARD MINUTES FROM APRIL 18TH.

DO I HAVE ANY PUBLIC COMMENTS ON THAT? ANY COMMISSIONER? DO I HAVE A SECOND? SECOND.

ALL IN FAVOR? AYE.

AYE.

ANY OPPOSED? THE MOTION CARRIES.

[2. 24-53132 Receive and file Overview of the Utilities Department Proposed Budget for Fiscal Year 2025.       Suggested Action: Receive and file. ]

PROPOSED BUDGET FOR FISCAL YEAR 2025.

WE HAVE BRANDON WALKER, MORNING COMMISSIONERS, AND HAPPY BUDGET SEASON FOR US FINANCE NERDS.

THIS IS LIKE OUR SUPER BOWL, SO I USUALLY TALK FAST IF I TALK EVEN FASTER.

IT'S 'CAUSE WE'RE SO EXCITED TO PRESENT THIS BUDGET TO YOU.

YEAH.

UM, SO IT SEEMS LIKE I WAS JUST HERE A FEW MONTHS AGO, BUT HERE WE ARE AGAIN KICKING OFF BUDGET SEASON.

SO WHAT WE'RE GONNA BE DISCUSSING OVER THE NEXT THREE MEETINGS, THIS IS THE, THE BUDGET TRILOGY, IF YOU WILL, IS, UH, OUR PROPOSED F FO I 25 BUDGET, WHICH STARTS OCTOBER ONE OF THIS, OF THIS YEAR.

SO HERE'S THE SCHEDULE TODAY.

SO TODAY WHAT WE'RE GONNA DO IS GIVE YOU A HIGH LEVEL OVERVIEW OF ALL THE WATER, GAS, AND SEWER FUNDS IN OUR PROPOSED 25 BUDGET AT A 10,000 FOOT LEVEL.

KINDA GIVE YOU THE LAY OF THE LAND OF HOW WE'VE GOT HERE, WHY WE'RE AT IN THE SITUATION WE'RE IN, WHAT THE NEXT FIVE YEARS LOOK LIKE.

EACH SUBSEQUENT MEETING, WE'LL DIG MORE INTO THE DETAILS, TALK IN MORE DEPTH ABOUT OUR CIP PROGRAMS AND SOME OF THE RATE SCENARIOS.

SO TODAY IS INFORMATION ONLY.

WE'RE NOT REQUESTING ANY BOARD ACTION, ANY KIND OF THE PROPOSED RATES OR, OR KIND OF NUMBERS WE'RE GIVING YOU OR KIND OF FOR DISCUSSION PURPOSES ONLY.

SO I WANNA, I WANNA MAKE THAT PERFECTLY CLEAR.

SO LET'S TALK ABOUT SOME OF THE HIGHLIGHTS INCLUDED IN THIS BUDGET.

SO, AS YOU MAY HAVE KNOWN, UM, THE CITY COUNCIL ADOPTED A AT, UM, THE LABOR CONTRACTS ACROSS THE BOARD ACROSS THE CITY.

SO THE CITY WAS, UH, FACED WITH LIKE MANY INDUSTRIES WITH A VERY, VERY SEVERE HIRING SHORTAGE.

A LOT OF VACANCIES.

IT WAS, IT'S HAS BEEN INSTILLED IN SOME SENSE IN EMPLOYER EMPLOYEES MARKET.

SO IT'S A VERY, VERY TOUGH LABOR LABOR ENVIRONMENT.

THE CITY, UM, YOU KNOW, OVER MANY YEARS FELL BEHIND MARKET WHEN IT CAME TO LABOR AND WAGES.

SO AT THE, UH, BEHEST OF THE CITY COUNCIL AND LEADERSHIP FROM BOARDS LIKE YOURSELF, THE CITY ACROSS THE BOARD, UM, RAISED WAGES FOR MANY OF OUR, OUR, OUR, OUR ALL OF OUR UNIONS.

WHY THIS IS REALLY IMPORTANT.

EVERYONE THAT PROVIDES THE MEN AND WOMEN THAT COME OUT TO ALL OF THE RESIDENCES RESPOND TO EMERGENCIES, UH, IMPROVE OUR PIPELINE TO MAKE SURE THAT WE'RE DELIVERING SERVICES SAFE, AFFORDABLE SERVICES TO OUR CUSTOMERS.

IT'S ALL STAFF.

AND WHEN WE'RE NOT ABLE TO HIRE AND RETAIN THIS HIGHLY SKILLED LABOR, BUT JUST AT A SEVERE DISADVANTAGE, WE HAVE MANY COMPETITIVE COMPETITORS WHEN IT COMES TO THE LABOR MARKET AROUND US IN THE REGION, METROPOLITAN SOCAL PRIVATE INDUSTRY.

SO IT'S VERY, VERY CRUCIAL THAT WE'RE ABLE TO HIRE, RECRUIT, AND RETAIN SKILLED WORKFORCES, SPECIFICALLY IN A VERY, VERY HEAVILY REGULATED ENDANGERED INDUSTRY LIKE WA LIKE WATER AND GAS.

SO WE'RE VERY HAPPY THAT, UM, WE ARE BRINGING OUR RATES UP TO, UP TO THE MARKET RIGHT NOW TO BE ABLE TO RECRUIT AND RETAIN TALENT.

AND THE SECOND BENEFIT OF THAT, IT'S VERY, VERY EXPENSIVE TO HIRE AND RETRAIN STAFF.

I THINK THAT'S A, A HIDDEN COST THAT A LOT OF AGENCIES LIKE OURSELVES, UM, DEAL WITH.

BELOW THE, BELOW THE SURFACE IS THAT WHEN YOU'RE CONSTANTLY TURNING OVER AND RECRUITING STAFF, IT DIVERTS FROM US PROVIDING SERVICES, CONSTANTLY HAVING TO RETRAIN NEW STAFF.

IT'S A VERY, VERY, UH, DETRIMENTAL SITUATION YOU'RE IN, ESPECIALLY WHEN IT COMES TO VERY HIGHLY REGULATED INDUSTRY.

LIKE, LIKE THE UTILITIES WE'RE GONNA SEE ALSO TOO IS OUR CONTINUED INVESTMENT IN CRITICAL INFRASTRUCTURE.

THIS BUDGET CONTAINS ALMOST $70 MILLION OF INFRASTRUCTURE IMPROVEMENTS ACROSS THE WATER AND GAS AND SEWER FUNDS TO MAKE SURE THAT WE'RE ABLE TO PROVIDE SAFE SERVICES FOR OUR NATURAL GAS, WATER, AND SEWER CUSTOMERS.

AND LASTLY, CLIMATE CHANGE IS REAL.

AND I THINK WE'RE SEEING THE EFFECTS FINANCIALLY AND ORGANIZATIONALLY TODAY.

I THINK IT'S ONE OF THOSE THINGS THAT'S ALWAYS DOWN IN THE HORIZON.

WE'RE SEEING THOSE IMPACTS TODAY, WHETHER IT'S DROUGHT, WHETHER IT'S, UH, YOU KNOW, WEATHER CHANGE PATTERNS AFFECTING THE, THE PRICE OF NATURAL GAS

[00:05:01]

CLIMATE CHANGE IS REAL.

AND THROUGH THIS BUDGET YOU'LL SEE STRATEGIC INITIATIVES AND PROGRAMS TO MAKE SURE THAT WE'RE ABLE TO BE AS RESILIENT AND SELF-RELIANT AS POSSIBLE WHEN IT COMES TO TODAY AND INTO THE FUTURE.

BUT WITH THAT BEING SAID, WE ARE FACING SOME HIGH FINANCIAL HEADWINDS.

I THINK I'LL PREFACE THIS WITH, UNFORTUNATELY, THE REALITY IS WE ARE NOT ALONE IN FACING THESE PICTURES.

EVERY TIME YOU OPEN UP THE LA TIMES OR SOCIAL MEDIA, YOU SEE PRESSURES ACROSS THE WAY.

I BELIEVE YOU HAVE THE, UM, ARTICLE IN FRONT OF YOU IN THE LA TIMES, METROPOLITAN WATER DISTRICT, SEE, SOCAL GAS, ALL OF OUR MASSIVE REGIONAL PARTNERS ARE FACING THE EXACT SAME ISSUES.

WE ARE THE NATURE OF THE UTILITIES, EXTREMELY HIGH FIXED COSTS OF PROVIDING SERVICES WITH A DIMINISHING OR LESSENING REVENUE BASE.

SO WHAT DOES THAT MEAN? LESS THAN ABOUT A QUARTER, LESS THAN A QUARTER OF OUR COSTS ACTUALLY GO TO STAFF.

A LOT OF IT'S OTHER THING IS FIXED.

BUYING THE GAS, BUYING THE WATER, FLOWING THE WATER AND GAS OUTTA THE GROUND, TREATING IT, DELIVERING IT TO OUR CUSTOMERS.

VERY, VERY CAPITAL INTENSIVE, FIXED WAY OF DOING BUSINESS.

IT'S NOT WITH LONG BEACH, IS NOT UNIQUE AND, AND NO WAY UNIQUE.

SO THE SAME PRESSURES YOU SEE ACROSS THE BOARD, ANY UTILITY ACROSS THE COUNTRY, WE DEAL WITH THE EXACT SAME SITUATION.

UNFORTUNATELY, WHERE THAT REALLY, REALLY SHOWS UP IS AN INFLATION.

SO WHAT THE ENR INDEX IS, IT'S AN ENGINEERING INDEX, KIND OF THINK OF LIKE, YOU KNOW, THE CPI, THE CONSUMER PRICE INDEX THAT'S POSTED EVERY, EVERY MONTH, UH, BY THE BBLS.

THE ENR INDEX ESSENTIALLY IS A REGIONAL CPI SPECIFICALLY FOR THE CONSTRUCTION INDUSTRY THAT FACTORS IN MATERIAL SUPPLIES AND LABOR COSTS.

THOSE COSTS HAVE ACTUALLY SPIKED ALMOST 25% OVER THE LAST THREE YEARS.

SO YOU'RE SEEING THAT ACROSS THE BOARD, EVERY INCREASE YOU'RE SEEING FROM METROPOLITAN.

SO EVEN FROM US, WHAT WE TALK ABOUT IN THE NEXT FEW SLIDES, THAT'S THE MAIN DRIVING FORCE RIGHT THERE.

THE COST OF BUYING PIPE, THE COST OF BUYING CEMENT, THE COST OF CONSTRUCTION, THE COST OF SKILLED LABOR CONSTRUCTION IS GOING UP AND WE DON'T SEE THAT NECESSARILY SLOWING DOWN ANY TIME IN THE NEAR FUTURE.

AND AS I MENTIONED TOO BEFORE, CONSERVATION AND DEMAND REDUCTION, HIGH FIXED COSTS WITH A LESSENING REVENUE BASE, YOU, YOU'RE SEEING THOSE COST PRESSURES, UM, BECOMING A REALITY.

UNFORTUNATELY, I THINK THE NEW NORM ACROSS ALL UTILITIES IS RATE INCREASES ARE A WAY OF LIFE.

IT'S, IT'S, IT'S AN EXPECTATION THAT IF YOU'RE, IF YOU ARE NOT CONSISTENTLY RAISING RATES, YOU'RE KICKING THE CAN DOWN THE ROAD AND YOU'RE COMPOUNDING THE PROBLEM FOR FUTURE GENERATIONS.

I THINK YOU'VE SEEN THAT INDUSTRIES WHERE THEY DON'T KEEP PRICES UP WITH THE COST OF DOING SERVICE OR THE RATES UP, YOU GET HIT WITH MASSIVE DOUBLE DIGIT INCREASES.

AND I THINK AS THE UTILITY CUS AGENCY, WHAT WE WANNA DO IS OBVIOUSLY KEEP RATES AS AFFORDABLE AS POSSIBLE BY KEEPING OUR COST PRESSURES DOWN.

BUT LOW CONSISTENT RATES FOR OUR RESIDENTS IS ONE OF OUR DRIVING FORCES IN THIS BUDGET.

AND THE FUTURE BUDGETS, AND I MENTIONED BEFORE, WE ARE HEAVILY RELIANT AND A PARTNER WITH OUR, OUR REGIONAL ENTITIES, METROPOLITAN WATER DISTRICT AND SOCAL GAS.

WE PRO WE RELY ON METROPOLITAN FOR WHOLESALE WATER AND FOR SOCAL GAS, WE HEAVILY RELY ON THEM FOR TRANSMISSION AND STORAGE.

THESE SAME FACTORS ARE HAPPENING ON THEIR END AND WE ARE POTENTIALLY THEIR CUSTOMERS.

SO WE'RE SEEING THOSE COST PRESSURES UNAVOIDABLE, COST PRESSURES PASSING THROUGH ALL THESE FIGURES YOU'RE GONNA SEE OVER THE NEXT FEW SLIDES.

AND LASTLY, AGAIN, THE, THE COST OF CLIMATE CHANGE, I THINK WHETHER IT'S WHIP SAWING, WEATHER PATTERNS AFFECTING WATER SUPPLY, WHETHER IT'S, YOU KNOW, COLD, COLD, A COLD SEASON IN TEXAS AFFECTS WHAT WE PAY FOR NATURAL GAS.

SO YOU'RE SEEING THAT WE, EVEN THOUGH WE TRY TO BE AS SELF-RELIANT AND RESILIENT AS POSSIBLE, WEATHER PATTERNS ACROSS THE COUNTRY, ACROSS THE WORLD DO REALLY DO AFFECT US HERE AT HOME TOO.

SO THOSE ARE, THOSE ARE FACTORS THAT WE ALSO CONSIDER WHEN TALKING ABOUT OUR CIP PROGRAM SPECIFICALLY MAKING SURE WHERE'S RELIANT AS POSSIBLE AND MAKING SURE INFRASTRUCTURE SOUND, WE'RE ABLE TO ACCESS CHEAP WATER, WE'RE ABLE TO ACCESS, UH, CHEAP NA NATURAL GAS AS CHEAP AS POSSIBLE FOR OUR CUSTOMERS.

SO WITH THAT BEING SAID, WE'RE GONNA DIVE INTO, UH, THE THREE FUNDS.

AGAIN, I WANNA MAKE THIS CONVERSATIONAL.

THIS IS A WORKSHOP.

SHOULD YOU HAVE ANY QUESTIONS, CONCERNS, PLEASE FEEL FREE TO CHIME IN.

IF SOMETHING LOOKS KIND OF OFF, UH, PLEASE, PLEASE SPEAK UP.

UM, SO WITH THAT, I'LL TURN OVER TO STEPHANIE FOR A DISCUSSION OF THE GAS FUND.

GOOD MORNING COMMISSIONERS.

WELCOME.

WELCOME TO BUDGET WORKSHOP ONE.

OKAY.

TO PROVIDE CONTEXT TO HOW WE ARRIVED TO WHERE THE GAS FUND IS, THIS TABLE ILLUSTRATES THE PAST FIVE YEARS OF NET OPERATIONS IN WHICH WE INITIALLY MAINTAINED A SURPLUS LARGELY IN FISCAL YEARS.

UH, UM, 2020 AND 2021 DUE TO COVID-19, WHICH CAUSED DEFERRALS AND CAPITAL IMPROVEMENT PROJECTS.

SUBSEQUENTLY, CIP DID RAMP UP ALONG WITH INFLATION AND FY 22 AND WERE PARTIALLY OFFSET BY PERSONNEL VACANCIES.

THE REVENUE DECREASE IN FY 23 IS ATTRIBUTED TO THE INITIAL PURCHASE OF THE FOURTH FLOOR OF THE ELM STREET BUILDING, UH, ACQUIRED BY THE CITY.

ABSENT THIS EXPENSE, OPERATIONS WOULD'VE ENDED THE YEAR IN A NET NEUTRAL POSITION CONSIDERING THE HIGH GAS PRICES.

IN CONSIDERATION OF THE FY UH, 25 BUSINESS PLAN STRATEGY, WE'D LIKE TO BRING TO YOUR ATTENTION THE FOLLOWING HIGHLIGHTS, SOCAL GAS TRANSMISSION RATES HAVE SIGNIFICANTLY INCREASED OVER THE PAST TWO YEARS.

NOTABLY, A 62% INCREASE IN FY 23 AND A 77 INCREASE, PERCENT

[00:10:01]

WE ANTICIPATE STEADY DEMAND BASED ON CURRENT USAGE.

HOWEVER, TWO LARGE COMMERCIAL ACCOUNTS WILL NO LONGER BE IN BUSINESS AFTER THIS FISCAL YEAR.

THE METER REPLACEMENT PROGRAM IS CURRENTLY ACCELERATING WORK DRIVEN BY THE 20 YEAR BATTERY LIFECYCLE AND DEPLOYMENT OF A MI ROUGHLY SEVEN YEARS AGO.

AS A REFRESHER, OUR DEPARTMENT IS THE FINANCIAL STEWARD OF AB 32 GREENHOUSE GAS EMISSIONS PROJECT FUNDING AND PARTNERSHIP WITH THE CITY MANAGER'S OFFICE OF CLIMATE ACTION AND SUSTAINABILITY.

CAPITAL IMPROVEMENT PROJECTS ARE EXPECTED TO CONTINUE TO MAINTAIN THE SAFETY AND RELIABILITY OF THE PIPELINE INFRASTRUCTURE ACCORDING TO THE ENGINEERING'S DI UH, DISTRIBUTION INTEGRITY MANAGEMENT PLAN.

LASTLY, THE SECOND DISTRIBUTION OF THE ELM STREET BUILDING TENANT IMPROVEMENTS IN THE AMOUNT OF $6.2 MILLION ARE CONSIDERABLE FACTORS WORTH NOTING.

SO HERE'S A HIGH LEVEL OF, UM, WHERE WE ARE TODAY AND WHERE WE COULD POTENTIALLY BE BY NEXT YEAR, UM, WITH TWO SCENARIOS.

ONE IS WITH A, UH, INCREASE, UH, NO INCREASE AND AN INCREASED PROPOSAL IN RATE REVENUES.

UM, CURRENTLY OUR FINANCIAL OUTLOOK DEPICTS A $7 MILLION DEFICIT THIS YEAR, AND THAT'S ATTRIBUTED TO THE SALARY SAVINGS AND SOCALGAS TRANSMISSION RATE INCREASES THAT BRANDON HAD PREVIOUSLY MENTIONED.

WITHOUT ANY RATE INCREASES, THESE INFLATED COSTS WILL IMPACT OUR FUND BALANCE BY COMPOUNDING THE DEFICIT YEAR OVER YEAR TO MITIGATE GREATER LOSSES.

THE PROPOSED FY 25 BUDGET REFLECTS THE DEFICIT REDUCTION OF ABOUT FIVE AND A HALF MILLION DOLLARS INCREASING BY INCREASING NON-COMMODITY REVENUE.

SO LET'S, UM, DIVE INTO, UM, THE DETAILS.

UM, WE HAVE OUR OPERATIONAL CHANGES, THOUGH GAS COMMODITY APPEARS TO INCREASE NEXT YEAR.

THE COST OF NATURAL GAS HAS BEEN LOWER THAN ANTICIPATED THIS FISCAL YEAR.

AND AS A REMINDER, THIS IS A PASS THROUGH TO THE CUSTOMERS.

AS PREVIOUSLY MENTIONED, SOCAL GAS TRANSMISSION COSTS HAVE RISEN BUT ARE ANTICIPATED TO REMAIN UNCHANGED.

GOING INTO FY 25 SALARY INCREASES FOR NEXT YEAR REFLECT A FULL YEAR'S WORTH OF COMPENSATION, AND THAT'S BECAUSE THIS YEAR WAS JUST A A PROPORTION OF THAT.

UM, IN ADDITION TO SHIFTING OF MANAGEMENT ALLOCATION BETWEEN WATER AND GAS, THE SCOPE OF CAPITAL IMPROVEMENT PROJECTS ARE EXPANDING BEYOND THE TRADITIONAL ENGINEERING CIP FOR PIPELINES AND NOW ALSO INCLUDES THE METER REPLACEMENT PROGRAM.

ADDITIONAL CIP BILLABLE WORK IS INCREASING BUT WILL BE COMPLETELY OFFSET BY REIMBURSEMENTS.

AND THAT'S FOR A MULTI-YEAR PORT PROJECT.

WITH RISING COSTS, WE ARE PROPOSING A SLIGHT REDUCTION IN THE GENERAL FUND TRANSFER BY JUST UNDER $1 MILLION.

UM, THE MOU REVENUE BUDGETED SLIGHTLY HIGHER FOR NEXT YEAR TO COVER THE INCREASED SALARY, UM, FOR SERVICES THAT WE PROVIDE.

AND LASTLY, AB 32 IS A NON-OPERATIONAL EXPENSE FOR CLIMATE, UH, CREDIT AUCTIONS USED TO FUND CITYWIDE GREENHOUSE GAS EMISSIONS PROJECTS, WHICH WE HAD FORGONE THIS YEAR BECAUSE OF THE GAS PRICE, UH, CRISIS LAST YEAR.

SO NEXT YEAR WE'LL BE RESUMING CITYWIDE PROJECTS.

AS FOR THE REVENUE, IN ORDER TO MAINTAIN THE EXPENSE BUDGET, WE HAVE VARIOUS FUNDING SOURCES, SOME OF WHICH ARE DIRECT PASS THROUGHS, INCLUDING THE GAS COMMODITY REVENUE, AB 32 AND CIP BILLABLE REIMBURSEMENTS.

OUR PRIMARY REVENUE STREAM IS THE GAS TRANSMISSION RE RATE, WHICH COVERS THE COST OF MAINTAINING PIPELINE INFRASTRUCTURE AND OVERHEAD ASSOCIATED, UM, SUCH AS PERSONNEL O AND M AND A PORTION OF CIP.

THE MAIN TAKEAWAY FROM THIS TABLE IS A PROPOSAL TO INCREASE TRANSMISSION RATES BY ABOUT $6 MILLION WHILE ENSURING COM COMPARABLE MARKET-BASED RATES WAS STILL CALGAS GIVEN THE UNANTICIPATED COST INCREASES IN RECENT MONTHS.

WE'RE CURRENTLY PROJECTING A STEEP DECLINE IN THE GAS FUND BALANCE, BEGINNING WITH THE $7 MILLION SHORTFALL BY THE END OF THIS YEAR, MITIGATED WITH ANNUAL RATE REVENUE INCREASES STARTING IN FY 25 AND A GRADUAL REDUCTION OF THE GENERAL FUND TRANSFER FROM $13 MILLION TO 10 MILLION, $10 MILLION OVER THE NEXT FIVE YEARS.

ADDITIONALLY, ADDITIONALLY, THESE PROJECTIONS ASSUME THAT SOCAL GAS RATES WILL BE HELD FLAT AND ELM TENANT IMPROVEMENTS ARE SPLIT BETWEEN FISCAL YEARS OF UH, 25 AND 26.

ALTHOUGH THESE PROJECTIONS ARE STARTLING, WE ARE ACTIVELY AND CLOSELY MONITORING THE FUND BALANCE AND ARE CURRENTLY WORKING WITH DOWNTOWN TO COMPROMISE ON THE GENERAL FUND TRANSFER.

ADDITIONALLY, THE POSITIVE OUTLOOK ON THE GAS FUND SITUATION IS THAT WE NOW HAVE OVERSIGHT BY ALL OF YOU THE COMMISSION, WHICH HAS ESTABLISHED A RESERVE POLICY FOR SHORT TERM, UM, CRITICAL NEEDS.

AND WITH THAT, UM, I CAN PASS IT OVER TO BRANDON UNLESS YOU HAVE ANY QUESTIONS FOR ME REAL QUICK TO GO BACK.

THIS IS A SCARY PICTURE.

I, I THINK IN, I CAN HEAR THE GAS IF, IF IF IT'S JUST INTERNALLY.

AND I THINK THAT, YOU KNOW, STEPHANIE MENTIONED THAT WE'RE LOOKING AT A $6 MILLION ESSENTIALLY NEED, UH, NEXT YEAR THROUGH RATES AND WHY WE DIDN'T ACTUALLY FORECAST AND ACTUALLY GIVE YOU A NUMBER OF TOWELS.

THAT'S GONNA BE THE TOPIC FOR WORKSHOP TOO.

YOU'RE FAMILIAR WITH

[00:15:01]

THERE'S USUALLY ONE HEADLINE NUMBER WE'VE APPLIED ACROSS THE BOARD.

THE GAS RATE STRUCTURE IS VERY, VERY COMPLEX.

MANY DIFFERENT TIERS, MANY DIFFERENT MOVING PARTS.

SO WE THOUGHT THAT IT WOULD, IT WOULD BE WORTHWHILE TO DO A DEEP DIVE IN WORKSHOP TOO, OF WHERE THOSE RATES GO.

AND AS STEPHANIE MENTIONED WAS REALLY IMPORTANT IS MAKING SURE THAT WE'RE COMPETITIVE WITH SOCAL GAS.

SO THERE'S A LOT OF MOVING PARTS WHEN IT COMES TO OPTIONS.

WE HAVE TO GET TO THAT $6 MILLION.

SO, UM, THOUGH WE'RE NOT COVERING THE EXACT RATE INCREASE, UH, TODAY, THAT THE, THE HEART AND THE MEAT OF A WORKSHOP TOO IS GONNA BE LAYING OUT TO THE BOARD.

WHERE DO WE COMPARE WITH SOCAL? WHAT ARE THE LEVERS THAT THE BOARD HAS TO, UM, GET US TO THAT $6 MILLION NEED WE HAVE? AND AGAIN, I THINK THE BIG, THE BIGGEST PART OF THE FUTURE YEARS IS, AGAIN, THESE ARE, THESE ARE, THEY'RE SCARY SCENARIOS, BUT THERE ARE ACTIONS WE CAN DO TODAY TO MAKE SURE THAT THESE NUMBERS, UH, OBVIOUSLY IMPROVE OVER TIME.

SO, UM, I'LL GET UP THIS SLIDE BEFORE IT, IT SCARES ANY, ANYONE ELSE, ANY ANYMORE? WELL ACTUALLY IF YOU CAN GO BACK, UH, TO SLIDE , GO BACK TO SLIDE SIX PLEASE.

ONE OF THE THINGS I WANNA POINT OUT TO THE, THE BOARD IS IF YOU LOOK AT FY 20 AND FY 21, UM, THAT WAS DURING COVID AND SO THERE WAS A LOT LESS BEING SPENT ON CIP 'CAUSE THERE WAS JUST NOT THE ABILITY TO EXPEND THE MONEY.

SO THEN YOU SEE WE COMING OUT OF COVID AND YOU SEE THE EXPENSES ARE GOING UP.

THEN YOU ALSO SEE IN FY 22 AND 23 BIG INCREASES IN EXPENDITURES AND REVENUES.

THAT'S LARGELY DUE TO THE COMMODITY INCREASES THAT WE EXPERIENCED.

AND NOW AS STEPHANIE SAID, THE PRICES HAVE COME BACK DOWN.

SO, UH, UM, HOPEFULLY GOING FORWARD, UH, YOU'LL SEE LESS OF THAT, THE IMPACT THAT WE HAD DURING THAT PERIOD.

IF YOU GO TO SLIDE SEVEN, PLEASE, UM, WHEN WE TALK ABOUT THE SOCAL GAS TRANSMISSION RATE INCREASE, THAT IS, IF YOU THINKING ON THE WATER SIDE, SOCAL GAS IS LIKE METROPOLITAN WATER DISTRICT IN THE SENSE THAT WE USE SEC.

UH, SO-CALLED GAS PIPELINES TO BRING NATURAL GAS PURCHASES THAT WE GET FROM OUT OF STATE IN CANADA TO, TO LONG BEACH.

AND SO WE PAY THEM A TRANSMISSION FEE FOR THAT.

AND THEN THOSE TRANSMISSION FEES THAT THEY CHARGE US ARE APPROVED BY THE CALIFORNIA PUBLIC UTILITIES COMMISSION.

SO WE REALLY DON'T HAVE, WE, WE GET INVOLVED WITH THE CPC, BUT THAT'S SET BY THE PUC AND WE DON'T HAVE CONTROL OVER THAT.

UM, AND THEN ELM, SHE MENTIONED, UM, IF YOU RECALL, UH, WE PAID, UH, $6 MILLION OUTTA THE GAS FUND THIS YEAR, UM, THAT WAS PREVIOUSLY APPROVED BY THE CITY COUNCIL.

AND THEN THE EXPECTATION IS THAT THERE'LL BE ANOTHER SIX AND A HALF MILLION DOLLARS IN IMPROVEMENTS TO THAT ONE FLOOR.

UM, AND I THINK WHAT WE'VE DONE IS WE'VE, UH, ANTICIPATED SPREADING THAT COST OVER TWO YEARS.

WE DON'T KNOW THAT FOR SURE, UM, THAT IS, UH, BEING HANDLED BY PUBLIC WORKS DOWNTOWN.

SO WE'D HAVE TO LET YOU KNOW HOW THAT CHANGES.

BUT, SO JUST WANNA GIVE YOU A HEADS UP ON THAT.

YEAH, SO I THINK WHERE WE'VE BEEN, IT'S VERY IMPORTANT TO NOTE THAT WE HAVE BEEN ESSENTIALLY RUNNING FLAT UP UNTIL LAST FISCAL YEAR.

I THINK THE LABOR INCREASES, OBVIOUSLY THE CPI INCREASES WE'RE SEEING ON THE CONSTRUCTION SIDE IS REALLY HAMMERING FUND BALANCE.

SO I THINK, AS STEPHANIE MENTIONED, I CAN'T REITERATE ENOUGH, THE BIGGEST BENEFIT I SEE PERSONALLY OF THE MERGER IS HAVING A DEDICATED STAFF OR COMMISSION WITH THE BANDWIDTH TO TALK ABOUT WHERE ARE WE GOING THE LAST FIVE, NEXT FIVE YEARS.

I THINK AS, IT'S NOT A KNOCK ON THE CITY COUNCIL OR THE CITY MANAGER, BUT I THINK IT'S, YOU KNOW, GAS SERVICES WAS ONE SERVICE AMONGST MANY POLICE, FIRE PARKS, PUBLIC WORKS LIBRARIES.

WE PROVIDE RESIDENTS BANDWIDTH, WHICH WASN'T THERE TO FULLY FOCUS ON WHAT SHOULD WE BE DOING OPERATIONALLY TO MAKE SURE THAT THE FUND IS HEALTHY FOR THE NEXT FIVE, 10 YEARS, MAKING SURE THAT WE'RE KEEPING RATES AS COMPETITIVE AS POSSIBLE.

SO EVEN THOUGH THIS LOOKS LIKE A VERY BAD PICTURE, I HAVE FULL CONFIDENCE THAT WITH THE BOARD'S DIRECTION, INTENT AND QUESTIONING, WE CAN, WE CAN RIGHTSIZE THE SHIP THIS YEAR STARTING INTO THE NEXT FIVE YEARS.

SO LET'S PIVOT NOW TO THE WATER SIDE.

SO I'LL TURN OVER TO A**L FOR THE NEXT TWO SLIDES TO TALK ABOUT HOW WE GOT WHERE WE'RE AT TODAY WHEN IT COMES TO, UH, BIG PICTURE REGIONAL ISSUES.

THANK YOU BRANDON.

UM, YEAH, SO ON HERE WE GO TO THE WATER FUND BUDGET AND WHAT WE START FIRST IS A GRAPH.

SO LET ME JUST WALK YOU THROUGH THE GRAPH.

IT IS OUR HISTORICAL WATER CONSUMPTION, OUR POTABLE WATER CONSUMPTION.

UM, ON THE BOTTOM, YOU SEE THE YEAR 1997 IS ON THE FAR LEFT AND ON THE FAR RIGHT, THE MOST RECENT YEAR THAT WE HAVE ALL THE DATA FOR IS, UH, CALENDAR YEAR 23.

AND YOU CAN SEE IT'S A DECLINE.

IT'S A DECLINE IN WATER USE AND YOU CAN RELATE IT TO WATER CONSERVATION.

AND IN FACT, WHEN YOU GET INTO BUDGET SEASON, MANY PEOPLE RELATED EXACTLY TO THAT.

I WANT TO HIGHLIGHT FOR YOU WHAT ALSO IS IN THIS GRAPH IN THE MIDDLE YEARS AROUND 2007 TO 2009, WHAT HAPPENS IS THE RELIABILITY OF THE STATE WATER PROJECT IS BROUGHT INTO QUESTION BECAUSE A JUDGE'S RULING AFFECTS THE IMPACT ON FISH AND FISH POPULATIONS IN THE DELTA, IT BEGINS TO LIMIT EXPORTS ON PUMPING AND THE RELIABILITY OF ONE OF THE IMPORTED WATER SYSTEMS IS COMPROMISED.

THAT DECISION COMES AHEAD OF A SIGNIFICANT DROUGHT IN THAT TIMEFRAME JUST BEFORE 2010.

AND CORRESPONDINGLY, THIS DEPARTMENT AT THE TIME, THE WATER DEPARTMENT WITH ITS RESIDENTS AND ACROSS MUCH OF SOUTHERN CALIFORNIA ENGAGED IN A MAJOR WATER CONSERVATION EFFORT

[00:20:01]

AND SO YOU CAN SEE A BIG DROP THERE AROUND THE MIDDLE OF THE GRAPH.

IMPORTANT TO NOTE IS THAT PARTICULAR TO LONG BEACH, BUT ALSO THROUGHOUT SOUTHERN CALIFORNIA, THE RESIDENTS CAN CONSERVE AND THEY GET TO A NEW LEVEL OF CONSUMPTION.

AND THAT'S IMPORTANT BECAUSE WHAT HAPPENS AFTER THAT IS THAT THE SUPPLY DOESN'T BECOME MORE RELIABLE.

THE SUPPLY BECOMES LESS RELIABLE.

AS WE GET INTO THE YEARS LEADING UP TO 2015, THAT IS TOWARDS THE SECOND THIRD OF THE GRAPH.

ON THE RIGHT HAND SIDE, YOU CAN SEE THERE'S A LITTLE BIT OF RISE IN CONSUMPTION AND ALL OF A SUDDEN THERE'S ANOTHER DROP.

AND THAT'S IN REACTION TO A MULTI-YEAR DROUGHT THAT OCCURS LEADING INTO 2015.

THAT CONSERVATION LEVEL AND RESPONSE IS APPROPRIATE, RESPONDING TO THE SITUATION AT THAT TIME, BUT IT'S ALREADY A REACTION THAT'S AT A DIFFERENT LEVEL OF CONSUMPTION.

YOU CAN IMAGINE WHAT WOULD'VE HAPPENED IF THE CONSERVATION RESPONSE IN 2015 WAS BASED ON THE CONSUMPTION THAT WE WERE SUSTAINING BACK IN 1997.

IF WE WERE DRINKING THAT MUCH WATER AS WE WERE BACK THEN WITH ABOUT THE SAME POPULATION, THEN WE WOULD FIND OURSELVES DRAMATICALLY HAVING TO ALTER OUR WATER USE.

BUT IN 2015, UH, THAT'S THE LAUNCH OF MISSION, H2O LONG BEACH, THAT'S THE LAUNCH OF LIVE H2O LONG BEACH.

THAT'S THE LAUNCH OF MANY OF THE CONSERVATION PROGRAMS THAT ARE AWARD-WINNING AND RECOGNIZED THROUGHOUT SOUTHERN CALIFORNIA THAT WE DID HERE IN LONG BEACH.

AND YOU CAN SEE THAT CONS, UH, CONSERVATION HAS ITS CORRESPONDING EFFECT.

WATER USE COMES DOWN AGAIN.

AND THEN WE GET INTO WHAT BRANDON HIGHLIGHTED TO YOU IS CLIMATE CHANGE IMPACTS.

AND IN THE 20 21, 22 TIMEFRAME WE EXPERIENCE IN THE STATE OF CALIFORNIA, THE WORST THREE YEARS OF THE STATE WATER PROJECT'S HISTORY IN RAPID SUCCESSION, UH, NEVER EXPERIENCED ANYTHING LIKE THAT.

IMPORTANT TO NOTE THAT WITH THAT THERE WAS A LOT OF NEWSPAPER COVERAGE ABOUT STATE WATER PROJECT DEPENDENT AREAS, WHICH YOU WOULD RECOGNIZE AS VENTURA COUNTY, LARGE PORTIONS OF NORTHERN LOS ANGELES COUNTY.

THEY HAD TO SEVERELY CUT BACK THEIR WATER USE.

IT'S IMPORTANT TO NOTE THAT FOR LONG BEACH AS WELL AS THE REST OF SOUTHERN CALIFORNIA, THERE WAS LITTLE TO NO IMPACTS IN WATER SUPPLY USAGE.

AND THAT WAS BECAUSE ALREADY, AS YOU CAN SEE, BY THE TIME WE GET TO THE RIGHT HAND SIDE OF THE GRAPH, OUR CONSERVATION RESPONSE HAS PAID OFF HANDSOMELY TO US BECAUSE IT ALLOWS US TO ENJOY THE WATER USAGE THAT WE CURRENTLY DO, THE LIFESTYLE THAT WE CURRENTLY DO, AND WE DON'T FIND OURSELVES HAVING TO DO DRAMATIC CUTBACKS THAT WE WOULD'VE HAD TO IF WE HAD NEVER ENGAGED IN THIS RECORD ATTEMPT AT CONSERVATION DATING BACK NOW ALMOST 15 YEARS.

SO WE TALK ABOUT BUDGET SEASON AND WE TALK ABOUT THE BUDGET AND WE TALK ABOUT WATER RATES AND THAT, AND PEOPLE EQUATE CONSERVATION AND WATER RATES IN ONE PARTICULAR WAY.

BUT I WANTED TO SHARE WITH YOU THIS PERSPECTIVE THAT CONSERVATION DOES BENEFIT US ALL, AND IT DOES SO BY LIMITING OUR EXPOSURE TO CUTBACKS AND RESTRICTIONS AND THINGS THAT WE DON'T INHERENTLY ASSOCIATE WITH WATER TODAY.

WE LOVE THE RELIABILITY THAT WE HAVE AND THE FACT THAT THE WATER IS AVAILABLE TO US EVERY DAY, AND THAT THAT'S AN IMPORTANT PART AS WE GO INTO BUDGET AND RATE SEASON.

THANK YOU, BRENDA.

I ECHO EVERYTHING HE JUST SAID.

UM, THIS, THIS CHART MOVING ON IS SOMETHING A CHART YOU'VE SEEN BEFORE.

ESSENTIALLY WHAT THIS DOING IS PICKING UP, ESSENTIALLY WHAT THE LAST PART OF THAT, OF THIS, OF THIS GRAPH HERE IS THE TOP LINE HERE IS OUR LAST THREE YEARS IN OUR ESTIMATE OF FY 24 OF OUR CUSTOMER DEMAND.

AS YOU NOTICE, THE 2021 TO 23 TRACKED THAT LOWER DOWNWARD TREND.

23, AGAIN, THERE AS A REMINDER WAS A HISTORICALLY WET WINTER.

AGAIN, NOT AS FREQUENTLY THE AMOUNT OF DAYS AS RAIN, BUT A LOT OF RAIN ALL AT ONCE.

SO THE DEMAND IN 23 WAS AT A, WE HOPE IT WAS A, A TROUGH 24.

OUR ESTIMATES ARE SHOWING DEMAND SLIGHTLY UPTICK.

BUT I WANNA POINT OUT THOUGH, ESSENTIALLY THE BOTTOM THREE LINES ARE OUR SOURCES OF WATER.

AND THIS IS AN ACRE FEET, THE AMOUNT OF PUMPED WATER, THE AMOUNT OF WATER WHICH ESSENTIALLY IS CONTRACTED PUMPED FROM LAKEWOOD AND THE AMOUNT OF PURCHASED WATER.

WHAT'S MAKING THESE NUMBERS A LITTLE WONKY? IT'S A VERY, VERY HEAVY FOOTNOTE I WANNA CALL OUT.

IT IS FY 22 AND FY 24.

YOU NOTICE THE PURCHASE WATER AMOUNTS ARE QUITE HIGH.

THAT'S SPECIFICALLY DUE TO THE TREATMENT PLANT SHUTDOWN.

SO AS WE MENTIONED BEFORE, TO MAINTAIN SAFETY TO MAKING SURE THAT WE'RE KEEPING THE TREATMENT PLANT FULLY OPERATIONAL EV ABOUT EVERY OTHER YEAR, RIGHT? EVERY OTHER YEAR, WE, WE SHUT THE TREATMENT PLAN DOWN FOR ROUTINE MAINTENANCE TIME, LOT OF THE CAPITAL PRODUCTS TO MAKE SURE THAT THAT ESSENTIALLY IS THE HEART OF OUR, OF OUR WATER SYSTEM.

WE WANNA MAKE SURE IT'S HEALTHY AND STRONG.

SO WHAT IT ENDS UP DOING IS RE REQUIRING US TO PURCHASE A, A HEAVY AMOUNT OF PURCHASE WATER WHILE THAT TREATMENT PLAN IS SHUT DOWN.

SO IF YOU KIND OF PULLED THOSE TWO NUMBERS OUT OF 22 AND 24, WHAT YOU'RE SEEING IS SOMETHING THAT WE ARE VERY PROUD OF AND WE'RE FOCUSED ON IS THE AMOUNT OF PURCHASE WATER DECLINING

[00:25:01]

IT'S A DIRECT IMPACT FROM ALL OF OUR CAPITAL INVESTMENT PROGRAMS. UM, WE'VE BEEN INVESTING IN, ESPECIALLY OVER THE LAST THREE YEARS.

AND WE'LL CONTINUE WITH THE BOND THAT YOU APPROVED LAST, UH, LAST MONTH.

SO OUR GOAL IS TO SEE THAT PURCHASE WATER AMOUNT GO DOWN, THE MORE EXPENSIVE WATER GO DOWN AS DEMAND GOES DOWN ACCORDINGLY.

SO LET'S TALK ABOUT OUR FY 25 BUDGET.

SO STRUCTURALLY IN FY 24, WE'RE SEEING A SLIGHT BOUNCE BACK IN REVENUE.

AND WITH SOME, UH, CIP DEFERRALS, WE'RE ESSENTIALLY GONNA PRO, UH, PROPOSING TO RUN A NET, ESSENTIALLY A NET NEUTRAL OPERATION, A BREAK EVEN OPERATION FY 24.

BUT FACTORING IN SOME OF THE METROPOLITAN RATE INCREASES, THE LABOR INCREASES AND THE SLIGHT UPTICK IN HOPEFULLY IN DEMAND WE'RE PROJECTING WITH NO RATE INCREASE TO RUN ABOUT A $2 MILLION DEFICIT.

SO LET'S PUT THAT IN CONTEXT.

UM, IN THE NEXT FEW SLIDES, THE NEXT FEW SLIDES IS GOING TO EMBED AN 11% PROPOSED RATE INCREASE THAT IS FOR DISCUSSIONARY PURPOSES RIGHT NOW.

UH, AT THE, AT THE APRIL 4TH BOND PRESENTATION, I PRESENTED A FIVE-YEAR FORECAST.

I KIND OF BAKED IN THIS 11% AND SHOWED WHAT THE WOULD LOOK LIKE, KIND OF THE NECESSARY RIGHT SIZING OF REVENUE TO MATCH WHAT WE WE'RE SEEING.

AS I MENTIONED, THOSE, THOSE SOMETIMES UNAVOIDABLE EXPENSE DRIVERS GOING IN THE OUT YEARS.

SO AGAIN, NO FORMAL ACTION IS, IS REQUESTED TODAY.

THE 11% IS TO SHOW YOU KIND OF WHAT WE'RE TALKING ABOUT AND WHAT THAT WOULD MEAN IN NEXT FISCAL YEAR AND HOW THAT IS A POSITIVE BENEFIT GOING OUT TO THE NEXT FOUR OR FIVE YEARS.

SO STEPHANIE DID, I'LL DO A QUICK RUNDOWN OF SOME OF THE MAJOR EXPENSE DRIVERS, AS YOU MENTIONED.

UM, AS WE MENTIONED BEFORE, WE'RE STILL GONNA SEE THE, THE FULL ANNUALIZED RATE IN, UH, LABOR INCREASES HIT IN FY 25, OUR CIP UH, PROGRAM.

SO THE 34 MILLION, I THINK WE BUDGETED 41 THE SLIGHT DEFERRALS MOVING INTO NEXT FISCAL YEAR.

BUT THE 50 MILLION, I WANNA POINT OUT 34 AND A HALF MILLION OF THAT IS BEING FUNDED BY THE BOND ISSUANCE THAT WE ARE, KNOCK ON WOOD CLOSING, UH, AS A, AS OF, UM, TUESDAY, NEXT TUESDAY.

SO I WANNA THANK THE BOARD AGAIN FOR THEIR FORESIGHT AND APPROVAL OF LETTING US TO ACCESS THAT DEBT FINANCING TOOL.

IT'S ESSENTIALLY 34 AND A HALF MILLION DOLLARS.

WE'RE ABLE TO AMORTIZE AND SPREAD THE COST OUT OVER 30 YEARS, IF NOT FOR THAT BOND.

THAT'S 34 AND A HALF MILLION DOLLARS HAVING TO COME OUT OF OUR RATE PAYERS POCKETS, UM, THIS YEAR.

SO, UH, TH THANK YOU TO THE BOARD AND THE CITY COUNCIL FOR APPROVING THAT O AND M.

UH, WE'RE DOING SOME BELT TIGHTEN AND REALIZING THAT, YOU KNOW, INFLATION IS A, A WAY OF LIFE AND MAINTAINING MORE OR LESS A FLAT O AND M WATER PURCHASES.

SO TWO THINGS ARE GOING ON.

ONE IS I, THE GRAPH BEFORE WE DO EXPECT TO PURCHASE LESS WATER NEXT YEAR WITH NO TREATMENT PLANT SHUT DOWN AND REDUCE, REDUCE DEMAND.

BUT METROPOLITAN, UH, THEY WERE FLOATING A DOUBLE DIGIT RATE INCREASE TO US AS WHOLESALE RATE CUSTOMERS, BUT THEY DID SOME SORT OF PROPERTY TAX MECHANISM.

BUT WE'RE STILL WITH THAT SEEING A, AN 8.5% RATE INCREASE FOR ALL OF OUR PURCHASE WATER NEXT YEAR.

SO THOSE ARE EMBEDDED IN OUR FY 25, BUT IT'S ALSO DEBT SERVICE.

I WANNA POINT OUT THE TIMING OF THE BOND WAS VERY FORTUITOUS.

UM, THERE'S ABOUT SIX AND A HALF MILLION DOLLARS OF DEBT SERVICE NOW ACCRUING EVERY SINGLE YEAR, ANNUALLY FOR THIS NEW BOND ISSUANCE.

BUT WE HAVE A 2010 BOND ROLLING OFF.

SO ALL THAT MEANS NET, NET IS WE'RE KEEPING DEBT SERVICE LEVELS AT A VERY LOW LEVEL, A MANAGEABLE LEVEL MOVING FORWARD.

SO WE HAVE NO CONCERNS ABOUT COVERAGE RATIOS AND BEING ABLE TO DEBT, FINANCE, FUTURE PROJECTS IF NEEDED.

SO THAT'S, THAT'S VERY, VERY CRITICAL VEHICLES.

AS I MENTIONED, CLIMATE CHANGE IS THE NEW REALITY, AND I THINK YOU'VE SEEN IN THE PAPERS TOO, CARB, THE CARB MANDATES OF, OF EV UH, MANDATED VEHICLES FOR MEDIUM AND HEAVY DUTY.

A HUGE MAJOR ISSUE.

WE'LL BE COMING BACK TO THE BOARD IN THE NEXT FEW WEEKS TALKING ABOUT OUR PROGRAM TO MEET THOSE MANDATES.

BUT EVS ARE EXPENSIVE.

UH, JUST LOOK AT, UH, FORD F-150 VERSUS FORD F-150.

LIGHTNING MASSIVE INCREASE OF, OF COST.

NOT ONLY THAT IS RELIABILITY OF DELIVERY.

SO WE ARE COMPETING WITH EVERY AGENCY ACROSS NOT ONLY CALIFORNIA, BUT THE, THE, THE STATE AND THE COUNTRY FOR THESE, THESE ELECTRIC VEHICLES.

SO IT'S NOT LIKE BUYING A FORD FOCUS FOR THE DEALERSHIP, IT'S BUYING THOSE HEAVY DUTY F TWO 50 YELLOW TRUCKS, THE SWEEPERS, THE DUMP TRUCKS.

THE MARKET IS NOT QUITE THERE YET.

SO WE'RE HAVING TO BALANCE WHERE'S THE MARKET AT? WHERE ARE THE, WHERE ARE THESE EXPENSIVE VEHICLES GONNA COME FROM? BUT THIS INCREASE DOES, UH, WE'LL DIG IN MORE DETAIL IN THE NEXT FEW WORKSHOPS OF, OF FACING THAT NEW REALITY OF CARD MANDATES.

AND TYING THIS TEAM HAS DONE A WONDERFUL JOB LAYING OUT A 10 YEAR PLAN TO MAKE SURE THAT WE'RE OBVIOUSLY NUMBER ONE, COMPLYING WITH STATE MANDATES, BUT DOING SO IN A VERY, VERY FINANCIALLY PRUDENT WAY TO KEEP COSTS DOWN FOR OUR CUSTOMER.

SO WE'LL GO INTO MORE DETAIL IN THE NEXT FEW WORKSHOPS.

AND AGAIN, THE GENERAL FUND TRANSFER, UH, NO MORE MEASURE AND TRANSFER.

SO THAT'S SEVEN POINT HALF MILLION DOLLARS ANNUALLY THAT WE ARE NO LONGER TRANSFERRING TO THE GENERAL FUND AS A RESULT OF, OF THE MEASURE M LAWSUIT.

THIS IS ESSENTIALLY THE NEXUS AMOUNT, THE THE PIPELINE CHARGE FOR RUNNING OUR, OUR PIPES THROUGHOUT THE CITY STREETS, HOLDING STEADY AT ABOUT $2 MILLION NEXT FISCAL YEAR ON THE REVENUE SIDE.

SO FOR AN ILLUSTRATIVE PURPOSES, AGAIN, WHAT WE DID IS BAKED IN A WHAT WOULD AN 11% INCREASE DO FOR US? AND OBVIOUSLY IT'S A, IT'S INCREASING OUR POTABLE WATER SALES, AS I MENTIONED BELOW, ABOUT 20 AND A HALF MILLION DOLLARS ARE WE'RE USING TO SUBSIDIZE OUR CIP PROGRAM FROM THE BOND PROCEEDS AGAIN THIS YEAR.

AGAIN, WONDERFUL TO BE ABLE TO SPREAD THOSE COSTS TO MATCH THOSE BENEFITS OVER THE NEXT 30 YEARS.

AND WE'RE DOING SOME,

[00:30:01]

SO AGAIN, WHAT DOES THIS MEAN? UM, A A A LITTLE BIT BRIGHTER PICTURE THAN THE GAS FUND SIDE, BUT AS I MENTIONED BEFORE, AS YOU'LL SEE ACROSS THE BOARD, GO INTO THE METROPOLITAN BOARD MEETINGS, UH, TALK, LOOK AT THIS.

SOQUEL GAS, UM, RATE PROPOSALS, RATE INCREASES ARE A WAY OF LIFE.

IT'S AN UNFORTUNATE ASPECT OF RUNNING UTILITY BECAUSE I THINK THAT WE'VE, UH, TRIED OUR BEST TO SOCIALIZE OUR CUSTOMERS AND, AND THE BOARD TO KNOW THAT THE COST PRESSURES ARE UNAVOIDABLE, UH, 25%.

UH, AS I MENTIONED, ENI INDEX OVER THE LAST THREE YEARS, LABOR INCREASES.

UH, I KNOW THERE'S A, A LOOMING, UM, PERS INCREASE COMING DOWN THE PIPELINE FOR ALL CALPERS, UM, BENEFICIARIES THE NEXT, THE NEXT FEW YEARS.

ALL THAT BEING SAID IS, IS WE'RE DOING OUR BEST TO MAKE STRATEGIC INVESTMENTS IN OUR CAPITAL PROGRAM TO LOWER COSTS WHERE WE CAN REDUCING THE RELIANCE ON IMPORTED WATER, LOOKING AT SYNERGIES WHEN IT COMES TO A NEW SHARED UTILITY TO MAKE SURE THAT WE'RE ABLE TO STABILIZE OUR, OUR FUNDS.

SO WHAT THIS IS DOING IS SAYING THAT IF YOU DID AN 11% INCREASE IN FY 25, THE GOAL IS TO MITIGATE THOSE INCREASES IN THE OUT YEARS TO ESSENTIALLY MATCH INFLATIONARY PRESSURES MOVING FORWARD.

AND AGAIN, WITH THE TARGET OF MEETING OUR MINIMUM RESERVE LEVEL.

AGAIN, I HAVE TO REITERATE THREE MAIN PURPOSES OF THE RESERVE FUND, RAINY DAY RESERVE.

IF UNSEASONABLY WET WINTERS EMERGENCY REPAIRS HAPPEN, IT'S NICE TO HAVE THAT BUFFER TO BE ABLE TO ADDRESS THOSE CONCERNS AND NOT HAVE TO DO AN IMMEDIATE RATE INCREASE TO THEIR, TO OUR RESIDENTS TO, TO UH, HAVE, UM, THEM BEAR THE BRUNT OF THAT.

UH, THE BIGGEST THING THOUGH, OBVIOUSLY IS NOW GOING OUT FOR DEBT IS THIS IS WHAT THE RADIO AGENCIES LOOK AT RIGHT AWAY.

IT'S LIKE YOUR CREDIT SCORE, RIGHT? YOU'RE GOING OUT FOR A, A MORTGAGE.

THEY'RE LOOKING AT IS YOUR REVENUE MAINTAINING YOUR LEVEL OF LIFE? ARE YOU INBA I BALANCE? DO YOU HAVE AN EMERGENCY RESERVE? OH, THIS FUND BALANCE IS A REFLECTION OF HOW PRUDENT WE ARE COLLECTIVELY MANAGING OUR FINANCES.

MAINTAINING A UPWARD TRAJECTORY IS VERY, VERY KEY TO THE RATING AGENCIES.

SO AS WE TALK ABOUT CIP PROGRAMS THAT WE'LL GO REVIEW IN THE NEXT FEW WORKSHOPS, UH, NEW FACILITIES, NEW CAMPUSES, NEW TREATMENT PLANS, NEW PIPELINE WORK, ALL THAT IS GONNA HAVE TO BE DEBT FUNDED IN SOME WAY, SHAPE OR FORM.

IF WE'RE ABLE TO SHOW THAT WE'RE KEEPING OUR FINANCES IN ORDER, LIKE, LIKE GETTING A MORTGAGE, OUR, OUR RATES, OUR BORROWING RATE WILL BE VERY COMPETITIVE, WHICH WILL KEEP, UH, RATES DOWN AND COST DOWN FOR, FOR OUR CUSTOMERS.

SO THAT'S VERY, VERY IMPORTANT FOR US.

SO I'LL BRIEFLY TURN OVER TO THE SEWER FUND.

UM, AGAIN, THE SEWER FUND IS ABOUT A SEVENTH, THE SIZE OF, OF THE WATER FUND.

SO THESE NUMBERS ARE A LOT SMALLER, BUT SAME FACTORS ARE GOING INTO PLAY.

WE'RE SEEING THE SAME, UH, INFLATIONARY PRESSURES ON THE CAPITAL IMPROVEMENT SIDE, THE SAME LABOR INCREASES, BUT THREE DISTINCT DIFFERENCES WITH THE, UH, THE WATER FUND.

UM, THE LAST FEW YEARS, IF YOU NOTICE, I CALL IT THE CRANE INDEX.

YOU GO DOWNTOWN, YOU SEE CRANES.

WHAT DOES THAT MEAN? THAT'S DEVELOPMENT.

THAT'S DEVELOPMENT MEAN MORE SEWER CAPACITY FEES.

SO WE HAVE A A, A MAJOR SOURCE OF REVENUE FOR THE SEWER FUND IS AS YOU'RE BUILDING NEW UNITS, THAT'S A NEW HOOKUP TO OUR SEWER SYSTEM.

SO WE GET A A, A KIND OF THAT, THAT REVENUE FROM THE DEVELOPERS AS THAT CONSTRUCTION WORK HAS REALLY KIND OF REACHED A PEAK OVER THE PAST FEW YEARS.

OUR REVENUE'S ACTUALLY DONE BETTER THAN WE'VE ORIGINALLY PROJECTED.

THAT'S STARTING TO SLOW DOWN.

WE'RE RECOGNIZING WE'RE GOING BACK DOWN TO BASELINE.

SO THAT, THAT'S ONE CRUCIAL ASPECT.

ANOTHER CIP WORK.

SO WE PROJECT TO SPEND ABOUT $3.8 MILLION IN CIP FOR FY 24.

THAT'S JUST REFLECTS A DEFERMENT OF ONE PROJECT.

SO SOME REGULATORY AND SUPPLY CHAIN DELAYS.

THAT'S ONE PROJECT AT TWO AND A HALF MILLION DOLLARS.

THAT'S WHY IT'S BEING DEFERRED TO THE NEXT YEAR.

THE REST OF THE JUMP HAS TO DO WITH PROACTIVE PIPELINE WORK.

SO ROBIN, HIS ENGINEERING TEAM RECENTLY COMPLETED A SEWER MASTER PLAN.

SO A LOT OF THAT IS GONNA COME A LOT OF PROACTIVE PIPELINE WORK THAT IS CRITICAL TO MAKE SURE THAT OUR SEWER SYSTEM IS FULLY FUNCTIONING.

THERE'S A ONE PROJECT, I BELIEVE ABOUT TWO AND A HALF, $3 MILLION BAKED IN FY 25.

THAT'S A PROACTIVE RESPONSE TO SOME OF THE, UM, SOME SPILL ISSUES WE'VE SEEN OVER THE PAST FEW YEARS.

SO ROBIN AND HAS TEAM HAVE DONE A GREAT WORK TO MAKE SURE THAT WE'RE KEEPING UP WITH OUR IMPROVEMENT WORK TO MAKE SURE THAT WE ARE MINIMIZING THE CHANCE OF A SEWAGE BILL, WHICH NO ONE, I MEAN NO ONE WANTS TO, WANTS TO DEAL WITH.

SO WE'RE DOING HERE FOR AN ILLUSTRATIVE PURPOSES IS BUILDING A AN 8% RATE INCREASE.

AGAIN, SEWER HAS NOT RAISED RATES, I BELIEVE IN TWO YEARS.

SO ESSENTIALLY WE ARE TWO YEARS BEHIND WHEN KEEPING UP WITH INFLATION.

I THINK DUE TO THOSE INCREASED CAPA THOSE SEWER CAPACITY REVENUES FROM DEVELOPERS, WE WERE ABLE TO FOREGO A RATE INCREASE.

BUT AGAIN, SEWER IS JUST LIKE ANY OTHER UTILITY.

WE'RE LOOKING JUST TO PASS ALONG THE COST THAT WE'RE SEEING, UM, FROM A FORCES OUTSIDE OF OUR CONTROL.

SO WHAT DOES THAT MEAN? I MENTIONED THAT THE SEWER FUND IS ONE SEVENTH THE SIZE.

WHAT THAT MEANS, IT'S VERY, VERY, VERY SENSITIVE TO ANY KIND OF WHIP SHOWING OF ANY COST INCREASES.

IF YOU NOTICE THE BANDWIDTH BETWEEN THE MINIMUM AND MAXIMUM BOUNCE IS ONLY $5 MILLION, ESSENTIALLY ONE AND A HALF CIP PROJECTS.

SO WHAT YOU'RE SEEING IN COMING FROM FFY 24 TO FY 25 IS THAT ONE ADDITIONAL PIPELINE PROJECT COMING ON, ON, ON ONLINE, LESS CAPACITY REVENUE.

SO OUR FUND BALANCE IS NOW GOING DOWN TO THE MINIMUM.

SO AGAIN, ANY KIND OF SENSITIVITY TO INCREASES ON THE REVENUE ON THE EXPENSE SIDE OR DECREASES IN REVENUE, REALLY WHAT SAW THE SEWER FUND BACK AND FORTH.

SO, UM, WE WERE VERY, VERY SENSITIVE TO MAKING SURE THAT WE'RE DEALING WITH A VERY, VERY SMALLER POT OF MONEY.

[00:35:01]

A LOT OF INFORMATION.

AGAIN, I THINK, UH, THE GOAL TODAY WAS JUST TO GIVE YOU A 10,000 FOOT LEVEL OF WHERE WE ARE, HOW WE GOT HERE WITH THESE THREE FUNDS WHERE WE PROJECT TO GO AT FY 25, KIND OF GETTING, SETTING THE STAGE FOR MORE IN DEPTH CONVERSATION.

UM, AFTER THIS, WE'RE HAPPY TO HEAR COMMENTS AND FEEDBACK AGAIN, I THINK THE, THE FOCUS OF NEXT WORKSHOP WILL BE DRILLING DOWN INTO RATES TO FIGURE OUT WHAT OUR OPTIONS ARE, HOW IS IT GONNA AFFECT OUR CUSTOMERS, UM, GETTING BOARD DISCRETION AND GUIDANCE ON WHAT WE WANNA TALK ABOUT ON THE REVENUE EXPENSE SIDE.

UM, BUT WITH THAT, A LOT OF INFORMATION.

UM, THANK YOU FOR YOUR ATTENTION.

IF YOU HAVE ANY QUESTIONS OR CONCERNS, I'M SURE YOU DO.

UM, LET'S HAVE A CONVERSATION.

THANK YOU.

OH, THANKS BRANDON.

THANK YOU STEPHANIE.

WOW, THAT WAS RATHER DAUNTING.

, THAT'S A LOT.

WE LOOK FORWARD TO THOSE WORKSHOPS.

UM, ANY, UH, PUBLIC COMMENTS? ANY COMMISSIONER COMMENT? GO AHEAD.

SO JUST A COUPLE CLARIFICATIONS FOR MY OWN EDIFICATION.

THE, UM, UH, YOU TALKED ABOUT, UH, LOSS OF A COUPLE INDUSTRIAL CUSTOMERS.

WHO IS THAT SPECIFICALLY? SURF PLANT IS THE ONE WITH NATURAL GAS USER MAINLY IN THE WINTERTIME.

AND THEN, UH, NATIONAL GYPSUM, I THINK IS THE, THE DRYWALL PROVIDER, UH, DOWN GOLD BOND.

GOLD BOND, YEAH, GOLD.

OKAY.

THEY, THEY DO DRYWALL DOWN IN THE, UH, PORT AREA, RIGHT? SO THEY'RE CLOSING DOWN.

UH, AND THEN, UH, YOU TALKED ABOUT A, UH, CIP BILLABLE, UH, GAS PROJECT, UH, IN THE PORT.

WHAT IS THAT SPECIFICALLY? I TALK ABOUT THAT.

SO THE, THE PORT OF LONG BEACH IS DOING THEIR PURE B UH, RAIL EXPANSION.

UH, THERE'S A LOT OF UTILITIES.

UH, I THINK WATER IS IMPACTED AS WELL.

UH, SO WE'RE MOVING SOME OF OUR GAS PIPELINES, UH, TO ACCOMMODATE THAT PROJECT.

UM, I THINK WE'RE SPENDING CLOSE TO 6 MILLION NEXT YEAR ON THAT, BUT THAT IS ALL REIMBURSABLE FROM THE PORT.

OKAY, PERFECT.

THANK YOU.

I THINK THAT'S ALL I HAD.

THANK YOU, BRANDON.

APPRECIATE THAT.

UM, I, I DO AGREE RATE INCREASES ARE A WAY OF LIFE.

MY CONCERN, KNOWING THAT THIS IS OUR FIRST ONE AND THERE'LL BE MANY, MANY QUESTIONS THAT COME UP.

UM, SO WE'LL HAVE TO KIND OF GO THROUGH THIS WHOLE PROCESS AND THEN DISCUSS IT AT THE END.

BUT WHEN RATE INCREASES ARE A WAY OF LIFE, BUT THEN ALSO CONSERVATION IS A WAY OF LIFE.

THE CONCERN THAT I HAVE, AND I'M SURE THE REST OF US SHARE, IS THAT OUR COMMUNITY IS LOOKING AT IT AND SAYING, RIGHTFULLY SO, YOU KNOW, WE'RE SAVING WATER, WE'RE DOING WHAT WE'RE SUPPOSED TO, AND YET NOW WE'RE HAVING TO, YOU KNOW, PAY MORE.

HAVING SAID THAT, I DON'T KNOW HOW WE TRY AND, AND INFORM PEOPLE MORE, BUT, UM, I THINK THERE'S GOTTA BE A WAY THAT WE COULD MAYBE DO A TOWN HALL OR DO SOMETHING WHERE I KNOW WE DO PROP TWO 18, PEOPLE DON'T TEND TO COME TO THAT, BUT IF WE COULD DO SOMETHING THAT WOULD, IF PEOPLE ARE INTERESTED IN THAT TO EXPLAIN SOME THINGS AS TO WHY WE HAVE TO GET TO THE POINT WHERE WE'RE AT, UM, I THINK IT MIGHT BE WORTH OUR WHILE TO DO THAT FOR, FOR OUR RESIDENTS.

RIGHT.

I WE CAN CERTAINLY LOOK AT DOING A PUBLIC WORKSHOP AND, AND DISCUSSING IT.

OKAY.

THANK YOU.

ANY OTHER COMMENTS FROM COMMISSIONERS? AND AS, AS WE'VE SAID, THIS IS JUST STEP ONE OF THE BUDGET DISCUSSION.

WE'RE GONNA HAVE, UH, MORE IN-DEPTH DISCUSSIONS OVER THE NEXT TWO WORKSHOPS.

AND CERTAINLY TALKING ABOUT, UH, NOT ONLY THE RATES, BUT SOME OF THE COMPONENTS OF SOME OF THE, UH, I THINK S STEPHANIE MENTIONED, THE LEVERS THAT YOU CAN PULL TO, UH, TO, TO MITIGATE SOME OF THAT.

SO WE'LL BE TALKING ABOUT IN MUCH MORE DETAIL.

OKAY, THAT'S GREAT.

THANK YOU.

SO, UM, I NEED A, UM, A MOTION TO RECEIVE AND FILE OVERVIEW OF THE UTILITIES DEPARTMENT PROPOSED BUDGET.

SECOND.

ALL IN FAVOR? AYE.