HomeMy WebLinkAbout2017-03-21 Finance Committee Summary Minutes
Special Meeting
Tuesday, March 21, 2017
Chairperson Filseth called the meeting to order at 6:01 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California.
Present:Filseth (Chair), Fine, Tanaka
Absent: Holman
Oral Communications
None.
Action Items
1.Preliminary Financial Forecasts and Rate Changes for Electric, Gas, Wastewater Collection, and Water Utilities for Fiscal Year 2018.
Chair Filseth:
Dean Batchelor, Utilities Chief Operating Officer:
Eric Keniston, Resource Planner for Utilities: … the electric, gas, wastewater collection and water utilities. This is the arching overview of what we are thinking of bringing to you
in the way of increases. It’s your first bite of the apple, you get to come back and ask a bunch of questions. We will be coming back with the water and wastewater proposals on April
4 and the electric and gas will come to you on May 16. The final adoption night will be sometime, I’m not quite sure what the final night is in June, but that night we will have any
hearings also that we need to have on the water side for Prop 218-related hearings. So, once again, here we review the financial reserves, the main one being the operations reserve.
Here we will also talk a little bit about just, we have the refuse rate and storm drain rate increases on our slides, just as a point of notation. Tonight, we are bringing to you only
two rate increases and that will be for the electric and water. The gas and wastewater collection we currently are proposing no rate increases at this time. The overall rate increases
that we are proposing for the overall bill impact is going to be lower than we showed last year. So to start, as I said, we are talking a lot about reserve health here. Back in 2015
we had only one real reserve, and that was the rate stabilization reserve for each one of the funds, but it covered everything and the minimum and maximum guidelines for the amount of
money we needed or wanted to hold in it were a little bit squishy, so at the recommendation of the auditor we went and firmed these up. We broke out the amount of money into different
reserves for different purposes, and firmed up those min and max guidelines. So the main one we have now is the operations reserve. This one is meant to hold our day-to-day cash that
we need to go on. We still have the rate stabilization reserve, but this is sort of a holdover. It’s excess money that we are using up to help keep rates low. We also have additional
reserves for construction and capital improvement projects and committed and re-appropriated funds from prior projects as well.
Chair Filseth: Can I ask a question?
Mr. Keniston: Sure.
Chair Filseth: (Inaudible) but there is some discussion later on in distributions operation reserve?
Mr. Keniston: Yes.
Chair Filseth: What’s the difference, I mean, what is that, the difference between operations and…
Mr. Keniston: So in some of our funds, the electric and gas, we had, primarily in the electric these days, there is back in – remember in the old days, deregulation? We were required
to break out the funds into two separate groups, the commodity side, the supply side. It was possible for people to procure their resources from external suppliers, whereas the distribution
side is what we here in Palo Alto need in order to transmit energy or gas services to customers. We still have the electric supply, the Electric Fund broken out into the Supply and Distribution
Funds, in case anything ever happens again, but it’s easier to keep them broken out than to bring them all back again and then, of course, someone is going to turn around and bring back
deregulation or something like that, and then we will have to split them, so…
Chair Filseth: So when you talk about operations reserves, does that cover both of those?
Mr. Keniston: We have an operations reserve for the distribution and the supply side in those cases. So, as I mentioned the operations reserve is our primary reserve. We usually try
to keep between 60 to 120 days’ worth of expenses in there. We generally try to target about the 90, right in the middle, 90. There is an additional component to this that we talk about,
is the risk assessment level, and that’s sort of the sum of all fears bit. That’s if we had the maximum amount of revenue variance that we have seen in the last ten years. I think the
biggest we’ve ever seen is a 10 percent revenue drop, sales drop. We factor that in there. We also look at the cost of if we had a 10 percent increase in, CIP expenditures, if for some
reason we needed to go out and do a new project. So that’s factored into those risk assessment lines. We have additional reserves, as well, as I mentioned; rate stabilization, unassigned.
When reserves get to max we put them into unassigned to be used as soon as possible, and CIP reserves for any excess Capital Project Funds. So the main slide we go for tonight is the
overall rate projection. As I said, in the electric utility we are looking at a 12 percent rate increase. Now these are preliminary projections, really, for the electric side. Chances
are, we’ve been looking at it, I’ll say this early. On the electric side we’ve, once we did the rate increase back in July we’ve noticed that revenue sales have been down by about 6
to 7 percent, so we’re actually going to need probably something closer to about a 14 percent rate increase on the electric side. Even with that said, we’re looking at still having overall
bill changes of about 5 percent. Gas, wastewater, no rate increase; water 4 percent; refuse is going to be projected to be a 5; storm drain we have in there just for points of comparison,
but in general the overarching long-term view is about 4 to 5 percent rate increases going forward. The median residential bill these days runs about $283.
Male: Median?
Mr. Kensington: Median for a single family residential.
Council Member Tanaka: How does that compare against the PG&E?
Mr. Keniston: So our electric rates are very favorable. We’re like 35 percent below PG&E.
Council Member Tanaka: How about a rate increase?
Mr. Keniston: Over others? We don’t have a sense yet of what other utilities are doing with regards to their rate increases at this point in time. We sort of go a little bit earlier
than some. Part of that is we have to start earlier for specifically the water and wastewater side. Those are Prop 218-related items and we need to have a 45-day notice sent out before
we have the Council hearing, so we need to get this rolling relatively early in the year going out. So other agencies, they sometimes don’t even do their rate increases until say, if
they do July they are now going to their Boards instructing to put out notices. Some of them don’t even start their rate changes until say September.
Ed Shikada, General Manager for Utilities: Along those lines, do you recall when we would be issuing our Prop 218 notices for rate increases?
Mr. Keniston: So here what we would do, as I said, on April 4 we will bring you the water and wastewater proposed rate changes. If you approve those at that point in time, by the end
of April we will send out the Prop 218 notices. That would be done 45 days ahead of whatever June hearing that we would end up having the utilities rate night. (Inaudible) And refuse,
thank you. So, this year the only items covered under the Prop 218 notice would be the water and refuse items. And as I mentioned, you know, 4 to 5 percent rate increases in going forward
in the future, last year we were thinking we would need something steeper, say in the order of 9 percent overall rate increase, so even with all this said, even though we would need
to have a higher electric rate proposal than what we were thinking, the overall bill impact is going to be less than we were thinking it was going to be last year. And with that, moving
to the individual funds. Does anybody have any questions before I launch in.
Chair Filseth: Given the small nature of this group, I think, is it okay that I jump in? When the group, the presentation is finished we will have a round of sort of comments and questions.
We’re not going to do any motions tonight.
Council Member Tanaka: So what kind of feedback have you heard from residents in terms of the bills and increases and stuff like that? Have you any feedback?
Mr. Keniston: In general our feedback is, you know, people are fairly used to the fact that we’ve had rate increases pretty much every year, especially in the last few years with regards
to needing to increase water rates and wastewater rates related to the drought. People understand, folks are generally understanding that these increases are necessary, so. And when
we, when moving into the electric, the last time we had an electric rate increase was July 2009, so there had been quite a period of gap before we had our most recent electric rate increase,
and we didn’t hear a whole lot in the way of complaints from customers when we did that. I mean, most of what you hear these days are questions as to when we’re going to end the drought
surcharge on water, which I will tell you tonight, we’re proposing to remove that July 1, so I think that will make a lot of people happy on that side.
Council Member Tanaka: The reason why I’m asking is, you know, back when I was running for election I knocked on a lot of doors and one of things that came up was this thing about the
water. “Hey, I’m using less water but I’m getting charged more.” So that seemed to be a very frequently, because I always ask people, you know, what are you concerned about, and they
said the water rates. That’s why I was also interested in knowing how this increase is versus PG&E, right? Maybe everyone is increased; it’s just the way it is. Or maybe it’s just us.
So we might need to do some marketing around there, because it seems like, even though this is a really dry subject, some people really care about it, and they’re not happy with the
increase.
Mr. Keniston: Agreed.
Council Member Tanaka: Was that what you found when you were knocking on door?
Council Member Fine: I mean, yes, I heard the same thing about water. The other thing I heard about, I don’t know how much flexibility we have here, is from elderly, you know, fixed-rate
payers, right. I don’t know if we can differentiate those customers.
Chair Filseth: There was a lot of confusion on this topic last year and a lot of discussion about communication and so forth. I guess what we’re hearing is that people still remember
it, or remembered it as of last October. So you’re saying the drought surcharge is going to go away and so forth?
Mr. Keniston: I’ll talk a little bit more when we come back in April, I’ll talk a little bit more about our Proposed Communications Plan is going to be. I’ll get some feedback from our
communications manager on that. So launching into electric, here’s a case where, as I said, we had a rate increase last year and we projected that we were going to need an additional
rate increase this year of about 9 to 10 percent. We knew that the operations reserves were going to be below or at minimum when we did that proposal, but as I also said, the sales have
been coming in lower than was expected. We were expecting to see a steeper revenue line. It’s coming in less and expenses have not. Expenses have been a little bit lower now that we’ve
had, we’re starting to get some rain, so we will in the future, we should see less in the way of purchase costs. We get a lot of our energy via hydro projects and hydro is by far the
cheapest resource, but you know, those rains are relatively recent and we didn’t see those cost savings until later on down the line.
Council Member Fine: So a quick question. It seems like you know, in the next two years, the next two Fiscal Years we have about a 10 percent increase each year. After that it’s 1 to
3 percent. Are we paying into the operations reserve more now, or why is it kind of front loaded?
Mr. Keniston: Well, as you can see in the reserve transfers, we’ve got, we’re pulling out about $11.4 million from the hydro stabilization reserve, pulling out essentially everything
that’s left in the supply rate stabilization reserve. We’re using what reserves we have just to get through and keep the operations reserve as flush as possible, and we’re also going
to propose pulling about $10 million from the electric special projects reserve to keep the operations reserves healthy. Now, normally the special projects reserve is just that. It’s
for special projects. We have that set aside for things such as building a secondary transmission line, SMART projects and whatnot. I mean, it’s not really meant to be used as a rate
stabilization mechanism. If we use it, we will plan on paying that money back to it over the next couple of years, FY20 and FY21, to reseed it for those future projects.
Council Member Fine: And that paying down the electric special projects reserve would come from these same rate increases, just further down the road?
Mr. Keniston: Just further down the road, after we’ve increased rates we would then pay it back.
Council Member Tanaka: So what’s the rate of inflation right now?
Mr. Keniston: We’re estimating the rate of inflation at about 2.5 to 3 percent. I think in our earlier models…
Council Member Tanaka: No, I’m asking what, I think the rate of inflation right now is pretty low, right? If you look at, you know (crosstalk) 3.5, yeah, okay. So 12 percent is, what,
four times the rate of inflation? Is that the way to think about it? Is that right? Okay, so I guess, you know, the naïve resident would probably ask, “So why is the rate increasing
more than 4 times or 3times the rate of inflation of the Bay Area?” And what would your answer be?
Mr. Keniston: Well actually, we can go right here to this graph, here to this chart. And the reason is, you can see, and you will see this chart shows up, the same format of the chart
shows up across all the utilities. The blue line up at the top is our revenue stream and the bars show our expenses. And in electric, revenues have been, and are projected to be, below
expenses. And so why, we went through a whole string there of no rate increases, even when expenses were above, and we were, as I said, bleeding off the rate stabilization reserves to
bring them down. We, at the time we did our study in 2015 we determined then that we had quite a bit of excess money that we were holding on to. It’s the customers’ money that we collected
over the years. So instead of doing rate increases, we said we will hold things flat and used those rate stabilization reserves and then start increasing slowing as we start dwindling
those down, and then the drought happened. Unfortunately, with the drought that meant that we didn’t get the hydro. We had to go out for more market purchases and we’ve seen our, what
reserves we’ve gone through them much faster than we were originally expecting to use them at. So that’s why we need to increase rates faster than the rate of inflation. The goal here
is to bring rates up to a case where you always want to have revenues matching expenses, and that’s what this proposal gets us to. Yes, you have a question about that?
Chair Filseth: So that is sort of what we were looking at, if I recall right. There was a little bit if discussion about this last year, and we’ve basically burned down the rate stabilization
reserve in order to cover this. But, did we reduce the operations reserve as well, to subsidize rates? Because it looks like the operations reserve was at the bare minimum in 2015, right,
and even that has dropped a little bit. So did some of the stabilization come out of the operations reserve?
Mr. Keniston: Yes. I mean, we’ve had to use a little bit from everywhere to get through this wonderfully tough time.
Council Member Tanaka: So, and I don’t know if this is common, but do you guys hedge your bets? I mean, is there like if futures go high, do you hedge so you can use like energy futures
or options to kind of hedge, so we don’t have this kind of fluctuation?
Mr. Keniston: Generally, we have long-term contracts in relation to our, for our electric and gas portfolios, but we don’t, I’m not quite sure, hedges, no not so much.
Council Member Tanaka: Is it common among other utilities, or not really?
Mr. Keniston: Not my realm to speak. I can ask the relevant power procurement people and get back to you in 2 weeks when we return, or get back to you on that one. Yeah, we do have long-term
renewable contracts.
Mr. Shikada: And those typically provide the best rates. It’s the long-term, let’s see, what is it. The long-term year beyond, month ahead, day ahead and spot market, so clearly the
shorter term has the higher rate, but we use it as a way of balancing our load versus our supply.
Council Member Tanaka: I guess what I’m trying to say is, industry does it right. Airlines, when the price of fuel is low you buy a bunch of futures, right, and when like, so when the
prices are high, you use the money to hedge it, right, so you use the market to help defray some of the risk, right, in this? Yeah, so I was just wondering.
Mr. Shikada: So I would observe and others who have been here longer can correct me, but my sense is that our purchases, our decisions on how and where to make those long-term investments
have been driven more by conservation interest, such as renewables, we have the hydroelectric, the solar projects and the like and have bid those out to get the best price within those
particular categories of supply as a primary way of maximizing our market advantage, and we actually do sell some power periodically, depending on how our load compares to our supply.
Lalo Perez, Chief Financial Officer: We used to go out much longer in our agreements, but through Council direction, that changed. We are buying, more what I would call more on the market
as a result of that direction. It used to be a practice that we would go two, three years out, especially in gas, it got to be very challenging. The Council was not very thrilled that
the market got turned around, and it was upside down for us, and we were in longer term…
Council Member Tanaka: So that’s what I’m saying. I was just wondering if you have a like a locked-in long-term contract? It’s another thing to basically use derivatives to hedge, right,
to hedge the market fluctuations. So when we see the market going to abnormal low, then we say, okay, let’s buy some futures or options on this, so that we don’t pass, you know, 10,
12 percent rate increases on to our residents.
Mr. Perez: Yeah, and I guess it philosophical, the policy direction that’s been, that’s gone, in the years that I’ve been here, it’s gone both ways, where we’ve gone to that. Not necessarily
to hedging, but something close to it. It’s called lateraling your portfolio, right, and you lateral further out, and it just – being in a political public place, there’s a lot more
sensitivity when it goes the opposite way, right. When you take those risks.
Council Member Tanaka: What I’m saying, this actually moderates the risk. It doesn’t increase it, it moderates it, right?
Mr. Perez: Well, some people would disagree with that, because as I said, if you’re speculating and you’re wrong on that speculation, because then you have to buy an offset to…
Council Member Tanaka: It’s different than, like if you’re like an energy trader, right, and you don’t actually use the power. Palo Alto actually uses the power, right? So, if we were
a speculator we would, there would be a lot of risk, end users of the power, or water or whatever, right? But if we are the consumer of this, we actually use it, we can use it to moderate
these fluctuations, so there is never going to be a time when we have a 10 to 12 percent increase right? So, of course it’s not free. We have to pay. It’s going to cost us a bit, but
it prevents like these wild swings, right, because as Adrian said, there are some people here who are on a fixed income and, you know, 10 percent, 12 percent may not sound like a lot
to someone’s electric bill, but I’ve talked to some people in Palo Alto who are dirt poor. I mean, they are barely getting by the skin of their teeth. They are not going to like seeing
a, you know, a 12 percent on top of a 10 percent rate increase, right. So I think, I mean, to me it seems like it would behoove us to look at these financial instruments that are readily
available to moderate our, moderate the fluctuation. Because we are a consumer of the stuff, right? I mean, farmers do it, airlines do it. I mean, just about every industry uses derivatives
to moderate the risk. We’re not speculators, we’re not like energy traders, right.
Chair Filseth: Let me weigh in, comment on that a little. I think, as Lalo said, I think the pendulum has probably gone back and forth a few times with different Councils and so forth.
I mean, the reciprocal argument is, you know, the market is what it is, okay. And no amount of moving things, because when you do what you’re talking about you’re basically moving things
across time periods, and you know, you’re dampening the fluctuations, but the long-term averages are going to end up the same either way, and if anything, you pay a slight premium for
risk reduction by all these instruments, and so forth. So the argument on the other side, which has gone back and forth, right, is that the market is what it is. And there’s, I mean,
it’s simpler and more transparent if you just pass it through to the customers, because that’s the real cost, right. And then so, now you’re looking at a philosophical dialog, right.
It’s a taste great, less filling thing, so it’s gone back and forth and it could go back and forth again. The most recent Councils have weighed in on the other side, but.
Mr. Shikada: I’d like to introduce Dave Yuan, our Administrative Office from the Utilities Department.
Dave Yuan, Utilities Strategic Business Manager: Hi. I think the main reason that caused these spikes of 10 to 12 percent is because of the drought mainly, and also because there is
a decrease in load or usage because of the drought, the same conservation. So I think that was a main factor. I think, in general we do try to stabilize the rates on five-year forecasts,
but these are some things that were out of our control.
Chair Filseth: But as you say, you can do that small signal, right, but if you have an extended drought and you run out of your ability, then suddenly you have a bigger step than you
would have had maybe if you let it fluctuate, right, so hard to tell.
Mr. Shikada: Exactly. Eric, you might want to move to the next slide.
Mr. Keniston: Hindsight being 20/20, we would have done, started years ago of doing small increases over, you know, 2 percent increases over time to get us to where, so we wouldn’t have
had the double digit spikes.
Mr. Shikada: That said, we do have, our primary mechanism which does exist on the next slide, which is our rate stabilization reserve, so we do draw down on it. It is certainly not an
infinite resource, but it’s a way of dampening the fluctuations on a year-to-year basis.
Mr. Keniston: And you can see the effects of the drawdowns here. We are taking what we had in hydro stabilization reserves and supply rate stabilization reserves and using them all up
essentially by, almost by the end of this year. You can also see we are taking some money out of the special projects reserve to help stabilize a bit, so. Even with all of these transfers
and bringing things in, it is projected that the supply operations reserve will be below minimum, at least for the next two years or so, but as is within our guidelines, the goal is
we, over the forecast period we want to bring the reserves back up to the target level. Also, to a certain extent, this also feeds the rate increase projections that we do. I mean, yeah,
so we are going to try to resupply.
Mr. Keniston: Exactly.
Chair Filseth: I think the distinction here is you’re talking about operations reserve as opposed to rate stabilization.
Mr. Keniston: Yes, yes. So this is the…
Chair Filseth: (Inaudible) fluctuations and expenditures. Not necessarily trying to hold (inaudible).
Mr. Keniston: Yeah. That’s correct. We’ve essentially taken all the money we would use to try to buffer, against rate increases, and we’ve used that up. So, as to supply reserve adequacy,
we also specific to the electric supply side, we also have a risk assessment here, and that’s really – this one has a little bit more to it in that we look at things like risk to hydro
type effects and additional purchase costs. So it’s a bit on the higher side. Then all the other ones, which are mainly distribution related, but here you can see we’re about equal with
the operations reserve, a little bit below the risk assessment level, but not terribly much so. Again, another reason we want to try to bring that operations reserve up to mitigate against
future risks. On the distribution side, we don’t really have any rate stabilization reserves left. Those were all used up in FY15. We do have the operations reserve. We are growing it
somewhat in FY18, it’s growing a touch in FY19. The function of how the model works, when it took in money for the special projects reserves it moved it automatically to the capital
reserve, but that should be in the distribution side. You can see we are restocking and bringing the distribution operations reserve back up. So we’re trying to get that – we want to
keep the operations, distribution operations reserve in this case above the risk assessment level, which is sort of our bottom line. We don’t want to ever really drop below that. If
that were to happen, of course, we would have to have a plan, tell you how we are going to get above that as is per our guidelines.
Council Member Fine: This is a silly question. How often can we reset rates? Is it once annually, or can you do it?
Mr. Keniston: You know, in general we only like to do rate increases, you know, once a year, in July and have it that way, but we can, and have, brought forth mid-year rate increases.
Chair Filseth: Didn’t we do one at three-month intervals?
Mr. Keniston: That was gas back in 2000, 2001, yes. I think we had three or four rate increases in the span of a year.
Council Member Fine: Okay, and that may be because we’re hitting that risk assessment level or another reason?
Mr. Keniston: Yeah, the gas actually was specific to, we had a hard cap. We do have a cap on how much we can charge for commodity prices and gas prices went way above that cap, so we
needed to go and increase rates in order to just keep afloat. I remember those days. That’s when I first came on. So even with all this said, current projections are a little bit higher
than we were thinking last year. We were thinking about a 10 percent rate increase. We are bumping out to about a 12, and we just realistically think we are going to need slightly larger
increases going forward just to resupply and restock the reserves. Question?
Council Member Tanaka: What is the average bill in Palo Alto, to you know?
Mr. Keniston: The median bill is I think about $283 for a single family residential home.
Council Member Tanaka: Per month right?. Okay, so for a family then, what is 12 percent of that?
Mr. Keniston: So about an additional $30.
Council Member Tanaka: So times 12, so about $360 a year.
Mr. Keniston: The 12 percent is on the over the total bill, but our total bill impact is only looking to be about 5 percent.
Council Member Tanaka: 5 percent?
Mr. Keniston: Yeah. It’s 12 percent on just the electric portion and then, I can’t…
Council Member Tanaka: So $170 basically?
Mr. Keniston: What?
Council Member Tanaka: $170 increase annually.
Mr. Keniston: Yes. So because this is a presentation from back in February, some of these slides are still holdovers from back in the time before we had rain. How long will the drought
last? Ideally it is over, but never say never. There is always potential, things could happen. Warm rains could come and wipe out the snowpack. So, let’s hope not. Things like second
transmission line, cost of SMART grid, again, these are projects that we have slated to be, if we do them the electric special projects reserve would cover those, but if it turns out
we’re not going to do a second transmission line, maybe reevaluate what to use the special projects reserve for, and just general uncertainties, increasing CIP costs. Something that
we have seen happening to the utilities in general after the recession is that everyone’s working on infrastructure and construction crews can sort of take their pick of what they want
to work on, costs are going up. We have seen this happen across the board. And it actually directly impacts our water, gas and wastewater collection funds, which you will see coming
up.
Chair Filseth: Is there actually enough money in the special reserve to do the second transmission line?
Mr. Keniston: I believe we are holding, we’re currently sitting at about, provided that we do the ten lane transfer, at about $41 million out there. I can’t remember off hand what the
projected cost was on the second transmission line, but I could look that up and get back to you on that.
Mr. Perez: I remember 30 to 50, I think was the range.
Mr. Keniston: So that study was also done several years ago, so we’ll see what current specs would come back. And with that, actually, I’m talking about electric and was going to move
on to gas.
Chair Filseth: Do you want to take more questions about electric, or do you want to…
Council Member Fine: On little interesting thing. Where would the second transmission line be?
Mr. Keniston: So the second transmission line would come down from the 280 side into, like through (inaudible) territory and Stanford, so.
Mr. Perez: I haven’t been involved in the discussions recently, but there was some interest by Stanford to do a joint project, so the cost would be somewhat split.
Mr. Shikada: In fact, that is still the current state of the discussions. Stanford is currently considering whether it is cost effective for them to participate in the project.
Mr. Keniston: Barring other questions, moving on to gas. Less pain on the gas side. No rate increase projected on the distribution costs for the gas side. One of the things, as a preface
for gas, when we talked about rate increases on the gas side, there are several factors which we pass through to customers. The commodity cost changes monthly, and we pass those through
directly. It changes every month on the bill. There is a spot on the website where we show what those costs are. PG&E transportation rates, those are tied directly to the PG&E rate schedule,
which we are charged to transport the gas on their system to Palo Alto. We pass that through directly to customers. So when we talk about rate increases here, it is really the distribution-related
costs, what we use to operate our main infrastructure here. So on that side, no projected rate increases for FY18, and ongoing, about 2 to 3 percent rate increases in the ongoing future.
So here, you can see that revenues are a little bit closer to projected expenses, so that’s a nicer portrait than we saw on the electric. One of the things you might notice is that the
orange bar, which is the capital investment line for FY17 and FY18 is lower than what you would see going forward in other years. There are a couple of different reasons for this. Again,
CIP projects gone out to bid have come back at higher projected costs than what we were expecting and what was budgeted for. So in order to do that, either we go and ask for more money,
or we repackage, redesign those projects to get them done within the same budgetary constraint. That said, we are currently understaffed on the gas side and people are working, people
work on the gas, water and wastewater design area collectively, so there is a lot of work to be done and not enough Staff to support all that. We have gas operations Staff that we are
understaffed with, and we have a large existing project which is being, which was done in 2016 and still wrapping that up. But the main replacement project which was originally SPECCED
for FY2017 and we generally try to do a main replacement project every single year. And just in reality, because it came back, because we are going to have to redesign it, we said, you
know, we are not going to be able to start a new project until a new redesign, get a new one going until FY19. So we have a two-year bit of a reprieve for main replacement project work
and that dropped our expenses significantly and is enabling us to have a much lower long-term rate profile going forward as things resume back in 2019, but by then with the rate increases
we have projected, we should be able to do a better match and get things closer.
Chair Filseth: (Inaudible) Sorry, it looks like on all these areas there was a CIP blip in 2017 and 2018.
Mr. Keniston: Yes, there was a two-year blip, ’17 and ’18 in water, gas and wastewater collections, we’re having a two-year…
Chair Filseth: And is it the identical dynamic in all those?
Mr. Keniston: It’s an identical dynamic. There is also, is it the CAL-F project is taking a bit more time and work, and then redesigning of those. Getting everything, the existing projects
we have in the hopper able and ready to run, so.
Mr. Batchelor: Also, just to add to that is there are plans in the hopper right now to look at the Downtown area here on University and the Linton piece to look at doing a water and
gas joint trench down University that will be coming up here during that period of time, so we’re kind of doing the design for that, as well as a water upgrade and a gas upgrade in the
outlying street lines, but it’s all going to be in the Downtown area. So it’s working with the other departments to see what we can do with University from Traffic and Planning as well
as Public Works.
Mr. Yuan: …the bids for water and wastewater CIP projects, the bids came in about 30 percent higher than we had anticipated, so we have to go back and rebid twice, sometimes three times
to get it within our budget, so that’s why, what caused some of the delays. The bid prices had gone up because of material mainly, and also because of labor.
Mr. Keniston: Thank you. So the blue bar, which is the gas supply, that we pass through directly, so revenues fluctuate 1:1 whenever those are projected to change. We have estimates
of what the gas supply costs are doing, but they change, the projections that we ran about a month ago are now totally different from what we’re getting today, because gas market prices
have been coming in low, so those just fluctuate constantly. When we talk about rate increases, what we do is we hold the commodity steady so that, because if we project the rate, that
commodity costs are going to go down, then we would see these wild swings and dips and the path of rate change becomes a bit, almost nonsensical. Operations costs in here on the gas
utility, we do have a little bit of a bump we see in FY18. We do have a continuing project to do scoping for gas cross boars, making sure those are, there are none of those in the system,
so we do bear some additional cost on that. I think that – and as I said, because we have had the, last year, the year before, we were expecting we would go through our rate stabilization
reserves fairly quickly and then start down the path of rate increases, because we have had a budgeting hiatus, we are going to have rate stabilization reserves going probably into FY20,
FY21 and even 22, so we can keep that steady or state of rate increases going forward, which is, I think, easier for customers to deal with as well.
Council Member Fine: And then do we start refilling them in ’21,’22?
Mr. Keniston: We don’t refill the rate stabilization reserves. The plan on those is that they go away. The only time we have money in them is if we were to have, if we had surplus in
the operations reserve more. Say if some windfall situation happened and we had tons of money, that would flow back either into the unassigned or rate stabilization reserves for future
use. In general that would go to the unassigned with the goal that we would try to return that to customers in some way, shape or fashion as soon as possible. Or we could go, under Council
direction, move it to rate stabilization for a longer term use.
Council Member Fine: I mean, like here it looks like in ’17 we have $6, 8 million there. Where did that come from actually?
Mr. Keniston: Those were holdovers from when we restructured, we had large rate stabilization reserves. We actually took and split out from the rate stabilization reserve what we felt
was, we brought the operations reserve out, we moved out its section back to target, and then what was left over was put in the rate stabilization. So we’re just slowly using that up.
So the operations reserve is projected to be on target and a much better plan than what we had projected last year. We were thinking 8 to 9 percent rate increases, so we don’t need to
do anything near that drastic this time around. To the point of, on the gas side, our residential gas bills are fairly comparable to PG&E.
Council Member Tanaka: Can you tell me what are the rates like? I mean, how do we compare to each of them, like water, gas electric?
Mr. Keniston: So on the electric side, the PG&E, we’re, like I said, about 35 percent below. For gas we’re roughly, because they pass through gas commodities the same way we do, we’re
about the same, maybe slightly lower. They do have some additional costs because of the whole San Bernardino incident that they are having to collect on. We also have to bear a portion
of those costs through our transportation rates, but they by far regular customers saw the majority of those increases. For wastewater we are roughly comparable to other utilities, agencies,
so when it comes to water and wastewater, that’s a little bit more complex, because there’s no real, for water you have California Water Service, which is the main IOU player, but even
there they have different rates in different districts and agencies. So, say the Menlo/Atherton area is one district, Los Altos is another district, and there are dozens of agencies
around us to compare against. The same for wastewater. On wastewater we are right about in the middle of everyone, on water we are higher than pretty much all the other agencies around.
Mr. Shikada: We will, though, as a part of the run up to the budget be providing tabulation of comparison of rates among comparable neighboring agencies.
Chair Filseth: A question on that. A follow up on Council Member Tanaka’s question, which is, on water specifically, say we’re generally higher, right. Does that apply to other cities
that are part of the SFPUC System, or just to Santa Clara County for example?
Mr. Keniston: Our rates tend to be higher because we have a much more aggressive infrastructure program than some of the other agencies around, so we all get passed through the same
water commodity cost, but our distribution costs are higher than some of the other folks around.
Council Member Tanaka: Can you tell us how much higher?
Mr. Keniston: Not off the top of my head, but actually in two weeks I will bring you the chart and in the water report will actually show you a comparison to all the local agencies.
Council Member Fine: And then in terms of the infrastructure and distribution, why are we so much higher? I mean, what is the physical difference that we’re doing here?
Mr. Batchelor: I don’t think it’s a physical difference. I think it’s just that we’re being more aggressive in the replacement of the water mains, and also the distribution portion of
it. You know, size wise we’re pretty comparable size wise. We’re not using any different type of material size wise, pipes and everything. But the thing is that, as Eric said, we try
to do a project every year, somewhere in the neighborhood of about 15 to 20,000 feet that we are replacing. So we’re pretty aggressive in the infrastructure replacement and that’s where
the capitalization of using those funds comes from.
Mr. Perez: I think too, to Dean’s comments, we also have substantial debt for a water reservoir from a few years ago. That water reservoir, that tank at El Camino Park that we built,
so that’s imbedded into the rates as well.
Mr. Keniston: So on the gas side, the potential costs not included, policies related to fuel switching in the long run. We are still discussing and evaluating what that would mean. Probably
more near term and closer of relevance to us would be any change in the Cap and Trade Program related to allowances. Post 2020 the Air Resources Board is still debating as to what they
want to do with relation to that. So if we end up having to buy most or all of the allowances that we need to offset, that could increase costs dramatically, but we’re hoping that we
will still get some measure of free allowances from the State. And actually that ends gas. Are there any questions? Then we will go on to wastewater.
Council Member Tanaka: I’ve seen some of your comments earlier about this (inaudible) fluctuations, right. I mean when the gas fluctuates we just pass it on. Have you done a survey among
other utilities about moderating this with derivatives?
Mr. Keniston: So on the gas side…
Council Member Tanaka: I’m just surprised that nobody does it because to me it seems like a no-brainer, given that we have stringent usage, right, and we have fluctuating demand, it’s
almost like an ideal case for derivatives.
Mr. Keniston: Gas is actually one of those cases where we used to, at one point in time, have long-term contracts and we specifically stopped doing that. We had a three-year lateral
(crosstalk).
Council Member Tanaka: I guess I want to separate long-term contracts from derivatives, because those are separate things, right. There are separate financial instruments you could use
to help moderate, right? Or if like prices were low, lock it in, right? There are long-term things you can do. I guess I am just kind of surprised we are not doing that.
Mr. Keniston: In the…
Council Member Tanaka: I’m just questioning, what do other people do with it, right?
Mr. Keniston: There’s not a whole lot of other people out there. I mean, when it comes to gas.
Council Member Tanaka: What do you mean?
Mr. Keniston: Well, PG&E is a huge utility, but when it comes to other utilities our size, it would be us and there is only Long Beach, I think, and Susanville I think, are the only
other gas utilities in California, and in the grand scheme of things we’re a very small fish in the pond, so I’m not quite sure what our position would be with regards to derivatives.
Again, I will talk with our gas portfolio manager and…
Council Member Tanaka: (Inaudible) but in general, just because it seems like we have, you know, the City is going to be using a certain amount of water, a certain amount of gas, a certain
amount of electricity. It’s not like tomorrow we’re not going to use any, right. You have pretty steady chance of what the use is going to be, right? So on the other side you have the
supply that fluctuates, right? And this is almost like a textbook case of we use derivatives, so I’m really surprised that we don’t do anything here. I mean, it doesn’t get any better
than that.
Mr. Shikada: I was just commenting to Lalo that I believe this may be addressed through our risk management policies, so we’ll do a little research as to how, whether it be specifically
the use of derivatives or other practices have factored in, because again, I know many of these policies have been established over many years.
Chair Filseth: If I understand the question right, it’s is there precedent in other gas utilities for using hedging instruments like derivatives as opposed to using stabilization reserves,
for example, which in theory addresses the same problem. You’re carrying a cost of maintaining a surplus in exchange for (inaudible).
Mr. Keniston: For the wastewater collection utility, again, no rate increase proposed in FY18. Same reasons as in gas, the deferral of CIP. That’s the case here where we have had a string
of increases for several years so people are fairly used to it. It’s also the smallest utility that we have, so currently looking at about $32 a month, I believe, is the charge. We look
at no rate increase this year, and then 7 percent rate increases going forward. One of the things that sometimes is, can cause a bit of confusion for wastewater is that there are two
parts. There is the treatment and treatment is the plant that is out by the bay lands. It actually services not only Palo Alto but other agencies, (inaudible) agencies as well, so Mountain
View and Stanford, etc.
Council Member Tanaka: They pay us for this?
Mr. Keniston: They pay, yes, they pay into us. They use about 35 percent or so of the plant, so that’s the portion of that, that’s the cost here that you see in blue. Of that, there
is the light blue which is the operations-related costs, and the dark blue is the capital expense, specifically related to capital (inaudible) at the plant.
Council Member Tanaka: How do you figure how much to charge them?
Mr. Keniston: It’s based on flows, it’s contracture; flows, flow and strength, yes.
Council Member Tanaka: I’m talking about the rate. How do we know how much we charge them for the rate, or do we charge them what we charge ourselves? How does it work?
Mr. Keniston: Alright, so how much we charge the individual partners for?
Council Member Tanaka: Yeah, charge, like, Mountain View?
Phil Bobel, Assistant Director of Public Works: We do use the same formula for charging ourselves as we charge the other partners, so there are a total of six partners and there is a
formula that involves flow and three measurements of strength and it’s a weighted average of those four components.
Council Member Tanaka: So the answer basically is everyone gets charged the same rate, even though we’re administrating it?
Mr. Bobel: Charged the same rate for flow and the same rate for those strengths, yeah.
Chair Filseth: Are you essentially asking are we subsidizing the other cities?
Council Member Tanaka: Well, I guess a couple of questions, right. I mean, yeah, so basically if we have discretion could we not make a profit at this, right, or if we have to charge
the same rate as everyone else, then maybe we charge ourselves a higher rate and then we charge a lower rate on other stuff, right? I’m trying to understand where’s our flexibility there.
Mr. Bobel: So not much. So we have signed contracts with these people a long time ago for a long period of time, and they paid an initial amount that was agreed upon and then this formula
that I referred to is in these long-term agreements.
Council Member Tanaka: How long is long?
Mr. Bobel: It is 2035 when some of them end, and we just extended the Mountain View/Los Altos one and I’d have to check on that. I believe it’s 2050 now. It is a Prop 218 issue, yeah.
Mr. Keniston: So you can see, components are roughly increasing, like operations costs, are generally increasing by about, you know, with inflation, 3, 2 to 3 percent per year. We do
know that there is the need to do a lot more capital maintenance work out at the plant itself. It’s an ageing plant, an aging facility. It needs work so there is, that bar is growing,
one of the fastest growing ones. Yes, the facilities, yes. (Inaudible) It’s a fascinating tour. I’d highly recommend it. (Inaudible) And again, operations reserves are projected to be
well within the min/max guidelines, so again, we don’t – no real reason to have rate increase at this time. There is a little bit of rate stabilization reserve left and we will use that
up, but not much of a hit to the operations side. Last year we were thinking we might need something on the order of a 10 percent rate increase. Again, because of the CIP hiatus, it’s
just not necessary at this point in time. So, good news for this side. There is really not much more I can talk about or have to say on the wastewater collection utility, unless you
want me to. Okay, I’ll launch into water.
Council Member Tanaka: Just one basic question. Do we, are we breaking even on the contracts we’re doing, or are we making money or losing money or don’t know? On the service to other
cities, other entities, Mountain View and other cities?
Mr. Keniston: I believe we’re breaking even. I mean, everything we pass through the costs that we have directly, so whatever total treatment costs are, that gets divided out based on
the percentage of total use, so no profit.
Council Member Tanaka: But let’s say, for instance, you know, the costs of our labor skyrockets for some reason, does that get passed? We have these mega-long contracts, right, so what
happens?
Mr. Bobel: It does get passed through, Phil Bobel again. So the way it works is Palo Alto owns and operates the sewerage treatment plant, but the long-term agreement states that the
operating costs are divided up according to that formula I just mentioned. They don’t have a choice. And it’s not like other services that you can imagine, like our animal services center,
or something, where there’s flexibility on their side. Their pipes flow to our sewerage treatment plant. They really don’t have any choices. It would be a huge, huge expense for them
to say, “Well, we’ve decided we want to go to the San Jose sewerage treatment plant instead.” So we are really married to these people, well more than married to them. There are no divorces
that are at all likely. But the good thing is, we get to pass on all the expenses to them in proportion. Now capital expenditures are a little bit different, so the operating expenses
are the ones that behave according to this formula, and the capital expenses are a little bit different, depending on what the capital project is and who actually benefits, so as we
get further into it with the new Council Members, we will be needing to explain more of that to you, how the capital side works. The operating side is pretty darn straightforward. And
the other thing we will have to get into with you is the treatment plant reserves, so that’s different than the reserves Eric has been talking about. There is this Treatment Plant Fund
and it has reserves which you’re not talking about tonight, but we are going to have to talk about, because the treatment plant has got to undergo a major rebuild over the next couple
of decades and it’s going to require major expenditures and we’ve got to figure out a funding source for that. We don’t have significant reserves.
Chair Filseth: Is that (inaudible) capital expenses?
Mr. Bobel: It is reflected in the growing capital expenses, yes. The treatment capital part, yeah. Part of the rebuild is in there and, as we discussed with Ed a number of times, and
some of you, we don’t have enough capital projects in those out years built in, so we’re okay for the next couple of years, but we’re going to have to bite some large bullets here sooner
or later.
Chair Filseth: So you said this in the past…
Jessica Brettle, Assistant City Clerk: I’m sorry. We have to stop. We have lost quorum.
Chair Filseth: I was just going to ask Phil, you said a couple of times, sort of, you had concern that the wastewater expenses were going – the capital expenses, there is more work needed
than is reflected in our plans, and that’s what you’re talking about here?
Mr. Bobel: Right, for the next few years in this projection we’re taking out loans that are expressed here and capital projects are covered by those loans, but in the last few years
of this projection, we really should have started more projects, but we haven’t figured out a way to fund that yet, and we didn’t want to show this escalating, unfunded situation.
Chair Filseth: But your expectation is, as you work towards that the numbers, the blue bars are going to grow even within the confines of this chart.
Mr. Bobel: The blue bars in those later years, yeah. Beyond five years or so.
Mr. Shikada: And there are a couple of variables there. One, in terms of the capital planning and long-term financial forecasting. The other, just to, perhaps give you a preview, back
to Council Member Tanaka’s point, is another potential revenue and/or we’ll see how the expense side looks, is the use of recycled water coming out of the water treatment plant as well.
So that’s going to be both a capital expense as well as a question in terms of the potential revenue associated with the effluent as it goes to tertiary treatment and beyond.
Mr. Bobel: That’s a good point. I’m glad Ed raised that, is that there is where we do have some flexibility. We own that 35 percent of that water and we don’t own the other 65 percent,
those partners do, but the 35 percent that we own could become a valuable asset.
Council Member Fine: Would we, would us and all of our partners sell it together or pass it on together or would each of us take our part?
Mr. Bobel: It could happen either way. The agreements don’t dictate that.
Mr. Keniston: Last is the water. The Water Fund, what we are proposing is a 4 percent rate increase this year. The increase that we’re doing this year is solely to meet, bring the commodity
rate up to what was projected from the SFPUC that we got from them. So no distribution-related increases, just merely commodity. In that case, what the dollar-per-unit increase is going
to be the same, really, for all customers. We were earlier thinking that we needed to do about a 6 percent rate increase, so that’s a little bit lower. As I said earlier, though, the
big, the best news of all, we’re proposing the deactivation of the drought surcharge come July, so I have some tables at the back that will show you what the impact of that is. Again,
we’re looking at the same situation here, but as you can see, the expenses are still projected to be a little bit above, or right at where revenues are for FY17 and ’18. Because of that,
and just because of the magnitude that expenses are projected to be above revenues in future years, we didn’t feel that it was a wise decision to just do no rate increase at this point
in time. We felt something was needed, so 4 percent with a series of 6’s backing it up appeared to be a reasonable course with regards to both meeting, keeping rate changes relatively
flat for customers as well as getting our operations reserve back in line.
Council Member Fine: Question on that. Is there a difference between, at least for the customer, in terms of keeping the drought surcharge and keeping that percentage increase lower,
versus this?
Mr. Keniston: So keeping, the drought surcharge by far, so the reason the drought surcharge was put on was because during the drought sales were dropping precipitously and to meet our
distribution-related costs.
Council Member Fine: It wasn’t to deter use actually?
Mr. Keniston: It was not meant to deter use. I mean, it might have had that effect, but it’s really to keep our distribution operations afloat. So now that, because we’re out of the
drought, customer usage has started to pick up again, we’re recovering our distribution costs, we’re getting back there, there is no reason to keep this charge on customer’s bills. (Crosstalk)
It just doesn’t feel right.
Council Member Fine: Okay.
Chair Filseth: My recollection was that part of the flap over it was that, part of the confusion over the flap over it last year was, I mean, the drought label was not entirely, you
know, people thought, “Oh yeah, it would be easy to understand,” but actually it wasn’t directly, directly had to do with the drought. It really had to do with dropping commodity usage
and the amortization of the capital costs, right? But aren’t we going to a system in which people get two numbers on their bill now? Or am I mixing that with one of the other services?
Mr. Keniston: Well, (crosstalk) yeah. What we are contemplating is moving to, and we do have the option of taking the commodity charge from SFPUC and making that a pass through as well,
so you would see there two line items on the bill. One with the commodity charge, the SFPUC costs and then the distribution-related charge. It’s a little bit different on the water side
than it would be, say, on the gas and electric, so even if we were to do a pass-through mechanism on that side as well, it would have to be separately noticed via Prop 218 notice when
we did it and we would only be able to do it for five years and then have it reapproved. So it’s a function of the law, almost considered like a, almost like a CPI type of increase the
way that it was written in. So we’re not allowed to continually pass through in perpetuity. Whenever SFPUC changes their rate schedule, we would have to get it reaffirmed, so it wouldn’t
be a vote process, it would still be the current form where we would have to get a majority of customers saying they didn’t want to do it in order to not do it. The benefit of doing
this is that since the SFPUC doesn’t change their rate, or doesn’t approve their rate until late May, maybe sometimes even early June, right now we’re working with estimates. So what
we’re proposing might be higher or lower than what SFPUC actually ends up doing. Now in this case we know if we’re over we can use that to fund reserves, future rate increases come down.
If we’re lower than what they end up doing, hopefully we’ll have enough in reserves to be able to make it up and, you know, but if things get really bad, then we end up coming back at
midyear. We do always have that option. Something we might contemplate doing this year, though, is if reserves at the end of the year look healthy enough after we have had the drought
surcharge money coming in and usage coming up, we might come in at say midyear and do another Prop 218 notice and say, you know, “Here’s the final SFPUC rate, we’re going to tie it back.
And if that ends up being – we would probably do it more so in the case of if it was a rate decrease for customers. Like if we ended up guessing high, then that’s where we would go on
that side. And speaking of wholesale water rates, it' a little bit difficult in that they have just been going up and up and up. Again, this is due to the SFPUC’s water infrastructure
program that they have had going on, multi-billion dollar project that they are issuing bonds for constantly, and so the costs of that keep getting passed on to us in our water rates.
Now, again, they are in a similar position of, you know, those costs are relatively fixed. Going forth bond payments are relatively flat and constant thing, but the mechanism they have
to charge us is by water usage, so if water usage is going down our rates go up. If water usage goes up, then potentially, provided that they also don’t need to replenish their reserves,
their rates could even, you know, stay flat or come down. But that’s the – and in general we don’t ever project that their rates are going to come down. (Inaudible). So right now we’re
looking, with this path it looks like the operations reserve is going to be relatively healthy through the forecast period, so we’re hoping this ends up being the case. We’ve got a little
bit of money sitting out, leftover funds we are projected to have from rate stabilizations and unassigned. We have some Capital Reserve Funds that are leftover. We will use all that
up in the future years. We still take a bit of a hit to the operations reserve, but we bring everything back up to about, you know, for total reserves about $30 million, which is right
about where it breaks even. And, again, a better forecast than what we were showing last year. We were thinking 9 percent rate increases, so something less is always better. Again, now
if one of the things that is always a noted point of uncertainty, after a drought, and we’ve seen this in the last several droughts, usage recovers but it never recovers to the level
it was at when, before you started the drought. It comes up to maybe 60 percent of where it was at before, but you never know. Nor do you really know how long it will take to recover.
We seem to have a fairly, you know, it seems to be about 5 percent above our projections for this year, so we’re happy that it is recovering faster. Will that stall out? We don’t know.
It’s purely a function of what happens with future weather and what improvements people have made to their home systems, behaviors adopted during the drought that they maintain, so there
is always a little bit of uncertainty out there with regards to the future, but so far things are looking pretty good. And the same uncertainties in the water that we see for the gas
and wastewaters, with higher CIP costs. We’ll quickly skip through this and so there we are, and I think I’ll follow up but – actually timeline for future actions; so, as I said, April
we will be bringing the electric and gas financial plans to the UAC. The water and wastewater financial plans will come to you on April 4. Prop 218 notices will go out at the end of
April. And then in May, I believe May 16, the electric and gas financial plans will come back to you and then in June we will have the final Council hearings and an option of rates and
financial plans.
Mr. Bobel: Before you move on, could I chime in on the (inaudible). Just for the new Council people mostly, so tonight you’re focusing on the utility rates, but Eric has shown you the
other rates that the Public Works Department is in charge of. And I just wanted to give two notes on the two that we aren’t talking about tonight. One is refuse. First, just again, for
the new Council members, so Utilities handles the things that people want, like water and energy. Public Works, for some unknown reason, was given the things that people don’t want.
The wastewater, the refuse, and it used to be storm water. That’s changing. Everybody recognizes the value of storm water now, that’s great. So refuse, the only thing I wanted to note
for you there, and again, that is going to come back to you on April 4 with this other package that, the other ones that Eric mentioned for April 4, right. So refuse, we haven’t talked
about tonight. There are really no surprises there. The only surprise for you new Council members might be that you are being asked on April 4 to pass those on. And so the only note
I would say is, the 5 percent increase is part of a three-year plan. It’s the third in a three-year plan that we had to bring the residential rates in line with the commercial rates,
so that one group was not subsidizing the other. It’s actually less than we had envisioned that it might be. Our three-year plan was really to have an 8 percent increase this year and
because the economy is booming and, unfortunately, people seem to be throwing more stuff away on the commercial side, we didn’t have to do an 8 percent increase and we could do a 5 percent
increase. So it’s sort of good news on refuse and that’s probably all that needs to be said about that. Storm drain, the thing I wanted to warn you about there, I think you are all fully
aware that we’re in this period where people are voting right now. The ballots went out April 24, they are due back – I’m sorry, February 24. They are due back April 11 and we are going
to count them on April 12. So we won’t know on April 4 when you meet again, we won’t know the results of that. So we will have to leave this place holder information that we have there
in. So you will see that again, but you won’t be asked by us to take any action on that, because we won’t have any new information on the outcome. So it could be that the new, the proposed
rate is approved, in which case the picture will look like this. Or it could be that it won’t be, in which case the rate would be decreased effective immediately. It would be June 1,
it would be decreased to the preexisting rate, which is about one-third of what the current rate is. So I just wanted to alert you that you won’t, we won’t have any new information and
you won’t be making a decision on that on April 4.
Chair Filseth: That’s where your 5 percent per year total bill comes up?
Mr. Keniston: Yes. So that’s the proposals we are going to be bringing to you. The overall bill change about 4 to 5 percent, so that’s the – you know, in a perfect world, I you love
to bring zeros, but it’s just not.
Chair Filseth: I want to ask a question about the water utility line there. The next five years we have a 4 percent raise in the first year and 6 percent raises each year after that.
If I understand your curve here, you know, your blue line out here has a constant slope here, which I assume is proportional to the 6 percent increase every year, so it looks to me like
the actual costs take a bigger than, I’m going to guess from this, they take a big step in the first year, right, and then they’re almost flat after that. So what you’ve got here is
basically 6 percent a year out here for the rates, but the costs actually look like 10 percent, 1 percent, 1 percent, 1 percent, 1 percent, right, so that’s a policy decision to smooth
that over five years as opposed to having tracked the actual costs?
Mr. Keniston: Yes. Yes, that is a choice that we made to try to do longer, smoother rate increases when possible. You’re right, the alternative would be to take the water rates and jump
them up say, you know, 10, 12 percent and then do something, and then drop them down. In general we don’t like to do double-digit rates increases unless, like what we’re having to do
in the electric, unless we are in a position where we have little, you know, not a lot of reserve room to wiggle. Because it’s not good for customers to have that happen to them and
that’s really what reserves are for is to try to cushion those blows, so yes that is a policy call on my part to do the longer, slower path. And, you know, we always hope that costs
will come in lower and, you know, maybe sales will pick up and we can bring those future increases down even more.
Mr. Shikada: So, just correct that, Eric. Ultimately, it is the Council’s policy choice on how those rates are smoothed. I just wanted to make sure that everyone understands, and that
we understand that.
Mr. Keniston: I make a proposal. You can change them in any way and request anything you wish and it is my job to comply, so yes. I was going to finish up on this, the last little bit
for the water rate, because those have been put out there. So a 4 percent rate increase on user bills without the drought surcharge, but if, for what people are actually paying now with
the drought surcharge, and then, it’s actually going to be a nice decrease for pretty much everybody. And the reason we are starting to see revenue growth is because we do have increasing
consumption going forward.
Council Member Fine: Right. So I actually think in terms of one of the first questions we asked was marketing these new rate changes, this is a good story, right? Saying, “Hey, we’re
taking off this 20 percent surcharge.” But at the same time, if people have mistakenly believed this is a drought surcharge, let’s let them keep on knowing they need to keep on preserving
water as much as possible.
Mr. Keniston: And that ends my presentation. We welcome any questions you have.
Chair Filseth: Further questions and comments.
Council Member Tanaka: Well, I’m kind of new to this. I just have a really kind of very basic question. So, you know, we have our own utilities here, like a lot of other cities. So,
I’m just trying to like think of the pros and cons, right. So I think I heard that we have slightly, well our electricity is 35 percent below, which is good, right, but our water is
higher. I’m not sure how high. So I guess my question is, you know, by having our own utilities you would think there should be some sort of net benefit to Palo Alto theoretically, right?
Because there’s a lot of capital tied up into this which theoretically we could sell off to PG&E and use the capital for other purposes. So theoretically there should be a, we should
see, compared to surrounding or to PG&E customers, you would think we should see a net benefit to us, because I don’t know what the water is right now. I don’t know if there is a net
benefit or not, but we should, right? I mean theoretically, because we have this capital tied up in this asset, right, which theoretically we could sell off to someone else theoretically,
so net, if we look at everything, do we have lower rates overall compared to PG&E customers?
Mr. Keniston: Net overall bill, yes, we are lower. If not lower, we are on par with surrounding agencies.
Council Member Tanaka: On par is not good enough, because we have all this capital tied up in our own utilities, so…
Mr. Keniston: But other agencies are also in the same boat that we are in that they have their own water, they have their own wastewater, some places even have their own (crosstalk).
Council Member Tanaka: I’m just looking at it from a purely financial argument, right? So from a pure financial argument, it’s kind of like renting a house versus buying a house, right?
So if I buy a house, put all this capital into buying a house, my, like theoretically you should, because you own it and have all the capital tied into it, it should be cheaper per month,
because you have all this capital tied up into owning this house, right, versus renting where you are paying the month, you’re renting this service, right, so you should theoretically
be paying more money into it because you don’t have all that capital tied up, right? Otherwise, why own, right, why not just rent?
Mr. Shikada: Ultimately, I would argue that the decisions perhaps historically have been made more on a local control argument than necessarily a financial one, but even it were simply
financial, the benefit that Palo Alto rate payers see is the absence of the profit margin in effect for say a company like PG&E. We do have a number of (crosstalk).
Council Member Tanaka: Because I would (inaudible) on that, right. Because in the end it doesn’t matter to the customer right, as long as you pay, whether you make a profit or not. If
PG&E could do it cheaper than we could do it and make a profit, hey, more power to them, right? In the end what matters is, we have a bunch of capital tied up into our own utilities
and if we’re not seeing lower rates overall compared to say a PG&E customer, then what the heck, right? Why are we doing this?
Mr. Shikada: It depends. And it will depend by utility to utility. I would say certainly if electric were our focus of discussion, part of it is where we get our electricity from, which
is part of the reason we are seeing the community choice aggregators expanding throughout other cities that don’t run their own utility. Just as one example, but there are a number of
factors, not the last of which, as you just pointed out, the value of the assets. But we don’t invest in the system so that we could sell it out. That’s not the motivation for (crosstalk)
Council Member Tanaka: … I’m just talking about, from a pure financial point of view, right? Like we have I would imagine a ton of money tied up in the utilities right now. I can’t even
imagine how much, but it’s got to be a lot, hundreds of millions of dollars, maybe more. I don’t know, some large number, and you would think, because we are an owner of this utility,
we should have inherently lower rates because of the fact that we’re not making a profit off ourselves, right? And so, if we don’t have a lower overall rate, then something is not making
sense.
Mr. Perez: I think you have to look, I don’t think you can look at it only financially, because I think reliability is a big factor for the community as well.
Council Member Tanaka: I agree. So if we have better reliability, lower rates, or a combination of the two, that’s great, I agree. But do we have better reliability, is that true?
Mr. Perez: I mean, Dean could probably do a much better job than I can. For example, one of the things that I know that we do much more proactively than PG&E is the trimming of trees
by power lines, for example. Which, that decreases the number of outages tremendously. By having your own crews you dictate your response time. And you have, back to Ed’s point, control
of what kind of commodity you are buying, whether it is green or otherwise. So I think there are a multitude of areas for you to consider.
Council Member Tanaka: So I think if the level of service is higher, and/or the rates are lower, I agree with you on that, but I just don’t know. Is our level of service higher and our
rates lower? If it is, great, right.
Mr. Perez: So I think when we come back in a couple of months you will see that comparison, so we can pick up that discussion, because you will be able to see the residential and the
commercial and how it compares to the surrounding communities. It’s a subject that comes up, I would say every ten years, whether we should be in this business or not. It hasn’t come
up in a while at the Council level, but it’s definitely something that comes up every so often.
Chair Filseth: Let me try. You understand the question he is asking, and he hasn’t asked about a couple of the other factors, such as transfers to the General Fund and so forth, right.
But the question he is asking, is there, I mean, it’s a very pick your adjective for it kind of question, but, is there an answer to it? Is there a known answer to it?
Mr. Shikada: Is there a financial benefit to the City?
Chair Filseth: Yeah. Is, you know, are we better off?
Mr. Perez: Yeah. You know, I haven’t looked at it in quite some time. It has been a while since we looked at it at that level, because we were tasked a few years back, oh gosh, 10 or
12 years ago, to look at what we thought was the potential value if we were to sell the assets.
Chair Filseth: Really, I didn’t know that.
Mr. Perez: So, you know, it took quite some time to put that together. But at the end of the day, you start adding all the non-financial factors and they decided, well, it makes sense
as a whole to keep it. So I don’t have anything concrete to be able to answer your question tonight.
Chair Filseth: Let me try another inflammatory one here. If you know off the top of your head, we’ll see it in the budget hearings anyway, but what percent of the total expenses are
head count costs?
Mr. Perez: Head count?
Mr. Shikada: Personnel costs.
Chair Filseth: Personnel costs.
Mr. Batchelor: Do you know the number Ed?
Mr. Shikada: Yeah, it’s sets right now for about 10 percent in the utilities.
Council Member Tanaka: What’s it for PG&E?
Mr. Batchelor: Don’t know, don’t know.
Mr. Yuan: So real quick, in regards to our overall bill, so if you would compare it in our Strategic Plan, or the measures we have and our bill was 8 percent below our neighboring cities.
Council Member Tanaka: Okay, well that’s what I wanted to hear. I wanted to hear that we are net positive, right. There is a distinct advantage in either level of service or cost. If
it is, then yeah, it probably makes sense. But if we were like higher than other people and our level of service is worse, and we have all, you know, a billion dollars tied up in utilities,
something is not penciling out.
Chair Filseth: Cool. Are there any further questions or comments? We are, sorry. This is a discussion item only. There is not a Motion on the agenda. Are there any further questions
or comments on Item 1? Thank you very much fellas. Thanks for joining us. This is very interesting and informative and a spirited discussion here, right. (Crosstalk).
NO ACTION TAKEN
Future Meetings and Agendas
Chair Filseth: In that case, should we talk about future meetings and agendas?
Lalo Perez, Chief Financial Officer: Glad to. Let me ask Kiely to join us at the table as well, since we’re going to talk to you about the month of May as well. So, as you correctly
stated, we have not met until tonight, but we do have upcoming meetings in April. If you turn to the back of tonight’s agenda, you’ll see the calendar for the upcoming meetings. We have
April 4, as you heard from Phil, the refuse rates. We continue with the specific water and Wastewater Financial Plan rate adjustments and then on April 18 we have CDBG.
Chair Filseth: Is that going to be around?
Mr. Perez: Well, that’s a good question. It is a program that is on the chopping block. It has not been finalized, so it’s something that we’ll make sure that we have as much information
for you available, as we would know on that evening for the program. It is of concern, obviously, because it does have some great causes that it helps, and you’ll hear more about that
on the 18th, as to what specifically we are considering funding with that Federal Grant. In addition, that evening we’re going to bring you the Gas Utility long-term Plan, and then we
start the budget hearings in May. So now I am going to switch you over to the one that I just gave you, the one in green heading, which is the budget process proposal that we have in
terms of the agenda. Our goal is to have a message from the City Manager giving you the proposed Operating Budget and capital programs for the organization. Jim will give you an overview
of what’s included and the following week we will release the documents to you. There is no meeting the fourth Monday of April, so for that reason we kind of had to chop it up a little
bit. We’re bringing you the message on the 17th and delivering you the document the weeks of the 24th. The first meeting we will have to discuss items is Tuesday, May 2nd . We are hoping
that we could meet at 6:00 for these meetings, given the nature of the discussions, but we’re trying to close a gap. We want to make sure you have ample time for us to explain our proposals
and for you to have questions or direction for us. And we continue on the 4th. So it’s Tuesday, Thursday and we move down to the 9th and 11th and then what we want to do is have the
11th, excuse me, the 16th be our big night for all the utilities discussions, so all of the items we have been discussing through April and May we will bring you the whole view of the
budget for the utilities in capital, so that’s a big night. Then we are hoping that on the 18th we can wrap up all the items. So typically what we have, since there are two new Finance
Committee members, we have a multitude of evening meetings that we present information for you, you may have questions or requests of information that we may not be able to get to you
the very next evening, so we try to have all of those items closed and returned to you by the wrap up day. Our recommendation is that we start at 1:00 in the afternoon on the 18th, because
our experience has been that you need, you know, significant time to wrap up all the issues and since we’re recommending some decreases this year as well, that you may need that time
to deliberate and make your final recommendations to the City Council. That’s our proposed agenda.
Council Member Tanaka: So, let’s see. Do we vote on when we start or, how does that work?
Mr. Perez: Yes, you can do that.
Council Member Tanaka: Because I prefer to keep it at 7:00. I’m not sure about the rest of you guys, but I’d rather keep it at 7:00, as it is, versus making it 6:00.
Chair Filseth: So the absent member of the Council, or the Committee, also has strong preference for 7:00. Are we going to talk about the pros and cons maybe for a minute, of that.
Mr. Perez: Right. Having a later start squeezes you and keeps you here later, because these processes take several hours to go through because we have multiple departments coming through,
so it’s not a quick presentation, if you will. And the thinking is you’re going to be here Monday nights late, so we’re trying to give you an earlier exit on Tuesdays, if possible.
Council Member Tanaka: Yeah, but I mean, also you know, I’m doing other things during the day, so, because other people are so.
Ed Shikada, General Manager of Utilities: I’d would also note that it helps Staff to have the meetings earlier. I would just note that for the Committee’s information.
Council Member Fine: I mean, 7:00 is easier for me coming back from the City where I work. I can do 6:00 but 7:00 like Greg, is easier for me. Another one I’m noticing is on the 16th
of May is the Tall Tree Awards. I know that’s a separate thing, but I assume some of us will be there.
Council Member Tanaka: Also, I think if you’re going to do a, like all day meeting, I’d rather see it like on a Saturday or Sunday or something versus a Thursday, a work day, because
that’s a pretty big burden there.
Kiely Nose, Budget Director: Kiely, I’m the Budget Director. One thing to note on the wrap up, that is something that’s an all City-wide thing, so every department has representation
there, so it’s all directors typically and all departmental budget Staff, financial Staff as well. So it’s a pretty significant staffing component that would be attending this meeting.
Chair Filseth: And my recollection of that one is you get a very large number of City Staff there, and people rotate in and spend a couple of hours there, and then rotate out to whatever
else they are doing, and so forth. Let me ask, as we discuss this, let me throw another iron into this fire, which is, does anybody have a conflict with any of these dates that they
can’t be here on that day?
Council Member Fine: So the only one that might be hard is the Tall Tree Awards, the 16th of May. Otherwise, I’m good. I don’t know what time that dinner starts actually.
Council Member Tanaka: So I have a standing meeting that goes to 6:30 every Tuesday (inaudible).
Council Member Fine: For me on the 11th, I might be a little bit late. I’ve got a 5 to 6 PM appointment and I would come here after that.
Chair Filseth: Suppose we were to, I hesitate to suggest it, but suppose we were to try some split the baby compromise, like we start at 6:00 on Tuesdays and 7:00 on Thursdays or visa
versa or something like that?
Mr. Perez: If that’s what the Committee can do, we will work with it. Then, because another point that we probably need to help you with, past practice has been that if a particular
Council member has a conflict in an evening, as long as there was a quorum, we continued to hold the meeting, with the understanding that we are going to make every effort for all four
of you to be available for the last wrap up meeting.
Chair Filseth: That’s a good clarification, is that in the past we have found it tractable, if we have four members at most of the meetings. The risk is that if we ever have two absent,
then we can’t hold the meeting.
Mr. Perez: That’s correct.
Council Member Fine: And then we’re all there on the 18th, that whole day thing. Okay. As long as you feed us.
Mr. Perez: We will provide food and drinks and snacks so that we’re actually – the wonderful City Clerk’s Staff does all that.
Chair Filseth: So Council Member Tanaka will not be in town on the 11th of May.
Council Member Fine: And I’ll be a little late that day, but maybe that’s a good one to go to 7:00?
Chair Filseth: So maybe that’s a good one to go to 7:00.
Council Member Tanaka: Although on the 11th, if (inaudible) Motion at 6:00.
Chair Filseth: But Adrian can’t be here.
Council Member Fine: I can be here like at 6:30. I mean…
Chair Filseth: I’m going to suggest 7:00 because if you’re 10 minutes late at 6:30, then we’re sitting here for 10 minutes, right so I’m going to suggest we just shoot for 7:00.
Council Member Tanaka: On the 18th we have scheduled a ton of meetings. I’d much rather have that on Saturday. Also, the public, which I think is important too. (Inaudible).
Chair Filseth: I think it’s a tough thing to haul 30 or 40 people from City Staff in on a weekend, I mean, if I had to choose. That’s a tricky one.
Mr. Shikada: But I think from a Staff standpoint…
Chair Filseth: A couple dozen anyway.
Mr. Shikada: At the risk of speaking for Staff, we would be happy to do it if you drew a lot of public participation. This typically does not. (Crosstalk).
Mr. Perez: The other alternative in order for us to meet the budget package, because we have to turn around and put it together for Council with your recommendations, would be that Monday,
but you would have Council, so you would be subject to an earlier starting time and a hard stop because of the Council meeting.
Chair Filseth: Yeah, I mean the alternative is you could split it over multiple days and do a Wednesday evening, and then Friday evening or something like that too.
Council Member Tanaka: Friday evening is good. I’d rather see that than just like instead of just block out my whole Thursday.
Council Member Fine: Friday evenings aren’t great for me in general, but I can…
Mr. Perez: The other challenge we have is it’s a dark Friday for some of the Staff, because we alternate the Fridays. Some of the Staff are out on one Friday, some other, another.
Chair Filseth: What about Wednesday, the 17th?
Council Member Tanaka: I can’t do Wednesdays.
Mr. Perez: Yeah, so it would have to probably be Monday then. I’m sorry.
Chair Filseth: Monday, the 22nd. Is there a Council meeting on Monday the 22nd?
Mr. Perez: That would be the challenge. Like last year, we would start it about 10 or 11:00 in the morning and at 4:00 we had a hard stop and we were barely able to make it.
Chair Filseth: That’s right. And then you have the same daytime issue of Committee availability, I assume, on Monday all day versus Thursday all day.
Council Member Tanaka: I’d rather not do all day. I’d rather just split across the evenings.
Chair Filseth: A simple solution to that hasn’t presented itself, because Monday night is Council meeting.
Mr. Perez: Our experience has been that in the evening you won’t finish.
Council Member Tanaka: (Inaudible) instead of doing all day, could we not like…
Chair Filseth: Split it over multiple evenings.
Mr. Perez: Still we would have to do 18th and the only other day is the 22nd, but then…
Chair Filseth: It’s a Council meeting. So you would need to start it at 3:00 in the afternoon or 2:00 in the afternoon or something like that. And if you don’t finish then – of course
you may not finish on Thursday the 18th as well. Well, I’m going to suggest that Thursday the 4th and Thursday the 11th start at 7:00 PM. Can we do that?
Mr. Perez: Yes, from a Staff perspective.
Chair Filseth: From a Staff perspective. I appreciate Staff’s forbearance in this.
Council Member Tanaka: What was that?
Chair Filseth: 7:00, the 4th and on the 7th we start at 7:00. (Crosstalk) I’m sorry, on the 11th we start at 7:00. Right. That solves Adrian’s problem. You’re still going to be gone
on the 11th, but Adrian can make it at 7:00 on the 11th. And I assume that 7:00 on the 4th is better for you than 6:00. And then we still have the issue of how we do the wrap up and
available options.
Council Member Tanaka: What time was the 16th, 7:00?
Chair Filseth: The 16th?
Council Member Tanaka: Yeah, Tuesday?
Chair Filseth: I think we said 6:00. I’m suggesting we do Tuesdays at 6:00 and Thursdays at 7:00. Unless you would rather do Tuesday the 16th at 7:00 instead of 6:00. What’s on Tuesday
the 16th, we have Utilities.
Mr. Perez: Utilities and the capital, so that’s a biggy.
Chair Filseth: Is that going to go late? That’s going to go late.
Mr. Perez: Yes, especially the capital because you’re going to want to know what all the changes, the cost increases.
Chair Filseth: I remember there was one meeting last year where it was going to go way late and we had to start at 6:00 and Karen couldn’t make it until 7:00 and we sort of engineered
the agenda so that (crosstalk) the first hour was…
Mr. Perez: It was that same agenda, so we started with Utilities because she didn’t want to miss the CIP, so we did…
Chair Filseth: We did more of the procedural stuff early. Is there a chance we can do something like that?
Mr. Perez: Sure.
Ms. Nose: That’s currently how the schedule is proposed on that evening, is Utilities would go until about 7, 7:30 and then we would switch to the general CIP, then switch back to Utility
rates.
Chair Filseth: Now, right. But then you would have to be there at 6:00, on the 16th. Well, actually, we have to make sure we had at least three.
Mr. Perez: If you have three, then Council Member Tanaka could come in a little later.
Chair Filseth: Could come in late because we have three. So we have a cage fight between two Council members, (crosstalk) sorry, she also wants, well, she wants 7:00 in general.
Council Member Tanaka: Three people prefer 7:00.
Chair Filseth: I guess we could put it to a vote? The question is, do you want to haul Staff in here. So the problem with the 16th, is if you start at 7:00 it’s going to go till 1:00
in the morning or something like that.
Council Member Fine: So how about (inaudible) on the 16th, we just do all 7’s. If that’s the big one.
Chair Filseth: That is the big one. Yeah, that’s what we’re talking about. So if we did, I mean there is a question on the 16th, so we’re doing 7:00 on the 11th. We’re doing 7:00 on
the 4th, right. At the moment we’re going 6:00 on the 2nd, the 16th and the 9th. Yeah, I think. Too bad. I was actually thinking about going this year because they are giving one to
Winter. Okay. I don’t see how we do this. I mean, the 16th is a big one. Which ones of these are the shortest?
Ms. Nose: I’m sorry. Could you repeat that question?
Chair Filseth: Which agendas, I should have asked this earlier. Which agendas here are shortest? Which are the short nights?
Ms. Nose: Sure. Actually, fair enough. The evening that’s actually the shortest is the 11th; however, there is a hold on there because typically things spill over from longer evenings.
So, for example, the 4th is a really jammed schedule on Thursday, so to the extent that things need to spill over from that, it will probably fall over onto the 11th, so there is a little
bit of a buffer so that the whole process doesn’t fall completely out of whack.
Chair Filseth: Right, so the 4th is – okay, what about the 2nd?
Ms. Nose: The 2nd is, I would say, a pretty standard evening and what I was actually thinking is giving the 7:00 start time on the 4th and may try to bump a few things up to the 2nd.
Again, a little ahead and a little behind.
Mr. Perez: There is interest from several of you to discuss pension and that’s probably the night…
Chair Filseth: Which?
Mr. Perez: The 2nd of May, that’s when we would discuss pensions.
Ms. Nose: Then the 9th is, I would say average, but you guys are probably going to want to talk about parking on that evening. And it’s also all of our Public Safety, so Police as well
as Fire.
Chair Filseth: Well, I think we should stick with 7:00 on the 4th and the 11th, sorry, and the 16th. No, on the 4th and the 11th, right. And 6:00 on certainly the 16th. Then we could
argue about Tuesday, the 9th.
Council Member Fine: I mean, if all of are here and Greg you are an hour late, so, you know, we can try to move things around at the Chair’s discretion.
Council Member Tanaka: But Karen can make the 6:00 though?
Chair Filseth: Well, we’ll have to check on that one too, yeah. So all this is subject to, just clearing with Council Member Holman. How big a difficulty is it if Tuesday, the 9th starts
at 7:00?
Mr. Perez: Well, that’s one of the departments where you are going to see the biggest cuts , and then parking seems to be subject – sorry, two departments with the biggest cuts. And
then a lot of issues with Planning usually, beyond parking.
Chair Filseth: Well, are you guys willing to stay till strange hours of the night?
Council Member Tanaka: I’d rather do that than…
Chair Filseth: You’d rather do that than start at 6:00? Why don’t we do that. And it will give us an incentive to be terse. So now we’re talking about 7:00 on the 4th, the 9th and the
11th, and 6:00 on the other nights.
Mr. Perez: And we have to review the 16th, Tall Tree.
Chair Filseth: The 16th, yeah, it’s worth doing I think. I mean, this is our job and the other thing is, it’s sort of our job, but not the same way, so. And then we have an issue with
the Thursday, the 18th issue. So I will consult with the absent member of our group on this and see where she stands on this kind of stuff. When is our next meeting?
Mr. Perez: The next meeting is the 4th of April.
Chair Filseth: And that is two weeks from today, or is it one week? Two weeks, it’s two weeks, okay. I am loath to let this go two weeks without a resolution, so let me consult with
Karen and get back to Lalo.
Mr. Perez: Thank you.
Chair Filseth: What are our other options? Suppose on the 18th, the 18th is the stickiest one. So we have one option which is proceed and hope we can get three people at it, okay. That’s
option A. What’s option B?
Mr. Perez: Start on the 18th and continue on the 22nd.
Chair Filseth: The 22nd. And what time on the 22nd?
Mr. Perez: It would have to be before your Council meeting.
Chair Filseth: Right. So 2:00 in the afternoon or something like that?
Mr. Perez: Yeah. We, you know, I’m not sure if Jessica has the current starting time for the 22nd.
Chair Filseth: What’s the current starting time on the 18th?
Mr. Perez: Well, we recommend 2:00, 1:00 is what we said, but it sounds like that’s an issue.
Jessica Brettle, Assistant City Clerk: Right now we don’t have a start time for the Council meeting on the 22nd. It’s going to be Study Sessions mainly on that day, and the Parks Master
Plan.
Chair Filseth: And if four of us are gone, is there still a quorum on Council? Some of you guys will be tied up. I’m exploring the idea that we could be still doing the Finance Committee
here while they are doing Council in there.
Mr. Shikada: That might be a first. (Crosstalk)
Council Member Tanaka: (Inaudible) Available to the public.
Chair Filseth: Option C is Saturday. I’m not supportive of Option C and not too many other people. I’d much rather we found a way to do this within the constraints of Staff.
Council Member Fine: So I can do the 18th during the day.
Chair Filseth: So Option B is the evening of the 18th plus some amount of time. If Council meeting starts at 6:00 plus 3 PM on the 22nd?
Council Member Tanaka: Well I would move it to another evening, like on Friday.
Chair Filseth: Okay, so that’s a possibility. What about, hey Lalo, what about the evening of Friday the 19th. Oh, that’s an off day, a dark day (crosstalk). What about Wednesday, the
17th? Can’t do that.
Council Member Tanaka: Can’t do Wednesdays.
Chair Filseth: So you’re saying Friday the 12th?
Council Member Tanaka: Or the 26th?
Chair Filseth: How about the 26th?
Ms. Nose: From a timing perspective, the Adopted Budget Packet actually has to go out two weeks after the 18th, so to pull all of you guy’s changes together and pull together your largest
CMR’s in that amount of time, two weeks is as short as we can get, and that’s working seven days a week.
Chair Filseth: How about Tuesday, the 23rd?
Ms. Nose: Well, what I was going to suggest is if you guys are okay, that’s for us to get the Packet out two weeks in advance of Council. If you guys are okay with it, then we could
do the adopted in late Packet.
Mr. Perez: That means that you would have all the knowledge and your Colleagues would only have a shorter amount of time to read all that. (Crosstalk).
Chair Filseth: Well, what’s Council going to do? Is Council going to vote on it?
Ms. Nose: Right.
Mr. Perez: Correct.
Chair Filseth: How long would Council have, oh, Council would have it for five days instead of…
Ms. Nose: Eleven days.
Chair Filseth: Eleven days. Okay. Let me have a word with the Mayor on that one. (Crosstalk) So if that were acceptable, then would an evening after the 22nd be…
Ms. Nose: Correct, as long as it’s in the first half of that week.
Chair Filseth: And as long as it’s in the first half of that week.
Ms. Nose: The 23rd, 24th?
Chair Filseth: The 23rd, 24th. Do we happen to have a Finance Committee meeting on the 23rd?
Mr. Perez: No.
Ms. Nose: And I partially say that because that is Memorial Day weekend, so I think you’re going to start losing people to taking a longer weekend.
Chair Filseth: Okay, well we won’t lose this group.
Ms. Nose: No, of course not. And you won’t lose us.
Chair Filseth: So the evening of the 18th and the evening of the 23rd, do you have anything the evening of the 23rd?
Council Member Fine: Not yet.
Chair Filseth: Okay. (Inaudible) The evening of the 23rd, such that the budget in late Packet. Okay.
Mr. Perez: So you would work on the starting times for both of those nights in that option?
Chair Filseth: So we would do 6 or 7 on the 18th and the 23rd. Both the 18th and the 23rd, and hope we finish it all. Right. And that would require the budget to go out, how many days
in advance?
Ms. Nose: Five days in advance.
Chair Filseth: Five days in advance.
Ms. Nose: Instead of the 11. So we would just give the Adopted Budget CMR, obviously you have access to the proposed books that may need changes that occur during these hearings. It’s
pulling all that together, summarizing it and redoing.
Chair Filseth: Got it. So my guess is actually that the Council will probably be okay with that.
Mr. Perez: Yeah, because what we try to do is also put the minutes in there, because they want to read what you deliberated.
Chair Filseth: Okay. Because the whole Council gets the books, right, so it’s all the changes?
Ms. Nose: Correct.
Chair Filseth: Alright. So I’ll have a word with Karen and Greg.
Mr. Perez: Thank you.
Chair Filseth: Thank you. Sorry this is, for the complexity of this. You guys okay with that? Okay.
Council Member Fine: Just once we finalize this, if Staff could send out an update.
Chair Filseth: Yeah, yeah. (Crosstalk) Okay, and with that, if there are no other items, we are adjourned. Thank you all very much.
Adjournment: The meeting was adjourned at 8:01 P.M.
FINANCE COMMITTEE
TRANSCRIPT
TRANSCRIPT
Page 1 of 44
Finance Committee Meeting Transcript
March 21, 2017
Page 44 of 44
Finance Committee Action Minutes
March 21, 2017