* 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. [CALL TO ORDER] [00:00:04] GOOD MORNING, EVERYONE. UH, IT'S THURSDAY, MAY 28TH. UH, THE MEETING OF THE PUBLIC UTILITIES COMMISSION IS CALLED THE ORDER, UM, GERALDINE [PLEDGE OF ALLEGIANCE] ALEJO, WOULD YOU PLEASE LEAD US IN THE PLEDGE ALLEGIANCE, UNITED STATES OF AMERICA JUSTICE. THANK YOU, DINA. MAY WE [ROLL CALL] PLEASE HAVE ROLL CALL PRESIDENT SCOTT. PRESENT VICE PRESIDENT CORDERO IS ABSENT. SECRETARY PARKIN. COMMISSIONER MCGUIRE HERE. COMMISSIONER AUSTIN. HERE WE HAVE A QUORUM. THANK YOU FOR THE RECORD. VICE PRESIDENT CORDERO IS EXCUSED FROM THE MAY 28TH BOARD MEETING. ARE THERE ANY OBJECTIONS FROM THE BOARD? SEEING NONE, WE WILL NOW MOVE ON TO THE REGULAR, UH, TO THE CONSENT CALENDAR. [CONSENT CALENDAR] ACTUALLY, UH, MAY I PLEASE HAVE A [1. 26-55205 Recommendation to approve May 14, 2026 Board meeting minutes.       Suggested Action: Approve recommendation. ] MOTION TO APPROVE CONSENT CALENDAR ITEMS, NUMBERS ONE THROUGH SEVEN. THANK YOU AND A SECOND. THANK YOU. UH, ARE THERE ANY PUBLIC COMMENTS? SEEING NONE. ALL THOSE IN FAVOR SAY AYE. AYE. ANY OPPOSED? THANK YOU. UH, NOW MOVING ON TO THE REGULAR AGENDA. ITEM [8. 26-55213 Recommendation to receive and file the Long Beach Public Utilities Department Fiscal Year 2027 Budget Planning Session 2 Presentation.       Suggested Action: Approve recommendation. ] NUMBER EIGHT, RECEIVE AND FILE THE LONG BEACH PUBLIC UTILITIES DEPARTMENT, FISCAL YEAR 2027. BUDGET PLANNING. SESSION NUMBER TWO, PRESENTATION. MAY I PLEASE HAVE A MOTION TO RECEIVE AND FILE. SO MOVED. THANK YOU. CALLING ON GERALDINE ALEJO FOR PRESENTATION. GOOD MORNING COMMISSIONERS. TODAY IS THE SECOND OF OUR THREE BUDGET PLANNING SESSIONS TO REVIEW THE PROPOSED BUDGET AND RATES FOR THE WATER, GAS, AND SEWER FUNDS. FOLLOWING TODAY, WE WILL HAVE OUR LAST PLANNING SESSION ON JUNE 4TH FOR THE BOARD TO REVIEW AND APPROVE THE FISCAL YEAR 27 PROPOSED BUDGET ALONG WITH RATES. SO AS A FOLLOW UP TO OUR LAST BUDGET PLANNING SESSION, WE ARE STARTING TODAY WITH MORE INFORMATION ON THE STRATEGIC INVESTMENTS AND EFFICIENCIES THAT ARE CURRENTLY UNDER REVIEW. EVALUATION OF THESE ITEMS INCLUDE FISCAL IMPACTS AND TIMING IMPLEMENTATION. AS SUCH, UH, MANY OF THESE ITEMS ARE NOT REFLECTED IN OUR FISCAL YEAR 26 ESTIMATES OR FY 27 PROPOSED FIGURES. FIRST CATEGORY IS THE COST CONTROL EFFORTS. THIS INCLUDES POSITION ENHANCEMENTS THAT WERE REQUESTED IN FISCAL YEAR 27, BUT DEFERRED TO FISCAL YEAR 28 FOR CONSIDERATION AS PART OF THAT FISCAL YEAR, AND SHIFTING CAPITAL IMPROVEMENT PROJECTS PLANNED FOR FISCAL YEAR 26 TO FISCAL YEAR 27. SECOND CATEGORY IS EXPANDING OUR IN-HOUSE CAPABILITIES. THIS INCLUDES TRANSITIONING GAS DATA TO AN IN-HOUSE MODEL AND OPTIMIZING OUR INTERNAL EXPERTISE FOR PUBLIC AFFAIRS MATERIALS. THIRD, PROCUREMENT EFFICIENCIES, CONTINUING TO EVALUATE CONTRACTS AND POTENTIALLY REBIDDING CONTRACTS TO EVALUATE MARKETING PRICING OPPORTUNITIES. AND ALSO OUR ONGOING EFFORTS RELATED TO OUR PROCUREMENT HARMONIZATION INITIATIVE, WHICH WILL STREAMLINE PROCESSES AND PROVIDE CONSISTENT TRAINING TOOLS FOR THE DEPARTMENT FOR REVENUE ENHANCEMENT AND COST ALLOCATION EFFORTS. WE WILL BE EVALUATING THE GAS COST OF SERVICE USER FEE STUDY. SO THIS IS COVERING THE NON-UTILITY RATES AND STUDY RECOMMENDATIONS. WE WILL ALSO BE ENGAGING A CONSULTANT TO REVIEW AND DEVELOP A OVERHEAD AND ADMINISTRATIVE COST ALLOCATION METHODOLOGY. AND FINALLY, ORGANIZATIONAL AND PROCESS EFFICIENCIES. WE CONTINUE TO EVALUATE TECHNOLOGY SOLUTIONS FOR THE CALL CENTER AND BILLING OPERATIONS TO IMPROVE CUSTOMER SERVICE AND REVENUE COLLECTION AND IDENTIFY OPPORTUNITIES TO CONSOLIDATE WATER AND GAS. CIP WERE OPERATIONALLY FEASIBLE. SO WITH THAT, ALL OF THESE EFFORTS MENTIONED GO TOWARDS OUR GOAL OF BALANCING THE BUDGET AND PROVIDING AFFORDABLE RATES THROUGH IMPROVING EFFICIENCY, MANAGING DEBT, INCREASING REVENUE, AND CONTROLLING OUR COST. I'LL NOW TURN IT OVER TO DANIEL GUTIERREZ FOR A REVIEW OF EACH OF THE FUND'S, PROJECTIONS, AND PROPOSED RATES. GOOD MORNING COMMISSIONERS. TODAY WE'RE GOING TO CONTINUE REVIEWING THE PROPOSED BUDGET AND RATES FOR THE WATER, GAS, AND SEWER FUNDS, STARTING WITH THE WATER FUND. UH, [00:05:01] THE PROJECTION HERE INCLUDES, I'M SORRY, UH, WE HAVE A PROJECTED FUND BALANCE OF 780,000. UH, THIS INCLUDES THE STAFF RECOMMENDED 6% RATE INCREASE. SO AS YOU CAN SEE HERE IN THE PORTABLE WATER SALES, UH, WE HAVE AN INCREASE FROM 141 MILLION TO 147 MILLION, AND THAT'S ONLY ATTRIBUTED TO THE RATE INCREASE ITSELF. CONSUMPTION IS REMAINING CONSISTENT WITH THAT. UH, SINCE WE ALREADY REVIEWED THE INDIVIDUAL LINE ITEMS TODAY, WE'RE FOCUSING PRIMARILY ON THE KEY DRIVERS WITHIN EACH FUND. FOR THE WATER FUND, THE PRIMARY DRIVERS ARE RELATED TO THE CIP PROGRAM. UH, DEBT PROCEEDS INCLUDE DEFERRED DEBT FINANCING FROM FY 26 PROJECTS, UH, DEFERRED REIMBURSABLE CIP AS WELL AS NEW REIMBURSABLE CIP ASSOCIATED WITH THE HANES PLAN PROJECT. SWITCHING OVER TO THE EXPENSE SIDE, AGAIN, THE FOCUS CONTINUES TO BE ON THE CIP PROGRAM. UH, CIP EXPENDITURES ARE INCREASING FROM APPROXIMATELY 40 56 0.6 MILLION TO 63 MILLION. THIS INCREASE IS MAINLY, UH, RELATED TO DEFERRED FY 26 CIP PROJECTS SHIFTING INTO FY 27. WITH THAT, WE CAN GO INTO THE RATE SCENARIOS. UH, SO SCENARIO ONE IS THE ASSUMED, UH, OR THE, THIS IS THE 6% RATE INCREASE. UH, AND THIS IS THE STAFF RECOMMENDED RATE INCREASE. AND ONE THING I WANTED TO POINT OUT HERE IS THAT ALTHOUGH WE DO HAVE THE 6%, UH, INCREASES IN THE OUT YEARS, UH, THAT IS PURELY FOR ILLUSTRATIVE PURPOSES AND THAT IS NOT SOMETHING THAT THE BOARD WILL BE TAKING ACTION ON. UH, THIS SCENARIO UTILIZES THE 9 MILLION IN EXISTING BONDS AND, UH, AND AS WELL AS WELL ASSUMES A 21 MILLION IN ADDITIONAL BORROWING OVER THE NEXT TWO YEARS. SCENARIO TWO HAS AN 8% RATE INCREASE, UH, WITH THESE, THE SAME ASSUMED BORROWING NEEDS. UM, THE MAIN DIFFERENCE HERE IS THAT WE GET BACK DOWN TO THE 6% AND 5%, UH, AND THOSE OUT YEARS. SO LOWER RATE INCREASES, YES, I UNDERSTAND WE'RE NOT, BUT IN YOUR PROPOSAL, WHY, WHY, WHY ARE WE CHANGING THE OUT YEARS? WHY WOULDN'T THEY ALL BE 6% OR ALL BE 5%? WHY, WHY DO YOU GO UP AND DOWN WITH THE OUT YEAR? UH, WELL THAT, UH, IF WE LEFT THE OUT YEARS THE SAME, UH, WE WOULD ESSENTIALLY BE OVERSHOOTING, UH, THE, THE TARGET MAXIMUM. SO THE GOAL HERE IS TO HAVE A CONSISTENT RATE INCREASE AND THEN TO ALSO MEET THE MAX OR THE TARGET LINE IN THE FIFTH YEAR. AND THEN ALSO TO GET US BACK DOWN TO WHAT WE CONSIDER A TRADITIONAL RATE INCREASE, WHICH IS FOUR TO 6% RATE INCREASES IN THE OUT INCREASE. OKAY. SO, SO THE GOAL IS TO, IT SAYS MAXIMUM, BUT THAT IS A TARGET. THAT'S OUR GOAL IS TO GET TO THE TARGET MAXIMUM, HOWEVER YOU WANNA DEFINE IT. UH, FUND BALANCE, YES. OKAY. SO SCENARIO THREE, UM, REDUCES THE FUTURE BORROWING NEEDS FROM 9 MILLION FROM THE CURRENT 2024 BONDS TO ANOTHER 9 MILLION OVER THE NEXT TWO YEARS. SO REDUCED BORROWING NEEDS HERE, SO A COMBINATION OF LOWER RATE INCREASE AND LOWER BORROWING AMOUNTS. NOW, WHAT DOES THIS MEAN IN TERMS OF THE BILL IMPACTS? SO THIS SLIDE SHOWS THE PROJECTED RESIDENTIAL BILL IMPACTS FOR EACH SCENARIO. UH, THE, THE INCREASE TO THE TYPICAL RESIDENTIAL BILL RANGES FROM APPROXIMATELY $4 AND 64 CENTS TO $7 AND 71 CENTS. ARE THERE ANY QUESTIONS BEFORE WE SWITCH OVER TO GAS? YEAH, SO THIS MAY BE AN UNPOPULAR QUESTION, BUT, UM, YOU GAVE THREE SCENARIOS. UM, WHAT'S THE FOUR? THE FOURTH SCENARIO WOULD BE ZERO. AND WHAT WOULD THAT LOOK LIKE? UM, THAT IS SOMETHING THAT, UH, WOULD BE, SO TO GIVE YOU A, A RANGE OF WHAT WE'RE LOOKING AT HERE, UH, 1% ROUGHLY REPRESENTS, UH, ONE AND A HALF MILLION OR 1.4 MILLION. UM, SO IT WOULD BE THE MATH OF THAT. SO, WELL, NO, CAN YOU GO GO BACK TO THE 6%? YEAH. SO IN THIS SLIDE, THE 6% HERE GIVES YOU A SENSE OF FUTURE CHANGES IN BUDGET DUE TO INFLATION PREDICTION OF METROPOLITAN RATES, PREDICTION OF WRD RATES, CIP EXPENDITURES. AND YOU CAN SEE THAT THE DOWNWARD TREND IN FISCAL YEAR 29 WITH THE 6% NOW AND THEN TWO SUBSEQUENT 6% IS STILL A DECLINE, STILL A STRUCTURAL DEFICIT IN TERMS OF TRYING TO MANAGE COSTS. IF YOU DO NOT DO THE 6% NOW AND SUFFER ESSENTIALLY A GREATER THAN $6 MILLION LOSS [00:10:01] COMPOUNDING THE STRUCTURAL DEFICIT OF THE BUDGET, YOU WILL IN ESSENCE CRASH THE FUND WELL BELOW THE MINIMUM IN FISCAL YEAR 29. SO YOU WILL FAIL TO MEET THE MINIMUM TARGETS. SO WE DIDN'T SHOW ZERO BECAUSE ESSENTIALLY FOR THE INCREASES BEING HAD AND ENGAGING IN A STRUCTURAL DEFICIT, IT COMPOUNDS THE PROBLEM IN FUTURE YEARS AND LEADS TO NOT MEETING FUND BALANCE GOALS IN THE FUTURE. FUND BALANCE GOAL MINIMUM IS BASED ON EXPERIENCE NOW OF 90 DAYS CASH, A CRITICAL MINIMUM THAT NEEDS TO BE MET. SO THAT, THAT GIVES YOU AN OUTLINE. I THINK YOUR QUESTION IS VALID AS TO WHAT WOULD HAPPEN WITH THE 0% RATE INCREASE. UH, BUT THE CONSEQUENCES WOULD BE PRETTY SUBSTANTIAL IN THE OUT YEARS. AND TO ADD ONTO THAT, UM, IF WE DID NOT HAVE A RATE INCREASE, THOSE RATE INCREASES IN THE OUT YEARS WOULD, WOULD BE MUCH LARGER. SO WE WOULD HAVE TO MAKE IT UP, UH, IN THOSE OUT YEARS AS WELL. SO, UH, ONE OF THE PHILOSOPHIES IS ALWAYS MAKING SURE THAT THE CURRENT RATE, UH, RECOMMENDATION IS THE HIGHER OF THE FIVE YEAR FORECAST, SO THAT WE'RE NOT ESSENTIALLY PUSHING SOMETHING DOWN THE LINE, THE, THE FOLLOW THROUGH. SO FOR FISCAL YEAR 27 PROPOSED, YOU ESSENTIALLY HAVE A FLAT, UH, WITH THE 6%, RIGHT? BUT IF YOU SUFFERED THIS, WHAT, WHAT DID YOU SAY WAS THE 1%, UH, CHANGE IN IT'S ABOUT 1.4 MILLION, 1.4 MILLION. SO SIX TIMES 1.4 MILLION IS WHAT IS AN 8.4, 8.4 MILLION. SO IN COMPOUNDING FROM FISCAL YEAR 29 TO FISCAL YEAR 27 PROPOSED, YOU CAN SEE THAT THAT IS APPROXIMATELY A FOUR AND A HALF MILLION DOLLARS INCREASE. IF YOU DECREASE, IF YOU ADD THE 8.4 MILLION TO THE 4.5, YOU'RE FOLLOWING ME, DANIEL, RIGHT? SO THAT'S A $12.9 MILLION DECREASE NET OR HAVING FOREGONE THE 6% RATE INCREASE IN FISCAL YEAR 27. AND SO THE $12.9 MILLION DECREASE FROM THE CURRENT FUND BALANCE OF 39.2 MILLION IS WHAT IS ESSENTIALLY 13 MILLION. SO THAT WOULD TAKE YOU DOWN TO 26 MILLION. SO BY FISCAL YEAR 29, YOU WOULD'VE FALLEN BELOW THE MINIMUM, AND IN FACT, YOU WOULD BE ESSENTIALLY ALMOST FOUR TO $5 MILLION BELOW THE MINIMUM. YOU WOULD NEED AT LEAST A 5% INCREASE TO GET YOU BACK TO THE MINIMUM. AND THEN IN ORDER TO MAINTAIN BALANCE, YOU WOULD NEED AN INCREASE ABOVE THAT. SO YOU WOULD ESSENTIALLY HEAD INTO DOUBLE DIGIT RATE INCREASES IN FISCAL YEAR 28 OR 29 IN ORDER TO MAINTAIN FUND BALANCE. I GET IT. AND, UH, I DO APPRECIATE THE, THE VERY, VERY CLEAR EXPLANATION. UM, WHAT I'M, WHAT I'M NOT, I GUESS CLEAR ON IS, IS THE, THE THREE VARIABLES THAT WERE PRESENTED AND HOW WE GOT TO THOSE THREE VARIABLES, 6, 8, 10, AND THEN, YOU KNOW, WE LOOK, AS CHARLIE MENTIONED, THE OUT YEARS WE'RE AT FIVE AND LOWER. UM, WHAT, WHAT, HOW DO WE GET TO THE GOALS THAT, THAT, SO GENERALLY WE'RE TRYING TO STAY ABOVE THE MINIMUM. THAT WOULD BE THE NUMBER ONE GOAL. THE GREEN IS TARGETED AS MAXIMUM, IT'S USED THE WORD MAX AS INDICATIVE OF LIMITING THE OPTIONS OF THE BOARD. UNDER THE BOARD'S FINANCIAL RESERVE POLICY GOING ABOVE THE MAX, ANY AMOUNTS OVER THE MAX ARE IMMEDIATELY RATE RELIEF OPTIONS FOR THE BOARD. THE BOARD MUST USE THOSE FUNDS TO MINIMIZE THE RATES BETWEEN THE MAX AND THE MEN. THE BOARD CAN CHOOSE TO USE SOME OF THAT MONEY IN A COMBINATION. FIRST AND FOREMOST IS TO BE PREPARED FOR AN EMERGENCY CIP ACTION THAT MUST TAKE PLACE FOR A WATER PROJECT THAT IS AN UNFORESEEN CIRCUMSTANCE, SUCH AS WHAT WE HAD WITH THE BIXBY MAIN BREAK OR THE ORANGE MAIN BREAK FOR THE BOIL WATER. NOTICE, IT REPRESENTS THE ABILITY TO MITIGATE RATES IF IT SO CHOOSES. BUT IN GENERAL, BETWEEN THE MAX AND THE MEN AND THE CURRENT FINANCIAL RESERVE POLICY, THAT IS THE GOAL GOAL. THERE IS NO MATHEMATICAL PROVEN METHOD TO MATHEMATICALLY HIT EXACTLY OUT FISCAL YEARS. EXACTLY. WITH ANY PARTICULAR PROJECTION, THINGS ARE SIMPLY UNKNOWN. SO THE GOAL OF SIX, EIGHT AND 10 IS TO TRY TO STRIKE A BALANCE OF WHERE FUTURE RATE INCREASES MIGHT LIE IN ORDER TO HIT THAT TARGET IN BETWEEN THE TWO, AND HOPEFULLY BY THE FIFTH YEAR, NOT FIND OURSELVES EXCEEDING THE MAX. HOW YOU DO THAT WITHOUT ACTUALLY TRYING TO FINE TUNE IT INTO DECIMAL POINTS OF A RATE INCREASE IS ESSENTIALLY WHAT WE'RE DOING HERE. WE'RE MERELY TRYING TO GIVE THE BOARD GUIDANCE BETWEEN SIX, EIGHT AND 10 AS THE CONSEQUENCES OF RAISING THE RATES. YOU ESSENTIALLY, BY DOING A LARGER RATE INCREASE, NOW [00:15:01] YOU GAIN REVENUE THAT ALLOWS YOU TO MITIGATE FUTURE RATE INCREASES DOWN THE ROAD. AT THE SAME TIME THOUGH, IF IT'S NOT PALATABLE AND THE BOARD CHOOSES NOT TO, IT CAN CHOOSE A LOWER RATE INCREASE NOW, BUT SUFFER THE CONSEQUENCES OF BEING, FACING INCREASING RATES IN THE FUTURE. AND ANY BUDGET UPSET THAT WOULD OCCUR IN THE FUTURE MIGHT CAUSE HIGHER RATE INCREASES THAN THE STRAIGHT SIXES. SO THAT'S THE, THE BALANCE OF, OF HOW IT GOES. AND I APPRECIATE THE DIALOGUE. I THINK, I MEAN, EVERYONE ELSE MAY HAVE KNOWN THAT, BUT FOR MY BENEFIT IT DOES, IT DOES HELP. AND I THINK, UH, FOR, FOR THE, THE LISTENING PUBLIC, UM, I THINK THEY WILL APPRECIATE IT AS WELL. THAT'S KIND OF TONGUE IN CHEEK ANYWAY. NO, I, I I THINK IT'S, IT'S IMPORTANT. COMMISSIONER AUSTIN, THE, THE QUESTIONS THAT YOU RAISED ARE INCREDIBLY IMPORTANT BECAUSE THAT IS THE ESSENCE OF US ENGAGING WITH THE BOARD AND TRYING TO LAY OUT HOW THE BUDGET CAN GO AND THE RATES AND THEN THE RATE DECISIONS BEFORE YOU IS YOUR DECISION. YOU MAKE THIS DECISION AND WE'RE TRYING TO GIVE YOU SOME PERSPECTIVE ON AND OF THE BOUNDARIES. YOU COULD CHOOSE ANY RATE INCREASE THAT YOU WISH AND IT WOULD BE OUR OBLIGATION TO PRESENT THAT RESULT TO YOU. AND NOT, I'M NOT GONNA BELABOR THIS BECAUSE I KNOW WE'RE IN THE MIDDLE OF A PRESENTATION, BUT, UM, AFFORDABILITY AND UTILITY, UM, COSTS ARE FRONT OF MIND FOR MANY PEOPLE RIGHT NOW WITH THEIR, IT'S, IT'S PART OF THE PUBLIC DISCOURSE. I THINK WE NEED TO BE VERY MINDFUL OF THAT AND THEN, UM, VERY CLEAR ON HOW WE EXPLAIN, YOU KNOW, HOW WE ARRIVE TO, TO THESE, THESE, UM, ULTIMATE DECISIONS, UM, MOVING FORWARD. SO I THINK, UM, I LOOK FORWARD TO COLLABORATING COMMISSION AND, AND THE DEPARTMENT ON, ON DOING THAT. UM, BECAUSE OTHERWISE PEOPLE ARE GONNA COME TO THEIR OWN CONCLUSIONS AND, AND, YOU KNOW, CONSPIRACIES WILL, WILL RULE TODAY. SO WANNA MAKE SURE THAT THIS IS THE METHODOLOGY IS, IS CLEAR AND YES, AND, UH, UNDERSTOOD. AGREED. THANK YOU VERY MUCH FOR THOSE COMMENTS. OKAY. SWITCHING OVER TO THE GAS FUND, UH, WE ARE PROJECTING A FUND BALANCE GAIN OF 70,000, UH, FOCUSING ON THE KEY DRIVERS. UH, THE PRIMARY FACTORS, UH, IMPACTING REVENUES IS THE REDUCED CONSUMPTION. SO ALTHOUGH RATE INCREASES ARE INCLUDED, UH, PROJECTED REVENUES ARE SLIGHTLY BELOW THE FY 26 BUDGET, BUT ABOVE THE FY 26 ETC. ANOTHER SIGNIFICANT, UH, DRIVER IS THE DEBT FINANCING. UH, THE CURRENT PLAN ASSUMES A HUNDRED PERCENT DEBT FINANCING FOR NON-REIMBURSABLE CIP PROJECTS. ON THE EXPENSE SIDE, UH, THE PRIMARY, UH, INCREASE IS RELATED AGAIN TO THE CIP ACTIVITY, UH, INCLUDED IN THE CIP PROGRAM IS A FACILITIES PROJECT, UH, APPROXIMATELY ONE AND A HALF MILLION. NOW, LOOKING AT THE, UH, GAS LONG RANGE FORECAST, UH, THE PROJECTIVE FUND BALANCE INCLUDES APPROXIMATELY $3 MILLION, UH, FOR ONE TIME FUNDS ORIGINALLY DESIGNATED FOR THE HUNTINGTON BEACH PIPELINE ABANDONMENT PROJECT. UH, ONE OTHER KEY TAKEAWAY IS THAT THE, AGAIN, THERE ARE ASSUMPTIONS FOR ILLUSTRATED PURPOSES OF A 6% RATE INCREASE, UH, FOR THE FORESEEABLE FUTURE. THE FORECAST ALSO ASSUMES THAT THE DEBT FUNDED PORTION OF THE CIP PROGRAM REMAINS A HUNDRED PERCENT DEBT FINANCE OVER THE NEXT FOUR YEARS. WHEN DEBT FINANCING IS REMOVED, THE FUND BALANCE DECREASES BY APPROXIMATELY 5 MILLION IN FY 31. SO HERE WE HAVE, UM, A SLIDE THAT WE PRESENTED AT THE LAST BOARD MEETING, UH, WITH SOME CHANGES HERE. THE FIRST ONE IS THAT WE REMOVED THE SCHEDULE FIVE FROM CONSIDERATION. WE ALSO ADDED ADDITIONAL COLUMN TO SHOW NOT ONLY THE TRANSMISSION RATE COMPARISONS, BUT ALSO THE TOTAL BILL IMPACT, INCLUDING COMMODITY COSTS. SO FOR MOST SCHEDULES, COMMODITY COST REPRESENTS, UH, APPROXIMATELY HALF OF THE, UH, TOTAL CUSTOMER BILL. UH, WITH THAT, THE FINAL COLUMN NOW REFLECTS THE OVERALL TOTAL BILL DIFFERENCE, INCLUSIVE, INCLUSIVE OF COMMODITY CHARGES. IS THERE ANY QUESTIONS BEFORE WE SWITCH OVER TO THE SEWER FUND? THANK, THANK YOU. YES, A COUPLE OF QUESTIONS. SO THERE, JUST TO CLARIFY, THERE'S NO SCHEDULE SIX AND EIGHT, NO. YEAH, THEY NO LONGER EXIST, AND FIVE IS WE'RE NOT PROPOSING ANY CHANGE. CORRECT. AND THEN, UM, FOR, FOR THE OUT YEARS, WHEN YOU SAY THE 6% ON THE STRAIGHT OUT YEARS, AGAIN, I GUESS I'M CONFUSED, SOCAL GAS ARE TRANSMISSION RATES AND COMMODITY. I DON'T KNOW HOW YOU PREDICT THAT. IS THAT, UH, THAT IS, WE HAVE TO HAVE A BASELINE ASSUMPTION IN THERE. SO RIGHT NOW WE ARE USING THE 6%, BUT AS WE GET, AS THE, AS WE GET CLOSER TO THOSE YEARS, WE'LL HAVE A CLEARER IDEA OF WHAT THOSE EXACT RATES WILL BE FOR EACH OF THESE SCHEDULES. COMMISSIONER HARKIN, [00:20:02] DANIEL, IN, IN THE TABLE, WHEN YOU SHOW 6%, YOUR, YOUR ASSUMPTION IS THE REVENUE ADJUSTMENT, NOT THE RATE INCREASE, CORRECT? YES. YOU'RE SAYING THAT THE REQUIREMENT WOULD BE A 6% GROWTH IN REVENUE, HOW THAT 6% GROWTH IN REVENUE WOULD BE OBTAINED IN TERMS OF THE GAS FUND IS SLIGHTLY DIFFERENT THAN WATER AND SEWER RATES IN WATER AND SEWER RATES. YOU HAVE A LIMITED NUMBER OF SCHEDULES BASED ON CUSTOMER CLASS, AND YOU HAVE THE DISCRETION AS THE BOARD TO RAISE THEM ANY AMOUNT THAT YOU SO CHOOSE. IN ORDER TO BALANCE BUDGET. IN THE GAS FUND, WE TRADITIONALLY HAVE VIEWED OURSELVES IN COMPARISON TO SOCAL GAS RATES. AND SO THEREFORE WE HAVE THOSE, THOSE RATE SCHEDULES TO TAKE A LOOK AT, TO MAKE CHOICES ABOUT THE RATES. WHAT DANIEL IS HIGHLIGHTING HERE IS THAT WHATEVER COMBINATION OF CHOICES ON THE GAS RATES THAT THE BOARD CHOOSES, IT WOULD BE LOOKING AT NEEDING AT LEAST A 6% GROWTH AND TOTAL REVENUE IN THE OUT YEARS IN ORDER TO SATISFY THOSE REQUIREMENTS. YOUR, YOUR QUESTION IS ON POINT COMMISSIONER PARKIN, BECAUSE IT'S INCREDIBLY IMPORTANT AS THE BOARD CONSIDERS THESE OPTIONS, WHAT ARE THE CHALLENGES THAT LIE AHEAD FOR THE GAS FUND? AND THAT IS INDEED A NEED FOR A STEADY 6% GROWTH IN REVENUE IN ORDER TO HAVE A GROWING FUND BALANCE AND PREPARE OURSELVES FOR THE FIFTH YEAR IN FISCAL YEAR 31, WHERE THE A HUNDRED PERCENT FINANCING OF THE CIP GOES AWAY AND WE WOULD HAVE TO CARRY THE CIP ON CASH ALONE, AND THAT WOULD STILL NEED YET ANOTHER 6% GROWTH IN REVENUE FROM, FROM THE GUEST FUND. I HOPE THAT THAT CLARIFIES A LITTLE BIT AND GOES THROUGH YOUR QUESTION THAT YOU WERE ASKING. I GET, YES. OKAY. BUT BY SCHEDULES, I GUESS IS WHAT I'M IMPORTANT, THE, THE RESIDENTIAL SCHEDULE IS GOING TO, WE'RE PROPOSING A 1% INCREASE TO THE RESIDENTIAL THIS YEAR, IS THAT CORRECT? UH, IF YOU INCLUDE COMMODITY YES. CHANGE TO THE BILL 1%, YES. AND SO WHERE, WHERE DOES THAT PUT US? I MEAN, COMPARABLE TO SOCAL GAS, IF I WAS A SOCAL GAS RESIDENT VERSUS A LONG BEACH RESIDENT RESIDENTIAL USE, I UNDERSTAND THAT COMMERCIAL ARE ALL VARIABLES, BUT HOW, HOW DOES THAT COMPARE? IS THERE, IS THERE A BAR CHART OR SOMETHING YOU COULD PUT UP THAT WE COULD SHOW THE PUBLIC? WHAT DOES THAT MEAN? IS IT A $5 INCREASE? IS IT A TWO, DO THE SOCAL GAS TRANSMISSION RATE, SO THE INCREASE THAT WE'RE GONNA CHARGE OUR GAS CUSTOMERS, IF WE APPROVE THIS, IT LOOKS TO ME IT'S A 1% INCREASE TO YOUR BILL. WHAT DOES THAT LOOK LIKE IN DOLLARS PER MONTH? WELL, THE, THE DIFFICULTY IS THAT ALTHOUGH THERE IS SOME SEASONAL VARIATION IN THE WATER BILL, THE SEASONAL VARIATION IN THE GAS BILL IS DRAMATICALLY SIGNIFICANT. AND SO THERE IS TECHNICALLY NO AVERAGE BILL. THERE'S PERHAPS, TO YOUR POINT, THERE'S PERHAPS A SUMMERTIME BILL AND A WINTERTIME BILL, AND THE SUMMERTIME BILL. IN THE WINTERTIME BILL, WHAT THE AVERAGE BILL WOULD LOOK LIKE IS ENTIRELY DEPENDENT AND DRIVEN BY THE COMMODITY PRICE. AND SO IN THAT SENSE, WE COULD PROBABLY GIVE A HISTORICAL A SENSE OF LAST YEAR'S COMMODITY PRICE AT A CERTAIN TIME OF THE MONTH. AND GIVEN THAT WE WOULD HIGHLIGHT WHAT THE DIFFERENCES WERE, BUT WE WOULD BE, WE WOULD PROBABLY BE AMISS IN CALCULATING WHAT THE FUTURE BILL IS GOING TO BE BASED ON THIS BECAUSE THE COMMODITY CAN SWING. AND SO THEREFORE, WE WOULD BE, IN ESSENCE, TRYING TO FORECAST WHAT THE MARKET IS GONNA DRIVE ON THE COMMODITY TO GIVE THE IMPACT TO THE AVERAGE BILL. THAT WAS A SUPER LONG EXPLANATION TO A REALLY SHORT QUESTION. I THINK I'M, I JUST WANNA KNOW WHEN WE GO OUT TO TELL THE COMMOD, THE RESIDENTS, WE'RE GONNA INCREASE YOUR BILL BY 1%, THEY HAVE TO GO HOME AND CALCULATE IT THEMSELVES, I GUESS. NO, I BELIEVE THE ACTUAL ANSWER WOULD BE FOR THE RESIDENTIAL PORTION AT LEAST, IS 43 CENTS FOR THE, UH, TYPICAL MONTHLY BILL FOR RESIDENTS FOR GAS PER DAY. THANK YOU. YEAH, PER MONTH. PER MONTH, PER DAY. PER MONTH. I MEAN THAT WE COULD ILLUSTRATE THAT 43 CENTS CLARIFY. YEAH. A MONTH, RIGHT? DENNIS? PER MONTH. DENNIS IS NODDING. HE'S SAYING, YES. 43 A MONTH. I'M JUST FOLLOWING THE PER DAY, PER MONTH. KIND OF LIKE COMMISSIONER AUSTIN SAID, WHO'S ON FIRST? SO JUST TO FOLLOW UP ON THAT THEN, HOW DOES THAT COMPARE WITH SOCAL GAS? WHAT IS THEIR, I ASSUME THEY'RE RAISING THEIR, WELL, WE WOULD BE MATCHING THE, THE GOAL HERE WITH THE 2% IS TO MATCH SOCAL GAS' TRANSMISSION RATE. SO WE WOULD BE MATCHING IT IDENTICAL. THAT MEANS THAT DEPENDING ON WHAT THE COMMODITY PRICES ARE AND WHAT SOCAL GAS ACHIEVE FOR THEIR COMMODITY, WE COULD FIND OURSELVES THAT OUR MONTHLY BILL WOULD BE HIGHER THAN SOCALGAS. SO, STRAIGHT COMPARISON TO THE POINT OF THE WAY YOU ASKED THE QUESTION, PRESIDENT SCOTT, WE COULD FIND [00:25:01] A MONTHLY BILL THAT IS HIGHER THAN SOCAL GAS'S MONTHLY BILL. OKAY. OKAY. SWITCHING OVER TO THE SEWER FUND, UH, WE ARE PROJECTING A FUND BALANCE GAIN OF APPROXIMATELY 4.7 MILLION. UH, THIS PROJECTION INCLUDES THE STAFF RECOMMENDED 8% RATE INCREASE. SO AGAIN, THE INCREASE IN THE VOLUMETRIC AND DAILY SERVICE CHARGE IS, UH, PURELY RELATED TO THE 8% RATE INCREASE HERE. SO AGAIN, FOCUSING ON THE KEY DRIVERS, UH, THE PRIMARY FACTOR CONTINUES TO BE THE CIP PROGRAM. UH, YOU CAN SEE BOTH THE REVENUES AND EXPENDITURES NEARLY DOUBLING DUE TO THE INCREASE IN THE CIP ACTIVITY. UH, FOR FY 26 BUDGET, WE HAVE 34.8 MILLION. AND THEN FOR FY 27 PROPOSED, WE HAVE 67 MILLION. AGAIN, THIS IS MAINLY ATTRIBUTED TO THE LINE OF CREDIT NEEDED TO SUPPORT THE CIP. SWITCHING OVER TO THE EXPENDITURES, UH, THE FOCUS CONTINUES TO BE ON THE CIP PROGRAM. UH, SEWER, CIP EXPENDITURES INCREASES FROM 36.7 MILLION TO 62 MILLION, AND THE INCREASE IS PRIMARILY RELATED TO THE SHIFTING OF THE PROJECTS NEEDED TO PREPARE FOR THE LA 28 OLYMPICS. SWITCHING OVER TO THE, UH, RATE SCENARIOS, STARTING OFF WITH THE STAFF RECOMMENDED 8% RATE INCREASE. AS YOU CAN SEE HERE, WE HAVE THREE YEARS OF 8% RATE INCREASE. SO FOLLOWING THE SAME PHILOSOPHY HERE WHERE WE ARE NOT PUSHING OUT A HIGHER RATE INCREASE IN THE OUT YEARS, BUT KEEPING AN 8% RATE INCREASE FOR THE NEXT THREE YEARS BEFORE IT DROPS DOWN TO A SEVEN. AND THEN OUR TRADITIONAL 6%, UH, RATE INCREASE, THIS SCENARIO ASSUMES APPROXIMATELY 28 MILLION BORROWING ALONG WITH AN ADDITIONAL 14 MILLION IN THE OUT YEARS. SWITCHING OVER TO SCENARIO TWO, WHICH IS THE 10% RATE INCREASE, UH, THIS ASSUMES THE SAME BORROWING ASSUMPTIONS. UH, THE PRIMARY DIFFERENCE HERE IS, UH, THE HIGHER 10% RATE INCREASE YIELDS A MORE OR A LOWER RATE INCREASES IN THE OUT YEARS. SO WE GO FROM 10 NOW TO SEVEN, UH, AND THEN SIX, AND THEN OUR TRADITIONAL SIX TO FIVE RANGE. SCENARIO THREE, UH, SAME CONCEPT, UH, WE HAVE A 12% RATE INCREASE, AND THEN THAT IMMEDIATELY GETS US BACK DOWN TO OUR TRADITIONAL, UH, 6%, 5% RATE INCREASE AS WELL. SO WHAT DOES THAT MEAN IN TERMS OF, UH, BILL IMPACTS? UH, SO STARTING OFF WITH THE FIRST SCENARIO, UH, WE HAVE A $1 AND TENCENT INCREASE TO THE MONTHLY BILL, AND THEN THE 10% IS A $1 38. AND THEN OUR THIRD SCENARIO WITH THE 12% IS A $1 AND 65 CENT INCREASE. HERE WE HAVE THE CITY, UH, COMPARISON GRAPHS. UH, THE KEY TAKEAWAY IS THAT OUR RELATIVE STANDING AMONGST OUR COMPARABLE CITIES HAS NOT CHANGED EVEN WITH THE PROPOSED RATE INCREASES. UH, LONG BEACH CONTINUES TO REMAIN WITHIN THE MIDDLE RANGE OF COMPARABLE AGENCIES. AND WITH THAT, UH, THIS CONCLUDES TODAY'S PRESENTATION. UH, STAFF WILL RETURN ON JUNE 4TH, UH, WITH THE RECOMMENDED SCENARIO ONE, UH, FOR BOTH WATER AND SEWER FUNDS, AS WELL AS THE PROPOSED GAS RATE INCREASE. ARE THERE ANY QUESTIONS? THANK YOU, DANIEL. FIRST WE'LL DO, UH, ANY PUBLIC COMMENTS. OKAY. ANY COMMISSIONER COMMENTS? YOU KNOW, WHAT WOULD BE REALLY HELPFUL? UM, AND I KNOW THIS IS, THIS IS RELATIVELY NEW TO BE ABLE TO COMBINE ALL OF THESE DIFFERENT ENTERPRISE FUNDS TO IN ONE, BUT AS WE'RE TALKING ABOUT RATES AND POTENTIAL INCREASES, I THINK IT WOULD BE VERY HELPFUL TO UNDERSTAND WHAT THE, THE TOTAL PACKAGE WOULD LIKE. YOU KNOW, UM, MAYBE, MAYBE A GRAPHIC THAT SHOWS IF UNDER THIS SCENARIO IF A, B, C, AND, YOU KNOW, I DON'T KNOW, WE'RE CALLING THEM SCENARIO 1, 2, 3. UH, BUT HOW MUCH TOTAL IMPACT WOULD THAT HAVE ON A HOUSEHOLD AVERAGE HOUSEHOLD OR BUSINESS OR WHATEVER? I THINK THAT THAT WOULD REALLY HELP CLARIFY THINGS AS WELL. OKAY, THAT MAKES SENSE. IT DOES. AND SO, WE'LL, WE'LL MAKE SURE THAT WE DO THAT AND WE'LL MAKE SURE THAT WE DEFINITELY DO THAT FOR THE RECOMMENDATION FOR YOUR ACTION ON JUNE 4TH. I, I JUST DID SOME QUICK MATH BECAUSE THAT'S EXACTLY WHERE MY HEAD WENT, . AND, UM, IT LOOKS, YOU KNOW, 6%, 6% FOR THE FIRST TWO FUNDS, AND THEN 12% POSSIBLY FOR THE SEWER FUND, [00:30:02] A DOLLAR 65 INCREASE FOR THE SEWER FUND AT 12%. YOU KNOW, IT'S INTERESTING WHERE IT GOES BACK TO SIX AND FIVE SO QUICKLY THEN IN THE NEXT FOUR YEARS, BUT IT, IT COMES TO $6 AND 72 CENTS PER MONTH, WHICH IS, YOU KNOW, SOMEWHAT PALATABLE. AND I THINK THAT, YOU KNOW, THE SEWER FUND THING IS EASILY EXPLAINED WITH THE OLYMPICS FOR THE PUBLIC TO UNDERSTAND. SO EVEN THOUGH IT MIGHT LOOK A LITTLE OUTTA WHACK WITH 12 VERSUS, ANYWAY, THOSE ARE JUST, JUST THOUGHTS IN TERMS OF PUBLIC PERCEPTION. OKAY. YEAH, I THINK I FOLLOW WHERE WE WERE WITH THE 6% ON WATER, YOU WERE $4 AND 60 SOMETHING CENTS OR 64, RIGHT? AND THEN THE 43 CENTS ON THE GAS SINGLE FAMILY RESIDENTIAL CHANGE, THAT PUTS YOU AT $5. AND WITH THE DOLLAR 10 ON SEWER, YOU'D BE AT $6 AND 10 CENTS ON THE AVERAGE MONTHLY BILL. UM, AND SINGLE FAMILY RESIDENTIAL IS WHAT WE WOULD TYPICALLY SHOW. AND THE REASON BEING IS BECAUSE THE OVERWHELMING NUMBER OF ACCOUNTS FALL WITHIN THAT CATEGORY. UH, COMMERCIAL, WE TEND TO TRY TO NOT CALCULATE AN AVERAGE COMMERCIAL BILL BECAUSE DIFFERENT BUSINESSES FROM A MEDICAL OFFICE TO A RESTAURANT TO WHATEVER, SIMPLY USE THE RESOURCE AT DIFFERENT LEVELS, RIGHT? BUT SINGLE FAMILY RESIDENTIAL IS A WAY OF GAUGING JUST WHAT THE IMPACT IS TO THE COMMUNITY. SO, WE'LL, WE'LL DEFINITELY DO THAT FOR JUNE 4TH. ANY OTHER COMMISSIONER COMMENTS? OKAY, SO WE'VE GOT A, UH, MOTION AND A SECOND TO RECEIVE AND FILE. ALL THOSE IN FAVOR, SAY AYE. AYE. ANY OPPOSED? ALRIGHT, THANK YOU. THANK YOU DANIEL. AND TEAM, UH, MOVING ON. ITEM NUMBER [9. 26-55214 Recommendation to receive and file Campus Realignment and Modernization Update.       Suggested Action: Approve recommendation. ] NINE, RECEIVE AND FILE THE CAMPUS REALIGNMENT AND MODERNIZATION UPDATE. UH, IN ORDER TO HEAR THE PRESENTATION, MAY I HAVE A MOTION TO RECEIVE IN FILE? THANK YOU. AND, UH, CALL ON KEVIN TGA. GOOD MORNING COMMISSIONERS. UH, TODAY'S PRESENTATION IS SOMETHING THAT, UH, WE HAVE A FEW CHANGES, BUT IT'S MOSTLY THE SAME PRESENTATION THAT WE GAVE TO THE PLANNING COMMITTEE, UH, LAST MONTH. UH, WE FELT THERE WAS, UH, A LOT OF GOOD INFORMATION IN THERE. WE WANTED THE WHOLE BOARD TO SEE AND, UH, GIVE US ANY INFORMATION OR FEEDBACK IF WE'RE HEADING DOWN ON, UH, THE WRONG COURSE HERE. SO, UH, AS JEFF, UH, FULLERTON, OUR CONSULTANT DOES MOST OF THIS PRESENTATION. I WOULD LIKE TO YOU TO KEEP IN MIND THAT, UH, THE DO NOTHING SCENARIO IS NOT FREE. WE WILL HAVE TO MAKE INVESTMENTS INTO OUR, OUR, OUR CAMPUS, UH, TO THE TUNE OF MILLIONS OF DOLLARS PER YEAR, PROBABLY OVER THE NEXT DECADE. AND SO SOME OF THOSE NUMBERS ARE IN OUR PROJECTIONS TO HELP, UH, CLARIFY WHAT THOSE NUMBERS ARE. WE ARE, UH, GONNA HIRE A ANOTHER CONTRACTOR TO ASSIST WITH DOING AN ASSESSMENT OF OUR FACILITIES AND TO, UH, BETTER, UH, PROJECT WHAT THOSE COSTS ARE. AND THAT WILL HELP INFORM ALL THESE DECISIONS WE MAKE AS WE PROGRESS THROUGH THIS, THIS PROJECT. AND IF EVEN IF WE END UP, UH, GOING WITH THE DO NOTHING SCENARIO, WE WILL HAVE A BETTER IDEA OF WHAT THAT CAPITAL INVESTMENT WILL BE NEEDED, UH, INTO OUR CURRENT CAMPUS. UH, SO, UH, AS WE, UH, DEVELOPED THIS PROJECT, WE, UH, UH, WITH THE LEADERSHIP FOR MANTO, WE CREATED A FRAMEWORK OF WHAT OUR, WHAT WE'RE TRYING TO DO HERE. AND, UH, SO WE CAME UP WITH THREE ELEMENTS THAT KIND OF DEFINE THIS PROJECT. THE FIRST BEING DESIGN. SO, UH, THINGS LIKE IF WE'RE GONNA HAVE, I THINK FROM EARLIER PRESENTATIONS WE TALKED ABOUT WHETHER WE'RE GONNA DO A TWO CAMPUS OR A SINGLE CAMPUS, THAT'S PART OF IT. UM, WE ALSO HAD A CONSULTANT THAT HELPED KIND OF DEVELOP A NEEDS ASSESSMENT, UM, MAYBE THAT NEEDS ASSESSMENT WAS, UH, NEEDS TO BE REFINED. AND SO WE'RE LOOKING AT THAT DESIGN, SEEING IF WE CAN MAYBE SHRINK THE FOOTPRINT OF, OF PEOPLE'S OFFICE SPACES AND JUST RETHINK HOW AN OFFICE SHOULD BE IN THIS NEW ERA WHERE, UH, WE EMBRACE, UH, REMOTE WORK, UH, THAT MAYBE THE, THE FOOTPRINT COULD BE SMALLER AND HELP SAVE US COSTS ON, UH, THESE PROJECTS. THE OTHER IS, YOU KNOW, WE HAVE LUXURY OF SURPLUS LANDS THROUGH CONSOLIDATION OF OUR, OF OUR CAMPUS AND HOW WE WOULD WANT TO UTILIZE THE REVENUE THAT WE COULD GENERATE FROM THOSE SURPLUS LANDS TO SUPPORT THIS PROJECT. AND ALSO KEEP IT IN MIND THAT WE, WE MAKE SURE WE'RE STAYING IN COMPLIANCE WITH THE SURPLUS LANDS ACT OF CALIFORNIA. AND THEN FINALLY, AND PROBABLY MOST IMPORTANTLY IS THE FISCAL IMPACT, NOT JUST THE FISCAL IMPACT TO OUR BUDGETS, UH, TO THE THREE FUNDS THAT, UH, WE JUST WENT OVER, BUT ALSO TO THE, UH, THE IMPACT TO [00:35:01] OUR RATE PAYERS, UH, THAT WOULD, THAT POTENTIALLY WOULD BE AN INCREASE IN THEIR, IN THEIR RATES TO SUPPORT THIS PROJECT. BUT WE THINK WE HAVE SOME, UH, POSITIVE OUTLOOKS ON POTENTIAL REVENUES THAT, UH, MAKE THIS PROJECT LOOK, UH, FAIRLY DOABLE. AND SO WITH THAT, I'LL, I'LL TURN IT OVER TO OUR, UH, CONSULTANT, JEFF FULLERTON, WHO IS A REAL EXPERT IN THIS. GREAT. THANKS, KEVIN. AND, UM, YEAH, I WANT TO, UH, YOU KNOW, I'M ANXIOUS. I FOLLOW GERALDINE HERE IN THE BUDGET PRESENTATION, AND I KNOW THAT RATE INCREASES ARE, ARE SOMETHING THAT'S REALLY SENSITIVE TO THE COMMUNITY. SO I DEFINITELY WANTED TO START WITH, LIKE, OUR GOAL HERE IS TO SAVE THE TAXPAYER, THE RATE PAYER MONEY. UM, AND YOU KNOW, THAT'S PART OF THE, THE, THE, THE GENERAL UNDERLYING THESIS OF BRINGING THE THREE DEPARTMENTS TOGETHER. BUT YOU'RE, YOU KNOW, YOU'RE OPERATING COSTS NOW YOU'RE CURRENTLY OPERATING ON THREE CAMPUSES. SO I WANT, YOU KNOW, THAT TO KIND OF UNDERSCORE THAT WAS REALLY A LOT OF OUR WORK TODAY IS LIKE LOOKING HOW YOU CAN MAKE MORE EFFICIENT OPERATIONS THROUGH BETTER SPACE UTILIZATION. AND WHAT ARE YOUR TRUE COSTS OF OPERATING UNDER THE, YOU KNOW, FROM A REAL ESTATE PERSPECTIVE OPERATING THE WAY THAT YOU'RE OPERATING TODAY. AND I KNOW, UH, GERALDINE HAD MENTIONED THAT YOU GUYS ARE GONNA LOOK, LOOK FOR, UH, LIKE COST ALLOCATION METHODOLOGIES AND SOME OF THOSE THINGS IN THE, IN THE UPCOMING, UH, YEAR FOR THE BUDGET WORK. AND THAT WILL DOVETAIL INTO WHAT THIS IS. BUT YOU KNOW, THE, THE PUBLIC PERCEPTION IS OFTEN IF YOU'RE GONNA BUILD SOMETHING NEW, YOU'RE WASTING MONEY. AND I THINK THAT'S REALLY THE OPPOSITE OF WHAT WE'RE TRYING TO DO HERE. WE'RE TRYING TO FIND A WAY TO GET YOU A COST NEUTRAL DEVELOPMENT OR SOMETHING THAT MAKES FISCAL GOOD FISCAL SENSE, AND THAT'S REALLY WHERE MOST OF THIS IS COMING FROM. SO WITH THAT AS A BACKGROUND, SAY WHAT WE DID IS CAME IN AND LOOKED AT ALL THE WORK THAT YOU'VE DONE TO DATE, RIGHT? SO YOU DID, UH, YOU'VE DONE SOME MARKET ANALYSIS ON WHAT YOUR POTENTIAL LANDS ARE WORTH. YOU'VE LOOKED AT SOME, AND, AND THAT LEADS INTO THE SITE REDEVELOPMENT CONSIDERATIONS. AND THEN, YOU KNOW, WE'LL TALK IN THIS PRESENTATION ABOUT WHAT KIND OF THE NEXT STEPS AND TIMELINE ARE. SO IN TERMS OF THE INFORMATION THAT WE HAD TO WORK WITH, WE HAVE YOUR CURRENT COST, OPERATING COSTS, AND WE'LL GET INTO THAT IN A LITTLE BIT. UH, WE HAD THE NEEDS ASSESSMENT THAT WAS DONE, UH, WITH AN ARCHITECT ABOUT A YEAR AND A HALF AGO. AND, AND THE CURRENT PLANNING CONCEPTS THAT THEY CAME UP WITH THERE. AND THEN INDEPENDENTLY, WE LOOKED AT, WE TOOK ANOTHER LOOK AT THE MARKET, A FRESH LOOK, YOU KNOW, FROM BOTH OFFICE AND INDUSTRIAL AND RE AND AS WELL AS THE RESIDENTIAL MARKET. AND, AND THEN CONSIDERED IF YOU DO MOVE FORWARD WITH SURPLUS IN SOME OF THESE LANDS, WHAT ARE THE IMPLICATIONS OF THE SURPLUS LANDS ACT? AND I'LL TALK ABOUT THAT. SO TO GET RIGHT TO THE COSTS AND THE NUMBERS, AS KEVIN MENTIONED, YOU KNOW, THERE IS, THERE IS NO FREE RIDE, UM, ON THE CURRENT OPERATING COST COLUMN THERE IN THE MIDDLE, YOU'LL SEE THAT THERE'S A ROUGHLY $10 MILLION COST ESTIMATE, AND THAT IS THE NUMBER THAT WE CAME UP WITH. I WILL SAY THAT 4.9 MILLION OF THAT IS A REAL ROUGH ESTIMATE BASED ON THE CURRENT AGE OF THE BUILDINGS OF DEFERRED MAINTENANCE THAT YOU'RE PROBABLY NOT REALIZING TODAY. SO THAT IS THE SCENARIO WHERE, OKAY, THE ROOF, YOU KNOW, LEAKS THAT THEN CAUSES ADDITIONAL, YOU KNOW, UM, MECHANICAL SYSTEMS TO START TO FAIL OR THE ELECTRICAL SYSTEMS AND YOU NEED TO DO A LOT OF REPAIRS. THIS ROOM LOOKS GREAT TODAY, BUT WE DON'T KNOW WHAT'S BEHIND THE WALLS. AND THAT'S WHAT KEVIN WAS SAYING, IS DOING AN ADDITIONAL, THIS SKULL, UH, FACILITIES CONDITION ASSESSMENT IS PROBABLY AN IMPORTANT PART OF THIS EXERCISE TO REFINE THAT NUMBER. SO AGAIN, I WANTED TO SAY THAT IT'S A BIG PART OF THE 10 IS THE, IS THE 4.9, AND IT IS CERTAINLY GUESSWORK, BUT I KNOW IT'S NOT ZERO. YOU'RE CURRENTLY SPENDING ABOUT $1.6 MILLION A YEAR ON EXISTING, GO FORWARD CIP WITH A NEW BUILDING, NEW, UH, CONSOLIDATED FOOTPRINT, OPERATING EFFICIENCIES, THE BENEFITS YOU GET OUT OF A NEW BUILDING. AND, AND OF COURSE, LIFECYCLE EFFICIENCIES. AND I SAY BUILDING, I MEAN, BUILDINGS, YOU HAVE A LARGE CAMPUS, UM, YOU KNOW, THAT COST GETS SIGNIFICANTLY REDUCED. SO IT IS PROBABLY, YOU KNOW, THIS, THE DIFFERENCE HERE IS $6.5 MILLION A YEAR BETWEEN THOSE TWO NUMBERS. SO THAT IS WHAT WE THINK YOU COULD REALIZE IN OPERATING COST SAVINGS FROM A CONSOLIDATED FOOTPRINT. UM, DEFINITELY THAT'S A VERY, VERY ROUGH NUMBER, AND WE LOOK TO REFINE THAT OVER THE NEXT FEW MONTHS. SO NOW TO THE NEEDS ASSESSMENT AGAIN, UH, WHEN THIS TOPIC FIRST CAME UP, THEY HIRED AN ARCHITECT. THEY WENT AROUND AND SAID, UH, REALLY LOOKED AT HOW YOU'RE OPERATING TODAY AND, AND WHAT THE POTENTIAL GROWTH COULD BE FOR THE DEPARTMENT. UH, AND CAME UP WITH THESE, THESE ANALYSIS, UM, BETWEEN THE DIFFERENT FUNDS. AND, YOU KNOW, IT COMES UP TO ABOUT 600,000 SQUARE FEET OF TOTAL SPACE, ABOUT HALF OF THAT BEING YARD AND INDUSTRIAL SPACE, AND HALF OF THAT BEING OFFICE SPACE. AND THAT'S IMPORTANT FROM A, AN OPERATING COST AND CONSTRUCTION COST STANDPOINT. WE THINK THERE ARE OPPORTUNITIES TO WORK A LITTLE HARDER WITH THE DEPARTMENTS AND REDUCE THAT THROUGH SOME, YOU KNOW, THROUGH THE CONSOLIDATION OF OPERATIONS AND, UH, BOTH IN THE YARD AND IN THE OFFICE. [00:40:01] AND SO THAT'S AGAIN, SOMETHING WE LOOK TO, TO DRIVE HERE IN THE NEXT, UH, FEW MONTHS TO HELP REDUCE THE COST AND GET AS CLOSER TO THAT COST NEUTRAL NUMBER. SO JUST AS A RECAP, THESE ARE, THESE ARE THE THREE CONCEPTS THAT THE ARCHITECT HAD COME UP WITH. SO ONE OF THEM IS CONSOLIDATING THE, UM, THE, THE OFFICE AND WAREHOUSE ACROSS TWO SITES. UH, THE SEWER SITE IN, ON SPRING STREET, SORRY, THE GAS SITE ON SPRING STREET AND THE, UM, THE, THE EXISTING WATER TREATMENT PLANT SITE. AND, UH, YOU KNOW, THAT WAS, UH, AGAIN, IT WORKED OUT TO ABOUT A $225 MILLION COST ESTIMATE FROM A CONSTRUCTION STANDPOINT. THE SECOND CAMPUS WAS VERY SIMILAR PLAN, JUST, JUST MOVING THE ADMINISTRATION AROUND OFFICE AROUND AND PUTTING A LITTLE BIT MORE OF THE PROGRAM ON THE WATER TREATMENT PLANT SITE, AND A LITTLE LESS PROGRAM ON THE SPRING STREET SITE WHERE THE GAS COMPANY CURRENTLY OPERATES. VERY SIMILAR COST STRUCTURE. AND THEN THE THIRD PLAN WAS CONSOLIDATING ALL THE OPERATIONS ON THE WATER TREATMENT PLANT SITE. THAT'S THE, THE MOST, UM, CONDENSED AND THE MOST DENSE PLAN. UM, A LITTLE BIT MORE COST, BUT OF COURSE THEN YOU HAVE TWO SITES FOR POTENTIAL SURPLUS REVENUE TO HELP YOU PAY FOR THE PROJECT. WHEN WE CAN LOOK TO GET, UH, A COST NEUTRAL STUDY LIKE THAT, PLAN THREE TURNED WAS THE BEST, JUST BECAUSE AGAIN, YOU'VE GOT THE TWO SITES THAT WE CAN GENERATE SOME REVENUE FROM TO HELP OFFSET THE COST OF THE NEW BUILDING STRUCTURES. UM, AND, UH, YOU KNOW, WE, WE, WE THEN STARTED THINKING, WELL, HOW CAN WE CONTINUE TO, YOU KNOW, WORK AND REFINE ON THAT? AND THERE REALLY ARE TWO THINGS THAT CAN REALLY COULD DRIVE THAT COST DOWN. ONE IS POTENTIALLY RENTING SOME OF THE ADMINISTRATION SPACE INSTEAD OF BUILDING NEW FOR THE OFFICE COMPONENTS. BECAUSE THE MARKET RIGHT NOW, IT'S, IT'S CHEAPER TO RENT THAN IT IS TO BUY, BASICALLY. AND SO WE THINK THAT THERE MAY BE SOME OPPORTUNITIES TO REDUCE THERE. AND THEN ALSO, AS I MENTIONED, JUST REDUCING THE OVERALL PROGRAM WHEN WE REALLY THINK ABOUT HOW CAN WE WORK AS A CONSOLIDATED OPERATING DEPARTMENT, WHICH IS, YOU KNOW, A, A MUCH MORE ROBUST EXERCISE WITH THE STAFF. THIS IS JUST A SPREADSHEET TO SAY WE RAN A WHOLE BUNCH OF DIFFERENT SCENARIOS AND COSTS, AND YOU'LL SEE THERE'S A DO NOTHING SCENARIO THERE, NUMBER SEVEN, AND THAT IS THAT 10.1 MILLION A YEAR, AGAIN, SO OVER 45 YEARS WE HAVE IN THE MODEL, I MEAN THAT WITH INFLATION WORKS OUT TO ALMOST $800 MILLION. SO THAT MAY BE A LITTLE HEAVY ON THE ESTIMATE, BUT IT'S CERTAINLY NOT A ZERO COST, RIGHT? THERE IS DEFINITELY GOING TO BE A COST TO STAYING IN THE CURRENT BUILDINGS TO KEEPING THEM MAINTAINED TO CATCHING UP AND FIXING ON THE DEFERRED MAINTENANCE THAT YOU HAVE TODAY. THIS SCENARIO NINE BECAME THE MOST, UM, THE CLOSEST TO COST NEUTRAL, IN FACT, OVER THE 45 YEARS ACTUALLY TURNED TO BE, GENERATE MONEY, SAVE YOU MONEY, BE COST POSITIVE. UM, AND THAT IS WITH TAKING THE, THAT, THAT PLAN NUMBER THREE, THE CONSOLIDATED CAMPUS AT THE WATER TREATMENT PLANT SITE, REDUCING THE OFFICE COMPONENT TO PUT SOME, UM, THE LEASE PROBABLY ACROSS THE STREET OR THERE'S A COUPLE OF LOCATIONS I'LL SHOW YOU. AND THEN, UH, USING YOUR EXISTING LAND UNDER A LAND LEASE OR A REDEVELOPMENT SCENARIO, WHICH WE'LL GO INTO IN A LITTLE MORE DETAIL HERE. UM, THERE ARE, YOU KNOW, 15 OTHER SCENARIOS THAT WE'VE, WE'VE RUN SINCE WE DID THIS SPREADSHEET. AND JUST TO SAY, WE'RE TRYING TO CONTINUE TO WORK TO OPTIMIZE, TO FIND WHAT IS REALLY THE BEST KIND OF PLAN OF ACTION, AND THEN WE'LL, AND THEN WE'LL BE ABLE TO, TO MOVE FORWARD. UM, THIS IS A LITTLE MORE ROBUST VERSION OF WHAT THAT KIND OF LOOKS LIKE. SO WHAT I WOULD, WHAT I'D SHOW YOU IS THAT IN THE RED BOX HERE WHERE IT SAYS PAYMENT SOURCES, SO AGAIN, THERE'S THAT 10.1 MILLION, THAT'S YOUR CURRENT OPERATING PLAN THAT COMPARES TO THE 5.1 MILLION, WHICH WOULD BE THE CAPITAL COSTS, YOUR NEW O AND M COSTS, YOUR NEW, UH, UTILITIES AND, AND, AND CONTINUED, YOU KNOW, UP EVEN MAINTENANCE, UH, REGULAR LIFECYCLE COSTS. UH, THAT IS LARGELY OFFSET BY THE LAND RENTAL THAT YOU COULD POTENTIALLY GET FROM THE TWO CONSOLIDATED SITES. SO THAT BLACK LINE WOULD BE THAT THE $6 MILLION OF REVENUE A YEAR ESCALATED OVER TIME, AND THEN YOU'D SEE THE SERVICE PAYMENTS AND OPERATIONS BEING THE, THE TWO LARGE BARS. SO OUR REAL GOAL HERE WAS TO TRY TO KEEP THAT BLACKLINE ABOVE THE OTHER TWO LINES. AND AS YOU CAN SEE, WE'RE GETTING VERY CLOSE, AND SO WE'RE OPTIMISTIC THAT THERE IS A PATH FORWARD HERE. UH, AS I MENTIONED, IT'S CHEAPER TO RENT THAN TO BUY TIN TODAY'S MARKET. SO THERE ARE TWO POTENTIAL LOCATIONS WITH SIGNIFICANT VACANCY THAT COULD ACCOMMODATE MOST OF YOUR ADMINISTRATIVE OFFICE COMPONENTS. ONE OF THEM WOULD BE RIGHT ACROSS THE STREET FROM THE WATER TREATMENT PLANT SITE HERE, UH, THE KILROY BUILDINGS, AND THEN THE OTHER WOULD BE AT THE AIRPORT BUILDINGS. UM, THE ADVANTAGE OF THE KILROY BUILDINGS HERE IS THAT THEY'RE, THEY'RE CLOSER, UH, OBVIOUSLY [00:45:01] FROM AN OPERATIONAL, UM, IMPACTS, IT'S JUST, IT'S EASIER TO BE ABLE TO WALK ACROSS THE STREET FOR MEETINGS AND TO WORK WITH STAFF AND EVERYTHING ELSE. SO THIS IS PROBABLY THE BEST OPERATIONALLY, UH, IT'S A LITTLE MORE EXPENSIVE AND THERE'S A COST FOR PARKING. AND SOME OF THE THINGS THERE, THE ADVANTAGE OF, UH, THE AIRPORT BUILDING IS THAT THIS IS OWNED BY LONG BEACH TRANSIT, SO THAT'S A GOVERNMENT TO GOVERNMENT PARTNERSHIP WITHIN THE CITY FAMILY. AND, UM, IT'S, IT'S CHEAPER. IT'S GOT FREE PARKING, BUT IT'S OBVIOUSLY FURTHER AWAY FROM THE, UM, POTENTIAL YARD SITE. YOU KNOW, UNDER BOTH THESE OPTIONS, OF COURSE, YOU KNOW, COST INCREASE WITH INFLATION, YOU KNOW, YOU'RE, YOU'RE MOVING, YOU'RE BECOMING A TENANT INSTEAD OF AN OWNER. AND SO THERE ARE, YOU KNOW, UP THERE ARE LONG-TERM CONSIDERATIONS WITH THAT. BUT ONE OF THE THINGS I LIKE ABOUT THE IDEA OF YOU GUYS DOING MOVING FORWARD WITH A PLAN LIKE THAT IS THE SURPLUS LAND, SURPLUS LANDS, I'LL CALL 'EM. WE CAN, WE CAN COME UP WITH PLANS FOR THOSE THAT ARE TEMPORARY AND NOT PERMANENT SO THAT IF THE MARKET DOES CHANGE AND IT BECOMES VERY, VERY EXPENSIVE TO BE IN THESE BUILDINGS AND YOU DECIDE, NO, NO, WE NEED TO COME BACK AND BUILD AN OFFICE SPACE, THAT OPTION COULD STILL BE AVAILABLE TO YOU. UM, THIS IS JUST KIND OF, AGAIN, I'M REALLY APPROACHING THIS MOSTLY FROM A FINANCIAL STANDPOINT, TRYING TO GET THOSE COST NEUTRAL NUMBERS TO WORK. UM, YOU KNOW, IN THE BEGINNING THE THOUGHT WAS, WE'LL SELL THE LAND, AND YOU CAN SEE ON THE LEFT THERE YOU GET A BIG SPIKE IN TERMS OF YOUR REVENUE THAT CAN THEN BE USED TO PAY DOWN THE DEBT SERVICE. BUT EVEN WITH THAT, YOU KNOW, YOUR LONG TERM, LONG TERM, YOU'RE NOT FISCALLY, UM, YOU KNOW, COST NEUTRAL. WHEREAS IF YOU ARE RENTING THE LAND, YOU'RE RENTING OFFICE A SPACE, WE CAN REDUCE THE CONSOLIDATED FOOTPRINT A LITTLE BIT. YOU GET VERY, VERY CLOSE TO THAT, THAT COST NEUTRAL EQUATION THAT WE'RE STRIVING FOR WITH THIS PLAN. UH, SO LET'S TALK ABOUT OPTIONS WITH THE SITES. SO AGAIN, THERE ARE TWO SUR. THERE WOULD BE TWO POTENTIAL SURPLUS SITES, ONE THAT WE'RE SITTING ON HERE IN WARDLOW AND THE PART OF THE SPRING STREET CAMPUS. UM, THERE'S, UH, WITH ANY GOVERNMENT AGENCY IN CALIFORNIA, NOW WE HAVE TO THINK ABOUT THE SURPLUS LANDS ACT THAT SAYS THAT IF YOU ARE GOING TO, UM, PERMANENTLY DISPOSE OF LAND, YOU HAVE TO FIRST OFFER IT TO, UM, UH, A BUNCH OF DIFFERENT GOVERNMENT, YOU KNOW, USES AND NOT-FOR-PROFIT, UH, AFFORDABLE HOUSING DEVELOPERS. THERE ARE SOME EXEMPTIONS THAT WE THINK THESE SITES COULD POTENTIALLY QUALIFY FOR. ONE IS IF THE LEASES ARE LESS THAN 15 YEARS, IF THEY'RE LEASES OF EXISTING BUILDINGS, UM, OR IF YOU JUST SAY FOR ANY RESIDENTIAL DEVELOPMENT THAT'S GOING TO BE ON HERE IS GONNA BE 25%, UH, AFFORDABLE AS A MINIMUM. UM, THE PROCESS IS, UH, YOU KNOW, ONCE WE DO DECLARE THEM SURPLUS, EITHER SURPLUS OR EXEMPT SURPLUS, YOU GOTTA GO THROUGH THE, UM, UH, THE HOUSING DEPARTMENT IN THE STATE, UM, AND YOU HAVE TO SEND A NOTICE OF ABILITY, ABILITY TO AFFORDABLE HOUSING DEVELOPERS, PARKS, DEPARTMENTS, SCHOOLS, AND IF ANY OF THEM, UH, ARE INTERESTED IN THE PROPERTY, ENTER TO 90 DAY GOOD FAITH NEGOTIATION PROCESS. NOW, THERE'S NOTHING IN THE ACT THAT SAYS YOU HAVE TO SELL YOUR LAND BELOW FAIR MARKET VALUE, BUT YOU DO HAVE TO GO THROUGH THE PROCESS WITH THESE FOLKS SO IT, IT CAN LENGTHEN IT OUT. AND THERE'S DEFINITELY A SCENARIO WHERE WE SAY, YOU KNOW, LET'S JUST GO THROUGH THE PROCESS BECAUSE THAT GIVES YOU THE MOST OPTIONS. MANY, MANY UTILITIES AGENCIES ACROSS THE STATE HAVE DONE THIS JUST, UM, TO SURPLUS THEIR LANDS AND CLEAR THE SURPLUS LANDS ACT. SO YOU KNOW, MORE TO COME ON THAT ONCE WE FIGURE OUT WHAT THE FINAL PLAN IS AND DO A FULL ANALYSIS. BUT, YOU KNOW, I JUST WANTED TO SAY IT WAS A CONSIDERATION. WE DON'T THINK IT'S GONNA HAVE A MATERIAL EFFECT AT THE MOMENT. UM, AND PART OF THAT IS THE ECONOMIC VALUE, LIKE, YOU KNOW, RESIDENTIAL AND INDUSTRIAL WOULD BE THE TWO KIND OF HIGHEST AND BEST USES. GIVEN THIS LOCATION. INDUSTRIALS YIELDS A VERY SIMILAR LAND RESIDUAL, AND WHEN YOU TAKE IN ACCOUNT THE SURPLUS LANDS ACT, IF YOU DO MAKE IT RESIDENTIAL, THAT 15 TO 25% AFFORDABLE REQUIREMENTS SIGNIFICANTLY IMPACTS YOUR LAND VALUE AS A POTENTIAL RESIDENTIAL PLACE. UM, SO THEN OPTION, YOU KNOW, SO OPTION A WOULD BE SELL A LAND. I THINK THAT'S WHERE WE STARTED AGAIN WITH THOSE FIRST BASIC THREE SCENARIOS. UM, AND AS WE SAID, YOU KNOW, THAT SURPLUS LENS ACTC ERS, BUT ALSO FROM A TIMING PERSPECTIVE, THE SALE PROCEEDS COME IN AFTER YOU'VE MOVED AND THEN YOU USE IT TO PAY DOWN DEBT, AND IT'S JUST NOT AS EFFICIENT FROM A CASHFLOW STANDPOINT. UM, OPTION B WOULD BE TO CONSIDER THE GROUND LEASE. THE, THE APPRAISED VALUE IS THAT COULD RESULT IN THE 50, YOU KNOW, CENTS PER SQUARE FOOT PER MONTH TYPE, UM, INCOME TO YOU. UM, IT CAN ESCALATE OVER TIME, PROVIDE SOME OPTIONS FOR THE CITY TO COME BACK TO THE LAND IF IT'S NEEDED. AND SHORTER TERM LEASES ARE POSSIBLE. SO WE THINK THAT, YOU KNOW, THAT BECAME KIND OF THE BASELINE AS A PLACE TO LOOK IN TERMS OF WHAT THE BEST ECONOMICS COULD BE FOR THE, UM, THE REUSE OF THE LAND. UM, AND THEN WE THOUGHT, WELL, LET'S LOOK AT THE LEASING OF EXISTING BUILDINGS. ONE OF THE CHALLENGES HERE IS, AS I MENTIONED, IT'S BETTER TO RENT THAN TO OWN. SO IF YOU SUDDENLY BECOME A LANDLORD, [00:50:01] YOU START TO VERY QUICKLY GET ON THE WRONG SIDE OF THAT EQUATION, AT LEAST IN THE SHORT TERM. UM, YOU KNOW, PART OF THE, THE GENESIS OF THIS IS THERE'S A SIGNIFICANT DEFERRED MAINTENANCE COMPONENT TO THESE BUILDINGS, PARTICULARLY THE ONE WE'RE SITTING IN. SO, YOU KNOW, TO GUT IT, TO REHAB IT, TO RE-TENANT, IT BECOMES A VERY LONG AND RISKY INVESTMENT. AND MAYBE SOMETHING THAT, YOU KNOW, THE, THE, THE BOARD DOESN'T WANT TO BE IN THE BUSINESS OF BEING A LANDLORD UNDER THAT SCENARIO. AND WE DIDN'T THINK THE ECONOMICS WORKED OUT AS FAVORABLY AS JUST, YOU KNOW, POTENTIALLY DEMOING AND, AND RENTING THE LAND TO A LONG-TERM DEVELOPER. UM, THERE'S PROBABLY A FOURTH OPTION, WHICH IS A, WHICH IS A JOINT VENTURE P THREE TYPE DEVELOPMENT THAT WE COULD TALK ABOUT WHERE, YOU KNOW, A, UM, UH, DEVELOPER WOULD COME IN AND WORK IN PARTNERSHIP WITH THE BOARD. THE BOARD WOULD BE THE LANDOWNER, AND, UM, AND THEY WOULD, THEY WOULD, THEY WOULD DO EVERYTHING, UM, AND INVEST ALL THE NEW CAPITAL TO RE RE-TENANT REPROGRAM, REBUILD. WHAT, WHAT IS THE, TO THE HIGHEST BEST USE ON THIS LAND THAT PROBABLY WORKS OUT BETTER IN THE LONG TERM, BUT MAYBE NOT AS GOOD IN THE SHORT TERM BECAUSE THE DEVELOPMENT WOULD INCUR DEBT. AND WE CAN TALK MORE ABOUT THAT, BUT WE'RE WORKING ON THAT AS A POTENTIAL SCENARIO THAT THAT MAY BE THE, THE HIGHEST AND BEST, UH, METHOD TO MOVE FORWARD. I'M GONNA KIND OF BACK UP FOR A SECOND BECAUSE I KNOW P THREE IS A TOPIC THAT THE BOARD WAS INTERESTED IN. OBVIOUSLY, LONG BEACH HAS A COUPLE OF GREAT EXAMPLES WITH THE CIVIC CENTER AND THE, UH, BELONG THE DUKE MAJ COURTHOUSE, BOTH WHICH WERE, YOU KNOW, PROJECTS THAT SAVED, UH, EACH THE STATE IN THE CASE OF THE COURTHOUSE AND ALSO THE CITY AND THE STATE IN THE CASE OF THE CIVIC CENTER, YOU KNOW, A SIGNIFICANT AMOUNT OF MONEY BOTH OPERATIONALLY AND, UM, YOU KNOW, JUST IN TERMS OF KEEPING THE PHYSICAL PLANT UP, UM, AND GOT THEM NEW FACILITIES IN THE PROCESS. SO THAT IS REALLY LIKE A PERFORMANCE-BASED CONTRACTING METHOD OF P THREES AND THAT, YOU KNOW, COULD BE PART OF THIS PROJECT. THAT WOULD BE SOMETHING WE WOULD LOOK AT FOR THE NEW FACILITIES THAT IN THE SCENARIOS I PRESENTED, YOU MIGHT BE BUILDING ON THE WATER TREATMENT PLANT SITE. WE COULD COMBINE THAT WITH A DIFFERENT TYPE OF P THREE FOR REDEVELOPING THE SURPLUS LANDS. AND SO THERE'S EXAMPLES OF THAT, OBVIOUSLY BETWEEN, YOU KNOW, THE RDA SITES AND DOUGLAS PARK AND OTHER PROPERTIES THAT THE CITY HAS TAKEN FORWARD AND FOUND THE RIGHT PARTNER TO DEVELOP ITS HIGHEST AND BEST USE. AND THAT HAS TURNED OUT TO BE A GOOD ECONOMIC DEAL FOR THE CITY. UM, WITH THE, UH, I JUST WANNA SAY THERE'S ALSO LOTS OF PRECEDENTS FOR THAT FIRST TYPE OF P THREE, THE, THE, YOU KNOW, TURNKEY DELIVERY APPROACH, BOTH USING TAXABLE AND TAX EXEMPT FINANCING. UM, SOME OF THE ONES IN LONG BEACH HAVE BEEN, UM, A LITTLE BIT MORE INTENSIVE CAPITAL STACK TO PROVIDE A LITTLE BETTER RISK TRANSFER. THERE ARE CERTAINLY SEVERAL ACROSS THE STATE THAT HAVE USED TAX EXEMPT BONDS TO BRING THE OVERALL COST OF THE PROJECT DOWN. AND SO WE WOULD DEFINITELY COMPARE AND LOOK AT THOSE AND LOOK TO COME BACK TO THE BOARD WITH A FULL ANALYSIS AT, AT A FUTURE DATE. UM, SO AS I MENTIONED A COUPLE OF TIMES, YOU KNOW, OUR NEXT STEPS ARE FIRST REFINING THE PROGRAM AND COST ESTIMATES, REFINING THE REUSE PLANS, UM, AND ESTABLISHING A TRUE AFFORDABILITY LIMIT. I THINK WE'RE IN A POSITION TO DO THAT OVER THE NEXT 30 TO 60 DAYS. AND THEN LOOKING AT THE RATE PAYER IMPACTS AND A FUND ALLOCATION METHODOLOGY, YOU KNOW, WHICH DEPARTMENTS ARE USING THE SPACE, HOW ARE THEY USING IT, YOU KNOW, WHAT'S THE RIGHT ALLOCATION METHODOLOGY, AND THEN WE'LL WORKSHOP THOSE P THREE ALTERNATIVES, AS I MENTIONED, AND WHAT THE PROCUREMENT PATH IS GOING FORWARD. THAT'S KIND OF WHERE WE'VE BEEN, WHERE WE'RE GOING THE PRELIMINARY ANALYSIS. WITH THAT, I'M HAPPY TO ANSWER ANY QUESTIONS. THANK YOU VERY MUCH. UH, BEFORE WE DO THAT, ARE THERE ANY PUBLIC COMMENTS? ANY COMMISSIONER? I JUST, JEFF, THANK YOU. THAT WAS REALLY COMPREHENSIVE. I APPRECIATE THE UPDATE, ALL THE WORK EVERYBODY'S DOING ON THIS. UM, I JUST LOOK FORWARD TO HEARING BACK ON ALL OF THESE OPTIONS YOU'RE TALKING ABOUT BECAUSE IT CERTAINLY GIVES ME SOME HOPE. I, AT FIRST I WAS THINKING THERE'S JUST NO WAY WE'RE GONNA BE ABLE TO AFFORD TO DO EVERYTHING WE WANT TO DO AND HAVE A NICE BUILDING FOR ALL THE EMPLOYEES. SO, UM, APPRECIATE IT. THANK YOU. UM, HOPE IS THE OPERATIVE WORD. I THINK IT'S, IT'S DAUNTING, YOU KNOW, TO THINK ABOUT TAKING ON THIS PROJECT, BUT TO DO NOTHING IS REALLY NOT AN OPTION. WE HAVE A RESPONSIBILITY TO KEEP MOVING FORWARD, AND YOU'RE HELPING US UNDERSTAND, AND I SEE ALL KINDS OF WINDOWS OPENING UP THAT LOOK VERY PROMISING, YOU KNOW, BASED ON HISTORY AND SUCCESS IN OTHER PLACES. SO THANK YOU SO MUCH FOR ALL THIS WORK, AND WE'LL JUST KEEP DOING WHAT WE CAN TO LISTEN HARD AND MAKE GOOD DECISIONS. WELL, AS SOMEONE WHO'S BEEN INVOLVED, AND I KNOW CHARLIE AS WELL, UM, IN SOME OF THESE MAJOR PROJECTS, UM, WE DO HAVE [00:55:01] EXAMPLES OF, OF, UH, SUCCESS HERE IN THE CITY, UM, WITH, UH, KEY P THREE PP THREE, UM, MODEL. UM, BUT I DO THINK THERE'S AN OPTION. WE, WE SHOULD, WE SHOULD, WE SHOULD LOOK AT AT ALL OF OUR OPTIONS AND MAKE SURE THAT WE ARE, YOU KNOW, BEING AS EFFICIENT AS POSSIBLE. I'LL JUST SAY IT'S IMPORTANT THAT, THAT, YOU KNOW, WE, WE HAVE THE VISION, UM, AND THEN ONCE WE, WE LOCK IN ON A VISION THAT WE, WE MOVE FORWARD, UM, THAT, AND NOT SPEND A WHOLE LOT OF TIME AT, AT, I MEAN, AT SOME POINT, YOU KNOW, WE GET THERE AND EVERYBODY HAS TO BE LINED UP. BUT, YOU KNOW, THE MORE DEBATE, THE MORE STUDIES, THE MORE WE, WE, WE DEAL WITH, UM, YOU KNOW, LOOKING AT ALL OF THE DIFFERENT POSSIBILITIES AND SCENARIOS, WE'LL FIND OURSELVES, YOU KNOW, SPENDING YEARS IN, IN A PROCESS. UH, SO, UH, I, I THINK THERE'S, THERE'S A REAL OPPORTUNITY HERE, UM, FOR REALIGNMENT FOR OBVIOUSLY MODERNIZATION, WHICH IS DESPERATELY NEEDED. UM, I'VE HAD THE PLEASURE OF MENTIONED IT IN A COUPLE OF MEETINGS, TOURING MANY OF OUR FACILITIES, UM, IN PREPARATION FOR THIS, RIGHT? UM, OUR INFRASTRUCTURE COMMITTEE HAS BEEN KIND OF LASER FOCUSED ON LET'S, LET'S LOOK AT OUR FACILITIES, LET'S UNDERSTAND BEYOND WHAT'S ON PAPER, BEYOND WHAT'S BEING PRESENTED IN THE MEETINGS. BUT LET'S GO AND, AND GET OUR, OUR ROLL UP OUR SLEEVES AND, AND SEE WHAT WE'RE TALKING ABOUT AND WHAT OUR OPPORTUNITIES AND OPTIONS ARE. SO, UM, I APPRECIATE WORKING WITH TY, UM, AS, AS A STAFF LEAD ON THIS AND, AND, UH, MY COLLEAGUE MR. PARKIN WHO GETTING TO, TO KNOW PRETTY WELL, YOU KNOW, AFTER ALL THESE YEARS. UM, BUT THOSE ARE GOOD TIMES. UH, WELL, GOOD INFORMATIVE TIMES. YOU KNOW, WE'RE, WE'RE SPENDING THE EXTRA TIME REALLY OUT IN THE FIELD, UM, VISITING THE SITES AND UNDERSTANDING, YOU KNOW, WHERE, WHAT, WHAT'S WHERE THE, I WOULD JUST SAY EVEN LIABILITIES ARE SOMETHING IN SOME RESPECTS, BECAUSE WE DO HAVE SOME OLD FACILITIES, WE DO HAVE SOME FACILITIES THAT ARE FALLING APART. UM, WE EITHER ARE GONNA HAVE TO REINVEST OR WE'RE GONNA HAVE TO RE REPURPOSE OR REVISION, UM, WHAT, WHAT, UM, WHAT THOSE FACILITIES AND HOW THEY SHOULD FUNCTION, UM, FOR, FOR THE GREATER GOOD OF, UH, THE DEPARTMENT AND, AND THE RESIDENTS WE SERVE. SO I APPRECIATE THE PRESENTATION AND LOOK FORWARD TO GETTING TO, UH, TO A PLACE OF FOCUS. THANK YOU. I APPRECIATE YOU SAYING THAT, UH, BECAUSE IT'S KIND OF FRONT OF MY MIND TOO, FIRST OF ALL, JEFF, THOUGH, I WANNA COMPLIMENT YOU AND THANK YOU FOR, UH, STATING THE GOAL, UH, THAT THE TEAM HAS TAKEN ON, AND THAT IS TO SAVE RAPE HERE MONEY. UH, I THINK THAT'S A, A GREAT OVERARCHING THING TO KEEP IN MIND DURING THIS WHOLE PROCESS AND MAKE SURE THAT WE ARE NOT, UH, DOING A CAMPUS REALIGNMENT THAT MAY SEEM EXTRAVAGANT OR OVERLY EXPENSIVE OR, OR WHATEVER. I THINK THAT'S A GREAT THING TO KEEP IN MIND. I'VE GOT SOME, UH, I DON'T WANNA SAY CONCERNS, BUT, UM, THE, THE DIRECTION FROM THE BOARD BACK IN OCTOBER WAS, UH, WITH REGARDS TO THIS, UH, CAMPUS REALIGNMENT WAS TO DEVELOP A FRAMEWORK, UM, BY, UH, WITHIN THE YEAR, UM, WE'RE ENTERING JUNE, UM, SEPTEMBER COMES PRETTY QUICKLY AFTER JUNE. HOW DO YOU FEEL ABOUT, UH, IT SOUNDS LIKE THERE'S A LOT OF UNKNOWNS, A LOT OF PLATES SPINNING. UH, HOW DO YOU FEEL ABOUT BEING AN ABLE TO ANSWER A LOT OF THOSE QUESTIONS, UH, IN ORDER TO ALLOW THE BOARD TO AT LEAST VOTE ON A FRAMEWORK BY FALL? I MEAN, I, I, I THINK FROM AN, FROM AN ANALYTICAL STANDPOINT, WE CAN EASILY BE THERE BY SEPTEMBER. LIKE I THINK WE COULD GIVE YOU A VERY DEFINITIVE, WHAT I WOULD RECOMMEND AS A PATH FORWARD BY SEPTEMBER. UM, CERTAINLY IF THE BOARD WANTS TO GIVE US SOME GUARDRAILS AND SOME GUIDELINES, YOU KNOW, BEYOND THE COST NEUTRAL, WE'D BE HAPPY TO TAKE THAT INTO CONSIDERATION AS WE, AS WE DEVELOP THAT, THAT MAY BE KIND OF THE FRAMEWORK THAT YOU'RE LOOKING FOR. YOU KNOW, I, SO WE CAN TAKE THAT DIRECTION. OKAY. WELL, I APPRECIATE THAT. UH, I THINK PERSONALLY, I FEEL LIKE WE'RE STILL JUST A LITTLE TOO PRELIMINARY IN ORDER TO, TO PROVIDE ANY ADDITIONAL GUIDANCE. UH, I THINK THAT THE PATH THAT YOU AND YOUR TEAM ARE ON IS, IS GOOD. UH, I JUST, UH, WANNA MAKE SURE THAT EVERYBODY IS FOCUSED ON, YOU KNOW, SOONER THAN LATER, COMING UP WITH A, UH, NOT THE FINE DETAILS, BUT THE GENERAL FRAMEWORK OF, OF HOW WE'RE GONNA START MOVING AHEAD. SO KEEP UP THE GOOD WORK. ANY OTHER, SO HAVING HEARD YOUR COMMENTS P AND DISCUSS, SO THE, THE TEAM CAN WORK [01:00:01] TOGETHER AND WE CAN TRY TO BEGIN TO SHAPE WHAT A FRAMEWORK WOULD LOOK LIKE I'M HAPPY TO BOUNCE THAT OFF OF YOU AS THE FOCAL POINT FOR THE BOARD. SEE IF THAT GIVES YOU AN INDICATION OF WHERE YOU THINK THE BOARD SHOULD BE IN PROVIDING DIRECTION. AND WE WILL MARSHAL THAT FORWARD EVEN WITH ALL THE WORK THAT WE'RE DOING. WE'LL MARSHAL THAT FORWARD FOR YOU SO THAT THE BOARD IS IN A POSITION OF DIRECTING. MY UNDERSTANDING OF WHEN YOU SAY FRAMEWORK IS THAT THE BOARD IS ABLE TO DIRECT AND SAY, THIS IS MY EXPECTATIONS. AND NOW ALL ACTION ITEMS THAT COME FROM THAT LAND ANALYSIS, UH, FUTURE VALUE, ONGOING OPERATING COSTS, ALL OF THOSE THINGS FIT WITHIN THE GUIDANCE THAT THE BOARD HAS GIVEN. SO IF I INTERPRET THAT CORRECTLY, WE'VE GOT YOUR DIRECTION WITH YOUR COMMENTS TODAY, AND WE WILL WORK WITH YOU TO TRY TO DEVELOP THAT AND BRING IT BACK FOR FULL BOARD CONSIDERATION. I APPRECIATE THAT. I, I DO FEEL LIKE THOUGH THERE'S A LOT OF MISSING PIECES STILL, AND, AND I UNDERSTAND THOSE ARE, THOSE ARE IN PROCESS AND THEY, AND THEY CAN BE, CONTINUE TO BE WORKS IN PROGRESS. UM, BUT THE WORK IN PROGRESS IS WITHIN THE GOALS THAT YOU HAVE SET. AND SO WE'LL, WE'LL WORK TO DO THAT. OKAY. THANK YOU. ANY OTHER COMMENTS? OKAY, SO WE'VE GOT A MOTION TO RECEIVE AND FILE ALL THOSE IN FAVOR SAY AYE. AYE. AYE. ANY OPPOSED? THANK YOU VERY MUCH JEFF AND TEAM FOR PRESENTATION. UH, MOVING ON ITEM NUMBER 10 AND 11. [10. 26-55215 Recommendation to adopt Specifications WD-01-25 and award a contract to Advanced Industrial Services, Inc., for the Alamitos Tanks No. 11 & 13 Rehabilitation Project (EO-3600), in a total amount not to exceed $5,328,950; and authorize the General Manager to execute all documents necessary to enter into the contract, including any amendments.       Suggested Action: Approve recommendation. ] [11. 26-55216 Recommendation to adopt Request for Proposal to provide Construction Management and Inspection Services for the Alamitos Tanks No. 11 & 13 Rehabilitation Project (EO-3600), and award a contract to Accenture Infrastructure and Capital Projects, LLC, in a total amount not to exceed $785,051, for a period of three years; and authorize the General Manager to execute all documents necessary to enter into the contract, including any amendments.       Suggested Action: Approve recommendation. ] UM, WE'LL BE HEARING BOTH THESE, UH, BOTH OF THESE WITH ONE PRESENTATION AND WE'LL VOTE ON BOTH OF THEM TOGETHER. UH, SO ITEM NUMBER 10, ADOPT SPECIFICATIONS WD DASH ZERO ONE DASH 25 AND AWARD A CONTRACT TO ADVANCED INDUSTRIAL SERVICES INC. FOR THE ALAMITOS TANK. NUMBERS 11 AND 13 REHABILITATION PROJECT. AND THEN NUMBER 11, UH, ADOPT REQUEST FOR PROPOSAL, PROVIDE CONSTRUCTION MANAGEMENT AND INSPECTION SERVICES FOR THE ALAMEDOS TANKS. NUMBER 1113 REHAB PROJECT AND AWARD A CONTRACT TO ACCENTURE INFRASTRUCTURE AND CAPITAL CAPITAL PROJECTS. UH, MAY I PLEASE HAVE A MOTION? SO MOVED. THANK YOU. CALL ON DANA MONSA. MORNING EVERYBODY. UM, AS YOU MENTIONED, THE NEXT TWO ITEMS ARE RELATED TO THIS PROJECT, WHICH IS OUR REHABILITATION OF ALAMEDAS TANKS 11 AND 13. SO FOR SOME BACKGROUND, OUR ALAMEDOS RESERVOIRS LOCATED AT THE INTERSECTION OF REDONDO AND PCH AS SHOWN ON THE MAP. OVER HERE WE HAVE 19 PORTABLE WATER TANKS HIGHLIGHTED IN BLUE AND FIVE RECYCLED WATER TANKS HIGHLIGHTED IN PURPLE. PINK TANK 11 IS LOCATED RIGHT IN THE CENTER OVER HERE, UH, HIGHLIGHTED IN BLUE. IT WAS CONSTRUCTED IN THE 1930S, HAS A 3.3 MILLION GALLON CAPACITY AND HAS A RIVETED STEEL SHELL AND A WOOD ROOF TANK 13 IS LOCATED RIGHT NEXT TO IT, INSTRUCTED IN THE FIFTIES WITH A SIMILAR CAPACITY, BUT THIS ONE HAS A WELDED STEEL SHELL IN A WOOD ROOF. BOTH OF THESE TANKS WERE, UH, IDENTIFIED BACK IN 2019 FOR REHABILITATION AS PART OF OUR TANK MASTER PLAN FOR THE PROJECT OVERVIEW. THE PURPOSE OF THE PROJECT IS TO ABILITY THE TWO TANKS TO EXTEND THEIR USEFUL LIFE AND CONTINUE TO INCREASE OUR STORAGE RELIABILITY AT ALAMITOS TANK FARM. FOR PORTABLE WATER REHABILITATION IS GOING TO INCLUDE VARIOUS REPLACEMENTS AND REPAIRS, INCLUDING THE FULL INTERIOR REC COATING AND EXTERIOR PAINTING. WE'RE GOING TO BE INSTALLING NEW CATHARTIC PROTECTION SYSTEMS AT EACH TANK. WE'RE GOING TO BE REPLACING THE INLET AND OUTLET PIPINGS AT BOTH TANKS, UH, REPLACING THE OVERFLOW AND DRAINS, AND ALSO INSTALLING NEW ROOF HATCHES, ROOFING, AND FALL RESTRAINT CABLE SYSTEMS AT EACH OF OUR TANKS. THESE ARE PHOTOS OF THE EXISTING CONDITIONS OF THE TANKS. ON YOUR TOP LEFT, YOU CAN SEE THE INTERIOR OF THE TANK HANGING FROM THE CEILING. YOU CAN SEE THOSE CATHARTIC PROTECTION ODES. AND YOU CAN ALSO SEE THE CONDITION OF THE COATING IN THE WALL ON THE INTERIOR. UH, IN THE CENTER TOP, YOU CAN SEE THE CATWALK BETWEEN THE TANKS. YOU CAN SEE A LOT OF SIGNS OF CORROSION AND RUST. WE'RE GONNA BE REPLACING THE CATWALK AND, UH, RECODING THE HANDRAILS THAT YOU CAN SEE IN THE PHOTO THERE. UM, THE BOTTOM LEFT, YOU CAN SEE TWO PICTURES FROM THE ROOF OF OUR TANK. YOU CAN SEE THE DETERIORATED, UH, ROOFING MATERIAL AS WELL AS SOME CORROSION ALONG THE HANDRAILS THERE. SO WE'RE GONNA BE REHABILITATING BOTH OF THOSE. AND LASTLY, ON THE RIGHT YOU CAN SEE A VAULT THAT HOUSES THE INLET AND OUTLET PIPING. SO WE'RE GONNA BE REPLACING PORTIONS OF THE PIPING AS WELL AS REHABILITATING THE PORTIONS THAT ARE GONNA BE STAYING IN PLACE. FOR OUR FIRST RECOMMENDATION FOR ITEM NUMBER 10, UM, ON MARCH 17TH, WE PUBLISHED A NOTICE INVITING BIDS FOR THIS PRODUCT. ON APRIL 28TH, WE RECEIVED THREE BIDS. THE AFTER EVALUATING ALL THE BIDS, RECEIVED THE LOWEST RESPONSIVE BID SUBMITTED BY ADVANCED INDUSTRIAL SERVICES, ALSO KNOWN AS A IS IN THE AMOUNT OF $5,300,000 WAS FOUND TO BE IN CONFORMANCE WITH THE BID DOCUMENTS. SO FOR OUR RECOMMENDATION, WE RECOMMEND TO ADOPT [01:05:01] SPECIFICATIONS WD 0 1 25 AND AWARD A CONTRACT TO A IS IN AN AMOUNT NOT TO EXCEED $5,328,950, AND AUTHORIZE THE GENERAL MANAGER TO EXECUTE ALL DOCUMENTS NECESSARY TO ENTER INTO THE CONTRACT, INCLUDING ANY AMENDMENT. SHOULD I READ THE NEXT ONE, PLEASE? FOR ITEM NUMBER 11, ON MARCH 17TH, STAFF SOLICITED PROPOSALS TO PROVIDE INSTRUCTION MANAGEMENT AND INSPECTION SERVICES FOR THE PROJECT. UH, SEVEN PROPOSALS WERE RECEIVED, EVALUATED AND ANALYZED, AND STAFF RECOMMENDS ACCENTURE IN INFRASTRUCTURE AND CAPITAL PROJECTS BASED ON THEIR PROJECT UNDERSTANDING COMPREHENSIVE PROJECT APPROACH AND THEIR EXPERIENCE ON SIMILAR PROJECTS. SO WE RECOMMEND TO ADOPT THE RFP TO PROVIDE CONSTRUCTION MANAGEMENT AND INSPECTION SERVICES, AN AWARD OF CONTRACT TO ACCENTURE IN AN AMOUNT NOT TO EXCEED $785,051 FOR A PERIOD OF THREE YEARS, AND AUTHORIZE THE GENERAL MANAGER TO EXECUTE ALL DOCUMENTS NECESSARY TO ENTER INTO THE CONTRACT, INCLUDING ANY AMENDMENTS. THAT CONCLUDES MY PRESENTATION. I CAN ANSWER ANY QUESTIONS. THANK YOU. DANA. ARE THERE ANY PUBLIC COMMENTS? ANY COMMISSIONER COMMENTS? HI. HI, DANA. THANK YOU FOR THE PRESENTATION. CAN YOU JUST PLEASE TALK TO ME A LITTLE BIT ABOUT THE ENGINEER'S ESTIMATE OF SEVEN AND A HALF MILLION DOLLARS VERSUS THE BID AT $5.3 MILLION? AND ARE WE CONFIDENT THAT THAT 5.3, THERE'S NOT GONNA BE A BIG CHANGE ORDER TO COME IN AND I'M JUST, IT'S SUCH A GAP, I JUST NEED TO UNDERSTAND. THAT'S A GOOD QUESTION. SO THE ENGINEER'S ESTIMATE AIRED ON THE CONSERVATIVE SIDE. WE, THAT ENGINEER'S ESTIMATE WAS PREPARED LATE LAST YEAR. BACK AT THE TIME, THERE WAS STILL A LOT OF MAR UH, MARKET VOLATILITY BECAUSE OF THE SUPPLY CHAINS. SO THE ENGINEER, THE ENGINEERING CONSULTANT AIRED ON THE CONSERVATIVE SIDE. THERE'S A LOT OF CONTINGENCY AT 7.5. ACTUALLY, THE THIRD BID THAT WE RECEIVED AS PART OF THIS PROJECT WAS 7.5 MILLION. BUT IN TERMS OF THE GAP THAT YOU'RE SEEING BETWEEN THE LOWEST AND THE HIGHEST, WE HAVE WORKED WITH A IS IN THE PAST. THEY DID OUR TANK FIVE REHABILITATION AT ALAMITOS. SO WE FEEL CONFIDENT THAT THEY CAN DO IT. AT THE PRICE QUOTED, WE TALKED TO THEM ABOUT THE DIFFERENCE. UM, THEY DIDN'T HAVE ANY ISSUES OR CONCERNS. AND IN THE PAST, WHEN WE WORKED WITH THEM PREVIOUSLY, THERE WEREN'T A LOT OF TWO EGREGIOUS CHANGE ORDERS THAT WE FACED WITH THEM. MM-HMM . ANY OTHER COMMENTS? AN DID YOU HAVE ANYTHING? UH, OKAY. THANK YOU DANA. SO, UH, WE'VE GOTTEN A, UH, FIRST AND A SECOND. UH, ALL THOSE IN FAVOR SAY AYE. AYE. AYE. ANY OPPOSED? ALRIGHT, THANK YOU VERY MUCH. AND I SAW KEVIN TUUS OUT IN THE HALL. I DUNNO IF HE KNOWS THAT OR UP. UH, AGENDA ITEM NUMBER 12, [12. 26-55217 Recommendation to authorize the General Manager to execute all documents necessary to amend Agreement No. 35894 with ARB, Inc., to increase the contract amount by $8,000,000, and extend the term of the contract an additional six months.       Suggested Action: Approve recommendation. ] AUTHORIZE THE GENERAL MANAGER TO EXECUTE ALL DOCUMENTS NECESSARY TO AMEND AGREEMENT NUMBER 3 5 8 9 4 WITH A RB INC TO INCREASE THE CONTRACT AMOUNT BY $8 MILLION AND EXTEND THE TERM OF THE CONTRACT, UH, AN ADDITIONAL SIX MONTHS. UM, MAY I PLEASE HAVE A MOTION? THANK YOU. SECOND. THANK YOU. UH, CALLING KEVIN TUUS. GOOD MORNING AGAIN. COME BACK. UM, OKAY. SO, UM, THIS ITEM IS TO EXTEND OUR CONTRACT WITH A RB AND, UH, UM, THE MAIN REASON WE'RE KIND OF ASKING FOR THIS IS, UM, WE, WE ARE IN THE, WE'RE IN THE PROCESS OF GOING OUT TO BID FOR A NEW CONTRACTOR, BUT, UH, WE'RE NOT COMPLETED WITH THAT YET. SO IN, UH, MARCH 16TH, JUNE, 2021, BEFORE, UH, THE MERGER CITY COUNCIL APPROVED OUR, UH, UH, COMPETITIVE PROCUREMENT PROCESS THAT WE WENT THROUGH TO SELECT A RB AS OUR, OUR GAS CONTRACTOR, THAT WAS A A FIVE-YEAR CONTRACT. AND, UH, THAT'S GONNA END, UH, JUNE 2ND. UH, IN THE MEANTIME, WE'VE BEEN, YOU KNOW, USING THIS FOR OUR GAS FIELD WORK, BUT WE ALSO HAVE BEEN USING THIS CONTRACT TO, UH, ASSIST THE PORT WITH ITS PEER B PROJECT. IT'S A LARGE, UH, ON DOCK RAIL PROJECT THAT THEY'RE DOING TO IMPROVE THE EFFICIENCY ON HOW THEY MOVE CARGO. AT THE PORT OF LONG BEACH IN SEPTEMBER OF 2022, WE SIGNED OUR DEPARTMENT IN MOU WITH THE PORT OF LONG BEACH, UH, TO ASSIST IN MOVING OUR UTILITIES. BASICALLY, WE'RE JUST, WE'RE IN THE WAY, SO WE'RE MOVING OUR, OUR STUFF OUT OF THEIR WAY SO THEY, THEY CAN DO THEIR, THEIR, UH, THEIR PROJECT AND THEY REIMBURSE US FOR ALL COSTS, INCLUDING OUR STAFF TIME THAT'S SPENT WORKING ON THIS PROJECT. SO THE, UH, THE WORK THAT WE'RE DOING RIGHT NOW, UH, IS REQUIRED TO MOVE A A 2,800 FOOT 12 INCH STEEL PIPELINE, UH, IN THE WEST EXPANSION [01:10:01] PHASE OF PB PB IS, EVEN AFTER THIS, WE'RE NOT HERE. THERE'S MORE WORK THAT WE'RE GONNA HAVE TO DO, UH, DOWN THE ROAD TO ASSIST, UH, THE PORT ON THIS PROJECT. UM, THE, LIKE I MENTIONED BEFORE, OUR, OUR, OUR PIPELINES ARE, ARE IN THE WAY. THERE ARE OTHER OIL COMPANIES AND OTHER UTILITIES THAT ARE ALSO IN THE WAY. AND SO EVERYBODY IS HUSTLING TO, UH, MOVE THEIR UTILITIES. AND, UH, ONE OF THE THINGS I LIKE ABOUT THESE PROJECTS IS, ONE, IT'S NOT OUR MONEY, SO IT'S REIMBURSED AND WE'RE, WE'RE ABLE TO GET NEW INFRASTRUCTURE, NEW PIPELINE. AND SO THERE, THE, THE PORT IS ESSENTIALLY HELPING US WITH THEIR MONEY TO IMPROVE THE INTEGRITY OF OUR, OUR GAS DISTRIBUTION SYSTEM. AND AS I MENTIONED, YOU KNOW, OBVIOUSLY WHY WE'RE HERE. THE, THE CURRENT A RB CONTRACT WILL EXPIRE ON JUNE 2ND. AND SO, UM, THE REASON FOR THE ASK IS IF WE WERE TO, UH, NOT BE ABLE TO USE EXTEND THIS CONTRACT, WE WOULD HAVE TO GO OUT TO BID, WHICH WOULD MEAN WE WOULD, WE WOULD DELAY THE WORK THAT WE WOULD NEED TO DO FOR, UH, SUPPORT. AND, UM, THAT WOULD, UH, POTENTIALLY PUT AT RISK. THE PORT HAS FEDERAL GRANT MATCHING FUNDS THAT THEY'RE GETTING FOR THIS WORK, UH, TO THE TUNE OF $55 MILLION. AND THEY NEED TO SPEND, UH, THE BULK OF THAT BEFORE THE, UH, THE END OF 2027. SO IT'S CRITICAL THAT WE START OUR WORK NOW, BE OUT OF THEIR WAY SO THAT FOR MOST OF 2027 THEY CAN, THEY CAN DO THEIR WORK AND, AND, AND SEEK THE, UH, GRANT FUNDING OR GRANT MATCHING FUNDING THAT THEY WOULD GET FOR THIS PROJECT. AND SO, UH, RECOMMENDATION IS TO AUTHORIZE THE GENERAL MANAGER TO EXECUTE ALL DOCUMENTS NECESSARY TO AMEND AGREEMENT NUMBER 3 5 8 9 4 WITH A RB INCORPORATED TO INCREASE THE CONTRACT AMOUNT BY $8 MILLION AND EXTEND THE TERM OF THE CONTRACT IN ADDITIONAL SIX MONTHS. AND THAT CONCLUDES MY PRESENTATION. I'D BE HAPPY TO TAKE ANY QUESTIONS YOU MAY HAVE. THANK YOU. KEVIN, ARE THERE ANY PUBLIC COMMENTS? UH, ANY COMMISSIONER COMMENTS? KEVIN? THANK YOU. UM, SO IF I UNDERSTAND CORRECTLY, IS THE $8 MILLION ALL REIMBURSABLE FROM THE PORT BECAUSE IT LOOKED LIKE WE USED THIS CONTRACT FOR OTHER CONSTRUCTION SERVICES ALSO? THAT'S CORRECT. SO THE AMOUNT OF, WE'RE ESTIMATING THE AMOUNT OF WORK WE HAVE LEFT TO DO TO COMPLETE THIS PORTION OF THE PROJECT FOR THE PORT IS ABOUT $7 MILLION. THE, THE OTHER, UH, PART OF THIS IS ALSO TO EXTEND THIS ON-CALL. 'CAUSE AS WE'RE WAITING TO DO, UM, GET OUR NEW, UM, ON-CALL CONTRACTOR OR OUR NEW CONSTRUCTION CONTRACTOR ON BOARD, THAT MILLION WOULD BE IS IF WE NEED TO DO SOME OTHER WORK ON OUR, OUR GAS PIPELINES. SO FOR EXAMPLE, IF WE FIND A CROSS BOARD, SOMETIMES WE HAVE A RB COME OUT AND HELP RECTIFY THAT, THAT SITUATION FOR US. SO THAT WOULD ALSO HELP US BE ABLE TO CONTINUE TO USE A RB UNTIL WE GET A NEW CONTRACTOR ON, UH, ON BOARD. OKAY. AND, AND THE SIX MONTH IS LONG ENOUGH TO FINISH THE PROCESS AND GET A NEW CONTRACTOR ON BOARD? YES. OKAY, THANK YOU. YES, SIR. YEAH, I JUST WANT SOME JUST QUICK CLAR CLARIFICATION IN TERMS OF, UH, THE, THE SCOPE OF THE WORK THAT THE CONTRACTOR DOES, IS THAT WORK BEYOND WHAT OUR EXISTING WORKFORCE CAN PROVIDE? NO, NO, BUT, BUT THE, UH, BUT THE, THE, WITH THE PORT THIS, THE, THE AMOUNT OF, OF HOW QUICKLY THEY SOMETIMES NEED THIS TO OCCUR, UH, IT'S EASIER AND MORE EFFICIENT TO UTILIZE A CONTRACTOR FOR THIS WORK. AND IN, IN THIS CASE, AS I MENTIONED BEFORE, THIS IS, UH, REIMBURSABLE WORK. UM, SO WE ARE USING OUR IN-HOUSE CON, UH, GAS CONSTRUCTION FOR A LOT OF OUR GAS A IP. BUT ON THESE PARTICULAR PROJECTS, UM, WE'VE BEEN, WE'VE BEEN USING OUTSOURCING THE, UH, CONTRACT WORK. SO COMMISSIONER AUSTIN, YOU'RE ASKING, ASKING A TWO PART QUESTION. ONE IS THE CAPACITY OF THE WORKFORCE AND THE OTHER IS THE WORKFORCE SKILLSET. AM I UNDERSTANDING CORRECTLY? WELL, I DON'T KNOW ABOUT THE SECOND PART, BUT CERTAINLY THE FIRST PART, THE CAPACITY, CAN WE INSOURCE THIS WORK OPPOSED TO OUTSOURCE THIS? WE WOULD BE TAXING OUR CURRENT WORKFORCE AND ASKING THEM TO REPRIORITIZE THE MAINTENANCE WORK THAT THEY ARE DOING CRITICAL TO THE GAS INFRASTRUCTURE IN THE DISTRIBUTION SYSTEM TODAY. AND THEY WOULD BE DROPPING THAT WORK AND GOING OVER TO THE PORT TO TACKLE THAT PRIORITY. UM, AND SO IT IS A QUESTION OF CAPACITY. SO STAFFING WISE AND OPERATIONALLY, WE ARE DEDICATED ALREADY TO REPAIR WORK. THIS IS ADDITIONAL WORK. AND IN THAT CAPACITY, [01:15:01] IT IS SHORT TERM WORK AS WELL. IT COMES AND THEN IT GOES. AND SO IN THAT SENSE, WE'RE ACCESSING THE CONTRACTOR. SO THAT'S WHY I WAS ASKING CAPACITY VERSUS SKILL. IT IS WITHIN THE SKILLSET, I BELIEVE, BUT I'M NOT ENTIRELY SURE ABOUT THAT IN TERMS OF THE SKILLSET OF EXISTING CONSTRUCTION CREWS, BECAUSE THE NATURE OF THE WORK IN THE PORT IS EXTREMELY SPECIALIZED ALSO IN TERMS OF WHAT'S BEING REQUIRED THERE, KEVIN? MORE OR LESS, YES. AND I WOULD SAY YOU MAKE A GOOD POINT. UM, IT WOULD TAKE AWAY FROM THE WORK THAT THEY'RE CURRENTLY DOING. AND SO, UM, BECAUSE THIS WORK IS, YOU KNOW, NOT BEING, WE'RE NOT UTILIZING GAS FUND MONEY TO DO IT. WE DON'T WANNA BURDEN, YOU KNOW, OTHER PROJECTS BY TAKING THIS LABOR FORCE AWAY FROM THE, THE, THE JOBS THEY'RE DOING CURRENTLY. UM, AND WHY IS IT LONG BEACH UTILITIES THE CONTRACTOR AND NOT THE PORT THAT IS BY ARRANGEMENT IN THIS PARTICULAR TYPE OF CONSTRUCTION, WHAT THE PORT HAS ASKED TO BE DONE. SO IN CERTAIN SITUATIONS, THE PORT CAN TAKE ON THE CONTRACTING WORK THEMSELVES. IN OTHER INSTANCES THEY ASK AN ENTITY SUCH AS UTILITIES TO TAKE ON THE CONTRACTING WORK THEMSELVES AND THEN SIMPLY PAY FOR IT. UM, I THINK IT'S MORE ADMINISTRATIVE AND NOT NECESSARILY BECAUSE THERE'S A SPECIALTY PER SE, OTHER THAN WE WOULD BE MORE FAMILIAR WITH HOW TO CONTRACT FOR GAS REPAIR WORK IN THE PORT. OKAY. WELL, I, I'M GOING TO SUPPORT THE, THE ITEM, UM, BUT JUST EXPRESS MY RESERVATIONS BECAUSE I THINK, UH, IF WE CAN UTILIZE THE EXISTING WORKFORCE FOR PROJECTS, UH, IT'S, I THINK IT WOULD BE LESS COST, POTENTIALLY LESS COST IMPACTFUL. BUT, UM, YOU KNOW, AGAIN, I'M, I'M, THIS IS, THIS IS BEYOND MY EXPERTISE AND SCOPE AND I WILL DEFER TO YOU ALL AS EXPERTS ON THIS. I WILL TELL YOU THAT AS SOMEBODY WHO IS VERY INVOLVED IN THE LABOR FORCE AND AND REPRESENTATION COLLECTIVE BARGAINING, THIS IS ONE OF THOSE ISSUES THAT, THAT, UM, THERE'S OPPORTUNITY TO, TO, TO WORK WITH. I, I WANNA BE CLEAR IN THIS COMMENT AND LET YOU KNOW THAT I SUPPORT YOUR COMMENTS WHOLEHEARTEDLY. SO ONE OF THE ASPECTS THAT WE ARE LOOKING ABOUT AND WAS EMBEDDED WITHIN THE BUDGET PRESENTATION WHEN WE'RE TALKING ABOUT OPERATIONAL EFFICIENCIES, IS THAT WE CONTINUE TO LOOK INSIDE THE ORGANIZATION FOR THOSE OPPORTUNITIES TO BRING BACK IN-HOUSE CERTAIN ELEMENTS OF OUR ONGOING OPERATIONS AS A WAY OF MAXIMIZING THE EFFICIENCY OF THE LABOR FORCE AND ACTUALLY MAXIMIZING THEIR CAPACITY AS WELL. SO YOUR COMMENTS ARE, ARE WELL TAKEN AND WE'LL STRIVE TO MAKE A BETTER EXPLANATION BECAUSE WE HAVE ANY NUMBER OF ELEMENTS LIKE THIS HAPPENING IN PARTICULAR WITH THE PORT BECAUSE THE PORT WATER TRANSFER EFFORT HAS EMBEDDED WITHIN IT THE SAME CONCEPT OF DISCUSSIONS OF THERE'S A CERTAIN AMOUNT OF WORK TO BE DONE, HOW MUCH OF IT CAN BE DONE BY US, HOW MUCH OF IT NEEDS TO BE CONTRACTED AND HOW DOES IT GET PAID FOR SECRETARY PERKIN? JUST TO FOLLOW UP ON COMMISSIONER AUSTIN'S COMMENT, I, I THINK WHEN THIS COMES BACK, AND, AND MAYBE I'M WRONG AND I'LL DEFER TO THE CITY ATTORNEY'S OFFICE, BUT THERE HAS TO BE A PROP L FINDING. IT SOUNDS LIKE IF WE'RE DOING, IF THIS IS THE WORK THAT CAN REASONABLY DONE BY CITY EMPLOYEES AND WE'RE CONTRACTING IT OUT, UM, I THINK YOU NEED TO THAT PROP FINE, BUT MAYBE I'M, MAYBE I'M OFF ON THAT. BUT I'LL LOOK FORWARD TO HEARING FROM YOU IN SIX MONTHS. HOPEFULLY IT WON'T TAKE SIX MONTHS. FIRST WE'LL BE BACK ON THE NEW CONTRACT. I BELIEVE, MARSHA, YOU REVIEWED THAT PORTION FOR THE PROPEL STUDY, AND THEN THERE'S ALSO THE NEW AB 3 39 THAT ALSO REQUIRES US, I THINK WE'RE, WE'RE GOING THROUGH THE, THE DUE DILIGENCE AND ALL OF THAT BEFORE WE PUT IT OUT THE BID. SO MARSHA, WERE YOU GONNA COMMENT OR WE'LL JUST NEED TO ENGAGE IN FURTHER DISCUSSION ON THAT? I, I THINK I WOULD LIKE TO COMMENT AND SAY THE VERY NATURE OF UTILITY OPERATIONS IS ALWAYS GONNA FIND ITSELF WITH SKILLSET AND NEEDS THAT FAR EXCEED THE CURRENT CAPACITY OF STAFFING. IT CAN BE SHORT TERM, IT CAN BE TRANSITORY, IT CAN BE VERY SPECIFICALLY PROJECT BASED. IT IS THE NATURE OF UTILITY OPERATIONS TO ENGAGE IN CONSULTING SERVICES THAT MOVE BEYOND THE EXISTING CAPACITY OF THE WORKFORCE AND HAVE THE REASONING. IT CAN BE TRANSITORY, IT CAN BE PROJECT BASED, IT CAN BE OTHER ENTITIES, REQUIREMENTS AND OBLIGATIONS. AND AS SUCH, WE'LL ALWAYS BE MINDFUL OF THAT AS WE BRING THOSE SITUATIONS TO THE BOARD FOR THEIR APPROVAL. THANK YOU FOR THAT. ALRIGHT, ANY OTHER COMMENTS, QUESTIONS? OKAY, UH, SO WE'VE GOT A MOTION AND A [01:20:01] SECOND TO ALL THOSE IN FAVOR SAY AYE. AYE. AYE. ANY OPPOSED? THANK YOU. THANK YOU KEVIN. UH, MOVING ON. WE'RE WE'RE GETTING THERE FOLKS. UH, AGENDA ITEM 13, [13. 26-55218 Recommendation to authorize the General Manager to enter into one or more Natural Gas Commodity Fixed Price Swap Agreements pursuant to the International Swaps and Derivatives Association (ISDA) Master Agreements to provide natural gas price protection with terms that meet or exceed the following conditions: (1) a term of no more than three years; and (2) pricing indexed to the Southern California Border.       Suggested Action: Approve recommendation. ] AUTHORIZE THE GENERAL MANAGER TO ENTER INTO ONE OR MORE NATURAL GAS COMMODITY FIXED PRICE SWAP AGREEMENTS PURSUANT TO THE INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, ISDA MASTER AGREEMENTS TO PROVIDE NATURAL GAS PRICE PROTECTION WITH TERMS THAT MEET OR EXCEED THE FOLLOWING CONDITIONS. NUMBER ONE, A TERM OF NO MORE THAN THREE YEARS. NUMBER TWO, PRICING INDEX TO THE SOUTHERN CALIFORNIA BORDER. IN ORDER TO HEAR THE PRESENTATION, MAY I HAVE A MOTION? THANK YOU. AND A SECOND THANK YOU. UH, CALL ON TONY FOSTER FOR THE PRESENTATION. WELCOME TONY. MORNING PRESIDENT SCOTT AND COMMISSIONERS. THIS PRESENTATION PROVIDES AN OVERVIEW OF NATURAL GAS HEDGING. THIS MAY BE FAMILIAR TO YOU, UH, COMMISSIONER AUSTIN AS WE PRESENTED THIS IN A, UH, RESOURCE COMMITTEE, UH, WEEK OR SO AGO. SO, UM, SO THE OVERVIEW OF NATURAL GAS, HE HEDGING, UH, CURRENT MARKET CONDITIONS AND THE TOOLS AVAILABLE TO HELP PROTECT OUR CUSTOMERS FROM SIGNIFICANT COMMODITY PRICE VOLATILITY. STAFF IS ALSO ASKING FOR AUTHORIZATION FOR THE GENERAL MANAGER TO ENTER INTO ONE OR MORE THREE YEAR NATURAL GAS COMMODITY FIXED PRICE SWAP AGREEMENTS INDEXED AT THE SOUTHERN CALIFORNIA BORDER SO THE DEPARTMENT CAN ACT OPPORTUNISTICALLY WHEN FAVORABLE MARKET CONDITIONS ARISE. SO TODAY WE HAVE THREE OBJECTIVES. FIRST, WE WANT TO PROVIDE A PRACTICAL OVERVIEW OF NATURAL GAS HE HEDGING AND CURRENT MARKET CONDITIONS. SECOND, WE ARE SEEKING BOARD AUTHORIZATION FOR A NEAR TERM THREE YEAR HEDGING CONTRACT. AND THIRD, WE WILL WANT TO OUTLINE THE LONGER TERM GOVERNANCE APPROACH FOR FUTURE HEDGING STRATEGIES ARE ALIGNED WITH BOARD POLICY DIRECTION THROUGH THE STRATEGIC PLANNING PROCESS. OKAY, THE FUTURES MARKET NATURAL GAS FUTURES MARKETS ARE LARGELY BASED ON PRICING AT HENRY HUB IN LOUISIANA, WHICH SERVES AS THE BENCHMARK FOR NORTH AMERICAN NATURAL GAS TRADING. HOWEVER, LONG BEACH PURCHASES GAS INDEX TO THE SOUTHERN CALIFORNIA BORDER MARKET, WHICH CAN DIFFER SIGNIFICANTLY DUE TO REGIONAL PIPELINE CONSTRAINTS, SUPPLY CONDITIONS, WEATHER, AND LOCAL DEMAND. UNDERSTANDING THIS DISTINCTION IS IMPORTANT WHEN EVALUATING HEDGING STRATEGY. SO THIS GRAPHIC ILLUSTRATES HOW NATURAL GAS FUTURE PRICES CHANGES OVER TIME BASED ON MARKET EXPECTATIONS. THESE FORWARD CURVES REFLECT THE MARKET'S PERCEPTION OF FUTURE SUPPLY AND DEMAND CONDITIONS. UTILITIES MONITOR THESE CURVES CLOSELY BECAUSE FAVORABLE OR PRICING OPPORTUNITIES AND CREATE STRATEGIC OPPORTUNITIES, OPPORTUNITIES TO LOOK FOR PRICE PROTECTION FOR THE WINTER FUTURE, UH, PERIODS. NATURAL GAS MARKETS CAN BE HIGHLY VOLATILE. WEATHER EVENTS, PIPELINE CONSTRAINTS, ELECTRIC GENERATION DEMAND STORAGE LEVELS, AND BROADER MARKET SENTIMENT CAN ALL CAUSE SHARP PRICE INCREASES WHEN PRICES SPIKE UNEXPECTEDLY AND UNEXPECTEDLY. UTILITY BILLS CAN RISE SIGNIFICANTLY FOR CUSTOMERS. HEDGING IS INTENDED TO REDUCE EXPOSURE TO THESE SUDDEN MARKET DISRUPTIONS AND PROVIDE GREATER BILL STABILITY. SO LONG BEACH PURCHASES NATURAL GAS FROM SEVERAL SUPPLY, INCLUDING LONG-TERM PREPAY CONTRACTS, LOCAL GAS SUPPLIES AND SPOT MARKET PURCHASES. WHILE THESE ARRANGEMENTS DIVERSIFY SUPPLY, THERE ARE, THEY ARE STILL LARGELY INDEXED TO MARKET PRICING WITHOUT A HEDGE IN PLACE, CUSTOMERS REMAIN EXPOSED TO COMMODITY PRICE SPIKES DURING PERIODS OF MARKET STRESS. SO WHY CONSIDER HEDGING? HEDGING ALLOWS THE UTILITY TO TRANSFER A PER A PORTION OF MARKET PRICE RISK TO ANOTHER PARTY IN EXCHANGE FOR FINANCIAL CERTAINTY. THE GOAL IS NOT TO SPECULATE ON PRICES, RATHER TO STABILIZE COSTS AND PROTECT CUSTOMERS FROM EXTREME VOLATILITY. HEDGING CAN BE LAYERED ON TOP OF EXISTING PHYSICAL GAS SUPPLY CONTRACTS WHILE STILL ALLOWING THE UTILITY TO PARTICIPATE IN FAVORABLE MARKET CONDITIONS. THERE ARE SEVERAL COMMON HEDGING INSTRUMENTS USED IN NATURAL GAS USED IN THE NATURAL GAS INDUSTRY. FUTURES CONTRACTS, LOCK IN FIXED FUTURE PRICES SWAPS, EXCHANGE FLOATING MARKET PRICING FOR A FIXED PRICE OPTIONS PROVIDE PROTECTIONS ABOVE A SPECIFIED PRICE THRESHOLD WHILE PRESERVING SOME MARKET [01:25:01] FLEXIBILITY. EACH TOOL OFFERS DIFFERENT TRADE-OFFS BETWEEN PRICE, CERTAINTY, FLEXIBILITY, AND COST. WHEN EVALUATING A HEDGE STRATEGY HEDGING, UH, SEVERAL FACTORS MUST BE CONSIDERED, INCLUDING THE LENGTH OF THE HEDGE TERM SEASONAL TIMING, ACCEPTABLE RISK BOUNDARIES, PRICE, STABILITY GOALS, INDEX SELECTION, AND OVERALL COST. GOVERNANCE IS ALSO IMPORTANT. THE NEAR TERM CONTRACT BEING PROPOSED TODAY WOULD ADDRESS IMMEDIATE RISK MANAGEMENT NEEDS. WHILE FUTURE STRATEGIES WOULD BE GUIDED BY BOARD POLICY AND DIRECTION, LONG BEACH HAS SIGNIFICANT EXPERIENCE USING HEDGING SUCCESSFULLY. UTILITY IMPLEMENTED HEDGING PROGRAMS FROM THE EARLY TWO THOUSANDS THROUGH 2018, AND AGAIN BEGINNING IN 2023. HISTORICALLY, THE STRATEGY FOCUSED ON WINTER MONTHS WHEN CUSTOMER USAGE AND EXPOSURE ARE HIGHEST. THE OBJECTIVE HAS CONSISTENTLY BEEN TO PROVIDE CUSTOMERS WITH GREATER PRICE STABILITY DURING VOLATILE MARKET PERIODS. IN MAY, 2023, LONG BEACH ENTERED INTO A FIXED PRICE SWAP AGREEMENT COVERING WINTER PREPAID GAS VOLUMES FOR THREE CONSECUTIVE WINTERS, THE AVERAGED FIXED PRICE SECURED WAS APPROXIMATELY 62 AND A HALF CENTS PER THERM SUBSTANTIALLY BELOW THE EXTREME PRICING EXPERIENCE DURING THE 21 20 21 WINTER MARKET DISRUPTION. THIS ACTIONS STABILIZED CUSTOMER BILLS AND GENERATED SIGNIFICANT SAVINGS FOR RESIDENTIAL CUSTOMERS. THIS SLIDE ILLUSTRATES A FIXED PRICE SWAP STRUCTURE. UNDER THIS APPROACH, LONG BEACH CONTINUES PURCHASING PHYSICAL GAS AT MARKET PRICING, BUT FINANCIALLY EXCHANGES THAT FLOATING PRICE OR FIXED AGREED UPON PRICE. THE RESULT IS GREATER PRICE, CERTAINTY AND PROTECTION AGAINST EXTREME UPWARD MARKET MOVEMENTS. THIS SLIDE INTRODUCES SEVERAL ADDITIONAL HEDGING STRUCTURES BEYOND FIXED PRICE SWAPS, INCLUDING COST CEILINGS, COLLARS, COSTLESS COLLARS, ET CETERA. EACH STRUCTURE BALANCES RISK PROTECTION AND MARKET PARTICIPATION DIFFERENTLY. THE APPROPRIATE INSTRUMENT DEPENDS ON PRICING CONDITIONS, CUSTOMER OBJECTIVES, AND, UH, THE UTILITIES. OVERALL RISK TOLERANCE GO THROUGH SOME OF THEM. COST CEILING COST CEILING FUNCTIONS SIMILARLY, SIMILARLY TO INSURANCE. IT ESTABLISHES A MAXIMUM COMMODITY PRICE THAT THE UTILITY WOULD PAY IF MARKET PRICES RISE ABOVE A CERTAIN LEVEL. THIS PROTECTS CUSTOMERS FROM EXTREME SPIKES WHILE STILL ALLOWING PARTICIPATION AND LOWER MARKET PRICING. PRICES REMAIN LOW. THE CEILING, A COLLAR, COLLAR COMBINES BOTH A PRICE CEILING AND A PRICE FLOOR. IN EXCHANGE FOR PROTECTION AGAINST VERY HIGH PRICES, THE UTILITY GIVES UP SOME BENEFIT FROM EXTREMELY LOW PRICES. THIS STRUCTURE CAN REDUCE HEDGING COSTS WHILE STILL PROVIDING DEFINED RANGE OF PRICING STABILITY. A COSTLESS CALLER, COSTLESS CALLER CALLER FURTHER ADJUSTS THE FLOOR AND CEILING RELATIONSHIP SO THAT THE PREMIUM COST OF THE PROTECTION IS, IS EFFECTIVELY OFFSET. WELL, THIS STRUCTURE MAY LIMIT SOME POTENTIAL SAVINGS DURING LOW PRICE PERIOD. IT CAN PROVIDE ME MEANINGFUL PRICE PROTECTION WITHOUT REQUIRING AN UPFRONT PREMIUM PAYMENT. SO IN SUMMARY, HEDGING IS A RISK MANAGEMENT TOOL DESIGNED TO STABILIZE CUSTOMER GAS COSTS DURING PERIODS OF MARKET VOLATILITY. DIFFERENT INSTRUMENTS PROVIDE DIFFERENT LEVELS OF PROTECTION AND FLEXIBILITY. TIMING IS CRITICAL BECAUSE HEDGING OPPORTUNITIES DEPEND ON FAVORABLE MARKET CONDITIONS. ONGOING MONITORING OF FUTURE MARKETS IS THEREFORE ESSENTIAL TO IMPLEMENTING AN EFFECTIVE STRATEGY. HERE'S OUR PROPOSED PROCESS. PROCESS BEGAN WITH THE MAY 14TH COMMITTEE. DISCUSSION NOW SEEKS BOARD AUTHORIZATION TO PROCEED IF APPROVED STAFF WOULD BEGIN ENGAGING COUNTERPARTIES IN JUNE TO SEEK FAVORABLE PRICING OPPORTUNITIES. ONCE A HE, ONCE A HEDGE IS EXECUTED, STAFF WOULD RETURN TO THE BOARD WITH FINALIZED TERMS AND PRICING DETAILS FOR TRANSPARENCY, TRANSPARENCY AND OVERSIGHT [01:30:01] STAFF RECOMMENDS AUTHORIZING THE GENERAL MANAGER TO ENTER INTO ONE OR MORE NATURAL GAS COMMODITY FIXED PRICE SWAP AGREEMENTS UNDER EXISTING ISDA AGREEMENTS FOR TERMS NOT EXCEEDING THREE YEARS AND INDEX TO THE SOUTHERN CALIFORNIA BORDER. THIS AUTHORIZATION WOULD ALLOW STAFF TO ACT UPON, TO ACT OPPORTUNISTICALLY WHEN FAVORABLE MARKET CONDITIONS EMERGE AND CONTINUE PROTECTING CUSTOMERS FROM SIGNIFICANT COMMODITY PRICE VOLATILITY. SO THIS CONCLUDES ON MY REPORT AND I'M HAPPY TO ANSWER ANY QUESTIONS. THANK YOU. TONY, ARE THERE ANY PUBLIC COMMENTS? UH, ANY COMMISSIONER COMMENTS? SO, OKAY, SO THIS IS FIXED PRICE AND YOU PRESENTED THREE OTHER KINDS OF, THREE OTHER MODELS. AND THIS IS FOR NOT MORE THAN THREE YEARS. SO WITHIN THAT THREE YEAR PERIOD, IF THROUGH THE STRATEGIC PLANNING PROCESS, WE EVALUATE THE OTHER MODELS AND CHANGE OUR MIND. EXCELLENT QUESTION. YES. YEAH, A FIXED PRICE SWAP, UH, I DON'T THINK THE OTHER MODELS WILL BE AVAILABLE. WE'VE CONSTANTLY QUERIED THE MARKET. UH, CALL OPTIONS ARE DEFINITELY OFF THE TABLE, POSSIBLY CALLERS OR COSTLESS CALLERS. BUT FIXED PRICE IS THE HEDGING STRATEGY THAT MOST COUNTERPARTIES ARE WILLING TO ENTER INTO, GIVEN THE EXTREME MARKET VOLATILITY THAT WE HAVE TODAY. THAT SAID, IF OTHER OPPORTUNITIES BECOME AVAILABLE, WE WOULD CERTAINLY LET YOU KNOW WE HAVE THE FLEXIBILITY. OKAY, THANK YOU. CAN YOU CLARIFY THAT ANSWER? SO THE, IF A FIXED SWAP IS WHAT IS BROUGHT FOR ACTION, IT IS A FIXED SWAP FOR THREE YEARS, IT WOULD BE THREE YEARS. SO IF WE FIND, I WAS THINKING THAT IN MY HEAD THAT WOULD BE DIFFICULT TO UNWIND. OH, WOULD IT? OH, SO THIS IS SAYS NO MORE THAN THREE YEARS, TYPICALLY IT'S ACTUALLY THREE YEARS, YES. SO TYPICALLY WE ENTER INTO THREE YEAR WINTER HEDGE PERIOD AGREEMENT. HOWEVER, LOOKING WHAT, UH, IS PROPOSED TO US, IT COULD BE A SHORTER PERIOD IF, IF THE OUTER YEARS ARE PRICED, YOU KNOW, THE, THE FURTHER OUT YOU GO, THE MORE EXPENSIVE THIS HEDGING STRATEGY BECOMES. AND IF THE OUTER YEARS LOOK UNREASONABLE, THEN WE COULD COME BACK AND PROPOSE A SHORTER PERIOD. SO TO YOUR POINT, YES. YEAH. SO LET'S, THEY GO HAND IN HAND. SO THE PRICE ON A SWAP PROTECTS YOU AGAINST, PROTECTS YOU AGAINST HIGHER PRICES, BUT YOU CONCEDE THE LOWER PRICE BECAUSE YOU WILL NOT HAVE ACCESS TO THE LOWER PRICE, YOU'LL PAY THE SWAP PRICE. IN DOING SO. IN DOING SO, IT'S BEING OFFERED TO YOU ON WHAT THE SELLER BELIEVES THE NEXT THREE YEARS IS GONNA LOOK LIKE. IF YOU CHOOSE TO SHORTEN IT, THEN THAT'S A DIFFERENT PRICE. IT CHANGES THE PRICE, RIGHT? AM I CORRECT, TONY? YOU'RE ABSOLUTELY. SO, SO WE'RE PROPOSING THREE YEARS BECAUSE WE HAD PREVIOUSLY DONE THREE YEARS, AND WE BELIEVE IT'S A SHORT ENOUGH TIMEFRAME TO GET AN OPPORTUNITY TO HAVE SOMETHING ADVANTAGEOUS FOR US. AND AT THE SAME TIME, GOING INTO THE STRATEGIC PLAN, IT GIVES YOU THE FLEXIBILITY TO DIRECT FOR WHAT COMES AFTER. SO YOU HAVE THE ABILITY TO DIRECT US TO DO SHORTER. A CONCERN I HAVE IS THAT IF WE DO SHORTER, THEN THE PRICING MAY NOT BE AS FAVORABLE. DID I SAID IT ANY BETTER? ? ABSOLUTELY SPOT ON. OKAY, SORRY. THANK YOU. SO MY QUESTION IS AROUND THE CURRENT COST, FIXED COST FOR NATURAL GAS. UM, WE, WE ARE IN A CONFLICT AND OIL PRICES ARE, ARE RELATED. UM, IS IT, IS IS NOW LIKE A BAD TIME TO LOCK IN? WELL, WITH PRICES LOW, IT'S GENERALLY SPEAKING A GOOD TIME. OKAY. HOWEVER, THESE LOW PRICES ARE ATTRIBUTED TO A NUMBER OF THINGS. OUR BELIEF IS IT'S LARGELY DRIVEN BY DEMAND, WHICH IS DRIVEN BY WEATHER. SO WITH THESE WARM WINTERS THAT WE'RE EXPERIENCING, THE DEMAND HAS DROPPED SIGNIFICANTLY. AND THEREFORE PRICING THAT MIGHT NOT ALWAYS STAND. AND SO WHEN THE COUNTERPARTIES RUN THEIR MODELS, I CALL THEM STRIPS WHEN THEY LOOK OUT THREE YEARS INTO THE FUTURE, THEY COULD SEE WHETHER PATTERNS ARE IN THOSE MODELS, SOMETHING QUITE DIFFERENT. BUT TO YOUR POINT, LARGELY SPEAKING, LOW PRICES ARE MORE FAVORABLE. TONY, SOMETHING ELSE I THINK THAT WAS EMBEDDED WITHIN YOUR QUESTION, COMMISSIONER AUSTIN, IS THE, THE NEWS AND HEADLINES RIGHT NOW IS ALL ABOUT THE VOLATILITY, VOLATILITY IN THE OIL [01:35:01] MARKET. SO THE PRICE PER BARREL HAS BEEN FLUCTUATING DRAMATICALLY, AND YOU'VE SEEN THE EFFECTS OF THAT. YOU'VE SEEN IT IN THE PURCHASE OF FUEL, JET FUEL IN SO MANY DIFFERENT VARIATIONS. BUT OUR EXPERIENCE WITH THE NATURAL GAS MARKET IN TERMS OF THOSE COSTS SEEM TO BE FOLLOWING AROUND GENERAL HISTORICAL TRENDS THAT WE'VE SEEN. SO WE HAVE NOT SEEN PRICE SPIKING IN, IN NATURAL GAS. I THINK THAT WAS PART OF YOUR QUESTION. YES. I'M SORRY. I MESSED UP . THANK YOU TONY. UM, JUST MAYBE YOU COULD HELP ME UNDERSTAND, SO IF WE DO A THREE YEAR FIXED, THEN HOW DO YOU DETERMINE HOW MUCH YOU'RE WILLING TO PAY FOR THAT FIXED TO GET THAT GUARANTEED PRICE? WHEN YOU'RE MAKING THESE CALCULATIONS, I UNDERSTAND YOU, YOU, YOU NEED THE ABILITY TO ACT QUICKLY, BUT HOW DO YOU DETERMINE HOW MUCH, AND THEN HOW MUCH DO YOU FIX? DO YOU FIX A HUNDRED PERCENT OF OUR GAS PURCHASES, 50% OF A 25? HOW, HOW DO YOU DETERMINE THAT THOSE ARE ALL VARIABLES WHICH GO INTO THE DECISION MAKING PROCESS? SO IN TERMS OF WHAT ARE WE WILLING TO PAY FOR, WE GO OUT WITH A NUMBER OF ISDA COUNTERPART, ISDA COUNTERPARTIES, INTERNATIONAL SWAP DERIVATIVES ASSOCIATION. WE HAVE A NUMBER, THEY'RE LARGELY MOSTLY INVESTMENT BANKS ON A SPECIFIC DATE AND A SPECIFIC TIME. WE ASK THEM TO PROVIDE WHAT THEIR FUTURE FIXED PRICING WOULD BE FOR THAT THREE YEAR WINTER HEDGING PERIOD. THEY COME BACK AND WE CAN D DETERMINE, UH, THE LOWEST OF THOSE UH, OFFERS. BUT THEN TO YOUR NEXT POINT, WE DON'T HAVE TO HEDGE ALL OF OUR GAS SUPPLY. WE'VE TYPICALLY HEDGED OUR PREPAY VOLUMES, WHICH ARE ABOUT 70% OF OUR SUPPLIES, BUT WE CAN ALSO HEDGE ANY PERCENTAGE THEREOF, 50%, 25%, JUST WHATEVER LEVELS WHEN WE COME AT THOSE TOTAL NUMBERS. AND AS IT AFFECTS THE AVERAGE BILL, HOW MUCH PROTECTION SHOULD WE PASS THROUGH TO CUSTOMERS IN THE LIKELIHOOD OF A SIGNIFICANT PRICE VOLATILITY DISRUPTION, VOLATIL? SO, SO TO ME THE PERCENT THAT YOU HEDGE, WHETHER 25% OR HUNDRED PERCENT IS A POLICY DECISION. WHAT, WHAT IS YOUR CURRENT DIRECTION NOW AS YOU OPERATE TODAY? OUR CURRENT DIRECTION IS TO HEDGE 100% OF OUR PREPAY VOLUMES. WHERE THAT DIRECTION CAME FROM, IT'S JUST OUR HISTORICAL PRACTICE. SO WE, SO THAT'S ABOUT 70% OF THE VOLUME. THE OTHER 30 FLUCTUATES. THE OTHER 30 WE HAVE UNHEDGED. SO WE WOULD PAY WHATEVER THAT INDEX COMMODITY PRICE WOULD BE. AND THAT IMPACTS ALL THE SCHEDULES THAT WE TALKED ABOUT EARLIER IN THE BUDGET? THAT IS CORRECT. STRAIGHT COMMODITY COSTS. SO IF IT SPIKES THERE, WE'RE GONNA SEE 30% OF THAT SPIKE, BASICALLY. A HUNDRED PERCENT, YES. YES. AND HOW MUCH MORE MONEY IS IT TO HEDGE 100% VERSUS 70% ON A MAGNITUDE? WELL, WHATEVER THE HEDGE PRICE COMES IN TO COMMENT TO THIS, UH, WHATEVER THE HEDGE PRICE HAS COME IN, WE WOULD JUST MULTIPLY IT BY THE FULL VOLUME OF GAS. SO IF THAT INCLUDES ALL THE PREPAID PLUS ALL SPOT PLUS ALL LOCAL, WE COULD DO THAT. IT'S JUST, BUT I GUESS MY QUESTION IS THAT HAS A BIG IMPACT ON OUR RATES OBVIOUSLY, AND HOW MUCH ARE YOU WILLING TO PAY FOR THAT CERTAINTY, RIGHT? THAT'S CORRECT. AND REMEMBER, THAT'S A PASS THROUGH, SO I GET IT, BUT IT IT'S A PASS THROUGH TO THE CUSTOMER. THAT'S CORRECT. COMMISSIONER PARKIN, UM, I COULD TRY FOR AN ATTEMPT AT THIS ANSWER. UM, HISTORICALLY WE'VE HEDGED A HUNDRED PERCENT OF OUR PREPAY VOLUMES FOR THE WINTER MONTHS BECAUSE IT IS WINTER WHEN OUR CUSTOMERS TEND TO, OR RESIDENTIAL CUSTOMERS I SHOULD SAY, TEND TO USE THE MOST GAS. AND THE POINT OF HEDGING, WE BELIEVE, IS TO, TO MAINTAIN AFFORDABILITY AND STABILIZE RATES FOR OUR RATE PAYERS. SO IF WE WERE TO ONLY HEDGE 25% OF OUR VOLUMES, OR 50% OF THE VOLUMES, THEN WE WOULD REMAIN EXPOSED TO THE VOLATILITY FOR THE UNHEDGED PERCENTAGE OF OUR GAS. SO IF WE TOOK THE EXAMPLE OF 2023, UH, WHEN WE HAD THOSE VERY HIGH GAS PRICES AND 0% OF OUR VOLUMES HEDGED, WE WERE A HUNDRED PERCENT EXPOSED. UM, IN THAT SCENARIO, IF WE ONLY HAD HEDGED 50% OF THE VOLUMES, THE, THE RISE IN RATES AND BILLS FOR OUR RATE PAYERS WOULD LIKELY BE LESS THAN WHEN WE WERE EXPOSED TO A HUNDRED PERCENT. BUT IT STILL WOULD'VE RISEN SIGNIFICANTLY. MAYBE NOT 300%, BUT MAYBE 150%. AND, AND WE FELT, AND I, WE CAN COME BACK TO THE BOARD AND ASK FOR DIRECTION, BUT WE FELT TO STAFF THAT IF WE WERE GOING TO TAKE THE ACTION TO HEDGE, WE WANTED TO BE ABLE TO TELL RATE PAYERS YES, GAS SPIKED AND, AND THE COMMODITY COST WAS, [01:40:01] YOU KNOW, A HUNDRED PERCENT MORE THAN IT WAS IN, IN YEARS PAST. BUT WE HAVE PROTECTED A HUNDRED PERCENT OF OUR VOLUMES. SO YOU'RE ONLY GOING TO SEE A VERY DI MINIMIS, MAYBE THAT 30%, BUT EVEN THAT 30% COULD HAVE BEEN MITIGATED BY USING STORED GAS VERSUS PURCHASING SPOT GAS ON THE MARKET. SO THERE ARE DIFFERENT OPTIONS FOR, UM, DRAWING UPON THE GAS TO SUPPLY OUR CUSTOMERS DURING THOSE PERIODS OF TIME WHEN OUR PREPAY VOLUMES DO NOT MEET, UM, DAILY DEMAND. SO THE, THE POINT OF HEDGING A HUNDRED PERCENT OF THE VOLUMES IS TO BE ABLE TO TELL OUR RATE PAYERS, WE PROTECTED YOU TO THE MAXIMUM EXTENT POSSIBLE VERSUS WE PROTECTED HALF OF YOUR VOLUMES, BUT NOT THE OTHER HALF BECAUSE WE WEREN'T REALLY SURE. AND SO, SORRY, YOUR RATES DOUBLED, BUT IT WAS BECAUSE WE ONLY HEDGED TAF. SO RATHER THAN DOING SOMETHING ONLY HALFWAY, UM, HISTORICALLY THIS DEPARTMENT HAS HEDGED THE FULL VOLUME WHEN WE'RE CHOOSING TO HEDGE. WHEN YOU SAY FULL VOLUME, YOU ONLY, THE PREPAY 70%, YES, ONLY 70% OF THE PREPAY. BUT THE PREPAY WAS A ESTABL WAIT, WAIT, 70% OF THE PREPAY OR YOU HEDGE THE A HUNDRED PERCENT OF THE PREPAY, WHICH IS 70% OF OUR VOLUME. AM I SAYING THAT WRONG? NO, YOU'RE RIGHT. SO WE HEDGED A HUNDRED PERCENT OF THE PREPAY, WHICH IS ROUGHLY 70% OF THE VOLUME IN WINTER MONTHS. HOWEVER, BECAUSE WE'VE ALSO SEEN RESIDENTIAL CONSUMPTION DECREASE YEAR OVER YEAR BECAUSE APPLIANCES ARE, ARE CHEAPER, PEOPLE ARE ELECTRIFYING EVEN SOME OF THEIR HEATING, THERE'S LESS WALL HEATERS IN HOMES NOW, UM, THE, THE VOLUME OF GAS USED IS INCREMENTALLY LESS. SO THE, WHAT I'M TRYING TO SAY IS EVEN THOUGH OUR PREPAY VOLUMES DO NOT MEET A HUNDRED PERCENT OF THE DEMAND DURING THE WINTER MONTHS, THAT DELTA BETWEEN THE PREPAY AND THE DEMAND IS SHRINKING EVERY YEAR. SO IT'S FAIR TO SAY IT'S MAYBE MORE THAN 70% OF THE VOLUME WE NEED DURING THE WINTER MONTHS. PREPAY POT POTENTIALLY. YES. AND DURING THE WINTER IS WHEN WE RELY MOSTLY ON STORAGE. SO, UM, IN OCTOBER WE HOPE FOR FULL STORAGE, THAT'S THE PLAN. AND THEN BEGINNING IN OCTOBER WE BEGIN TO DRAW DOWN ON OUR STORED GAS, OUR STORED GAS IS ALREADY PURCHASED. RIGHT. SO WE CONTROL THAT. YES. WHAT WE SELL IT FOR, AND WHEN WE USE OUR, WHEN WE USE IT, WE RARELY SELL OUR STORED GAS. WELL, WHEN WE USE OUR STORED GAS IN THE WINTER, WE CHARGE WHAT RATE DO WE CHARGE THEN WE CHARGE THE SAME RATE THAT WE CHARGE FOR THAT MONTH OKAY. OF GAS. SO WE BUY IT HOPEFULLY WHEN IT'S CHEAP AND THEN WHEN IN THE WINTER WE SELL IT, WE, YES, THERE'S A LITTLE BIT OF A INCREASE IN MARGIN ON THAT. AND HOW MUCH, I'M SORRY DOMINIC THIS, BUT HOW MUCH MORE WOULD IT BE TO HEDGE 100% OF THE PROJECTED WINTER VOLUME, WHATEVER THAT IS VERSUS WHAT WE CURRENTLY DO? THAT IS THE MARKET QUESTION, RIGHT? SO IN, IN 2023 WHEN WE WERE NOT HEDGED AT ALL, OUR RATE PAYERS ENDED UP PAYING THE COST OF WHATEVER WE MAY HAVE HEDGED AT BECAUSE WE WOULDN'T HAVE HEDGED AT THAT $47 A DECK A THIRD. SURE, OKAY. UM, BETWEEN $7, WHICH IS WHAT STORED GAS WAS AND 47 WAS WHAT THAT WAS. BUT THAT'S, THAT WAS A POINT IN TIME. AND DID WE, I GOT A QUESTION, BUT THANK YOU. OH, BUT TO GO BACK TO WHAT WE WOULD ACTUALLY PAY, SO WHEN WE, WHEN WE HEDGED IN 2023, WE CHOSE, UM, A PRICE OR A PRICE CAME IN THAT WAS COMPARABLE TO 2021. SO WE FIGURED THAT IN 2023 WERE THE RISING COST OF GAS, EGGS, BREAD, ALL THE REST OF IT, THAT IF WE COULD MAINTAIN RATES AT A STABLE, STABLE AMOUNT COMPARED TO 2021, THAT THAT WAS A REASONABLE PLACE TO BE. AND AND I TOTALLY SUPPORT PAYING THAT PREMIUM FOR THE HEDGING TO STABILIZE THE RATES. THE SPIKES ARE, ARE A KILLER FOR FAMILIES. I I, I TOTALLY GET THAT. I, I GUESS WHAT I'M TRYING TO UNDERSTAND IS HOW MUCH MORE IS IT TO GIVE THEM 100% PROTECTION? BUT THE RATES ARE GONNA GO UP A LITTLE BIT BECAUSE YOU HAVE TO PAY MORE FOR THAT HEDGING AND I DON'T KNOW, YOU KNOW, THAT'S, YOU GUYS ARE IN THE ROOM WITH A OUIJA BOARD FIGURING IT OUT. BUT I JUST, YOU KNOW HOW THAT'S WHAT MY QUESTION. SO THE DIRECTION WAS ARE WE'RE GONNA CONTINUE FOR THE NEXT THREE YEARS TO HEDGE THE PREPAID PORTION. WE, WHEN WE DETERMINE WHAT WE HEDGE AT, IT'S BASED ON UM, US GOING OUT TO OUR COUNTERPARTIES AS TONY HAD MENTIONED, AND WE SAY WE WOULD LIKE TO HEDGE EITHER 25%, 50%, A HUNDRED PERCENT OF OUR VOLUMES. AND THEN AT THAT POINT IN TIME, THEY GIVE US A COST. THAT COST CAN CHANGE DEPENDING ON THE DAY THAT WE ASK. AND I, MY QUESTION IS, DOES THE BOARD GIVE THE DIRECTION OF HOW MUCH YOU GO AND TELL THOSE PEOPLE YOU WANT TO HEDGE? I SUPPOSE YOU COULD. LEMME JUMP IN. I THINK THAT'S WHAT WE DO, RIGHT? LEMME JUMP IN FOR JUST A SECOND. 'CAUSE IN THE NATURE OF YOUR QUESTION, THE RESPONSE IS, I FIND MYSELF CONFUSED. SO [01:45:01] CAN YOU BRING UP THE SLIDE ON THE PIE CHART? SO I GUESS COMMISSIONER BAR, YOU WERE ASKING WHAT ARE WE HEDGING? AND IN A FIXED PRICE SWAP, WE WILL SET A PRICE. AND IF I UNDERSTOOD YOUR QUESTION, THAT'S WHAT I'M TRYING TO UNDERSTAND. YOUR QUESTION IS ASKING, ARE WE GOING TO WORK TO GET A FIXED PRICE OR WHAT IS THE PREPAY CONTRACT? WHAT IS LOCAL GAS OR WHAT IS SPOT MARKET? KNOWING, KNOWING THAT IN THE WINTERTIME, IN THE WINTERTIME, THE CONSUMPTION SPIKES AND THERE IS A SIGNIFICANT AMOUNT OF GAS CONSUMPTION IN THE WINTERTIME COMPARED TO SUMMER. SO WHEN GAS USAGE IS THE HIGHEST HIGHEST, AND WE HAVE THESE THREE SOURCES, YOU WERE ASKING WHAT DOES THE FIXED PRICE SWAP APPLY TO? WELL, I THINK CLOSE REPHRASE MY QUESTION IF I UNDERSTAND IT CORRECTLY. WHEN WE GO TO THE MARKET, WE ARE HEDGING THE 70% PREPAY CONTRACT THAT WHATEVER THE PREPAY VOLUME IS, WE'RE GONNA HEDGE THAT. A HUNDRED PERCENT OF THAT IS WHAT WE HAVE 100% OF THE PREPAY AMOUNT. AND MY QUESTION IS, WELL I AM OBVIOUSLY I ASK WAY TOO MANY QUESTIONS, BUT THERE, THERE'S A SPOT MARKET IN A LOCAL GAS, WE'RE NOT HEDGING THAT. 'CAUSE THE WAY I UNDERSTAND DIANE IS EXPLAINING IT IS DURING THOSE WINTER MONTHS, WE USE SOME OF OUR STORED GAS. YOU COULD USE SOME OF, SO IN THEORY BY PREPAYING OR HEDGING THE 70%, WE'RE ACTUALLY HEDGING MORE THAN THE VOL MORE THAN 70% OF THE VOLUME WE'RE USING IN THE WINTER MONTHS. BUT MY MORE GENERAL QUESTION, QUESTION IS WHO GIVES THE DIRECTION TO HEDGE THAT AMOUNT? THE BOARD I WOULD ASSUME SAYS HEDGE 100% OF THE PREPAY, OR THEY COULD SAY HEDGE 100% OF WHAT YOU THINK THE WINTER VOLUME IS OR 50% OF THE PREPAY. AND THERE'S A, THERE'S OBVIOUSLY RISKS TO THAT. CORRECT. AND SO IF I'M UNDERSTANDING CORRECTLY, THIS CONTRACT THAT WE'RE APPROVING TODAY, MY QUESTION SPECIFICALLY WAS HOW MUCH ARE YOU WITH THIS APPROVAL TODAY? WHAT ARE YOU HEDGING? HOW MUCH OUR, OUR GOAL IS TO REFLECT BACK ON WHAT THE GAS DEPARTMENT WAS DOING WITH THE CITY. SO WHEN THE GAS DEPARTMENT WAS PART OF THE CITY, YOU ARE CORRECT SOMEWHERE, PRACTICE POLICY DIRECTIVE. HOWEVER, THAT STRUCTURE HELD FORTH, IF I SAY CORRECTLY, A HUNDRED PERCENT OF THE PREPAID CONTRACT WAS GOING TO GET HEDGED ON THIS FIXED PRICE SWAP. AND SO WE REPEATED THAT IN 2023. SO AS A MATTER OF PRACTICE, WE REPEATED THE PRACTICE AND THAT WAS BROUGHT TO THIS BOARD. YES OR NO, IT WAS BROUGHT TO THIS BOARD BACK THEN AS A MATTER OF CONTINUING THE PRACTICE. I I BELIEVE THAT YOUR QUESTION IS ON POINT, WHICH IS MOVING FROM A GAS DEPARTMENT TO A UTILITIES DEPARTMENT WITH A GOVERNING BOARD, THESE PAST PRACTICES BRING TO LIGHT THE OPPORTUNITY FOR DIRECTION THAT THE BOARD CAN SAY. OKAY, SO NOW THAT I'VE BECOME MORE FAMILIAR WITH HOW THIS GOES, LET ME GIVE YOU SOME GUIDANCE AS TO WHAT I'D LIKE TO SEE IN TERMS OF DECISION MAKING BEING RETURNED TO THE BOARD. AGREED. THAT'S CORRECT. THE THE ISSUE THAT I JUST WANNA MAKE SURE WE'RE VOTING ON TODAY IS WE'RE AUTHORIZING THREE YEARS OF HEDGING. AND WHAT AM I VOTING ON? AM I, UH, VOTING ON AUTHORIZING THREE YEARS OF HEDGING, 100% OR 70, THE 70% OF THE PREPAY? OR IS IT SOMETHING ELSE? BECAUSE I DON'T KNOW WHAT I'M VOTING ON. CORRECT. SO LET'S GO BACK AGAIN. CAN YOU CLARIFY WHAT THE FIXED PRICE SWAP APPLIES TO? GIVEN THIS PIE CHART, IF THIS IS CORRECT, THE PIE CHART IS AN ACCURATE REPRESENTATIVE REPRESENTATION OF WHAT WE'RE GOING TO GET A FIXED PRICE ON. CAN WE POINT TO THIS PIE CHART AND SAY, WHAT DOES IT APPLY TO? NO, WE CANNOT POINT TO THIS CHART AND SAY WHAT IT APPLIES TO, UH, THE BOARD. LET ME BACK UP. SO THE RECOMMENDATION THAT IS ON THE AGENDA ITEM TODAY IS THE SAME RECOMMENDATION THAT THIS, NOT THIS COMPOSITION OF THIS BOARD, BUT THIS BODY HAS HISTORICALLY APPROVED AS A WAY TO PROVIDE STAFF WITH THE FLEXIBILITY TO GO ACT ON IN AN OPEN MARKET TYPE ENVIRONMENT. AND IN THE OPEN MARKET TYPE ENVIRONMENT, WHAT WE ARE WILLING TO PUT ON THE TABLE, WHETHER IT'S 25% OF OUR PREPAY VOLUMES, 50% OR A HUNDRED PERCENT, UM, THOSE FACTORS WILL INFLUENCE THE PRICING THAT WE GET BACK FROM OUR COUNTERPART, FROM OUR COUNTERPARTIES. [01:50:01] AND SO OUR GOAL HAS ALWAYS BEEN TO MAXIMALLY PROTECT AFFORDABILITY FOR OUR RATE PAYERS. AND SO TO MAXIMALLY DO THAT, WE HAD HISTORICALLY ALWAYS HEDGED A HUNDRED PERCENT OF OUR PREPAY VOLUMES. NOW WE COULD CHOOSE TO HEDGE LESS. THERE'S CERTAINLY AN ARGUMENT FOR CHOOSING TO LESS HEDGE LESS THAN 100% OF OUR PREPAY VOLUMES. BUT THEN WE ALSO NEED TO ACCEPT THEN THAT THE VALUE OF HEDGING THE CERTAINTY IS ALSO DECREASED. AND I, I SUPPOSE IF WE WANT, IF THE BOARD WOULD LIKE TO DELAY THIS ITEM SO THAT THERE IS, UM, I SUPPOSE, UM, A MORE NARROW SET OF PARAMETERS ON WHAT WE CAN HEDGE, UM, WE COULD DO THAT. HOWEVER, IN THE, IN THE PAST, THE BODY HAS ALWAYS PROVIDED STAFF WITH MAXIMUM FLEXIBILITY AND THE DIRECTION TO PROTECT AFFORDABILITY. I ASK ONE MORE QUESTION. LET ME, LET ME JUST READ SOMETHING FIRST REAL QUICK. SO FROM THE INFORMATION PACKET, UM, BOARD AUTHORIZATION IS REQUESTED IN ADVANCE OF EXECUTION TO ALLOW STAFF TO ACT OPPORTUNISTICALLY IN THE FINANCIAL MARKETS AND LOCK IN FAVORABLE PRICING. WHEN CONDITIONS ARISE FOLLOWING EXECUTION, STAFF WILL REPORT BACK TO THE BOARD ON THE FINALIZED TERMS AND PRICING FOR TRANSPARENCY AND OVERSIGHT. AND I TOTALLY AGREE WITH THAT. HOWEVER, I DON'T AGREE WITH, AND I'M, I'M AGAINST THE 25%, I I WANT TO HEDGE AS MUCH AS YOU CAN TO, TO STABILIZE THE MARKET. SO I WOULD ADD TO THAT OR AMEND THAT RECOMMENDATION THAT IT'S THE DIRECTION OF THE BOARD TO HEDGE 100% OF THE PREPAY AS YOU'VE ALWAYS DONE. UM, AND NOT LIKE 20% OR 25. I WOULD BE TERRIBLE FOR ME TO SIT HERE AND SAY, HEY, WE ONLY HEDGED 25% AND WE HAVE A SPIKE AND THEY COME BACK TO THE COMMISSION AND EVERYONE'S YELLING AT US ABOUT THESE HIGH GAS PRICES AND WE DIDN'T PAY THAT DIFFERENCE. RIGHT? AND IF YOU COME BACK AND SAY, WE CAN'T HEDGE A HUNDRED PERCENT OF THE PREPAY, I I GET THAT MAYBE THE MARKET DOESN'T LET US DO THAT, BUT THE DIRECTION IS I WANT TO HEDGE AS MUCH OF THAT PREPAY AS I CAN. AND THAT DOESN'T SAY THAT. IT JUST GIVES YOU THE FLEXIBILITY TO HEDGE WHATEVER AMOUNT YOU WANT TO HEDGE. WE, WE, I THINK IF I CAN SAY WE WOULD LOVE AND WELCOME THE AMENDMENT, UM, TO THE RECOMMENDATION WITH DIRECTION FROM THE BOARD TO HEDGE A HUNDRED PERCENT OF OUR VOLUMES, AS LONG AS IT MAKES ECONOMIC SENSE TO DO THAT. IF WHEN WE PUT THAT UM, FORTH TO THE MARKET, THE PRICING COMES BACK HIGH OR UNFAVORABLE, WE DON'T LIKE IT, UM, WE CAN CERTAINLY HAVE AN OFFLINE CONVERSATION ABOUT THAT. I'M NOT SAYING WE HAVE TO DO IT, BUT THAT MY GOAL IS THAT WE HEDGE WHAT WE'VE HISTORICALLY HEDGED, BUT THAT'S IN OUR RECOMMENDATION. RIGHT? YOU'RE HEARING IT FROM THE, IF THE COMMISSION AGREES WITH ME, BUT THAT, THAT'S WHAT I'D LIKE TO SEE GOING FORWARD. THANK YOU. DID YOU HAVE A QUESTION? I SUPPORT THE DIRECTION THAT THIS IS GOING IN. UM, YES. I I THINK, I THINK MAXIMUM FLEXIBILITY FOR STAFF IS IMPORTANT, UM, TO, AS LONG AS IT'S PROTECTING OUR RATE PAYERS, UM, TRY TO SAY THAT SIMPLICITY, BUT YES, THAT I, I LIKE THE DIRECTION IT'S GOING AND IF YOU NEED A SECOND TO YOUR AMENDMENT, I'M MORE THAN HAPPY TO DO PROVIDE THAT. SO CONVERSATION IS FANTASTIC. SO IT REALLY HELPS, UM, BECAUSE IN THE DIALOGUE IT POINTS OUT A NUMBER OF DIFFERENT ASPECTS. ONE IS THE A HUNDRED PERCENT IS A GREAT GOAL, AND YET AT THE SAME TIME, STAFF WILL UNDERTAKE SOME FINANCIAL STEWARDSHIP AND MAKE SURE THAT IF FOR SOME REASON THERE IS SOME EXPOSURE, SOME RISK, SOME CONCERN, THEN WE WILL MAKE SURE THAT THE BOARD IS AWARE OF THAT. AT THE SAME TIME, AT THE SAME TIME, THE NATURE OF THE CONVERSATION IS BROUGHT FORTH. SOMETHING THAT I FIND INCREDIBLY IMPORTANT IN THE UPCOMING STRATEGIC PLANNING PROCESS WITH THE BOARD, AND THAT IS, I BELIEVE STRONGLY THAT THE BOARD NEEDS A BETTER AWARENESS OF HOW MONTH TO MONTH TRANSACTIONS ARE DONE TO SET THE PRICE THAT ULTIMATELY SHOWS UP ON CUSTOMERS BILLS. THE CONVERSATION THAT YOU'VE HAD JUST MOMENTS AGO ON USE OF STORAGE, ON USE OF THE PREPAID CONTRACT OF USE OF THE HEDGE IN WINTER MONTHS CONTRASTING WHAT THE TRANSACTION TRANSACTIONS LOOK LIKE IN THE WINTER MONTHS WITH WHAT THE TRANSACTIONS LOOK LIKE IN THE SUMMER MONTHS, COMMISSIONER AUSTIN ASKED, HOW'S THE PRICE OF GAS GOING THESE DAYS? AND IS IT SPIKING ALL OF THESE ELEMENTS? I THINK THE MORE THAT WE EDUCATE THE BOARD, WE PUT YOU IN THE POSITION OF SETTING POLICY AND GIVING DIRECTION ON HOW YOU WOULD LIKE TO SEE FUTURE CONTRACTS [01:55:01] COME BEFORE YOU FOR DECISION MAKING. IT WAS MY GOAL THAT IN THE MEANTIME OR THE SHORT TERM ASPECT OF IT, THAT AS A MATTER OF PRACTICE, WE WERE REPEATING THIS PRACTICE TO YOU IN THIS SHORT TERM, NOTWITHSTANDING ALL THE DETAILED QUESTIONS YOU HAVE THAT CONTINUES TO BE MY EXPECTATION AND UNDERSTANDING OF THE ACTION ITEM BEFORE YOU. TODAY WE ARE REPEATING A PRACTICE THAT WE HAVE BEEN CARRYING FORWARD REPEATEDLY OVER TIME, AND WE WILL DO THAT WITH THE DIRECTION THAT YOU GAVE TODAY. AND IN ADDITION TO THAT, WE WILL BRING BACK TO YOU FOR STRATEGIC PLANNING, THIS ELEMENT OF POLICY AND DIRECTION THAT YOU MUST GIVE SO THAT IN FUTURE CONTRACTS WE HAVE CLEAR DIRECTION ON HOW TO SET UP THE PARAMETERS. THANK YOU FOR THAT. THAT'S EXACTLY WHERE I WAS, UH, WHERE I WAS HEADED WITH THIS. THE, UH, IT'S FORTUITOUS THAT THIS AGENDA ITEM LANDED, UH, AHEAD OF THE NEXT TWO I AGENDA ITEMS. UH, IT, IT'S FUNNY HOW THINGS WORK OUT THAT WAY. UH, IT JUST PROVES THE POINT OF HOW IMPORTANT IT IS, UH, THAT WE MOVE AHEAD SWIFTLY WITH THE STRATEGIC PLANNING PROCESS, UM, THAT WILL HELP GUIDE THIS AND FUTURE DISCUSSIONS AND, AND DETERMINATIONS FROM THIS BODY. ANY OTHER QUESTIONS OR COMMENTS? ANY, ANYTHING ELSE FROM THE PODIUM? OKAY, COOL, PRESIDENT, THANK YOU. UH, SO WE, TO CLARIFY AGAIN, AND FOR MARSHA'S BENEFIT AS WELL AND STAFF COMMISSIONER PARKING, YOU ASKED FOR AN AMENDMENT TO THE RECOMMENDATION, IS THAT CORRECT? THAT'S CORRECT. AND THAT IT WOULD BE WITH A GOAL OR COMMITMENT TO TARGET A HUNDRED PERCENT OF, OF THE PREPAY VOLUME AS WE'VE HISTORICALLY DONE. I I DON'T, I'M HOPEFULLY I'M NOT ASKING FOR ANYTHING MORE THAN CLARIFY. NO, NO, I'M JUST, I JUST CLARIFY. YES, I DON'T, YES. OKAY. MARSHA, DID I SAY THAT RIGHT? JUST SO WE HAVE THE AMENDMENT CORRECT, IT'S TO TARGET THAT 100% OF THE PREPAY CONTRACT AMOUNT, UM, OR TO HEDGE THAT AMOUNT, IS THAT CORRECT? IN THE WINTER MONTHS. WINTER MONTHS, YEAH. IS THAT ENOUGH CLARITY? I SUPPOSE, BUT WHAT IF I'M JUST SAYING WHAT IF UH, THE FIXED PRICE COMES IN AT $10 A DECATHERM, WE'RE HEDGING IT A HUNDRED PERCENT OF OUR PREPAY. ARE WE, DO WE OH NO, THAT PLEASE, LET'S, LET'S TALK THIS THROUGH. I WANNA MAKE SURE THAT WE HAVE CLARITY AS TO WHAT WE'RE GOING TO ENGAGE IN. SO ONE OF THE REASONS WHY WE BROUGHT THIS ITEM TO BOARD SOONER RATHER THAN LATER IS BECAUSE, UM, MAZE USUALLY WHEN GAS PRICING BEGINS TO, TO STABILIZE BECAUSE WE'RE OUT OF WINTER AND SO NOW BECOMES A MORE OPPORTUNE TIME TO, TO HEDGE, WE CAN GO OUT AND ASK FOR A HUNDRED PERCENT OF OUR, OUR, OUR PREPAY VOLUME TO BE HEDGED. IF WE DON'T LIKE WHAT THE NUMBERS COME BACK WITH THE FIRST TIME AROUND, WE SAY, NO THANK YOU, AND THAT'S IT. AND THEN WE TRY AGAIN IN MAYBE A MONTH. AND IF IT LOOKS BAD AGAIN, THEN WE SAY NO THANK YOU. WHERE I THINK WE WOULD GET A LITTLE BIT NERVOUS IS IF WE'RE NOW IN AUGUST AND, UM, LOOKING AHEAD TO WINTER AND IN AUGUST IT STILL DOES NOT LOOK GREAT, THEN WE CAN COME BACK AND HAVE A CONVERSATION WITH THE BOARD. UM, BUT AT NO POINT WOULD WE, I DON'T THINK EVER ENTER INTO A CONTRACT THAT WOULD BE UNFAVORABLE TO OUR CUSTOMERS. THE THE GOAL IS AFFORDABILITY, UM, EVEN GIVEN THE DIRECTION THAT, UM, HOPEFULLY YOU'LL APPROVE TODAY. SO, SO IF YOU'RE, IF YOU'RE COMFORTABLE WITH THAT RESPONSE FROM STAFF, THEN YOUR AMENDMENT HOLDS. AND THAT'S WHY I WAS TRYING TO CLARIFY. WE OBVIOUSLY WILL RETURN TO THE BOARD IF FOR SOME REASON THAT GOAL CANNOT BE MET AND WE WILL DO SO WITH AN EXPLANATION. UH, SO IS THE AMENDMENT COMMISSIONER PARKIN TO, UH, I GUESS TARGET TO HEDGE 100% OF THE PREPAY CONTRACT AMOUNT IN THE WINTER MONTHS? THE RATES ARE FAVORABLE, YES. IT'S A GOAL. IT'S NOT A, IT'S NOT A DIRECTION. IT'S, THEY ASK TO BE MAKE FINANCIAL SENSE AND THAT'S WHAT THESE FOLKS DO EVERY DAY. I AGREE. THANK YOU. OKAY. THANK YOU PRESIDENT SCOTT. SORRY, I DO WANTED TO MAKE SURE THAT THE MOTION ON THE FLOOR WAS CORRECT. APPRECIATE THAT. SO, UH, MARSHA, WE'VE GOT A MOTION AND A SECOND AND AN AMENDMENT. ARE WE FREE TO GO AHEAD AND VOTE? UH, COMMISSIONER AUSTIN, YOU SECOND THE AMENDMENT. IS THAT CORRECT? YES. YES. ALRIGHT, THANK YOU. UH, SO ALL THOSE IN FAVOR OF THE MOTION AND THE AMENDMENT SAY AYE. AYE. ANY OPPOSED? PERFECT. THANK YOU [02:00:02] TONY. DON'T MOVE . SO I, AGENDA ITEM NUMBER 14, ADOPT, [14. 26-55219 Recommendation to adopt Request for Proposal No. UD-26-315 for consulting services and award a contract to Baker Tilly Advisory Group, LP to provide strategic planning services in a total amount not to exceed $437,325, plus a contingency of $43,735, for a total contract amount not to exceed $481,060 for a period of one year, with an option to renew for two additional six month periods; and authorize the General Manager to execute all documents necessary to enter into the contract, including any subsequent amendments.       Suggested Action: Approve recommendation. ] UH, REQUEST FOR PROPOSAL NUMBER UD 26 3 15 FOR CONSULTING SERVICES AND AWARD A CONTRACT TO BAKER TILLY ADVISORY GROUP LP TO PROVIDE STRATEGIC PLANNING SERVICES. UH, MAY I PLEASE HAVE A MOTION? SO MOVED. THANK YOU. UH, TONY FOSTER. ALL RIGHT, GOOD MORNING AGAIN, COMMISSIONERS AND I MIGHT SAY I'M EXCITED, EXCITED TO PRESENT THIS ITEM TO YOU. SO THIS ITEM REQUESTS BOARD AUTHORIZATION TO AWARD A PROFESSIONAL SERVICES AGREEMENT TO BAKER TILLY ADVISORY GROUP IN PARTNERSHIP WITH BELL BURNETT AND ASSOCIATES WHO ARE HERE IN THE AUDIENCE TODAY, UH, TO SUPPORT DEVELOPMENT OF THE LONG BEACH PUBLIC UTILITIES DEPARTMENT STRATEGIC PLAN. THIS EFFORT IS INTENDED TO ESTABLISH A UNIFIED LONG-TERM VISION AND IMPLEMENTATION FRAMEWORK TO GUIDE THE DEPARTMENT'S OPERATIONAL, FINANCIAL AND ORGANIZATIONAL PRIORITIES MOVING FORWARD. THE RECOMMENDATION, THE RECOMMENDED AGREEMENT WOULD AUTHORIZE A ONE YEAR PROFESSIONAL SERVICES CONTRACT WITH BAKER TILLY AND BB AND A IN A TOTAL AMOUNT NOT TO EXCEED $480,060, INCLUDING CONTINGENCY AUTHORITY. THE CONTRACT ALSO INCLUDES TWO OPTIONAL SIX MONTH EXTENSIONS IF NEEDED TO SUPPORT IMPLEMENTATION CONTINUITY. THE CONSULTANT TEAM WAS SELECTED BASED ON, ON ITS DEMONSTRATED PUBLIC SECTOR, UH, UTILITY EXPERTISE, STRATEGIC PLANNING EXPERIENCE, AND IMPLEMENTATION FOCUSED APPROACH. SO WHY THIS STRATEGIC PLAN MATTERS? LONG BEACH PUBLIC UTILITIES DEPARTMENT HAS UNDERGONE SIGNIFICANT TRANSFORMATION IN RECENT YEARS WITH THE INTER INTEGRATION OF WATER, SEWER, AND NATURAL GAS OPERATIONS INTO A UNIFIED UTILITY ENTERPRISE. AS THE DEPARTMENT CONTINUES TO EVOLVE, THERE IS A NEED FOR FORMAL STRATEGIC PLAN, UH, FOR A, UH, FORMAL STRATEGIC PLAN TO STRENGTHEN ORGANIZATIONAL ALIGNMENT, SUPPORT BOARD AND EXECUTIVE COORDINATION, AND ESTABLISH A SHARED DIRECTION ACROSS ALL UTILITY FUNCTIONS. THE STRATEGIC PLAN IS INTENDED TO SERVE AS AN ENTERPRISE LEVEL FRAMEWORK THAT ALIGNS THE DEPARTMENT'S VISION, PRIORITIES, AND LONG-TERM DECISION MAKING PROCESSES. IMPORTANTLY, THE PLAN WILL INTEGRATE WITH EXISTING EFFORTS, INCLUDING THE BUSINESS PLAN, 10 YEAR FINANCIAL PLAN, WATER RESOURCES PLAN, CAPITAL PLANNING ACTIVITIES, OPERATIONAL PLANNING INITIATIVES, AND FUTURE PERFORMANCE MANAGEMENT SYSTEMS TO ENSURE A COMPETITIVE AND TRANSPARENT PROCUREMENT PROCESS. THE DEPARTMENT ISSUED REQUEST FOR PROPOSAL NUMBER UD 26 3 15 FOR STRATEGIC PLANNING CONSULTING SERVICES. MARKET INTEREST WAS SUBSTANTIAL WITH 119 FIRMS VIEWING THE SOLICITATION AND 28 FIRMS ACKNOWLEDGING INTEREST. FOLLOWING A MANDATORY PRE-PROPOSAL CONFERENCE, EIGHT QUALIFIED FIRMS WERE RECEIVED, EVALUATED, AND ANALYZED BY STAFF. AFTER PROPOSAL EVALUATION, FOUR FIRMS WERE SHORTLISTED AND INVITED TO PARTICIPATE IN FINALIST INTERVIEWS. THE EVALUATION PROCESS FOCUSED ON ORGANIZATIONAL CAPACITY AND EXPERIENCE, STRATEGIC METHODOLOGY, COMMUNICATION AND FACILITATION, UH, CAPABILITIES AND OVERALL COST AND VALUES. INTERVIEWS ALSO ASSESS EACH FIRM'S UNDERSTANDING OF UTILITY SECTOR CHALLENGES AND ABILITY TO SUPPORT ORGANIZATIONAL TRANSFORMATION. BASED ON THE EVALUATION PROCESS AND FINALIST INTERVIEWS, BAKER, TILLY AND BB AND A WERE IDENTIFIED AS THE STRONGEST OVERALL FIT FOR THE DEPARTMENT. KEY STRENGTHS INCLUDED THEIR PUBLIC SECTOR UTILITY EXPERIENCE, GOVERNANCE FOR FACILITATION EXPERIENCE, STAKEHOLDER ENGAGEMENT METHODOLOGY, AND PRACTIC PRACTICAL IMPLEMENTATION FOCUSED APPROACH. STAFF ALSO DETERMINED THAT THE PROPOSED TEAM OFFERED A STRONG VALUE AND ALIGNMENT WITH THE DEPARTMENT'S STRATEGIC OBJECTIVES. THE STRATEGIC PLAN EFFORT IS EXPECTED TO PRODUCE SEVERAL KEY DELIVERABLES, INCLUDING AN ENTERPRISE STRATEGIC VISION, STRATEGIC GOALS AND PRIORITIES, STAKEHOLDER ENGAGEMENT FINDINGS, GOVERNANCE, ALIGNMENT RECOMMENDATIONS, AND IMPLEMENTATION ROADMAPS. CONSULTANT TEAM WILL ALSO [02:05:01] SUPPORT FACILITATION OF THE AUGUST, 2026 BOARD STRATEGIC RETREAT AND HELP DEVELOP TOOLS THAT CONNECT STRATEGY DEVELOPMENT WITH FUTURE BUSINESS PLANNING AND OPERATIONAL IMPLEMENTATION. THE PROPOSED AGREEMENT WOULD BE FUNDED THROUGH APPROPRIATIONS ALREADY INCLUDED WITHIN THE FISCAL YEAR 26 AND FISCAL YEAR 27. OPERATING BUDGETS. TOTAL CONTRACT AUTHORITY IS $481,060, INCLUDING CONTINGENCY AUTHORITY. THE STRATEGIC PLAN IS INTENDED TO SUPPORT LONG-TERM OPERATIONAL EFFECTIVENESS, ORGANIZATIONAL ALIGNMENT, AND FUTURE FINANCIAL AND POLICY DECISION MAKING ACROSS THE DEPARTMENT. SO STAFF RECOMMENDS THAT THE BOARD AWARD A CONTRACT TO BAKER TILLY ADVISORY GROUP LP FOR STRATEGIC PLANNING CONSULTING SERVICES IN A TOTAL AMOUNT NOT TO EXCEED $481,060 FOR A ONE YEAR TERM WITH OPTIONS FOR TWO ADDITIONAL SIX MONTH EXTENSIONS AND AUTHORIZE THE GENERAL MANAGER TO EXECUTE ALL NECESSARY CONTRACT DOCUMENTS AND SUBSEQUENT AMENDMENTS. SO THIS CONCLUDES MY REPORT AND I'M HAPPY TO ANSWER ANY QUESTIONS. THANK YOU. TONY, ARE THERE ANY PUBLIC COMMENTS AND ANY COMMISSIONER COMMENTS? OH, OKAY. UH, I'LL JUST SAY THANK YOU TONY. UM, UH, I WAS FORTUNATE ENOUGH TO BE INVITED TO, UH, OBSERVE THE INTERVIEWS WITH THE, WITH THE FOUR, UH, UH, ORGANIZATIONS, THE FOUR, FOUR, UH, FOLKS THAT WE WERE CONSIDERING. UH, AND I JUST WANNA SAY THAT I, I FELT THAT, UH, UH, BAKER TILLY WAS THAT, THAT GOLDILOCKS COMPANY, THEY, THEY, THEY REALLY FIT IN EXACTLY WITH HOW I VIEW LONG BEACH. LONG BEACH IS TOO BIG TO BE SMALL, TOO SMALL TO BE BIG. WE'RE, WE'RE JUST IN THAT SORT OF, THAT PERFECT ZONE. AND I, I REALLY THINK BAKER TILLY IS GONNA BE A, AN OUTSTANDING ORGANIZATION. I'M LOOKING FORWARD TO YOUR GROUP WORKING WITH THEM AND, AND, UH, I THINK THIS IS A SUPER IMPORTANT PROCESS AND, AND LOOKING FORWARD TO MOVING, MOVING AHEAD. THANK YOU. THANK YOU VERY MUCH. IT WAS A, A GREAT PROCESS, VERY LONG-TERM PROCESS. I'D LIKE TO THANK THE, UH, STRATEGIC PLANNING TEAM WITH JOY AND THOMAS AND DEAN. IT'S BEEN A WONDERFUL EXPERIENCE. I'M LOOKING FORWARD TO THE NEXT STEPS. THANK YOU. ANY OTHER COMMENTS? ALRIGHT, SO ALL THOSE IN FAVOR SAY, AYE. AYE. AYE. OPPOSED? NONE. THANK YOU VERY MUCH. UH, ITEM NUMBER 15, [15. 26-55220 Recommendation to establish an ad hoc committee consisting of one member for the limited purpose of addressing matters related to the Strategic Plan, with such committee terminating upon completion of the Strategic Plan effort; and have the President of the Board appoint the member.       Suggested Action: Approve recommendation. ] ESTABLISH AN AD HOC COMMITTEE CONSISTING OF ONE MEMBER FOR THE LIMITED PURPOSE OF ADDRESSING MATTERS RELATED TO THE STRATEGIC PLAN WITH SUCH COMMITTEE TERMINATING UPON COMPLETION OF THE STRATEGIC PLAN EFFORT. AND HAVE THE PRESIDENT OF THE BOARD APPOINT THE MEMBER. UH, MAY I PLEASE HAVE A MOTION TO CONSIDER? SO MOVED. SECOND. THANK YOU. UH, SO I'VE GOT JUST A BRIEF, UH, JUST A COUPLE BRIEF STATEMENTS ON THIS. I, I, I THINK I MENTIONED IN OUR LAST MEETING HOW IMPORTANT THIS STRATEGIC PLAN IS TO THIS, TO THIS BODY. I'M LOOKING FORWARD TO, UH, TO IT MOVING FORWARD TO FRUITION. UM, UH, I THINK IT'S IMPORTANT IN ORDER THAT THE BOARD'S PRIORITIES, UH, ARE RECOGNIZED DURING THE DEVELOPMENT OF THE STRATEGIC PLAN. I, I THINK IT'S CRITICAL THAT WE HAVE, UH, A MEMBER OF THIS BODY, UH, CLOSELY WORKING OPENLY, UH, TRANSPARENTLY, UH, AND DIRECTLY BETWEEN THE BOARD AND THE STRATEGIC STRATEGIC PLAN GROUP. UM, UH, SO IN THAT ENDEAVOR, THE, UH, PURSUANT TO THE AUTHORITIES, BOARDS, COMMISSIONS AND COMMITTEES HANDBOOK, UH, UH, I WOULD LIKE TO APPOINT MYSELF TO SERVE AS THE TEMPORARY AD HOC COMMITTEE MEMBER, UH, SUBJECT TO OBVIOUSLY YOUR APPROVAL. ARE THERE ANY PUBLIC COMMENTS AND ANY COMMISSIONER? CERTAINLY GLAD TO SEE YOU APPOINT YOURSELF. I SUPPORT THAT . IT WAS THE LEAST I COULD DO . CHARLIE, YOU'RE GOOD. ALL RIGHT. ALL THOSE IN FAVOR SAY AYE. AYE. AYE. OPPOSED? THANK YOU VERY MUCH. UH, ITEM NUMBER 16, [16. 26-55221 Recommendation to receive and file May 14, 2026 Resources Committee Report.       Suggested Action: Approve recommendation. ] UH, RECEIVE AND FILE THE MAY 14TH, 2026 RESOURCES COMMITTEE REPORT. UH, MAY I PLEASE HAVE A MOTION TO RECEIVE AND FILE? THANK YOU. AND A SECOND, SECOND CALL ON COMMISSIONER AUSTIN FOR THE REPORT IN PLACE OF, UH, COMMITTEE CHAIR CORDERO CURRENTLY. THANK YOU. UH, AND, UH, I WANNA THANK DEAN FOR HIS, UH, THIS, UH, GREAT STEWARDSHIP OF THIS, UH, COMMITTEE. UH, WE DID MEET [02:10:01] ON MAY 14TH, AND, UH, PRESENTATION WAS GIVEN ON THE WATER SUPPLY UPDATE. UH, AS WE ALL KNOW, THE RAINY SEASON THIS YEAR WAS, UH, CHARACTERIZED BY SIGNIFICANTLY LOWER EXPECTED SNOW PACK AND RUNOFF BY AVERAGE PER PRECIPITATION. UH, THE COLORADO RIVER WATERSHED, THE ROAD LOW RUNOFF THREATENS LAKE POWELLS, UH, MINIMUM POWER POOL ELEVATION, PROMPTING THE FEDERAL GOVERNMENT DROUGHT RESPONSE ACTION TO, UH, INCREASE INFLOWS AND DECREASE OUTFLOWS TO STABILIZE RESERVE LEVELS. RESERVOIR LEVELS, SORRY. MET, UH, WATER STORAGE REMAINS AT A RECORD HIGH, UH, WHICH PROVIDES A BUFFER AGAINST, UH, ONCOMING UPCOMING HYDROLOGIC UNCERTAINTY. AND, UH, WATER LEVELS ARE ALSO HEALTHY AND ABOVE TARGET. OPTIMUM QUANTITY, WHICH IS GOOD NEWS. UM, THERE WAS ALSO A PRESENTATION REGARDING THE 2025 URBAN WATER MANAGEMENT PLAN. UM, A STATUTORY REPORTING REQUIREMENT UNDER THE 1983 UWMP ACT, THE 2025 UWMP DOCUMENTS, PROJECTED FUTURE CONSUMER CUSTOMER WATER DEMANDS AND DEMONSTRATES THAT, UM, SUPPLIES, EXCEED DEMANDS ACROSS NORMAL, SINGLE, DRY, AND MULTIPLE DRY YEAR SCENARIOS THROUGH 2050, UM, WHICH INDICATE LONG-TERM WATER SUPPLY RELIABILITY. THE UWMP IS MADE AVAILABLE FOR PUBLIC REVIEW AND IS SCHEDULED FOR A PUBLIC HEARING ON JUNE THE FOURTH, AFTER WHICH IT WILL BE, UM, ADOPTED BY THE BOARD AND SUBMIT IT TO, UH, THE DEPARTMENT OF WATER RESOURCES ON JULY 1ST. SO THAT'LL BE COMING BACK TO US FOR ACTION. AND THEN, UH, LASTLY, A NATURAL GRASS HEDGING PRESENTATION, UH, WAS PROVIDED. AND, UH, THAT WAS A GREAT PRESENTATION BY TONY. THANK YOU VERY MUCH. AND, UH, I DON'T WANT GO INTO THAT ANYMORE BECAUSE WE TALKED QUITE A BIT ABOUT IT, , AND THAT ENDS OUR REPORT. UM, CHAIR CORDERO DID A GREAT JOB CHAIRING THE MEETING. THANK YOU. THANK YOU, COMMISSIONER AUSTIN, ARE THERE ANY PUBLIC COMMENTS? ALL RIGHT, ANY COMMISSIONER COMMENTS? ALL RIGHT, WE'VE GOT A MOTION TO RECEIVE AND FILE. ALL THOSE IN FAVOR, SAY AYE. AYE. AYE. ANY OPPOSED? THANK YOU VERY MUCH. UH, PUBLIC COMMENT PERIOD IS NOW [PUBLIC COMMENT Opportunity to address the Utilities Commission on non-agenda items. Each speaker is limited to three minutes to make their comments unless extended by the Board.] OPEN. IS THERE ANYONE WISHING TO SPEAK ON A NON AGENDA ITEM? SEEING NONE. PUBLIC COMMENT, PERIOD IS NOW CLOSED. AND ANNOUNCEMENTS, ANY [ANNOUNCEMENTS] ANNOUNCEMENTS FROM, UH, AND OUR GENERAL MANAGER? I, I HAVE NO SPECIFIC ANNOUNCEMENTS TODAY. I KNOW THAT IN THE SUBSEQUENT BOARD MEETING I'LL BE PROVIDING YOU THE GENERAL MANAGER REPORT. THERE IS A LOT OF THINGS HAPPENING, UH, IN THE WATER SECTOR. I'LL PROVIDE THEM THEN ALONG WITH, UH, AN OPPORTUNITY FOR DIALOGUE OR ANSWERING QUESTIONS. THANK YOU. THANK YOU VERY MUCH. UH, IN THAT CASE, THIS MEETING IS NOW ADJOURNED. [ADJOURNMENT] 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.