* This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting. [00:00:02] I [CALL TO ORDER] WOULD LIKE TO CALL THE MEETING OF THE FINANCE COMMITTEE TO ORDER. IF WE COULD HAVE A ROLL CALL PLEASE. [ROLL CALL] YES. CHAIR PARKIN HERE. MEMBER SCOTT PRESENT. THANK YOU. THANK YOU. APOLOGIES FOR THE DELAY. UM, BUT I'M LOOKING FORWARD TO THIS FIRST MEETING IN THE FINANCE COMMITTEE SO I CAN LEARN A LOT OF STUFF HERE. SO, ITEM ONE IS A RECOMMENDATION TO APPROVE [1. 26-53968 Recommendation to approve April 24, 2025 Finance Committee meeting minutes.       Suggested Action: Approve recommendation. ] APRIL 24TH, 2025, FINANCE COMMITTEE MEETING MINUTES. DO I HAVE A MOTION? MOTION SECOND. ANY PUBLIC COMMENT? ANY COMMISSIONER COMMENT? THANK YOU. ALL THOSE IN FAVOR? AYE. AYE. OPPOSED? MOTION APPROVE. SECOND ITEM RECOMMENDATION TO RECEIVE AND FILE THE 2025 PRELIMINARY YEAR END FINANCIAL UPDATE. MAY I HAVE A MOTION? MOTION AND A SECOND AND I WILL TURN IT OVER TO STAFF. THANK YOU. GOOD MORNING, COMMISSIONERS. UH, TODAY WE'RE GONNA BE GOING OVER THE PRELIMINARY FY 25 YEAR END. SO I'LL GO AHEAD AND GET STARTED. UH, SO WE HAVE A COUPLE HIGHLIGHTS THAT WE WANTED TO POINT OUT. UH, SPECIFICALLY FIVE. UH, THE FIRST ONE WOULD BE THAT THE MAJORITY OF THE ADJUSTMENTS THAT YOU'RE GONNA SEE ARE OFFSETS RELATED TO THINGS LIKE, UH, COMMODITY CHARGES, UH, AB 32 LB SEVEN A AND SOME OF THE, UH, REIMBURSABLE CIP PROJECTS. UH, THE NEXT POINT IS GONNA BE THAT THE CIP, UH, REDUCTIONS THAT YOU'RE GONNA SEE ARE ALSO GOING TO FOLLOW SOME OF THE DEFERMENT AND THE DEBT PROCEEDS THAT WE ORIGINALLY ALLOCATED FOR THOSE CIP PROJECTS. UH, THE THIRD POINT WE WANNA MAKE IS THAT A LOT OF OUR LABOR PROJECTIONS THAT YOU'RE GONNA SEE ARE GONNA BE, UM, IN LINE WITH THE PREVIOUS ESTIMATES. SO I'LL BE REMINDING YOU OF WHAT WE PRESENTED BACK TO THE BOARD IN MAY, AND THEN SHOW YOU WHERE WE LEFT OFF FROM THERE. UH, SIMILAR TO LABOR, UH, WE'RE SEEING THE REVENUE, UH, FOR SALES, UH, UH, SPECIFICALLY FOR THE WATER, GAS, AND SEWER THAT ARE ON, ON TARGET WITH THE PREVIOUS PROJECTIONS. UM, UH, WHICH IS GREAT NEWS BECAUSE THAT'S WHAT WE WERE HOPING FOR. AND LASTLY, THE COLLECTION OF BAD DEBT EXPENSE. SO IF YOU RECALL, DIANA BROUGHT OVER, UM, PART OF THE BOARD RETREAT, THE EFFORTS, UH, THAT TOOK PLACE IN REGARDS TO COLLECTING SOME OF THAT BAD DEBT THAT WE HAD OUTSTANDING. SO WE'RE GONNA SEE A, A SIGNIFICANT INCREASE IN THE FUND BALANCE RELATED TO THAT, TO THOSE EFFORTS. ALRIGHT, SO GO AHEAD AND STARTING WITH THE GAS FUND. SO, UH, HERE WE HAVE THE STRUCTURE, UH, WHERE WE HAVE THE TOTAL EXPENDITURES, TOTAL REVENUE, UH, WE HAVE THE FY 25 BUDGET, AND THEN WE HAVE THE FY 25, Q2 ET CS. SO THIS IS WHAT WE HAD BROUGHT TO THE BOARD BACK IN APRIL, UH, DURING THE LAST FINANCIAL UPDATE. UH, SO WE WANTED TO TAKE IT OFF FROM THERE, UH, AND THEN SHOW YOU THE Q4 AS WELL AS THE VARIANCE RELATED TO THE, THE Q, THE Q2 TO THE Q4 VARI OR COMPARISON. SO AS YOU CAN SEE IN THE EXPENDITURES, WE'RE SEEING A DECLINE OF ABOUT 3.7 MILLION IN THE GAS FUND, AND THEN WE'RE SEEING AN INCREASE IN REVENUES ABOUT 670,000. WHAT THIS MEANS IS THAT WE'RE GONNA HAVE A FUND BALANCE GAIN ROUGHLY ABOUT 4.3 ABOVE THE PREVIOUS ESTIMATE, AND THEN WE'LL GET INTO THAT IN THE LAST SLIDE FOR THE GAS. SO, JUMPING INTO THE, UH, CATEGORIES, STARTING WITH REVENUE, UH, FOR THE REVENUE GAS TRANSMISSION REVENUE, WE ARE SEEING A SLIGHT DECLINE DUE TO WARMER WEATHER. UH, IN REGARDS TO THE GAS COMMODITY, UM, AGAIN, THIS IS ONE OF THE OFFSETS THAT WE HAVE. SO ALTHOUGH WE ARE SEEING AN INCREASE HERE, WE'RE GONNA SEE AN OFFSET RELATED, UH, ON THE EXPENDITURE SIDE. UH, GAS SERVICE FEES AND PREPAY. SO THIS IS WHERE WE BAKE IN OUR BAD DEBT EXPENSE. SO AS YOU CAN SEE HERE, WE ARE SEEING AN INCREASE. SO ANTICIPATING THAT, UH, FOR THE FUND BALANCE, CIP BILLABLE PROJECTS CAME IN, UH, UNDER, HOWEVER, THERE IS THE OFFSET AND THE CIP EXPENSES. SO WE ARE SEEING, UH, THAT THOSE PROJECTS BEING DEFERRED. SO THAT REVENUE WILL BE COMING IN IN THE CURRENT YEAR FOR FY 26, AB 32 AND THE MOUS, UH, WE DID SEE A SLIGHT INCREASE, UH, FOR THE MOUS. UH, AB 32 AGAIN IS A PASS THROUGH. SO SORRY, GOING BACK TO MOUS, WE ARE SEEING THAT INCREASE OF ABOUT 700,000 IN REGARDS TO THE MISCELLANEOUS REVENUE, UH, WE'RE SEEING AN INCREASE OR A DECREASE OF ROUGHLY 300,000. UH, THIS IS RELATED. THERE'S A COUPLE OF DIFFERENT OBJECTS HERE THAT ARE, ARE COST, UH, THAT ROLL UP INTO THIS AMOUNT. UH, MAINLY BEING THINGS LIKE INTEREST POOLED CASH, UH, INVENTORY, UM, AND MISCELLANEOUS REFUNDS. SWITCHING OVER TO THE EXPENDITURE SIDE, [00:05:01] AGAIN, WE HAVE THE, THE, UH, FY 25 BUDGET, SAME, UH, AS BEFORE ETC. AND THEN WE HAVE THE Q4 AND THEN THE VARIANCE COLUMN. UH, SO AS I MENTIONED IN THE REVENUE SLIDE, WE HAVE THE GAS COMMODITY, AGAIN, IS A FUND NEUTRAL, SO NO IMPACT TO THE FUND. WE HAVE THE GAS TRANSMISSION REVENUE, UH, WHICH IS ALSO LOWER DUE TO THE WARMER WEATHER SALARIES, WAGES, AND BENEFITS. UM, AS I HAD MENTIONED EARLIER IN THE THE BEGINNING SLIDES, UH, WE ARE ANTICIPATING COMING IN VERY CLOSE TO THE ORIGINAL PROJECTION THAT WE PROVIDED DURING THE Q2 UPDATE. UH, JUST WANTED TO POINT AS OUT AS WELL THAT, UH, THIS IS COMING IN UNDER BUDGET. SO, UH, WE'RE LOOKING TO FINISH THE YEAR ROUGHLY 34 MILLION. AND, UH, WE ORIGINALLY BUDGETED 35.3 MILLION OM UH, THE MAIN DRIVER FOR THE O AND M REDUCTION OF ABOUT A MILLION DOLLARS WAS THERE WAS A ROOF REPAIR, UH, DEDICATED TO THE GAS CAMPUS. UH, THAT'S GONNA BE PUSHED OUT, UH, TO THE CURRENT YEAR FY 26. SO WE'RE HOPING TO GET THAT DONE THIS YEAR. IN TERMS OF THE CIP COMPLIANCE AND THE BILLABLE, THIS IS, UH, AGAIN, DEFERRED PROJECTS. SO WE HAD A FEW PROJECTS, MAINLY THE PIER B RAIL CIP PROJECT OVER AT THE PORT, SO THAT'S GONNA BE DEFERRED, SORRY, UH, AB 32 AGAIN, UH, THE WASH, SIMILAR, UH, WHAT YOU SAW ON THE REVENUE SIDE. UH, AND THEN MOUS WE'RE SEEING A DECREASE, UH, MAINLY RELATED TO TI AND FLEET AND SOME OTHER, UH, CITY CHARGES. GENERAL FUND TRANSFER IS PROJECTED TO REMAIN FLAT. UM, SO WE'RE EXPECTING NO CHANGE THERE. NOW WHAT DOES THAT MEAN IN TERMS OF FUND BALANCE? SO AS I MENTIONED IN THE FIRST SLIDE RELATED TO THE GAS, WE ARE SEEING AN INCREASE OF ABOUT, UH, JUST OVER $4 MILLION. UH, SO WE'RE NOW, WE'RE PROJECTING, ALTHOUGH WE ORIGINALLY, UH, THE LAST Q2 ESTIMATE WAS, UH, 2.9 MILLION. UH, WE'RE NOW AIMING TO FINISH THE YEAR AT 7.3, SO A SLIGHT IMPROVEMENT. UM, NOW SWITCHING OVER TO THE WATER FUND. WATER FUND, UH, SIMILAR, UH, TO WHAT I MENTIONED BEFORE IN THE GAS, UM, WE HAVE THE UPDATED Q4 COLUMN AND THEN THE ETC VARIANCE. SO, UM, BIG TAKEAWAY HERE. UH, WE HAVE, UH, 3.6 MILLION LESS IN EXPENDITURES, AND THEN WE HAVE A $12 MILLION REDUCTION IN REVENUE. AND I'LL GET INTO WHAT THAT MEANS AND WHAT HAPPENED THERE. UM, WHAT THAT MEANS IN TERMS OF NET EFFECT OF PREVIOUS FUND BALANCE PROJECTIONS TO THE CURRENT IS A REDUCTION OF ABOUT 8.6 MILLION. DANIEL? YES? CAN I JUST ASK A QUICK QUE ON THIS? YOUR ESTIMATE TO CLOSE IS NOT COMPARING IT TO THE BUDGET, IT'S NO, IT'S TO Q2 VERSUS Q4? CORRECT. OKAY. ALRIGHT. ALL OF THESE NUMBERS, YES. YEAH. UH, SO STARTING OFF WITH THE, UH, POTABLE WATER SALES AND RECLAIMED WATER SALES. SO THIS IS, UH, SOMETHING THAT WE'RE VERY EXCITED ABOUT. SO WE HAD BUDGETED 126 MILLION, UH, THE LAST ETC UH, CAME IN AT 126 MILLION, AND IT LOOKS LIKE WE'RE GONNA FINISH THE YEAR AT 126 MILLION. SO IN ALL THE YEARS THAT I'VE DONE THIS, THIS IS THE CLOSEST I'VE EVER COME TO NAILING THE SALES PROJECTIONS. SO, UH, VERY PROUD OF THAT. UH, MISCELLANEOUS REVENUE. SO THESE ARE SMALL AMOUNTS HERE, BUT, UH, THE MAJORITY OF IT'S COMING FROM, UH, INTERESTS, UH, GRANTS, AND THEN OTHER MISCELLANEOUS REFUNDS, UH, MAINLY COMING FROM THE LB SEVEN A. SO THIS IS WHERE WE BOOK OUR, UM, THE WATER WE PURCHASE, UH, TO, TO PROTECT DC WATER BARRIER. UH, AND THEN YOU'RE GONNA SEE AN OFFSET ON THE EXPENDITURE SIDE, WHICH IS A REDUCTION IN THE PUMPED IN PURCHASE DEBT PROCEEDS. AS I MENTIONED IN THE EARLY SLIDES, UH, THIS IS THE MAIN DRIVER OF WHY THE FUND BALANCE IS DROPPING. SO ORIGINALLY WE HAD BUDGETED 34 AND A HALF MILLION, AND THEN WE GOT IT TO 29 AND A HALF, AND NOW WE'RE LOOKING TO FINISH YEAR AT 19 MILLION. UH, WHAT THIS MEANS IS NOT LOST REVENUE, IT'S A DEFERMENT OF THE REVENUE. SO WE ARE RESERVING THIS AMOUNT, UH, FOR THE CURRENT YEAR, FY 26, AND THEN WE PLAN TO BE CAUGHT UP. UH, SO AGAIN, THIS IS NOT LOST REVENUE, IT IS DEFERRED REVENUE. AND THEN IN TERMS OF THE REIMBURSABLE CIP, WE'RE PROJECTING TO FINISH A YEAR, UH, EQUAL TO OUR LAST PROJECTION, UH, WITH ROUGHLY THREE AND A HALF MILLION SALARIES, WAGES, AND BENEFITS. UM, SO SIMILAR TO THE SALES FORECAST, WE ARE VERY CLOSE TO OUR PREVIOUS ESTIMATE. UH, WE ORIGINALLY BUDGETED 36 AND A HALF MILLION. UM, AND THE Q2 ESTIMATE, [00:10:01] UH, THAT WE PROVIDED BACK IN APRIL WAS 34, UH, AND A HALF. AND NOW WE'RE LOOKING AT 34 MILLION. SO VERY CLOSE TO THE PREVIOUS ESTIMATE. SO NOT A LOT OF CHANGE WHEN IT COMES TO THE SALARIES, WAGES, AND BENEFITS, UH, CIP, UH, WE HAVE A DEFERMENT OF PROJECTS HERE, UM, UH, MAINLY DUE TO THE HANES PROJECT HERE, SO WE'RE SEEING A DEFERMENT OF THE THREE AND A HALF, UH, MILLION FOR THE O AND M. UM, THE MAJORITY OF THIS IS REALLY COMING FROM, UH, INCREASES WE'RE SEEING ACROSS THE BOARD, UH, THAT WE'RE ATTRIBUTING TO THE MAIN BREAK. AND SOME OF THE, UH, JUST A SIMILAR, SOME OF THE OVERALL COSTS THAT HIT THE O AND M CATEGORY. SO PIPES, FITTINGS, ALL THOSE, ALL THOSE CATEGORIES, UH, PUMPED IN PURCHASE. AS I MENTIONED IN THE MISCELLANEOUS REVENUE, UH, WE ARE SEEING A VERY SMALL REDUCTION. SO, UH, PREVIOUS ESTIMATE WAS 42 MILLION, AND WE'RE LOOKING TO FINISH THE YEAR AT 41.6. UH, THIS ADJUSTMENT IS MAINLY DUE TO THE LB SEVEN A. SO WE SAW A REDUCTION IN THE REIMBURSABLE ON THE REVENUE SIDE, AND NOW WE'RE SEEING A REDUCTION IN THE COST, UH, ON THE EXPENSE SIDE. UH, DEBT SERVICE, UH, AND THE GENERAL FUND TRANSFER ARE STAYING, UH, FLAT WITH THE PREVIOUS PROJECTIONS. SO WE'RE NOT ANTICIPATING ANY CHANGES WITH THAT. WHAT THAT MEANS IN TERMS OF FUND BALANCE IS WE ARE TAKING THE ORIGINAL, UH, OR THE LAST ESTIMATE AT THE 18.9 MILLION AND LOOKING TO FINISH THE YEAR AT 10.2. BUT AGAIN, UH, TO REMIND YOU, THIS IS MAINLY DUE TO THE DEFERMENT OF THE DEBT PROCEEDS IN THE REVENUE CATEGORY. SO THE, THAT REVENUE IS GONNA BE PUSHED OUT, UH, TO THE CURRENT YEAR, AND, UH, WE'RE GONNA USE THAT TO HELP PAY OFF SOME OF THOSE CIP PROJECTS. SWITCHING OVER TO THE SEWER FUND, WE ARE SEEING AN INCREASE IN THE EXPENDITURES OF ROUGHLY HALF A MILLION DOLLARS, UH, FOR THE SEWER FUND, AND THEN AN INCREASE IN THE REVENUES FOR ONE AND A HALF MILLION. AND THE NET EFFECT OF THAT IS AN INCREASE TO FUND BALANCE OF ROUGHLY A MILLION DOLLARS, STARTING WITH THE SEWER REVENUE. UM, SIMILAR TO THE WATER REVENUE, UH, WE HAD BUDGETED 13 AND A HALF, OR SORRY, WE BUDGETED 19 AND A HALF MILLION, UH, WITH THE LAST Q2, WE WERE ANTICIPATING 19, A LITTLE OVER 19, AND IT LOOKS LIKE WE'RE FINISHING AGAIN, A LITTLE OVER 19. SO THIS IS VERY CLOSE TO THE ORIGINAL, UH, BUDGETED AMOUNT. SO VERY CLOSE ON OUR ESTIMATES FOR THE SALES SEWER CAPACITY. UH, WE'RE SEEING AN INCREASE, UH, FROM THE ORIGINAL BUDGET AMOUNT WITH 2.2 MILLION. SO THIS IS JUST INCREASED ACTIVITY. SO 2.4 MILLION IS LOOK, IS WHERE WE FEEL LIKE WE'RE GONNA FINISH THE YEAR OUT. SO ADDITIONAL 200,000 MISCELLANEOUS REVENUE IS A COMBINATION OF, AGAIN, INTEREST PULLED CASH, THINGS LIKE INVENTORY LOSS, SO SMALL THINGS, UM, FOR MISCELLANEOUS REVENUE. AND THEN IN TERMS OF THE REIMBURSABLE CIP, THAT WAS ONE OF OUR PROJECTS, UM, THAT WE, UH, THE HAYES PROJECT THAT WE'RE PUSHING OUT. SO, UH, ORIGINALLY WE HAD THOUGHT THAT WE WEREN'T GOING TO BE ABLE TO COLLECT THAT MONEY ON TIME. SO IF YOU LOOK AT THE Q2 ESTIMATE, WE WEREN'T ANTICIPATING TO RECEIVE THAT REVENUE, UH, BUT WE WERE ABLE TO COLLECT THAT, UH, BEFORE THE YEAR ENDED. SO NOW YOU'RE SEEING AN INCREASE IN THE REIMBURSABLE AMOUNT, UH, SALARIES, WAGES, AND BENEFITS SIMILAR TO THE OTHER FUNDS, WE, WE ARE COMING IN VERY CLOSE TO THE PREVIOUS ESTIMATES, SO ORIGINALLY BUDGETED 7.6 MILLION, AND NOW IT LOOKS LIKE WE ARE GONNA FINISH THE YEAR AT SEVEN POINT, UH, 2 MILLION. SO ONLY $60,000 DIFFERENT FROM THE ORIGINAL ESTIMATE, WHICH IS AGAIN, VERY CLOSE. UH, IN TERMS OF THE INCREASE IN THE O AND M, UH, WE DID SEE AN INCREASE. THE MAIN, UH, CAUSE OF THIS WAS REALLY THREE DIFFERENT CATEGORIES. THE DISPOSAL SERVICES, UH, SECURITY TECHNICAL SERVICES, UH, BUT REALLY THE DISPOSAL SERVICES REALLY BEING THE, THE MAIN DRIVER THERE. SO THAT'S SOMETHING THAT WE'RE GONNA KEEP AN EYE OUT, UH, WHEN WE GO THROUGH THE, UH, FY 26 ETC AS WELL AS THE FY 27 BUDGET DEVELOPMENT GENERAL FUND TRANSFER. AGAIN, THIS IS THE, UH, NEXUS STUDY, UM, AND WE SAW AN INCREASE ON THE SEWER SIDE, SO HIGHER THAN THE WATER SIDE. SO, UH, SOMETHING THAT WE'RE GONNA, AGAIN, HAVE TO ADJUST FOR THE, UH, UP FOR THE, UH, FY 26, UH, UPDATE, AS WELL AS [00:15:01] THE FY 27 BUDGET. SO WE'RE LOOKING TO RIGHTSIZE THIS, UH, GOING FORWARD. WHAT DOES THAT MEAN IN TERMS OF FUND BALANCE? WELL, AS I MENTIONED IN THE FIRST SLIDE, UH, WE'RE LOOKING TO ADD ROUGHLY A MILLION DOLLARS, UH, TO THE FUND BALANCE. UM, THIS, THIS IS ALL GOOD SIGNS BECAUSE THE MAJORITY OF IT'S COMING FROM, UH, THE OPERATING REVENUE SIDE. SO GOOD NEWS THERE. OKAY, SO KEY TAKEAWAYS. UH, JUST WANTED TO REMIND, UH, THE COMMITTEE THAT THIS IS A PRELIMINARY UPDATE. UH, WE STILL HAVE, I BELIEVE, IN A MONTH BEFORE THE OFFICIAL CLOSE HITS. UM, BUT YOU KNOW, I THINK IT'S IMPORTANT TO CONTINUE TO POINT OUT SOME OF THE CHALLENGES THAT WE'RE HAVING WITH INCREASE, UH, CIP EXPENSES, LABOR, AND, UH, JUST GENERAL INFLATIONARY PRESSURES THAT WE HAVE. UM, NEXT IS THE, THE NEXT THING I WANTED TO POINT OUT WAS THAT A LOT OF THE UPDATES HERE ARE IN LINE WITH THE PREVIOUS, UH, FINANCIAL UPDATE THAT WE GAVE TO THE BOARD BACK IN APRIL. SO NOT TOO MANY CHANGES. I MEAN, THE WATER, UH, THE WATER SIDE IS THE ONE THAT WE'RE SEEING THE MOST CHANGE IN. AND AGAIN, THAT'S JUST DEFERRED REVENUE. UH, BUT IN TERMS OF THE GAS AND SEWER FUNDS, UH, WE'RE LOOKING LIKE WE ARE FOR THE MOST PART ALIGNING WITH PREVIOUS PROJECTIONS. NEXT STEPS. SO NEXT STEPS, UH, STEPHANIE'S GONNA BE GOING OVER, UM, THE BUDGET CALENDAR AND WHAT WE CAN EXPECT FROM A FUTURE FINANCE COMMITTEES, AS WELL AS SOME OF THE, WHAT WE USED TO CALL BUDGET WORKSHOPS. SO WE HAVE A NEW BRAND NAME FOR THAT AND STEPHANIE'S GONNA GET MORE INTO THAT ON THE, UH, NEXT AGENDA ITEM. BUT THAT, ARE THERE ANY QUESTIONS? DANIEL? THANK YOU THAT, THAT WAS A LOT OF INFORMATION REALLY QUICK, SO I APPRECIATE IT. UM, I'M STILL DIGESTING IT. UM, ANY PUBLIC COMMENT? ANY COMMISSIONER COMMENT? MY ONLY COMMENT IS THAT I DON'T HAVE ANY COMMENTS, , SORRY, I WISH I HAD MORE FOR YOU. UM, YEAH, IT'S A LOT TO DIGEST. UM, UH, OBVIOUSLY DISAPPOINTED IN, IN, UH, THE REDUCTION IN THE, UH, THE RESERVES. THAT'S SOMETHING THAT, THAT THE BOARD IN GENERAL HAS, HAS CONTINUED TO VOICE CONCERN ABOUT. AND, UH, SO WE, WE DEFINITELY NEED TO START SEEING SOME IMPROVEMENT IN THAT. AND I KNOW WE'RE, WE'RE HOPING TO DO IT OVER LONG TERM, UH, YOU KNOW, WITH, WITH WAGE ADJUSTMENTS. BUT, UM, YEAH, WE'RE THAT, THAT'S STILL A CONCERN. YES, THAT'S, THAT'S ALL I HAVE TO SAY THAT. THANK YOU DANIEL. APPRECIATE IT. NO PROBLEM. UM, DO WE HAVE A MOTION? UH, WE HAVE A MOTION AND A SECOND TO RECEIVE AND FILE ALL THOSE IN FAVOR? AYE. AYE. OPPOSED? NONE. MOTION CARRIES. UM, NEXT UP TO RECEIVE AND FILE THE LONG BEACH PUBLIC UTILITIES DEPARTMENT'S FY 2027 BUDGET PLANNING OVERVIEW. UM, [2. 26-57326 Recommendation to receive and file FY 2025 Preliminary Year-End Financial Update.       Suggested Action: Approve recommendation. ] DO I HAVE A MOTION TO RECEIVE AND FILE, RECEIVE AND FILE? SECOND. I WILL SECOND THAT. AND STEPHANIE, PLEASE. THANK YOU. GOOD MORNING. GOOD MORNING CHAIR. AND DO I CALL YOU COMMITTEE MEMBER OR PRESIDENT ? WELL, GOOD MORNING EVERYONE. HAPPY NEW YEAR. UH, SO TODAY WHAT I'M GOING TO BE BRINGING TO YOU IS THE FY 27 BUDGET PLANNING OVERVIEW, PERFECT TIMING FOR THE START OF THE YEAR. ALRIGHT, SO I'LL BEGIN BY GROUNDING THE DISCUSSION IN OUR COMMITMENT TO RELIABLE SERVICES IN THE UTILITY, UH, DEPARTMENT, FOLLOWED BY AN OVERVIEW OF KEY CHALLENGES AND COST DRIVERS SHAPING THE FFY 27 BUDGET. I ALSO WANT TO SAY THAT, UM, THIS IS INTENDED TO SET THE STAGE FOR OUR UPCOMING BUDGET DISCUSSIONS WITH YOU ALL. UM, WE'RE GOING FOR SOMETHING RADICALLY DIFFERENT, UH, AS A**L AND I HAVE, UM, SET THAT GOAL FOR US. SO SINCE THIS IS AN EARLY, UH, BUDGET DISCUSSION, I AM WELCOMING THIS, UH, PRESENTATION AS A DIALOGUE. UH, IF YOU HAVE ANY QUESTIONS, FEEL FREE TO JUST JUMP RIGHT IN AND, UH, PROVIDE ANY FEEDBACK. AND ALSO THE INTENT IS TO, UM, PROVIDE TRANSPARENCY AND EARLY ENGAGEMENT. SO WE TOOK SOME LESSONS LEARNED FROM PRIOR YEARS. UM, ADDITIONALLY I'LL BE BRINGING, UH, SHOWING YOU SOME KEY, UH, CHALLENGES AND COST DRIVERS THAT ARE INFLUENCING THE BUDGET. UH, THEN I'LL BE GOING INTO THE HOW WE'RE BALANCING AFFORDABILITY WITH FINANCIAL SUSTAINABILITY. AND THEN, UM, I'LL SHOW YOU THE, WE'LL WALK THROUGH THE BUDGET PROCESS TIMELINE, AND AFTER THAT I'LL PROVIDE A RECOMMENDATION. ALRIGHT, SO OUR FY 27 BUDGET PLANNING CONTINUES TO BE GUIDED BY OUR CORE MISSION OF DELIVERING SAFE AND RELIABLE WATER, GAS, [00:20:01] AND SEWER RESOURCES. UM, I HAD TO DO THAT FOR THE EFFECT. UM, AND THIS IS IN ALIGNMENT WITH OUR, OUR BUSINESS PLAN OBJECTIVES. THIS COMMITMENT REQUIRES ONGOING INVESTMENT IN INFRASTRUCTURE, REGULATORY COMPLIANCE, SYSTEM RESILIENCY, AND A SKILLED WORKFORCE. SO, AS YOU CAN SEE IN EVERY PHOTO, WE WANTED TO BE ABLE TO HIGHLIGHT THE WORKFORCE THAT WE HAVE IN EACH OF THE FUNDS AND SERVICES THAT WE PROVIDE. I THINK A LOT OF TIMES WHEN WE THINK OF UTILITIES, WE THINK OF IT AS JUST THE COMMODITY ITSELF, BUT THE WORKFORCE IS WHAT REALLY DRIVES THIS, UH, ABILITY TO CONTINUE TO PROVIDE THAT FOR LONG BEACH. AS SYSTEMS AGE AND SERVICE EXPECTATIONS GROW, MAINTAINING RELIABILITY BECOMES MORE RESOURCE INTENSIVE, MAKING THOUGHTFUL LONG-TERM FINANCIAL PLANNING, ESPECIALLY CRITICAL. SO TO YOUR POINT ABOUT THE LAST AGENDA ITEM, THIS IS SOMETHING THAT WE'RE KEEPING AT TOP OF MIND. SO I'LL BE, UM, GOING OVER WHAT WE CALL SOME OF OUR MAJOR ITEMS FOR OUR, UH, KEY CHALLENGES AND COST DRIVERS. AND FIRST, STARTING OFF WITH COMMODITY, WE HAVE THE SUPPLY MANAGEMENT AND VERY DEMANDS FOR UTILITY RESOURCES. AS YOU KNOW, WATER AND GAS AND SEWER OPERATE VERY DIFFERENTLY. SO WE HAVE TO BE, UH, VERY MINDFUL AND INTENTIONAL ABOUT HOW WE PLAN, UM, FORWARD. UH, ADDITIONALLY, WE HAVE, UH, REGULATORY LANDSCAPES FOR, FOR EACH OF THOSE, UM, SERVICES THAT WE HAVE TO, UH, BE MINDFUL AND CONSIDERATE OF FOR OPERATIONS AND MAINTENANCE. WE HAVE ONGOING MAINTENANCE OF OVER 4,000 MILES OF MAINE AND LATERAL WATER, SEWER AND NATURAL GAS PIPELINES. AND AS DANIEL HAD POINTED OUT IN THE FY 25, UM, FINANCIAL UPDATE, INFLATIONARY PRESSURES. SO WE'RE, WE SEE THAT, UH, AND ARE PROJECTING THAT IN THIS NEXT YEAR. UM, AS I MENTIONED, WE HAVE OUR LABOR AND WORKFORCE. SO WITH THAT COMES COMPETITIVE WAGES WITH THE PRIVATE SECTOR, UH, WORKFORCE DEMOGRAPHICS. UM, WE SEE A LOT OF PEOPLE WHO ARE STARTING TO RETIRE WHEN WE HAVE PEOPLE WHO HAVE INSTITUTIONAL KNOWLEDGE THAT ARE, UM, MOVING ON INTO THE NEXT PHASES OF THEIR LIVES. SO BEING ABLE TO HAVE THAT CONTINUITY IN, IN SERVICES AND BUILDING UP, UM, NEWER STAFF IS, IS KEY. UM, AND LASTLY, INCREASED SERVICE LEVEL DEMANDS. AND THEN WE HAVE INFRASTRUCTURE IMPROVEMENTS. SO WE HAVE THE IMPLEMENTATION OF MULTIPLE UTILITIES, UH, MASTER PLANS TO MAINTAIN INFRASTRUCTURE INTEGRITY AND THE LA 28 OLYMPICS PREPARATION. THESE PRESSURES REQUIRE US TO BE DELIBERATE IN PRIORITIZING INVESTMENTS WHILE MAINTAINING FINANCIAL STABILITY. A CENTRAL OBJECTIVE OF THE FY 27 BUDGET DEVELOPMENT PROCESS IS BALANCING THE NEED FOR ADEQUATE FUNDING WITH OUR RESPONSIBILITY TO KEEP UTILITY RATES AFFORDABLE FOR CUSTOMERS. I WANNA EMPHASIZE THE WORD RESPONSIBILITY. THIS IS OUR RESPONSIBILITY TO MAKE SURE THAT WE ARE PROVIDING THE BEST RATES THAT WE CAN TO OUR CUSTOMERS WITHOUT, UM, JEOPARDIZING THE INTEGRITY OF OUR INFRASTRUCTURE AND SERVICES. WE APPROACH THIS BY CAREFULLY EVALUATING EXPENDITURES, IMPLEMENTING PROCESS EFFICIENCIES, STRATEGIC DECISION MAKING AND FINANCING OF LONG-TERM CAPITAL ASSETS SO THAT WE'VE REDUCED THE BURDEN OF TODAY'S RATE PAYERS. SINCE OUR ASSETS HAVE ABOUT 30 YEARS OF LIFESPAN AND ALIGNING RATE ADJUSTMENTS WITH LONG-TERM FINANCIAL PLANS, OUR GOAL IS TO AVOID SHARP RATE VOLATILITY WHILE ENSURING THE DEPARTMENT REMAINS FINANCIALLY RESILIENT AND ABILITY TO MEET FUTURE OBLIGATIONS. HERE COMES THE FUND PART. SO THIS IS OUR BUDGET PROCESS TIMELINE. THIS SLIDE OUTLINES KEY MILESTONES IN THE FY 27 BUDGET DEVELOPMENT PROCESS, AND WE'RE HERE RIGHT NOW IN JANUARY. UM, SO STAFF IS, UH, CURRENTLY PREPARING THE FY 27 BUDGET FRAMEWORK. UH, DANIEL AND HIS TEAM ARE WORKING WITH ALL MANAGERS. UM, WE HAVE 30 PLUS MEETINGS SET, UH, FOR THE NEXT TWO MONTHS. AND , I KNOW IT, IT'S, IT'S NOT AS PAINFUL AS IT SOUNDS. WE, I THINK THE FIRST YEAR, I'LL GIVE YOU A LITTLE BIT OF A, A BACKGROUND AND THE FIRST, UH, YEAR LAST YEAR WAS OUR OPPORTUNITY TO TRAIN STAFF AND MANAGEMENT ON FINANCIAL FLUENCY AND WHY, UH, FINANCE IS IMPORTANT AND CRITICAL IN MAKING DECISIONS. SO, UH, WE COLLECT ALL OF THAT INFORMATION, AGGREGATE IT, AND UH, WE ASSESS IT. SO WE DON'T JUST APPROVE EVERYTHING RIGHT AWAY, BUT WE, WE TAKE A GOOD HARD LOOK AS I MENTIONED, WE CAREFULLY EVALUATE OUR EXPENDITURES. UM, AND THAT PERIOD WILL TAKE PLACE FROM NOW AND, UH, THROUGH MARCH. THEN WE'LL COME BACK TO YOU FOR, UM, ANOTHER FINANCE COMMITTEE MEETING. UH, THE AGENDA HAS YET TO BE DETERMINED, SO I'M OPEN TO ANY FEEDBACK, ANYTHING YOU'D LIKE TO SEE. WE'LL HAVE THAT DISCUSSION. AND THEN WE HAVE A [00:25:01] BUDGET OUTREACH PROCESS, UM, WITH, WITH JOY IN PUBLIC AFFAIRS. SO AGAIN, LESSONS LEARNED, THINGS THAT WE'RE TRYING TO IMPROVE UPON AND BUILD UPON, UH, FROM PRIOR YEARS, UH, PRACTICES. WE WANNA MAKE SURE THAT WE HAVE EARLY ENGAGEMENT AND TRANSPARENCY TO OUR COMMUNITY. SO, UM, THAT I'M REALLY LOOKING FORWARD TO THAT. 'CAUSE USUALLY WE SIT BEHIND THE DESK AND NOW WE GET TO ENGAGE WITH EACH OTHER AND COLLABORATE. AND I'LL COME BACK AGAIN IN APRIL TO PROVIDE THE, UM, I APOLOGIZE. I THINK THERE'S A TYPO HERE. THIS SHOULD SAY FY 25 YEAR END FINANCIALS. SO, UM, WHAT DANIEL PROVIDED WERE THE, UH, PRELIMINARY FINANCIAL UPDATES FOR EACH OF THE FUNDS, BUT WE'RE CURRENTLY STILL IN THE PROCESS IN, UM, CLOSING THE BOOKS FOR FY 25. UH, WE'RE ALSO CURRENTLY WORKING WITH OUR EXTERNAL AUDITOR AND WE'LL BE, UM, FINALIZING OUR ACT FOR AT THE END OF MARCH. SO A LOT OF TIMES PEOPLE ASK, WELL, WHY DO WE START THE BUDGET PROCESS SO LATE? WE ACTUALLY STARTED EARLY BEHIND THE SCENES, BUT WE CAN'T MAKE OFFICIAL, UH, PLANS OR PROPOSALS UNTIL WE HAVE THE AUDITED FINANCIALS COMPLETED. AND IN AROUND THE SAME TIME, THE EXECUTIVE TEAM WILL PROVIDE THEIR INITIAL REVIEW OF THE FY 27 PROPOSED BUDGET. SO AFTER, UH, THE BUDGET TEAM AGGREGATES EVERYTHING, UH, COLLECTS ALL OF THE SUBMITTED REQUESTS FOR, FOR THE BUDGET, UH, THE EXECUTIVE TEAM WILL REVIEW IT, UM, COLLECTIVELY. AND THEN, SO THIS IS THE MOMENT IS WE'RE, UH, REBRANDING OUR BUDGET WORKSHOPS AND CALLING THEM BUDGET PLANNING SESSIONS. SO WE WILL CONVENE WITH THE REST OF THE BOARD, UM, TO HAVE OUR DISCUSSIONS. I THINK USUALLY WE HAVE ABOUT THREE, MAYBE FOUR AT THE MAX, BUT IF WE COULD KEEP IT TO THREE, THAT WOULD BE GREAT. I THINK WE'LL BE MORE EFFICIENT THAT WAY, ESPECIALLY WITH THIS IMPLEMENTATION OF THE FINANCE COMMITTEE. AND, UM, THE, THE BOARD WILL ADOPT THE FY 27 PROPOSED BUDGET AND RATES THEN, UM, THIS IS MY TIME TO TAKE A VACATION ACTUALLY IN THE SUMMER. SO, UH, THE ONLY TIME OF YEAR I COULD REALLY TAKE A VACATION. UH, SO THE TEAM WILL BE, UH, PROVIDING NOTICES FOR PROP TWO 18 AND AB 2257 TO BE MAILED TO CUSTOMERS. AND THEN, UH, WE HAVE A 45 DAY PERIOD AND, UH, THE DEPARTMENT WILL HOST THE PROP TWO 18 HEARING FOR WATER AND SEWER RATES. AND LASTLY, CITY COUNCIL WILL APPROVE, UH, OUR DEPARTMENT'S FY 27 BUDGET WITH THE REST OF THE CITIES. AND THEN OCTOBER WE START THE CYCLE ALL OVER AGAIN. AND THAT CONCLUDES MY PRESENTATION. SO THE RECOMMENDATION IS TO RECEIVE AND FILE THE LONG BEACH PUBLIC UTILITIES DEPARTMENT'S FY 27 BUDGET PLANNING OVERVIEW. UM, AS I MENTIONED THROUGHOUT THIS PROCESS, TRANSPARENCY AND PUBLIC, UH, ENGAGEMENT REMAIN KEY PRIORITIES. SO I'M OPEN TO ANY FEEDBACK THAT YOU MIGHT HAVE. STEPHANIE, THANK YOU DANIEL. THANK YOU TOO. THAT WAS A LOT OF INFORMATION. UM, FIRST IS THERE ANY PUBLIC COMMENT, COMMISSIONER COMMENT? UH, THANK YOU FOR THE PRESENTATION. UH, THE TIMELINE IS VERY HELPFUL. UM, AND IT SEEMS LIKE IT'S BUDGET SEASON YEAR ROUND ALMOST. UH, I DON'T KNOW WHY, BUT IT, TO ME IT NEVER USED TO FEEL LIKE THAT. BUT IT FEELS LIKE WE'RE ALWAYS IN BUDGET SEASON, BUT, UH, I KNOW IT'S A, A TON OF WORK, BUT YOU GUYS ARE, ARE BUILT FOR THIS, SO, AND I KNOW IT'S, IT'S WORK THAT YOU ENJOY DOING. SO KEEP IT UP, CONTINUE DOING A GOOD JOB AND LOOKING FORWARD TO, UH, UPCOMING MEETINGS, COMMITTEE MEETINGS. THANK YOU. I ALSO THANK YOU, BUT I THINK, I'M HOPING IT'S ONLY THREE MEETINGS TOO AND, AND I JUST 'CAUSE OF THE BUDGET, BUT I THINK ALSO I'M HOPING THAT THIS COMMITTEE CAN HELP FACILITATE THAT TOO AND NOT ADD TO THE WORKLOAD, IF THAT MAKES SENSE. AND, AND I THINK IN FOLLOWING, UH, THE PRESIDENT'S COMMENTS EARLIER IN THE MEETING, IN THE, IN THE REGULAR MEETING TODAY, IF WE COULD MEET MAYBE DANIEL AND COME UP WITH SOME IDEAS THAT MAYBE WILL HELP US BETTER UNDERSTAND THE PROCESS AND ALL THOSE NUMBERS, I MEAN, I WAS LOST TO BE HONEST WITH YOU, DANIEL, IN SOME OF THOSE NUMBERS. BUT THAT WAY I THINK GETTING THAT GIVES US A BETTER BIG PICTURE AND HOPEFULLY WE MAKE BETTER, BETTER INFORMED DECISIONS AND, AND QUICKER, RIGHT? SO, UM, I'M ALL ABOUT THE PROCESS OF GETTING OUT IN THE PUBLIC. I THINK THE WORKSHOPS ARE GREAT. I THINK THAT'S ALL GONNA BE REALLY GOOD. SO I APPRECIATE IT. THANK YOU. AND AGAIN, SORRY FOR MAKING YOU SIT HERE FOR THE LONG TIME OF THE DELAY. UM, WE HAVE A MOTION, A SECOND. UH, GENERAL MANAGER. AYE, AYE, ANY PUBLIC COMMENT? NON AGENDA? [PUBLIC COMMENT Opportunity to address the Finance Committee on non-agenda items. Each speaker is limited to three minutes to make their comments unless extended by the Chair.] SEEING NONE, WE ARE ADJOURNED. THANK YOU. * This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting.