On the agenda

1. 1Call to Order - Roll Call▶ 0:00
2. 2

   2018 Utility Revenue Sufficiency Analysis Update

   discussed

   Stantec consultants presented the 2018 Utility Revenue Sufficiency Analysis update for the city's water and sewer fund, recommending continuation of 4% annual rate adjustments over the 10-year planning period to fund operations, capital needs including the Orangewood utility purchase, and to build operating reserves to a six-month minimum by FY2021. The analysis projects approximately $4 million in bundled borrowing for FY2019-2020 and maintains strong debt service coverage above 3.5. Council discussion focused on rate comparisons with Pasco County, the city's service-area agreement, and concerns about Tier 3 pricing for irrigation water.

   • direction:Council directed staff/consultants to look into whether the city's out-of-city rates comply with the agreement with Pasco County and to examine the Tier 3 irrigation rate structure for possible adjustments. (none)

   🏢Burton and Associates🏢FGUA (Florida Governmental Utility Authority)🏢Orangewood Utility🏢Pasco County🏢SWFWMD🏢Stantec🏢Tampa Bay Water👤Eric Van Malsen👤Jeff Dykstra👤Mike Burton👤Mr. Rivera👤Ms. Manitz👤Robert#2018 Utility Revenue Sufficiency Analysis#4% annual rate adjustment#Capital Improvement Program#FGUA acquisition scenarios#Financial Analysis and Management System (FAMS)#Florida statute 25% out-of-city rate cap#Linderick service area#Multi-Year Financial Management Plan#Orangewood utility acquisition#Tier 3 irrigation rate

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   [00:00:17] appears to be the next item on the agenda. It is indeed Mr. Mayor. We have [00:00:22] representatives this evening who I'll allow Robert to introduce from Stantec [00:00:27] with you, formerly of Burton and Associates, who last presented themselves [00:00:33] to you in 2014 as it related to the financial management plan for our water [00:00:40] and sewer fund. The purpose of the revenue sufficiency study is to [00:00:45] determine from an operating and capital needs perspective of both systems [00:00:53] whether or not we are running appropriately or whether across-the-board [00:01:00] rate adjustments might be appropriate. And additionally, as part of the study [00:01:05] this year, we reviewed the possibility of buying the Orangewood utility system. [00:01:14] And Robert, I'm going to let you start. If you want to introduce Eric. Sure, we [00:01:21] have Mr. Eric Van Malsen. He's the Managing Consultant Financial Services [00:01:26] of Stantec and Mr. Jeff Dreiksta, Managing Consultant. The additional item [00:01:33] that we did include in this revenue sufficiency was we did go ahead and [00:01:37] present an option on the FGUA utility simply because everything tied in [00:01:44] together. There's no way that you could be able to review any of your numbers and [00:01:49] the financial state of the utility unless you looked at several scenarios. [00:01:55] The first scenario would be if the city operated under the current conditions [00:02:01] with its recommended four percent annual increases and everything remaining the [00:02:07] same. Included in that though would be the Orangewood utility purchase. The [00:02:13] other option we would look at is whether or not Pasco County was to acquire FGUA [00:02:19] and there were elements of the financial in that the city would that [00:02:25] would be reduced. And the final option would be if the city acquired FGUA [00:02:32] what the financial outlook of the utility would be. With that I'll turn it [00:02:36] over to the gentleman. Thank you, Robert. Members of the Council, it's a pleasure to be [00:02:41] here once again. My name is Eric Van Malsen, a Managing Consultant with [00:02:44] Stantec. With me today is my colleague Jeff Dreiksta and we'll be presenting the [00:02:47] revenue sufficiency analysis first and show you our conclusions and [00:02:51] recommendations regarding the study. As a brief agenda, we'll go over a little bit [00:02:55] about the project background and the scope of which we were hired to do, an [00:02:58] introduction of the project team, the key issues your utility are facing, the [00:03:02] financial management plan itself, a rate survey as your typical single-family [00:03:08] residence compares to as they're under the existing rates and the recommended [00:03:12] rates to your neighbors and similar systems and they'll open it up for [00:03:15] discussion. As a brief background of the project, we were last hired when we were [00:03:21] previously Burton and Associates by the city to perform the multi-year financial [00:03:24] management plan for the utility in fiscal year 2014 and the analysis [00:03:29] confirmed the need for annual indexing adjustments of 4% for both water and [00:03:34] sewer rates across the board to carry the system forward over the next 10 [00:03:37] years. We were retained in this fiscal year to update the multi-year financial [00:03:42] management plan with the most current available data to figure out if the [00:03:46] operating and capital needs of the utility systems would be functional [00:03:50] under the current rate plan or if any adjustments would be necessary, including [00:03:54] the integration of the potential purchase of the Orangewood utility [00:03:57] systems. As Robert already mentioned, Jeff has done a separate analysis of the [00:04:02] Lend-Rate-Gift-UA system and you won't see that mentioned in this PowerPoint [00:04:06] presentation but we have that here to discuss as well. And of course the output [00:04:11] of the financial management plan will be to see what future annual rate [00:04:14] adjustments will be required by the utility to meet the ongoing financial [00:04:18] requirements of the system. The project team includes Mike Burton, the man [00:04:23] himself with over 30 years of utility experience, and myself on the utility RSA. [00:04:28] Not pictured, Jeff Dykstra was the lead consultant on the FTOA Lend-Rate-Gift [00:04:33] acquisition scenario planning. The process for the financial management [00:04:38] plan includes for each year in the planning period starting with fiscal [00:04:42] year 2018 going out 10 years, the inputs include the financial data for the [00:04:46] budgets, revenues, and expenses as provided by your staff, economic [00:04:50] assumptions of growth within the city, capital and operating plans, policy [00:04:55] considerations, and including regulatory requirements. Those are input into our [00:04:59] financial model which we call FAMS or financial analysis and management system [00:05:03] and that outputs the financial management plan with revenue projections, [00:05:06] projections of costs for operating and capital, any necessary borrowing [00:05:10] requirements to fund the capital improvement program, the rate [00:05:14] requirements as well as impacts to customers which you'll see on the survey [00:05:17] portion of this presentation. The key issues your water and sewer utility [00:05:22] faces are of course keeping pace with escalating operating costs which is not [00:05:26] unique to your utility, maintaining adequate debt service coverage which we [00:05:31] target a debt service coverage ratio above 2.0 and you'll see you in our [00:05:35] financial management plan that is not a worry of this utility, you have strong [00:05:38] debt service coverage under the existing scenario and any potential [00:05:43] scenario of new debt issuance. One of the major key issues we want to track is [00:05:48] maintain the operating levels above the minimum requirement. The current target [00:05:52] requirement would be three months of operations and maintenance costs and per [00:05:56] discussions with your staff we are aiming to increase that utility minimum target [00:06:01] of six months by fiscal year 2021. Not only would that give you more cover for [00:06:07] any actual emergencies to need to use that cash but it'll also give you a [00:06:12] better outlook from rating agencies for any new debt issuance and provide an [00:06:17] overall better financial stability for the utility going forward. Of course one [00:06:23] of the key issues for all utilities in particular is to make sure funding [00:06:27] is adequate and available for all capital improvements and renewal [00:06:31] replacement needs of the system and the capital improvement program we've been [00:06:36] provided includes the purchase and improvement of the Orangewood utility [00:06:39] system so that the financial management plan you're going to see with that we're [00:06:44] going to present to you includes the purchase of that system and all the [00:06:47] dynamics that would be involved with including that purchase in the capital [00:06:50] plan. What you're seeing on the screen right now is a control panel of our [00:06:55] model all the details behind the financial management plan are contained [00:06:59] within the model but it's output it into this control panel and while there's a [00:07:02] lot going on there's a few key areas that I just want you to focus on. If we [00:07:07] go into live scenario modeling with the financial model itself the key convention [00:07:11] is the blue bars and the blue numbers are your active scenario and the green [00:07:15] are a static scenario so if we change anything you'll see the blue numbers and [00:07:19] bars move around so you can see what the difference was to the last scenario. This [00:07:24] financial management plan shows the continued need for 4% rate adjustments [00:07:29] going forward in each year of the planning period which is consistent with [00:07:33] the rate adjustments that the city's adopted year-over-year for the utility. [00:07:37] It shows sustainable cash flows and while it shows the minimum balance of [00:07:43] three months being met for next fiscal year this utility will also meet the [00:07:47] minimum of six months requirement by fiscal year 2021 and I apologize for the [00:07:51] typo six months not months but the 4% annual rate adjustments would be not [00:07:57] only providing the minimum requirements now but build up to that increased [00:08:01] requirement going into fiscal year 2021. The capital improvement program is heavy [00:08:06] in the early years and that is highly related to the purchase of the Orange [00:08:11] Wood utility system as well as the improvements needed for this system as [00:08:14] provided by your staff. Because of the high level of CIP in those early years [00:08:21] we do show our model calculates the need for some borrowing and what we show for [00:08:26] fiscal year 19 is a bundled borrowing for fiscal year 19 and 20's projects [00:08:31] that need additional funding outside of your available operating cash flows and [00:08:35] reserves as well as a smaller level of borrowing in fiscal year 2021 and this [00:08:40] assumes that you would spend 100% of the dollars that we've been provided in your [00:08:44] capital improvement program. To the extent those projects get kicked down [00:08:48] the road either due to execution issues or savings elsewhere the borrowing would [00:08:53] either be decreased or not needed at all particularly in that 2021 issue but in [00:08:58] the particularly in fiscal year 2020 as well as some amount in 2019 we would [00:09:03] project under these scenarios the need for some borrowing and the Orange Wood [00:09:07] utility purchase is included in that. While you could afford that purchase [00:09:12] with cash alone you would need borrowing for other areas of the capital [00:09:17] improvement program so we think it'd be valuable just to bundle all the needs [00:09:20] together into an approximate four million dollar issue for this next [00:09:23] fiscal year and to fund projects through fiscal year 2021. And of course one of [00:09:29] our key issues we maintain is debt service coverage and you can see across [00:09:33] the board there while we look at a minimum of senior lien debt service [00:09:36] coverage above 2.0 you have over 3.5 and above for each year the projection [00:09:41] period which is a very strong debt service coverage of your existing debt [00:09:45] service and any projected new debt service that you would undertake that [00:09:49] the financial model is outputting. So as our conclusions and recommendations we [00:09:54] recommend that you continue to adjust utility rates by 4% annually to meet the [00:09:58] projected requirements of the financial management plan and you can see here [00:10:01] this chart shows over the next five years if rates were adjusted for water [00:10:05] sewer and reclaimed water across the board what the bills for an average user [00:10:10] would be within the city for water and sewer using 4,000 gallons a month and [00:10:14] for reclaimed water using 15,000 gallons per month. And of course we [00:10:19] always recommend that the city continue to update this analysis on an annual or [00:10:22] biannual basis to keep up to pace with changes of your financial management [00:10:27] plan including operating costs, capital needs, renewal and replacement, any other [00:10:31] purchase scenarios of utilities and how those dynamics may change as well as [00:10:35] just overall economic conditions. Compared to neighboring utilities and [00:10:41] similar utilities in the area you can see that your current rates where your [00:10:45] average water and sewer customer of using 4,000 gallons a month residential [00:10:50] customer currently would pay a combined bill of 5,509 with the 4% increase they'd [00:10:54] be paying 5,733 so while they'd be in the bottom third of the survey now they [00:10:59] would be right in the middle after that rate adjustment. But we should also note [00:11:03] that this survey is based upon known fiscal year 18 rates and as we are [00:11:07] entering October many if not all these utilities are also facing rate pressure [00:11:11] and they're likely to have increased as well so the actual position on the [00:11:15] survey may be a little bit exacerbated because we're not showing their [00:11:19] projected rates for fiscal year 19. With that I conclude the revenue [00:11:24] sufficiency analysis presentation and open up for discussion and questions. The [00:11:31] comment about the Pasco County rates or the other rates because Pasco showed up [00:11:36] being a little less expensive than New Port Richey at 4,000 and could you [00:11:41] have a little expounding on that because I know there are different levels. You [00:11:46] look at an average 4,000 usage but if somebody uses 6,000 we might be lower [00:11:52] rate or if they use 2,000 we might be a higher rate and I think the 19 rates are [00:11:56] in it fiscal year 19 rates are in effect now right so we don't have a projected [00:12:00] rate for 19 we should know what that rate is. Right well we this survey was [00:12:05] performed a you know a little while back while we were in the middle of the [00:12:08] study so I don't have everybody's October 1st rates in here but you're [00:12:11] correct that the tier ranges have a difference so where a 4,000 gallon a [00:12:15] month user in New Port Richey does pay you know what you show on the screen and [00:12:21] if that same gallon was was the average in Pasco County that would be their bill [00:12:25] but that may not be their average use in Pasco County and depending on when that [00:12:28] where their tiers are if they trip at 6,000 gallons they may see a big jump in [00:12:32] that average user at 6,000 gallons compared to where your tiers are so it's [00:12:37] all a matter of where the the consumptive use tiers are. I I raised [00:12:40] that question because one of the agreements that the city has with the [00:12:44] county is that our out-of-city rates don't exceed their rates so our proposed [00:12:51] rate of 55, 57 versus the Pasco's 55 if that's our in-city rate that you're [00:13:03] telling me that our out-of-city rate at a 25% increase is considerably more at a [00:13:08] 4,000 level which is a concern to the city because of our agreement with the [00:13:13] county so is that something we need to look at or should we be or is it an [00:13:21] issue? The county's already been complained about the annual 4% step-up [00:13:25] I've heard it from several commissioners from staff at the county it's already an [00:13:30] issue. Okay. There are they're aware of it. Yeah I can speak to that a little bit [00:13:40] they do have a different four four tiers versus five tiers for example and then [00:13:46] within the tiers as Eric mentioned different different rates the county's [00:13:49] first and second tier rate are lower than the city's first and second tier [00:13:53] rate and so depending on what level of usage you're looking at you'll see some [00:13:57] differences. To the councilman's comment one option we would have would be to set [00:14:01] our rate if to see in a model what it would take for us to be able to sustain [00:14:06] rates that stay within our agreement with the county in other words it may be [00:14:09] your company now is also a company that consults on rates with the county so [00:14:15] your methodology may vary in terms of what your recommendations are but to me [00:14:21] if we set our county rate at a not to exceed the county's county rate to stay [00:14:28] within our boundaries would we need to cut back on some of our transfers so I [00:14:36] mean what would it take for us to get into compliance you know. And to add on to [00:14:42] that the county just their 2019 improve rates just went into effect they went up [00:14:46] by one and a half percent for water three and a half for wastewater so just [00:14:49] to give you. And they've adopted this similar increases that we have and the [00:14:56] question I would ask you councilman are you also talking about the [00:15:00] Florida statute that calls out a maximum of 25% increase, are you saying that in our service area, even in the portion of unincorporated Pasco County, that our rates stay the same for those customers as the customers that are inside the city? [00:15:20] Our requirement with our agreement with the county to have the service area is that we won't, I believe. [00:15:26] Correct, but it also allows us to institute that 25% maximum by Florida statute. [00:15:31] Oh, above their rate. [00:15:33] Correct. [00:15:34] So as long as you stay within that amount, you're okay. [00:15:37] I'm not saying we're doing anything illegal. [00:15:39] I'm just saying the county's ticked off about it. [00:15:41] I've had behind the closed doors meetings with Ms. Manitz and myself and more than one commissioner, and it's a big concern and issue they have with us as a city. [00:15:51] I'm not saying we have to change it. [00:15:53] I'm just throwing it out there. [00:15:54] I will say this, the reason why if you're in unincorporated Pasco County and you pay a little more is simply because we have what we would call that capital recovery fee or that capacity fee that goes out to those areas. [00:16:09] And so therefore, we're allowed to do that, and that's what the Florida statute calls out. [00:16:14] And so it's not out of the norm. [00:16:18] I suspect one of the county commissioners is really aggravated about this because she's in the Linderick service area, and they're getting hosed. [00:16:28] Well, we don't service them, though. [00:16:32] We provide water. [00:16:33] But that's not a factor in this. [00:16:36] Our agreement with them doesn't talk about retail. [00:16:38] That is, I'm sure, the reason that she is so upset about our rates, because when she gets her water bill, it's sky high. [00:16:46] Well, that's what I'm hearing. [00:16:47] You're charging Linderick 4% every year. [00:16:49] You don't have to do that. [00:16:50] Well, that's a whole different story there. [00:16:52] Yeah, it is. [00:16:53] I'm not saying it's the same. [00:16:54] But I am curious to get, because my understanding of the agreement with the service area was that our, in my mind, was that our bill didn't go higher than the bills that they charge for people in the county. [00:17:08] And if you're saying whether it says that or not, it doesn't, that's not valid. [00:17:14] I believe it says the rate, but then we are allowed not to exceed, and it calls out the statute. [00:17:20] And if you look at the statute, that's where it calls out the 25%. [00:17:23] Okay. [00:17:24] Yeah, I think it's worth looking into, just to solve this has been a long riddle in my head. [00:17:29] So if that's fine, then that's great. [00:17:32] And then, Mr. Rivera, when during this meeting, or are we not going to discuss it during this meeting, [00:17:35] are we going to discuss the issue that I have with the increased rate that we charge for people that use water to irrigate their lawn systems? [00:17:44] We're trying to ask people to take care of their homes or lawns, but, you know, you and I have had several discussions about my water bill [00:17:50] and water bills of other people that irrigate their lawn during the dry season where we're not exceeding what we're allowed to use, [00:17:58] but the bottom line is we charge our residents a lot more money for the outside water than we do for inside water. [00:18:03] Is that correct or not correct? [00:18:05] You charge the outside? [00:18:07] Yeah, like if I hose water, irrigation water outside, isn't it a higher rate than the water used inside? [00:18:14] No, sir. [00:18:15] You're not paying for it. [00:18:16] If you have an irrigation meter, you're not paying for the sewage charge on it. [00:18:20] You're strictly paying for the water rate. [00:18:23] Where are my office, ma'am? [00:18:26] It starts at Tier 3 because it's the assumption that the average person that has an irrigation meter is not going to start at that base rate [00:18:37] that you would use just minimal water for showers, cooking, those types of things. [00:18:44] It's assumed that you're going to be using your irrigation system, you're going to be washing your cars, [00:18:49] you're going to be filling your pool up, and you're going to start at the Tier 3 rate. [00:18:54] That's the issue I have, I think. [00:18:56] Why are we starting on the Tier 3 rate? [00:18:58] I have an issue with it. [00:18:59] A couple of dry weeks and you've got to fill some water in your pool. [00:19:03] I mean, you feel it in your water bill, you do, for three, four inches in your pool. [00:19:07] And I had talked to Mr. Burton about that, and he couldn't make it tonight, and he was going to touch base with you on that. [00:19:13] But that is something that they do do if we want to change the structure that we have. [00:19:21] They can look at that and come out with some recommendations. [00:19:25] I think we should, because in certain neighborhoods, a lot of our residents want reclaimed water. [00:19:30] We've been told that we're not able to. [00:19:33] But with SWFMUD, we don't have the funding, they don't have the funding to provide that to these neighborhoods that want it. [00:19:41] So if you still want to take care of your lawn, you don't have an option for reclaimed water like a lot of our residents do, right? [00:19:47] So you want to take care of your lawn, you want to wash your car, you're paying more money. [00:19:51] With the reclaimed water, it's very inexpensive to water your lawn. [00:19:54] So we have some residents that have access to do that, some that don't. [00:19:57] We're charging a Tier 3 rate for the ones that don't, and I just don't think it's fair. [00:20:02] I could expand on this a little bit. [00:20:05] This is far from my area expertise. [00:20:07] Right. [00:20:08] So what Robert said is correct, is the first couple of tiers of your rates are designed, [00:20:14] the first tier is generally an affordability tier, [00:20:16] and the second is essentially trying to cover the essential domestic usage of water. [00:20:22] So everybody, even people who live in a small apartment and a fixed income, [00:20:26] have to use a certain amount of water to get through the month to clean their clothes, drink, eat, and so on. [00:20:32] So those affordability tiers are intended to provide a lower level of cost to those essential domestic usages. [00:20:39] Once you get to those upper tiers, the whole concept behind the tiered rate system is a conservation rate system. [00:20:45] It's kind of counter to economics to where the more you buy, you should get a better price to it. [00:20:50] It's essentially you want to hit on a price point at those higher levels of usage to provide an incentive for conservation. [00:20:57] May I interrupt you? [00:20:58] Sure. [00:20:59] I'm sorry, because I'm going to support what you're saying here [00:21:02] and just remind that when someone has a separate meter to water their lawn, [00:21:09] all of these incentives of don't stay in the shower too long, don't do the bath, don't do all the water, [00:21:16] those are all replaced by what are my landscaping needs. [00:21:20] And so it's not really seemed to me that it's as well suited for a punitive or conservation purpose. [00:21:30] It's really do we have enough water to provide. [00:21:33] And the deal with Tampa water is now our costs are going up every year because one of our partners is not buying water. [00:21:41] And now we're paying a higher share of the overhead. [00:21:43] So I'm not so sure that we couldn't relax if we're not in a drought or a situation like we used to be years ago, [00:21:51] that we couldn't relax those rates for the water meters. [00:21:54] We're trying to improve the aesthetics of our homes in New Port Richey, right? [00:21:58] So I have a pretty long lot personally. [00:22:01] I have legustrums that go as a privacy border the length of my lot. [00:22:06] Well, you know, they got infected by something, and I lost about 10 of them. [00:22:10] I spent $800 on new plants that I planted myself, took three days off of work. [00:22:14] It was not an easy feat. [00:22:16] I had to water those plants every day for like the first two, three weeks to get them going. [00:22:21] My water bill went up like a third, I think more than that, just by trying to keep my yard nice. [00:22:26] That's the issue I have. [00:22:27] Yeah, and I understand. [00:22:28] I'm just trying to explain why the rates are where they are. [00:22:31] And if the entire goal of the city is changed from a conservation standpoint to beautification [00:22:38] or more of a mindset of, you know, economic incentive to keep your lawns green, [00:22:44] then you can consider changing the structure of your rates. [00:22:48] I'm just trying to explain why they are what they are when they first got adopted to look this way in terms of the tiered rate structure. [00:22:54] It was a conservation mindset. [00:22:56] And I appreciate that very much, and I'm not coming at you personally. [00:22:58] I think it's something the city should look at. [00:23:01] I believe Tampa Bay water rates for raw water purchasing has remained the same for the last five to seven years. [00:23:08] Yeah, as long as I've been on Tampa Bay water, they've been static. [00:23:13] And Mr. Starkey brings a good point. [00:23:17] I live in one of those neighborhoods that also doesn't get reclaimed water. [00:23:22] I'd almost kill to get reclaimed water because I flat cannot afford to water my yard with the potable water [00:23:35] because the water rates are high enough. [00:23:38] I mean, my wife screams if she sees the sprinklers going. [00:23:44] It's an issue. [00:23:46] Well, I believe what we can do to try to find out if there's a more efficient way that we can work together to meet your request [00:23:56] is to be able to have Stantec take a look at it and then come back with a couple different proposals for us [00:24:03] to where we could keep the utility as far as its revenue sufficiencies in check [00:24:13] and still meet the needs that you request. [00:24:16] I think that's more plausible than looking to install reclaimed water simply because reclaimed water doesn't seem to work anymore [00:24:24] like we thought that it used to. [00:24:26] When we need to get rid of reclaimed water, we can't. [00:24:29] That's the problem. [00:24:30] And so SWFMUD has instituted their cooperative funding additional requirements before they will give out that money. [00:24:40] And it's harder and harder for government agencies to meet those requirements. [00:24:45] And we've actually gone to them a couple times in your neighborhood to see if we could get that, [00:24:51] thinking that that was low-hanging fruit and the numbers didn't line up for us to be able to get that funding. [00:24:57] And so with the tight budget constraints that we have, being able to install the transmission lines [00:25:05] and everything that it would take to get out to you just is cost prohibitive. [00:25:09] So I think it would be easier for us to work with the consultants to come up for a solution [00:25:15] to where we could accommodate those large irrigating lawns and go that way. [00:25:23] Lawns and landscape. [00:25:25] So there you go. [00:25:26] Well, it would be one and the same. [00:25:29] It's just a matter of what we call rate design is figuring out a better way to meet the goals of the city [00:25:35] in terms of how you want these costs to be applied to your customers. [00:25:39] And if the goal is to be not so punitive on those higher tiers, there are options we can look at to smooth that out. [00:25:46] I'll just say, just so you'd be prepared for that discussion, [00:25:51] the revenue sufficiency analysis identifies the amount of revenue you need to generate [00:25:55] to keep this fund sustainable going forward to meet its financial goals. [00:25:59] And if that revenue is a balloon and it's squeezed over here and inflated over here with your current rate structure, [00:26:08] the analogy holds that if you squeeze it a little over here, it's going to rise over here. [00:26:12] So if you're going to decrease the cost on those top tiers, it's going to fall into the bottom tiers. [00:26:16] So you just have to be prepared for those kinds of costs. [00:26:18] Or, as a secondary, you can look at the expenses that the utility has [00:26:22] and determine if there's a modification that needs to be made to what you're spending. [00:26:26] That's also it. [00:26:27] I just want to raise that because over the past five or ten years when the city was really, [00:26:32] lack of saying it more politely, sucking wind on their general fund, [00:26:37] there was the PLOF that occurred, which was a payment in lieu of taxes, [00:26:41] sort of a payment that comes over from the water and sewer. [00:26:44] There's also the money that we're now taking from the interest on the sale to Tampa Bay Water of the Land, [00:26:50] which is a diminishing number. [00:26:52] And on top of that, there's a payment for a portion of the cost of the utility operation. [00:27:01] One of the potentials is to lower those costs, and one of those potentials, I think, [00:27:07] I believe the city manager had talked about at some point getting into a better solution for our garbage collection. [00:27:15] And just as one example, if the utility billing department was to bill all of the residents for the utilities of garbage [00:27:26] and we were then to farm out to those same folks that were there that job in a more effective way, [00:27:32] then the cost of running billing collection would be underwritten by a new revenue source to some degree. [00:27:38] So I think that we could look at our business plan and not just say the balloon squeezes here and goes there [00:27:44] and say if the balloon squeezes here, what do we have to do to be able to make that work? [00:27:49] That's correct. [00:27:50] If costs can overall come down, then the impacts to any other rate payers [00:27:54] versus just the ones that we're concerning about with the higher tiers could be absolutely mitigated. [00:27:58] That's under the plan we have right now. [00:28:01] Until those options are settled, we have to recommend the rates to generate enough revenue to meet this financial management plan. [00:28:09] But that absolutely always should be looked at. [00:28:11] I'm sure there's options where we can get a more affordable rate to take care of your landscape and your yards [00:28:17] without charging people that are barely making their bill payments on a monthly basis. [00:28:22] The city limits a higher rate for their inside water usage. [00:28:26] I'm sure there's options. [00:28:27] If you could just work with Mr. Rivera and come back and say we can't make it work, sorry, [00:28:31] if you want to take care of your lawn, you're going to pay for it through the nose like we've been doing, [00:28:35] then I'll accept that. [00:28:36] But until we look at different options, I'd like to keep that discussion open. [00:28:40] Another question on your model, if I could, on the rate that you posted up there. [00:28:45] And this discussion we had about the 25 percent increase to the non-city rate payers. [00:28:51] When we look at our business model, our business plan, you know, it really, to me, [00:28:57] and Robert, please stop me or help me if I get off the track of trying to explain your sewer and water operations situation, [00:29:05] but we have a 7.5 million gallon day plant. [00:29:09] Correct. [00:29:10] Design. [00:29:11] And we own 4.5 million of that. [00:29:15] And the county owns 3 million. [00:29:18] Correct. [00:29:19] So we have this capacity that we're not using completely. [00:29:26] So the question really is if we buy orange wood or if we expand [00:29:32] or when these apartments come on and we start getting more customers, [00:29:36] you must have factored in your rate study some growth in the utility. [00:29:40] And that has two types of growth, the inside the city, which is at the lower rate, [00:29:45] and the outside the city, which is at the higher rate. [00:29:48] And to me, it spins off of our sewer plant because we've got all the water we want. [00:29:53] And so I've talked a little bit with the utilities department about what is the, you know, what is the capacity. [00:30:00] capacity and what is the growth plan, and I guess you'll get into that maybe with some [00:30:05] additional discussion if it comes up at all. [00:30:07] They're directly related and it's very important because you can have all the opportunities [00:30:12] that you want to be able to expand a utility, but if you don't have the capacity, somebody [00:30:18] else is going to service that area whether or not it's yours or not. [00:30:21] And so when you make those decisions on what direction you're headed as far as what type [00:30:27] of expansion you want to go, whether it's basically like a redevelopment or new construction, [00:30:33] you have to make sure that you know what you're doing and you have the capacity that would [00:30:37] be available to you to utilize. [00:30:40] And once you've used it, now you're either expanding your plant or you're renegotiating [00:30:45] with Pasco County to be able to get a little more capacity from them if they have any left [00:30:52] that's in our existing plant. [00:30:55] You guys are following with right now we're selling, what, $800,000 a year of sewer capacity, [00:31:05] sewer charges to FGUA? [00:31:08] Correct. [00:31:09] And they're very actively trying to get the county to take that over or have approached [00:31:15] the city for years to... [00:31:17] Gulf Harbors is trying, yes. [00:31:19] And so one of the questions I had was, you know, was that feasible? [00:31:23] Was the county going to do it? [00:31:26] Who could best serve them? [00:31:27] And if we have a half a million gallons of our capacity left after all of this, that [00:31:37] still allows us to have another area as big as Gulf Harbors on top of what we're serving [00:31:43] now, I think. [00:31:44] So the question is, is that going to be city services or how is your model picking up? [00:31:53] How do you predict those rates? [00:31:55] You put one rate up there, but we have two, so do you have a blended rate? [00:31:59] Are you projecting the city to get more than its rate from its future growth or are you [00:32:06] calling it just city growth? [00:32:08] What we have is a growth in utility accounts on water, sewer, and reclaimed at different [00:32:14] rates based upon the input of your staff. [00:32:17] When we look at the overall blended budget, water, sewer, and reclaimed together, what [00:32:24] does it need to maintain its reserve balances, meet your operating requirements, capital [00:32:29] requirements, debt service coverage? [00:32:31] And the across-the-board increase is what we look at as the recommendation. [00:32:35] Until you guys say, let's look at the rate design, then we'd start piecemealing it out [00:32:39] a little bit differently. [00:32:40] But some of the things you mentioned there are not part of the analysis. [00:32:44] I'm not following a little bit of the specifics of what you said and our model does not monitor [00:32:50] available capacity to achieve the growth. [00:32:53] Your staff would have told us we can't grow 100% a year because of capacity issues. [00:32:58] What is the growth rate you've got on the thing? [00:33:01] For water, looking at about 0.75% growth for a year of water, it's approximately 80 accounts [00:33:14] 1.75% for sewer, which is approximately 150 accounts a year in NOAA assumed growth for [00:33:20] the reclaimed system. [00:33:22] So higher level of growth in sewer versus water. [00:33:25] Growth is good in the model, though, I expect. [00:33:28] Absolutely. [00:33:29] One more question. [00:33:30] I'm not going to announce names, but there's been a kind of commissioner who's come to [00:33:34] me privately more than once and said, I'd really like you guys to look into purchasing [00:33:39] the FGOA, Linderick, and Gulf Harbors. [00:33:42] I've been told that they just have an extremely extreme amount of debt, so that's not feasible [00:33:46] for us to do that, correct? [00:33:49] That's correct. [00:33:50] We've modeled, so just to give some background, formed a feasibility acquisition feasibility [00:33:56] study separate from this revenue sufficiency analysis for the city, and the useful part [00:34:01] about doing the revenue sufficiency is that we have a current plan that we can then compare [00:34:05] to the acquisition there of FGOA's Linderick system. [00:34:10] We actually have the modeling for that completed. [00:34:13] We have a general direction on what the results would be, give or take some expenses, but [00:34:18] generally wouldn't change the overall picture of with or without. [00:34:22] We have modeled the status quo scenario, if the county took over the system, kept it, [00:34:28] or if you took over the system without the debt. [00:34:31] We've looked at all that, and yeah, to your point, it's not really feasible if you took [00:34:37] on the debt, the large amount of debt that they have on your own. [00:34:42] So our anticipated outcome is that this remains with FGOA, and we extend our agreement? [00:34:52] I mean, FGOA, if it's sold to the county, then the county owns FGOA, and then we'll [00:35:00] lose the revenue from the, so you've worked the loss of that revenue into this model? [00:35:05] As a scenario, the plan I presented to you does not assume that, but what I can point [00:35:10] to is if we took out those revenues from FGOA, the difference, if I go over to my model here. [00:35:17] So what you see here in these out years is a surplus that starts to accumulate as your [00:35:38] cash in starts to exceed cash out. [00:35:41] Now, this is now affording your CIP in these out years via just operating cash, no further [00:35:47] issuance of debt beyond fiscal year 2021. [00:35:50] So this could mean a couple of things. [00:35:51] It means you could either stop or reduce these 4% rate increases so you don't start to exceed [00:35:56] your six-month target out here, or some other thing could happen to change that plan. [00:36:02] But for right now, until we get that far out there and we know this is absolutely going [00:36:06] to occur, we don't have anything to recommend beyond that. [00:36:09] When we take away the Lendrick revenues, if the county were to take it over, all that [00:36:14] would change in this model would be you would see these blue bars staying right at this [00:36:18] six-month target. [00:36:19] You wouldn't build up this surplus in these outer years. [00:36:22] So the overall financial management plan doesn't change. [00:36:25] It just doesn't show as much of a surplus in years, basically, 7 through 10 of the forecast [00:36:30] of this model. [00:36:32] So the question that was asked was more of a statement that it didn't make sense, and [00:36:38] then you agreed to it. [00:36:39] So I want to just make sure I hear that directly again, that it could not occur, or you're [00:36:47] just saying it doesn't? [00:36:48] That's related to taking on the debt service. [00:36:49] Yeah, the debt service for that system is about $1.9 million a year. [00:36:54] And so that's just with the forecasted expenses that it would take for you to operate the [00:36:59] system and at your rates, it would just not be. [00:37:03] But the assumption you're making is that we would take over the debt service at its existing [00:37:07] rates and at existing payment levels and existing and remaining bond, because to me, [00:37:12] the folks in Gulf Harbors have expressed a willing desperation to say, you know, whatever [00:37:17] it takes, they would like to, you know, get into municipal or county ownership. [00:37:22] So the scenarios we've looked at with Linderich is we've modeled it with and without Linderich, [00:37:31] under both of those scenarios, assuming that the debt service, the $1.9 million a year, [00:37:37] would be handled in some other way. [00:37:39] So an assessment paid by the residents of Linderich that the county put together or [00:37:46] some other outside funding for that debt service. [00:37:50] And even excluding that debt service, you know, we could look at, we've looked at scenarios [00:37:55] with and without, but even without that, it's a little, it's a little tight on your, on [00:38:00] your system. [00:38:02] Even without the debt service. [00:38:03] Right. [00:38:04] But is that not partly because of the capital, the capital costs that's anticipated that [00:38:08] need to be spent on that? [00:38:09] Yeah. [00:38:10] And just, that's part of it. [00:38:12] Another thing is just, if you think, forgetting the capital piece of it, if you just think [00:38:15] about revenues and expenses, revenues under your rates for that, for that system, under [00:38:21] Linderich right now, FGOA operation, they generate about $4.3 or $4.4 million from those [00:38:27] customers. [00:38:28] Under your rates, it's only $2.9. [00:38:32] So the projected operating expenses under your, on a county operation with the general [00:38:37] fund transfer is only about $2.7 or so. [00:38:40] So you only have a little bit of, you know, cushion there. [00:38:45] And then you have some R&R needs, capital investments. [00:38:47] So it's just a... [00:38:48] Bottom, bottom line is the people who lived out there would have to be responsible for [00:38:52] the improvements of their own district, so to speak. [00:38:54] I think that's what the county had talked about, assessing them directly. [00:39:00] You're saying without even the county being assessing them, that the debt and our debt [00:39:06] being that adding additional customers doesn't make sense to us? [00:39:11] The revenues that they would generate, especially at inside city rates, is about $2.9 million. [00:39:16] Not inside city rates, outside city rates. [00:39:17] But even if they were outside city, that's about another $750,000. [00:39:24] And we've got it, this scenario pulled up here. [00:39:27] What you can see here is I've put in a Lendrick acquisition and everything starts to impact [00:39:31] your city in fiscal year 2021. [00:39:33] And you can see over here, the higher level in the blue bars compared to the green bars, [00:39:36] the baseline plan, a higher level of capital improvement needs, higher operating reserve [00:39:41] target, which we meet. [00:39:43] But what I just did was added a 25% surcharge to the Lendrick system. [00:39:48] So this scenario assumes they would be charged that 25% surcharge. [00:39:52] Now the biggest difference to this overall plan, as you can see here, these blue bars [00:39:57] stack up in fiscal year 2021 and 2025, and this is issuance of debt needed to fund the [00:40:04] capital improvement program going forward. [00:40:06] So from our perspective, as the difference between your baseline plan and purchasing [00:40:12] the Lendrick system, even at the outside city rates would be a significant amount of debt [00:40:17] issuance needs for the utility to fund the capital improvement programs and the overall [00:40:21] change in dynamics of the financial system. [00:40:23] And that's a bad thing? [00:40:24] That's, I'm not saying it's bad or good. [00:40:26] Well, it sounds like it. [00:40:28] If I may add, it also would impact those customers negatively, because not only are they still [00:40:38] having their assessment to them, now they're paying our rate plus the 25% outside rate. [00:40:47] And so in the end, their total bill is more money. [00:40:51] More than a hundred and some dollars they're paying now. [00:40:53] That's my question, is what's the best thing for them? [00:40:56] That's all I'm asking. [00:40:57] So if you look at... [00:40:58] Oh, I'm sorry. [00:40:59] So I was going to say, if you looked at that rate survey, the current bills for Lendrick [00:41:04] is somewhere in the hundred, depending on the usage, but it's around $110, I think $113 [00:41:09] for that level. [00:41:10] And to Robert's point, if you add the 25% surcharge for outside city rates and then [00:41:16] contact on the cost of the assessment to them for the debt service, if that's the approach... [00:41:22] Would the assessment be more than $25 a month per customer? [00:41:26] Yes. [00:41:27] Yeah. [00:41:28] The only way that this would, to my way of thinking, would make any economic sense whatsoever [00:41:36] would be if they were to petition us to annex, and then you change a whole bunch of dynamics. [00:41:45] As recently as this morning, I had somebody in Gulf Harbors asking if we could annex them. [00:41:50] So, I mean, it's not totally out of the question, but it would be quite the reach to get however [00:41:59] many hundred homeowners there are out in there to agree to that. [00:42:05] Lendrick's service area is bigger than Gulf Harbors. [00:42:09] All of these comments are fine, but I don't think annexation is something that organized [00:42:16] people even want to talk about. [00:42:18] They run you out of the room when you talk about it with their leadership groups. [00:42:22] But, bottom line is, those folks have a committee together. [00:42:27] They're looking at this. [00:42:28] They're talking to the county. [00:42:29] They're talking to us. [00:42:30] And so, I think it would be imperative for them to come to us at this point to say this [00:42:35] is what we're willing to do and to see if we're willing to take it on. [00:42:39] It's just a big acquisition. [00:42:41] It looks like the blue line is still above the red line in your scenario, right? [00:42:46] So, when you say it doesn't make sense, in the long run, you've spent a lot of money [00:42:52] and you've still got the blue above the red. [00:42:55] From my conclusions I draw is it makes sense in these out years you may be generating more [00:43:01] of a surplus than you would have otherwise by not acquiring them. [00:43:04] If you charge the 25% rate, it will just require a significant amount of debt issuance to afford [00:43:10] the capital program over your baseline scenario. [00:43:12] Right. [00:43:13] So, that's the only clarification I wanted to hear from you all professionally. [00:43:16] I mean, it's feasible. [00:43:18] The thing to kind of point out, the issue is with that system, a lot of capital investments [00:43:23] needed for it to get to county or city level service standards. [00:43:28] And so, our engineering team did site inspections, pulled together a whole report outlining the [00:43:34] capital improvement needs of that system. [00:43:36] And that bottom left graph that we've got shown there, you see in the middle there initially [00:43:42] a lot of capital investment that's needed and it's driving that borrowing. [00:43:47] And once you get over that long term, it starts generating some cash flow if you charge on [00:43:52] the 25% surcharge outside city rates. [00:43:55] The issue is it doesn't really give them much relief from an overall rate or cost perspective. [00:44:01] So, for those customers. [00:44:03] I think that the question I have is you're comparing what we're going to have to spend a lot of money on [00:44:08] or the county to get them to the point they need to be to meet our standards, which by the way, [00:44:12] they're out by the Gulf of Mexico, which by the way, we're trying to get scallops to come back into. [00:44:16] And I'm just adamant about the environmental impact, not only to the Gulf, but also to our sewer plant [00:44:23] because our plant is going to receive that, whether it's the county side of it or the city side of it. [00:44:29] And we'll share in any penalties for failures that have to do with the content of what's coming in. [00:44:36] So, to me, it's like it's married to our plant. [00:44:39] And so, to say that we can avoid these costs is probably not realistic or that the Gulf Harbors people [00:44:46] are going to have to have an additional assessment. [00:44:49] How are they planning in their rate structure to manage these capital plans you say we need to put into place? [00:44:55] So, I really appreciate everything you're saying. [00:44:57] I'm not trying to be argumentative. [00:45:00] Back up a little farther and say, you know, we're in the utility business and we might [00:45:05] have better customers to the east. [00:45:07] I think, Robert, you and I have talked about that before. [00:45:10] And we have a certain amount of plant we can grow into. [00:45:13] So I know it's beyond the scope of what you all are talking about, but your information [00:45:17] is critical for us to be able to make, have those kind of analytical questions to talk [00:45:22] about. [00:45:23] If I may, just to keep it simple, layman's terms, Gulf Harbors is county jurisdiction, [00:45:27] not ours, right? [00:45:28] Right. [00:45:29] That's not our problem. [00:45:30] I know we sell water to Linderick. [00:45:31] So we're willing to work with the county the best that we can, I'm sure, but they're not [00:45:35] city residents. [00:45:36] They're county residents. [00:45:37] So it's the county's problem currently. [00:45:40] The questions that I've been receiving, why don't you just buy Linderick and take over? [00:45:46] They don't want to be assessed or they don't want to be annexed. [00:45:48] They don't want to be, what we've heard, majority of Gulf Harbors residents don't want to be [00:45:52] annexed, right? [00:45:53] So why would we, you just said it's even without the debt, it's really not all too feasible. [00:45:59] It's not feasible for us to take over their water system. [00:46:01] So to me, it's not our problem, number one. [00:46:04] But number two, the one commissioner, and I won't mention names once again, that kind [00:46:08] of cornered Debbie and I one time and was complaining about the 4% rate increase. [00:46:14] We're not doing anything out of our agreement with the county, correct? [00:46:17] Correct. [00:46:18] Correct. [00:46:19] Okay. [00:46:20] Number two, this huge exorbitant rate that Linderick's charging is not due solely to [00:46:24] that 4% rate increase. [00:46:26] It's a very, very small part of it, correct? [00:46:28] That's correct. [00:46:29] Yeah, that's a red herring. [00:46:30] Well, I know that's, but if you don't mind... [00:46:33] That's all I needed to know. [00:46:34] Yeah. [00:46:35] I don't mind you asking questions. [00:46:36] Yeah, no, but I just want to direct my comments back to you, though, to say that, you know, [00:46:41] I think as, again, you've talked about the jurisdiction, you know, the old Maydam Chambers [00:46:47] service area had the Gulf Harbors within our service area. [00:46:52] And to that regard, that was a potential customer that belonged to us that, because [00:46:58] of the state statutes, I think Robert showed me, the law says outside our jurisdiction [00:47:03] it goes to, if there's a sponsor of FGUA, which is really a government entity, right? [00:47:10] The host, which is... [00:47:11] They have to have a host and the statutes call the host to be the county, not the city. [00:47:18] The utility that has, or the government agency that has the most customers of that utility, [00:47:27] in this case, all the customers except for a small portion where Ms. Manns lives are [00:47:34] county residents. [00:47:36] And so that makes Pasco County the host government. [00:47:39] Right. [00:47:40] So... [00:47:41] And while they're not city residents, we didn't look at it that way. [00:47:48] And I think in a lot of ways the city and the city utility has gotten a bad name because [00:47:53] of the things that have come out about the 4% and we're the cause of their... [00:47:59] We have. [00:48:00] That's the point I was trying to make. [00:48:01] ...situation that they're in. [00:48:02] And since FGUA took over, the first year we helped avoid a 14% increase because we reopened [00:48:12] our interlocal agreement and redid the definition of capital recovery charges, which would have [00:48:19] gone on indefinitely, and switched it over to impact fees so we could help with their [00:48:24] borrowing and get lower interest rates. [00:48:26] So right off the bat, we saved them 14%. [00:48:29] They had an initial debt service of $25 million and it still remains today. [00:48:35] So to say that the city hasn't been there and tried to help out, our rates are based [00:48:42] upon what standard industry rates are based on, and we actually go through even a more [00:48:48] strenuous review of what our rate justifications are than, say, a lot of private utilities. [00:48:56] What I would like to do is to say I understand that issue, and that's an issue that is unfair, [00:49:03] you know, complaint of the city or whatever. [00:49:06] But I want to make sure that I can convey to my colleagues what I'm trying to say, which [00:49:10] is that, you know, we have a service area and we have rights to that, and those areas [00:49:17] outside our city, we have a right to have an increased charge. [00:49:21] And a lot of the money coming back into the general fund, we can thank the fact that we [00:49:25] have that in place because that gives us the extra money that's in our budget that comes [00:49:30] out of your rate study as an expense that tells you whether we can or can't do it. [00:49:36] So the thing I'm trying to get to, Jeff, is if we have a building that can make so many [00:49:42] widgets and we're only making this many widgets, and we got this many widgets left to make [00:49:47] and there may be some revenue in there, then if it's not Gulf Harbors, which was an initial [00:49:54] concern I had that we were going to lose that revenue, we have other areas we can expand [00:49:59] into to grow our rates. [00:50:01] And so... [00:50:02] And what we're doing in the next top three. [00:50:03] And that's exactly... [00:50:04] Well, yeah, but also to say that those folks are still in an important position related [00:50:13] to the geography of our city, and I care about whether the people in Gulf Harbors make these [00:50:19] required improvements, and I think we should care because they're sending sewer to us, [00:50:25] and we've had some problems with what comes in. [00:50:29] We have an interlocal agreement, and it calls out those parameters that they're supposed [00:50:34] to meet. [00:50:35] They've had an excess of what we would call salt intrusion in their system that we've [00:50:43] had to treat, and I think they are supposed to stay under 600, whatever it is. [00:50:49] Right now, they're averaging around 445. [00:50:52] They have exceeded it, but we've worked with them, which is something else that we've worked [00:50:57] on. [00:50:58] I'd like to point out that while FGUA isn't a government agency, they have board members, [00:51:05] and each one of the board members are government agencies. [00:51:08] Well, they are government. [00:51:10] And so they will follow... [00:51:12] It's not like if the city doesn't acquire them that those residents are left out on [00:51:16] their own. [00:51:17] They are still operating under government standards by government utilities that are [00:51:25] going to do the right thing. [00:51:28] But it will cost money, and it will raise their rates. [00:51:31] So when we compare the outcome for them, if their rate goes from $110 a month to $160 [00:51:39] a month because this capital expenditure, which is causing us, you know, hesitation [00:51:45] is going to be faced on them, their rates are going to go up, too. [00:51:49] So all I'm saying is if they don't want, you know, what they want is the rates to go down, [00:51:54] you know, they're not going to be able to achieve that by us staying out of the way. [00:52:00] Their rates will only continue to go up. [00:52:02] That was what I was looking at in the chart was exactly that, because if we don't acquire [00:52:09] Lendrick, those millions of dollars of additional investment still are going to have to be made [00:52:16] by somebody. [00:52:18] Correct. [00:52:19] And so what would happen is either the county would have to invest, or we would have to [00:52:24] invest, or maybe the state gets involved and they're going to have to invest. [00:52:28] But you're absolutely right. [00:52:29] At some point in time, a government agency has to acquire their system. [00:52:35] My concerns are, is not that I don't have compassion for the situation that those customers [00:52:43] are in, I also look at it from the standpoint of, okay, what are our city residents, our [00:52:49] city customers, what impact is that going to have on us? [00:52:53] And so when I go back to our capacity, we commit to FGUA, the Lendrick system, so now [00:53:01] our capacity for our plant is tied up, leaving us less to where we might be able to get some [00:53:09] of the capital, the revenues from expanding over towards the east side, but now we've [00:53:16] limited it because of the capacity. [00:53:19] We've had to invest higher capital into an existing old system. [00:53:25] How does that affect our customers? [00:53:28] And I think it would have a negative effect on it, and it would limit our expansion abilities [00:53:33] unless we had to renegotiate. [00:53:34] Okay, so the truth is, so the bottom line is that this concern about our residents versus [00:53:42] the compassion for them, Robert, I am not here to say compassion for them, I'm here [00:53:48] to point out a simple fact, which I think the mayor said as well, which is those investments [00:53:52] will have to be made. [00:53:54] We agree they'll have to be made. [00:53:56] And so the idea that our city residents are going to have to get hammered as a result [00:54:00] of that only comes through if we don't have enough capacity to continue to grow the way [00:54:05] we want to grow in a better, more profitable way. [00:54:09] I'm following your logic. [00:54:11] I'm just saying I think it's time for us to decide what is going to be the best plan, [00:54:16] and I know that's not part of your rate study, but I appreciate your being here because the [00:54:21] real question is, you know, what is the overall plan for the utility, and how do we convey [00:54:27] that information to the people in Gulf Harbors in a way that just says, look, you've got [00:54:32] $9 million worth of improvement, or 90 or 20, and, you know, you're already breaking [00:54:39] your back with your payments on that. [00:54:41] How are you going to do it? [00:54:42] I mean, that's why they're desperate, I think, in coming to the county and the city. [00:54:46] If they're at 25 now and they've got another eight or nine added on it, they're going to [00:54:49] be like $30-something million in debt. [00:54:52] And I appreciate what you're saying, and please don't feel like I don't have compassion for [00:54:56] Gulf Harbors residents. [00:54:57] There are friends or neighbors. [00:54:58] I have a ton of clients that live in Gulf Harbors that I have very good relationships [00:55:00] with on a business level. [00:55:02] However, what Robert said, I agree with 100%. [00:55:05] I think the city has been more than willing to assist in any way possible. [00:55:11] You said we saved them 14%, right? [00:55:14] And it's irresponsible for the county and county commissioners to blame the high water [00:55:18] prices that they're charged in Gulf Harbors on the city. [00:55:21] And that's what I've heard. [00:55:22] That's what Ms. Mann's heard. [00:55:23] And it's been said publicly. [00:55:24] And it's irresponsible for someone from the county to say that when, according to what [00:55:28] Mr. Rivera's saying, that's just not true. [00:55:30] Correct? [00:55:31] Correct. [00:55:32] That's the only point I was trying to make. [00:55:33] I'm 100% with you. [00:55:34] Right. [00:55:35] And I'm with you as well. [00:55:36] I'm just trying to take advantage of our chance to talk through this to say this is an important [00:55:42] element of our city's revenue stream. [00:55:44] Sure. [00:55:45] But the decisions we make need to be made, and we need to then proceed through what's [00:55:52] going to happen. [00:55:53] I think we're more than willing as a city, and correct me if I'm wrong, I'm not trying [00:55:56] to speak on behalf of everybody, to sit down with the county, sit down with Lyndrick, and [00:55:59] see what we can do to help those residents lower their overall costs. [00:56:02] Right? [00:56:03] I mean, would you agree? [00:56:04] Correct. [00:56:05] And what we have going on right now, and actually, this is Mr. Mike Carballo. [00:56:08] He's with the county utilities. [00:56:11] We've been talking and working with one another. [00:56:15] Right now, we've contracted with Stantec, and the city has done this on their own initiative, [00:56:21] is to reopen our wastewater bulk agreement, and our water bulk charges. [00:56:30] We're having them review it to see if maybe we might be too high, or where we're at. [00:56:36] And they might come back, because it's been a while. [00:56:40] And so those bulk agreements fall under the automatic 4% increases. [00:56:45] So it's like, okay, well, let's go ahead and review that, and if that's something that [00:56:50] we can... [00:56:51] That bulk cost is such a small portion of the bill, that I'm with the councilman here, [00:56:56] that that's a red herring. [00:56:58] That's not the answer. [00:56:59] That's not the $9 million or $10 million that Gulf Harbors needs to fix it. [00:57:05] And going back to the political misspeaking, or misdirecting blame, there's no blame. [00:57:15] Whoever bought it for what they bought it for, or however much they sold it for, that's [00:57:19] why it's an expensive system. [00:57:20] It's $20-something million to a quarter, so it's not cheap. [00:57:26] Sir, I'm sorry. [00:57:27] What was your name? [00:57:28] No. [00:57:29] Mike Carballo. [00:57:30] Mike Carballo. [00:57:31] Would you say... [00:57:32] I wonder why you were taking so many notes. [00:57:34] Would you say the working relationship right now between yourself and Pasco County and [00:57:38] our department is a positive relationship? [00:57:41] Is there anything we can do, in your opinion, to make it an easier... [00:57:46] I don't know. [00:57:47] Lack of words here, but anything we can do better to help the residents of Gulf Harbors [00:57:52] from our standpoint? [00:57:53] I think the relationship is good, and the conversation... [00:57:54] Excuse me. [00:57:55] The conversations are... [00:57:56] Could you come up to the mic? [00:57:57] We're on the air. [00:57:58] Thanks. [00:57:59] Mike Carballo, Pasco County Utilities. [00:58:08] The working relationship with the city is great. [00:58:12] Everything has been going very, very well. [00:58:14] Mr. Rivera and I have talked on several occasions about that. [00:58:17] The county is looking at all of the FGOA systems as a whole, and so the Lendrix system [00:58:23] is one piece of the puzzle. [00:58:26] Anything that... [00:58:27] Obviously, the county wants to work to help these ratepayers, but as the council here [00:58:32] points out, it's the debt that is the real issue. [00:58:36] Maybe there are ways that we can work together that can help these residents. [00:58:40] These are things that we're working at. [00:58:42] We're working with Stantec as well, running our own financial scenarios, and the hope [00:58:46] is to get together and have conversations to see what can collectively be done. [00:58:50] Are there any options from the state level that could assist as well? [00:58:54] This is something that we had to do on our own. [00:58:56] Oh, I'm sorry. [00:58:57] I thought you were asking. [00:58:58] Whoever wants to answer. [00:58:59] There could be options. [00:59:00] I mean, it's a possibility. [00:59:01] I mean, it sounds like a pretty big mess we're in right now with what these people are paying [00:59:06] to Gulf Harbors. [00:59:07] You could be a bailout if it was anything. [00:59:08] Yeah. [00:59:09] You know, those got the... [00:59:10] Yeah, but it was basically what FGOA did. [00:59:12] They bailed out a private utility company that had spent a small fortune. [00:59:17] Yeah, that's correct. [00:59:20] The issue for Lyndrick is their $1.9 million annual debt service. [00:59:26] That fundamentally has to get, if someone acquires it, that has to be addressed in some [00:59:31] way. [00:59:32] And so, yeah, the capital is a big issue, but you can sort of, I think you could overcome [00:59:39] that. [00:59:40] And we just showed within a plan, if that debt service is gone, you can handle it within [00:59:45] your financial plan without adjusting your rates. [00:59:49] It's just that annual debt service is a real burden for that system, so. [00:59:54] If there's a solution to the debt service, you said we can handle it, I mean, is that, [00:59:58] in your opinion, something we should... [01:00:00] Looking to doing, I mean, you said we could handle it, but earlier I thought you said it wasn't really feasible. [01:00:05] Without the outside city surcharge. [01:00:08] Without outside surcharges, 25%. [01:00:10] By handling it, we mean that 4%, as we show is the need for the 10-year forecast, that doesn't change at all. [01:00:15] It just means you would have to issue more debt to afford the capital. [01:00:18] You wouldn't have the cash flows. [01:00:20] And just to get everything out that I've spoken to anybody over there about, [01:00:24] so we all know whatever I've said to them, and talking with the county, [01:00:30] I spent 12, 14 years doing bond issues in the community development district business, [01:00:35] so I know all of the state players and how all that works. [01:00:40] And talking to the folks in Gulf Harbors, the question was if the debt can be paid off in a year, [01:00:47] and if that debt could be refinanced out for another 30 years or whatever, [01:00:53] you could lower the payments and probably make it fit back within the $110 they're already paying or the 90 or whatever. [01:01:00] And so I think that there is an answer for those folks, but as has been said, [01:01:06] and Robert, as you confirmed, that somebody is going to have to make those improvements, [01:01:11] and we have two happily getting along. [01:01:15] We always got along well with the county from a staff level that I can recall from days back, [01:01:21] and we're partners in the plant. [01:01:24] So the only question I had when I first heard the county might buy it was what's that going to do to our bulk rate, [01:01:29] and we're going to have to refigure how we use our 60 percent and you use your 40 percent. [01:01:34] So the cooperation with the county as to our levels of use of the plant [01:01:39] and trying to maximize the plant's efficiency by using it fully is a good plan going forward, I think. [01:01:48] Whoever has it, whether it's the county or the city. [01:01:52] The cooperation has to be there between the two of us, right? [01:01:55] I mean, there's no other option to get these rates lower. [01:01:57] Well, correct, and the county recognized the impact of the county taking it on the city, [01:02:00] which is why we started these conversations. [01:02:03] Thank you for that. [01:02:05] Putting it on that monster debt load into some sort of special taxing district would almost make sense [01:02:14] if you could stretch it out long enough to get the annual payments down. [01:02:20] And fund the capital that needs to be made and make the improvements and go on, yeah. [01:02:28] Nice to meet you. [01:02:29] Thank you. [01:02:30] Yes, thanks for coming. [01:02:33] Anything else on this? [01:02:35] Matt, you've been sitting there pretty quiet. [01:02:37] No, no, it's just one of those situations. [01:02:40] I just think it's going to have to be a hybrid kind of scenario. [01:02:43] It's not going to fit into what we have now. [01:02:46] It's going to take possibly annexation, partial bailout, [01:02:50] and the rates are probably going to be a little more than what we're paying. [01:02:53] It's the only way to make it work, basically, and that's the question. [01:02:58] Do the seaforests have these same rates? [01:03:00] Yes, they do. [01:03:01] So Gulf Harbors, Woodlands, Seaforests, all on the same rate. [01:03:04] Okay. [01:03:05] There was a point when we were working on the agreement when I worked for the city manager back in the old days [01:03:11] when there was some question about whether we could have them extract the city annexed properties into our city utility. [01:03:22] I didn't ever go anywhere, but, you know, that was even an argument to say what's in the city, [01:03:27] it would be nice if it was in the city, and our city residents could enjoy our city rates versus those rates. [01:03:34] But I would not expect that the rates of our city residents would go up, [01:03:40] and I just wanted to make that clear in response, Robert, to what you said. [01:03:43] It's not a matter of a winner and a loser. [01:03:45] I mean, the utility is their utility, it's the FGUA utility, [01:03:52] and I wouldn't be advocating anything that would increase our own residents' rates to acquire it. [01:03:58] But I think that they're a willing, open-minded group that's working hard to get the county to buy it, [01:04:03] and if they do, then that may solve the issue. [01:04:08] From a personal standpoint, my mom lives out in Heritage Lakes, also on FGUA, [01:04:14] and if the county wants to take that one over, please, please do. [01:04:20] I look at our water bill, and I look at hers, and it's like, you've got to be kidding. [01:04:27] Mayor, on the next step as we have them here, [01:04:31] and I know that I've talked a lot about the CRA and the money coming in, [01:04:38] and I would love to see the interplay between all of the money coming out of the utility [01:04:44] and just reviewing that, how that comes to the general fund. [01:04:48] You know, when we get ready to make a lot of these capital improvements we've been talking about in the city, [01:04:53] that whole interplay of the CRA, the utilities, and the general fund is a model. [01:05:00] The city paid quite a bit of money for it. [01:05:02] We don't have to pay that money again for the model, [01:05:05] but I'm assuming we could go back to the well and ask for that kind of analysis, [01:05:10] and I think I'd hope that something like that would be the next step. [01:05:14] Right. [01:05:15] In 2014, we did perform not only an analysis of your general fund projection along with utility analysis, [01:05:22] but we also modeled the CRA's financial forecast. [01:05:25] We looked at multiple scenarios of if development were to occur at a certain rate within the CRA, [01:05:29] how quickly money can come back to the general fund from the CRA and the financial dynamics of each, [01:05:35] and that could also be linked and was linked to the utility model, [01:05:38] but we didn't analyze any scenarios of potential relief of the utility [01:05:43] and how it would impact the general fund and ultimately the CRA. [01:05:46] But the models are ready to be updated if that's something the city wishes to engage us for, [01:05:52] and we'd be open to coming back [01:05:54] and helping you guys run all sorts of scenarios between the three different funds [01:05:58] and figuring out how the challenges of financial dynamics could play out over the next 10 years. [01:06:04] Thank you. [01:06:05] Yeah, that would be interesting to have that update because it's been five years. [01:06:10] Anything else on the utility? [01:06:14] I like the Excel program. [01:06:16] I have one question for Eric. [01:06:19] Could you update us? [01:06:22] The analysis that you just presented to council, I would assume that if we had a consensus, [01:06:31] we would move forward with it because we have to consider the process of borrowing for capital, [01:06:39] which you've recommended. [01:06:42] The question that I would have for you is if they gave us the nod to go ahead [01:06:48] and start proceeding with that process, how would it affect everything if you all came back [01:06:56] and said, okay, FGUA is doable under these circumstances. [01:07:02] Is it going to have any kind of effect on what we're trying to do for year 2020? [01:07:11] Any of the Lendrix scenarios we looked at didn't really affect the next two years [01:07:17] of the financial management plan. [01:07:19] When we added Lendrix in, we've been targeting the financial impacts hitting around fiscal year 2021, [01:07:25] and we're recommending the need to borrow for fiscal year 2019 and 2020 just for the city's own, [01:07:32] the Orangewood and all the utility R&R improvements. [01:07:37] I don't think the Lendrix scenario would impact any of that, the financial management plan, [01:07:44] for the next two years, unless you tell me otherwise it's going to happen sooner than that. [01:07:49] My recommendations either way would still hold, at least for the next few years. [01:07:54] The 4% consider issuing the debt issuance up to $4 million to fund your capital needs [01:07:59] over the next two years. [01:08:02] That sounds like a good segue into Orangewood.

   This text was generated automatically from the meeting video. It is not a verbatim or official record. For exact wording, consult the video or the city clerk.

3. 3

   ↳You arrived here from a search for “Lehigh Acres comparable” — transcript expanded below

   Orangewood Lake Utility Services – Valuation Analysis

   discussed

   Staff and consultant Mitch Chavarroni of McKinnon Creed (Kimley-Horn/Creed) presented a valuation analysis of Orangewood Lakes Utility, recommending the city acquire it for an estimated weighted-average value of $855,000 plus $1.161 million in capital costs, totaling just over $2 million with a six-year ROI. Council expressed support and recommended staff pursue acquisition, returning with a notice of intent; a verbal negotiation of $950,000 has been reached with the owner Mr. Heigler.

   • consensus:Council recommended staff pursue acquisition of Orangewood Lakes Utility and bring back a notice of intent. (passed)
   • motion:Motion to adjourn the work session. (passed)

   📍Little Road📍Massachusetts Avenue📍Methlar📍Osteen Road📍Rowan Road, just south of Massachusetts🏢Barbara Ann Utilities🏢Burton🏢Hacienda Treatment Facility🏢Lakewood Villas🏢McKinnon Creed (Kimley-Horn & Creed)🏢Orangewood Apartments🏢Orangewood Lakes Utility🏢Orangewood Mobile Home Park🏢Silver Oaks🏢Stantec👤Al Heigler👤Matt👤Mitch Chavarroni👤Robert Rivera#Capital improvement budget $950,000#Cypress Knolls Subdivision#Indian Rocks Beach comparable#Lakewood Estates Subdivision#Lehigh Acres comparable#Lendrick utility comparable#Notice of Intent process#Orangewood Lakes Utility acquisition#Six-year return on investment

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   [01:08:06] So we are going to start the process then of following the analysis that was presented? [01:08:15] Do we have another session on Orangewood? [01:08:18] That was already incorporated into the documents that we saw, [01:08:21] so it's kind of like a two-for-one program here. [01:08:24] I had a second item listed on the agenda that was the valuation analysis. [01:08:33] Are we ready for that? [01:08:35] We're ready, Robert. [01:08:37] Mr. Rivera, go ahead and start. [01:08:39] Thank you. [01:08:41] I have with us Mitch Chavarroni. [01:08:45] He's with McKinnon Creed. [01:08:47] He is the one that did the valuation. [01:08:52] If you remember back in 2017, the city purchased three private utilities [01:08:58] on the east side of Rowan Road, just south of Massachusetts. [01:09:05] This utility company is intertwined with that one [01:09:10] and kind of fills in that gap in between the city service area that's up towards Little Road [01:09:18] and where we stop now. [01:09:20] I'll turn it over to Mitch. [01:09:22] Thank you. [01:09:26] Thank you. [01:09:28] Now, as Robert talked about, we actually started this a while ago here. [01:09:33] Thank you. [01:09:34] Here we go. [01:09:36] A couple of years we've been working on it. [01:09:38] A couple of years. [01:09:40] Where's your two pins? [01:09:51] While we're waiting on that, yeah, we did start this back in 2016. [01:09:56] Started talking to the utility at that particular time. [01:10:01] A couple of things on the history of that. [01:10:03] They approached the city about the same time we were wrapping up [01:10:06] the previous three utility acquisitions or valuations. [01:10:12] As part of this evaluation, we followed the same process that was used there, [01:10:17] but we'll go over that process here shortly. [01:10:20] Not working? [01:10:24] It's not advancing. [01:10:28] All right, there we go. [01:10:29] There we go. [01:10:30] We got it. [01:10:31] It's starting now. [01:10:33] Real quick, the utility that we're talking about, [01:10:39] Orangewood Lakes Utility, is essentially this green area [01:10:42] that's off of Osteen Road. [01:10:45] It's made up of several different areas. [01:10:49] There is the Orangewood Apartments. [01:10:52] There's the Orangewood Mobile Home Park area, [01:10:55] Cypress Knolls Subdivision, and the Lakewood Estates Subdivision. [01:11:02] Combined, it's 482 customers, water customers, and 436 sewer customers. [01:11:10] The Cypress Knolls sewer system actually is treated [01:11:14] by the Hacienda Treatment Facility, which is down here in this corner. [01:11:19] That's why the discrepancy or the difference between the number of customers. [01:11:28] As I said, currently the utility is handling the Orangewood Lakes Mobile Home Park, [01:11:33] the Orangewood Apartments, Cypress Knolls, Lakewood Estates. [01:11:39] As I said, Cypress Knolls is not part of the sewer system. [01:11:44] Going back to the timeline again, [01:11:46] we started in 2016. [01:11:50] Initial conversations, Kim and Creed was brought on board to do the evaluation. [01:11:55] We started collecting data. [01:11:56] One of the things that we noted was, okay, if we were to, [01:12:00] or if the city was to take ownership of that particular utility, [01:12:04] that utility has its own water treatment and wastewater treatment facility [01:12:09] in the mobile home park grounds, which the city would not acquire [01:12:14] or would not take ownership of and operate. [01:12:17] How do we get the wastewater into the city's collection system [01:12:22] and how do we bring water down from Massachusetts Avenue? [01:12:27] There was another study commissioned by the city. [01:12:33] A different consultant looked at where can we tie in [01:12:37] and bring in this additional load into your collection system [01:12:41] as well as water for your distribution system. [01:12:45] That started in 2017. [01:12:49] Then we wrapped up the evaluation actually in March of this year, [01:12:54] but we didn't come to you until tonight because of the rate study [01:13:01] that was being performed. [01:13:05] A little history again. [01:13:06] There's three ways to do evaluations. [01:13:09] First is an asset evaluation that looks at the actual physical inventory. [01:13:15] What is the infrastructure? [01:13:17] Your water pipes, your sewer pipes, manholes, pump stations, [01:13:20] wastewater treatment plants, water treatment facilities. [01:13:24] Second way is the income valuation, [01:13:27] which is looking at essentially potential earnings. [01:13:30] That's basically the revenue that's generated plus your cost to produce [01:13:35] and distribute water, collect the wastewater and treat the wastewater. [01:13:40] Then the third valuation is the comparable sales. [01:13:43] That is looking at similar sales in the area. [01:13:47] The problem with that one is this is a very small utility. [01:13:52] A lot of the local or area-wide, [01:13:57] Tampa Bay area-wide utilities are much greater. [01:14:02] What we did for that is we basically looked at the cost per lineal foot of pipe. [01:14:07] We used the cost per lineal pipe in the sales [01:14:12] to come up with a comparable valuation number. [01:14:18] Using the asset valuation, [01:14:21] we came up with a $285,000 asset value. [01:14:27] That is looking at basically the remaining life of the infrastructure. [01:14:34] Again, there's a treatment plant, [01:14:37] water treatment plant and a wastewater treatment plant that the city would not be acquiring. [01:14:42] That wasn't part of the asset valuation. [01:14:46] The cost to demo that plant and decommission that plant [01:14:51] would be borne by Orangewood Lake Utilities. [01:14:55] The value of the pipe going into the ground, [01:14:58] we took and looked at. [01:15:00] what it would cost if you're putting that pipe in the ground today, [01:15:02] and then the fact that that pipe is almost 50 years old, [01:15:06] what is the value of that pipe now, as well as the pump stations. [01:15:09] The income valuation, that was looked at, as was previously mentioned by Stantec here, [01:15:18] it's all Tier 1 customers, their average water usage is less than 5,000 gallons, [01:15:23] so we're at the Tier 1 rates, we apply those Tier 1 rates to the water usage, [01:15:30] over the past four years, and again, since this was started in 2016, [01:15:36] we went through 2017, if I recall right, so 2013 through 17 average rates, [01:15:42] I'm sorry, average water consumption, and came up with an income valuation [01:15:48] of just over a million dollars, and then the comparable sales valuation, [01:15:54] which, again, was looking at a per pipe cost, or per linear foot pipe cost, [01:15:59] and we looked at Lehigh Acres, I'm trying to remember the names here, [01:16:04] it's been a while, [01:16:12] we had Lehigh Acres, Lendrick, Sale Lendrick, [01:16:16] the three that we had, the city acquired a couple years ago, [01:16:21] the Barbara Ann Utilities, Silver Lakes, or Silver Oaks, and the Lakewood Villas, [01:16:26] and then Indian Rocks Beach, all of those had different, [01:16:30] some had water only, some were water sewers, so again, we just revert, [01:16:34] basically brought it down to a per linear foot of pipe cost, [01:16:39] and came up with an average per linear foot of pipe cost, [01:16:44] applied that to the linear foot of pipe that would be part of the Orangewood Lakes, [01:16:50] came up with a comparable sales valuation of $912,000, [01:16:57] and then we took a weighted average, [01:16:59] and the weighted average is based on confidence levels, [01:17:03] because of the asset valuation, there's a lot of unknowns, [01:17:08] we did not do exploratory work to determine the condition of the pipe, [01:17:14] we did pop some manholes to see what the condition of the manholes were, [01:17:19] we looked at more of the age and industry standards for the existing or remaining life, [01:17:26] so we applied a 25% factor to the asset valuation, [01:17:31] the income valuation, because those numbers are known, [01:17:34] we applied a 65% factor, and for the comparable sales, we applied the balance, [01:17:42] and we came up with a weighted average of $854,000, [01:17:45] or almost $855,000 for the average of the three valuation methods. [01:17:54] In addition to acquiring or purchasing of the utility, [01:17:59] you have a capital cost of $1.161 million, [01:18:04] and that capital cost is to put in a pump station at the wastewater treatment plant site, [01:18:11] the force main up Osteen Road in Massachusetts, [01:18:14] tying into the city's collection system, [01:18:19] the water transmission main from Massachusetts down Osteen Road, [01:18:25] there are some pump stations, existing pump stations in Cypress Knolls, [01:18:28] I'm sorry, not Cypress Knolls, Lakewood Estates, that would need to be upgraded, [01:18:33] and then all the meters within the water meters would need to be replaced [01:18:39] with the county standard water meters. [01:18:41] Essentially, that $1.16 million is to bring the existing system [01:18:47] to existing city standards, as well as extend the service [01:18:52] to your current collection and transmission system. [01:18:59] So when you take the weighted average, or the valuation of $855,000, [01:19:05] plus the capital cost, you come up with a total investment [01:19:08] for the city of just over $2 million. [01:19:13] The annual revenue, again, was based on the current water consumption [01:19:18] for those 482 water customers, and then we reduced that to the 436 sewer customers, [01:19:25] assuming that the city would not provide sewer to the Cypress Knolls area. [01:19:33] The operating costs are based on the information that we had from the city, [01:19:37] as well as from Burton when they did the previous analysis. [01:19:44] We then applied, or did a return on investment, [01:19:49] looking at using a 1.5% interest rate, [01:19:55] and came back with a, basically, a six-year return on investment. [01:20:01] So, after talking with Robert, I know that he's had some discussions [01:20:13] with the utility owner. [01:20:18] They're anxious, obviously, to get out of the utility business. [01:20:21] They approached us, like I said, two years ago. [01:20:24] But at this point, a recommendation would be for the city to execute a notice [01:20:29] of intent, and then fund it, as we discussed earlier in the previous presentation. [01:20:38] With that, I'll open it up to any questions that you have. [01:20:45] Just, since we've got this sort of, both of you here, [01:20:50] you said there were 482 water customers, 435. [01:20:54] So, if we said 450 to blend it out, just out of curiosity, [01:20:57] 450 customers for a $2 million investment, [01:21:02] how many customers is in that Lyndric one? [01:21:04] I'm just curious to see a cost per customer, if you know the answer to that. [01:21:08] Lyndric has about 3,000 water, and about 2,600 sewer. [01:21:13] Right. So, that kind of tells that the purchase price, [01:21:18] with the capital improvements of this system, [01:21:21] is a considerably better bargain, in that sense, [01:21:25] or it can fit within our rate structure, where, again, the debt service over here, [01:21:32] 482 times, like, seven or eight is what you're going to end up with, [01:21:38] which would be like a $14 million investment. [01:21:42] So, what costs 29 million, versus, you know, [01:21:47] compares to what would be 14 if we got this price for that utility. [01:21:52] So, sounds like a good deal, and you've done the valuation, [01:21:56] and I, Mr. Mayor, I don't have any more questions. [01:22:02] I think that it's being proposed to us. [01:22:04] They're asking us for authority. [01:22:06] I would support it. [01:22:08] Six-year ROI is pretty good. [01:22:11] Feasible. [01:22:12] Yeah, it is. [01:22:13] Matt, anything? [01:22:15] No, I think the numbers look very good on that one. [01:22:18] Since it's a workshop, we can't make... [01:22:20] That's correct. [01:22:21] We can recommend, right? [01:22:22] We could recommend staff pursue this. [01:22:24] Yeah. [01:22:25] We would bring it back as a notice of intent. [01:22:29] I would like to say that Mr. Heigler, he is the owner of the utility, is in attendance. [01:22:35] Him and I have talked in between. [01:22:38] He's been very patient with us. [01:22:42] As Mitch had indicated, we have waited a while since he contacted us [01:22:48] because of certain things. [01:22:50] None of the delay was due to Al, and so he's been very gracious. [01:22:57] You will notice in the capital improvement budget, we did budget 950. [01:23:05] Al and I have gone through our process of negotiations and have done a verbal of 950, [01:23:14] and that's all contingent upon presenting it to you, getting a notice of intent, [01:23:20] bringing it to you, and getting your approval. [01:23:23] The system that he has now currently has expansion capabilities. [01:23:30] When we did the study, and Mitch had come up with the valuation, [01:23:36] we knew there was potential for expansion, but since that's happened, [01:23:41] 60 additional units have requested to come online, and so we feel that the number [01:23:48] that Al and I have worked out is a very fair and equitable deal, [01:23:53] even though it is higher than the valuation. [01:23:56] There are 60 units just to the north, or plan 60 apartment houses just to the north [01:24:04] of the existing Orangewood apartments to be built in two phases, [01:24:09] having talked to that particular developer's engineer. [01:24:14] The assets, or really the capital cost that the city would see with those coming [01:24:22] on board would be negligible, the increase in capital cost. [01:24:27] The assumption being that if the city were to bring them on board, [01:24:30] you would require them to put in city standard meters, but the force main [01:24:35] and the sewer line that are necessary, the pump station to service the rest [01:24:40] of Orangewood is already included there, so it's really just a revenue generator [01:24:44] at that point, and if I remember the numbers I ran for you this morning, [01:24:49] essentially there was about a $300,000 increase in the income valuation [01:24:57] from 1.065 million to about a 1.3, so that brought it, [01:25:02] and when you take the weighted average, that brings that number closer [01:25:05] to what you were talking about. [01:25:06] There may be some other opportunities, too. [01:25:09] We previously had purchased a contiguous area to this, and I know because I've got friends [01:25:19] that live on Methlar, and they've got city water now, but they're still using a septic tank, [01:25:26] and if we're bringing in the sewer lines and everything else to tie in, [01:25:32] there may be an opportunity to pick up sewer customers in that other area. [01:25:38] Mr. Mayor, while we have the county there, it would be worth saying out loud probably [01:25:43] that the city recognizes, or we've always recognized the Florida statutes requirement [01:25:50] that if a line goes in front of a house that it has to hook up because of the incentive [01:25:57] to get folks hooked up on the sewer, that would be another discussion that would be worth reentering [01:26:04] into with the county because we have so many areas in our service area that are not served [01:26:09] that we could be serving if we had a good plan, and I think, am I wrong, that they used to use [01:26:18] like the old paving assessments that we used to have here before we modernized [01:26:24] to require the people to ask for it and get approval from the residents, [01:26:30] which is problematic sometimes, like every time. [01:26:35] Yeah, exactly. [01:26:41] Thank you very, very much. [01:26:43] Any other questions or comments? [01:26:46] Thank you. [01:26:47] Thank you, and I believe at this point it would be appropriate to entertain a motion to adjourn. [01:26:53] So moved. [01:26:55] Thank you.

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4. 4Adjournment