We're live. >> All right. This is a continuation of the uh PUC meeting from where I losing my papers here. December 3rd. No. Yeah.
>> No, we changed it. >> We did. >> It was a continuation of the 9th >> the 9th >> PC meeting. And today is December 12th at 9:00 a.m. I call the meeting to order to follow up with the continuation of
where we left off on discussing the sewer water rates. Um, all members present, uh, Patrick, Mike, Charles, Scott, and myself, Craig. Um, so Charles, do you have any, um,
more discussion on what you thought about or what any more questions? Um, we have a proposed increase of 10% on sewer and 10% on water. Um,
>> that's in conjunction. Mike, are you saying 0% on electrical? >> Yeah. >> Yeah. With a 0% increase on electricity, which it is been proposed. I guess my question if you have if you don't have a question I'll start. I have
a question that um with a 10% increase, Mike, those are numbers that fall into place with the proposed uh things we have to do
on the maintenance side for the water. >> Yeah, we have some things coming up next year that we have to get done. >> Mhm. Um, we talked about fire hydrants that were on the list
and main valves that one main valve needs to be changed. Um, so I guess what I'm looking what what does that generate that 10% increase? The budget number is 43,000
for the 10% increase. I'd say between 40 and 45,000, maybe 50 if it's a big year is all fair estimate. >> Okay. That's what that increase generates. >> Yeah.
>> Okay. And that's, you know, significantly less than what we're going to spend on capital improvements in the plant next year is my guess. >> Right? >> So, it's not a one-time collection of rates to pay for one chunk of capital
projects. It's more of a upward adjustment of all of our revenues every year to pay for capital projects. sort of related to that the let's see it says 2024 sales came in
slightly higher than 2023 2025 sales are down 3% down 3% from 2024 I think yeah >> yeah so that'd be so for 2025 you're anticipating
something under 400,000 Uh, no. Um, so if you look at the 2025 budget for revenue, we had assumed we were going to get about $430,000 based on 2024 rates plus a 3% rate
increase that would have generated an additional $12,900. What I'm assuming is we're actually going to get instead of $443,000 in 2025, I'm assuming it's going to come in closer to 430,000.
And so I'd carry that number over as in 2026 if you don't change rates, I think we'll make about 430,000 and then I'm building the 10% on top of that at 43,000. >> Yeah. So, so when you say sales are down 3%,
that's down not compared to 2024. It's compared to what you had been anticipating for 2024. >> It's compared to 2024 more um the but remember we had a rate increase, >> right? So 2024 revenue plus or plus 3%
would have generated a certain number and you're saying the number that we're anticipating is going to be >> three 3% less than that number. Basically you're saying it's going to be the same as 2024. I think it'll be higher than the actual collections in 2024 because we've
adjusted rates. Uh I think the amount of gallons we sell is going to be really similar to 2024. Okay. So then so you would expect then you say the 2024 actual 47,000 and this is I guess it these are sort of details that in a certain way don't matter too
much but I'm just curious where the numbers come from. So that 47,000 47 Yeah. 47,000 2024 actual mean with the 3% increase means that the
2025 actual you'd expect to be what is that another like 420,000 >> somewhere in that ballpark. Another way to look at this though if you use the same type of analysis you're doing look at the difference between 23 and 24. 24 sales were up and we had a rate increase
in 2024 and yet the total revenue came in just a little bit higher. And that seems low to me. Like I can't explain why >> because all the numbers that I've got on sales and rates would have suggested that number should be higher. So I'm
assuming there's some other sort of strange phenomenon about uh billing falling across a year cycle or number of customers or fixed fees or something that you know if we would did a real deep dive into that number there'd be an explanation as to why it's 407 instead
of >> 420 or 430 is what I would have expected it to look like based on the sales. >> So my assumption is it's just going to be that. And you know, we know in 2025 our sales are down, but our numbers aren't down. The the collections are are
on pace really to hit that 430 number in 2025. So, I think it's the 407. That's the number that's a little off and I can't explain why. >> I see. Okay. And then again, just curious about the numbers, how those work. Do the fees
do those naturally those are subject to the to the 3% increase and the 10% increase, right? Or not or is that something different? >> There's not a lot of things built into that anymore. So the the major component of that was facility fees,
>> meaning hookup fees, right? Initial hookup fees, right? Well, the the and that's the only piece that's left now is initial hookup fees, and we're not suggesting that those get changed with the rates. We may come back and talk about whether those need to be adjusted. One of the things that the city council
is going to look at in January is an updated fee ordinance for all the fees, and I think we're going to look at zoning fees, but also these hookup fees at the same time we do that. That's a small component of of the rates. I don't think we're going to change it enough to move the needle.
>> Yeah. And and is that is sort of you know we we voted to do away with those for certain for the yeah for new hookups right >> and is that why 2024
actual for fees is so much less than 23. So that's why >> it was 10,000 we >> we lost there or we for went for go we for the math is easy on that. It's was
$1,000 per >> unit. >> Per Yeah. >> For every new connection unit. >> Mhm. >> So not sure that I'd expect there to be 10 new connections every year, but six to 10.
>> Yeah. Yeah. Okay. Um Okay. So, and then going to the sewer side. Um um the services
is the huge is the biggest. Oh, wait. Is this Yeah, this sewer. So, is the biggest increase, right? 257,000 goes to 339,000 or 340,000 really. >> Yeah. And 257 as a budget number for 2025.
>> Yeah. >> We're above that. Um we're going to come in quite a bit higher than that. So the increase is maybe going to be anyway. It's it's it's like 30% right
now. 2025 to 2026, but you're saying it's actually less than that. >> The increase between 25 and six won't be very high, but between 24 and 26 will be significant. So that 23 24 period, we
had our sludge hauling costs in the 100,000 a year range. And now in 2025, it's up more on the 175 amount. And so that's just based on
operational changes that we made for 23 24 and that we've decided aren't sustainable and now we're back to hauling about the same volume that we were that we hauled historically and it's just inflated
costs >> that there's two components of that. We pay for the trucking to get it to Duth, but we also pay a fee at Duth what we bring. >> Yeah. >> And it's it's based on the strength of what we bring down there, too. It's not
just gallonage. So, >> and their fees have gone up as well. Mhm. And and the so that that's those that services number is primarily
the hage that that but um so seems like also in there would be systemwide improvements, maintenance or not. >> It's it's just over half sludge hauling
in that number. and the rest of it is electric bill for the plant and paying engineers and other consultants to help with some of the projects that we've got going on. Um not sure if there's another
>> there's televising and jetting sewer lines. >> Yeah. So so contractors working on the distribution system. Yeah, that and the when there's a line there that says this item has been increasing with new best practice operational standards from our
wastewater superintendent. Um, so that's that's basically we're doing things differently with a sludge than we were previously. Yes. >> Yes. >> And what what is it? Tell me once again. And I think you told us what's the what what is it that we're doing differently
that makes it more expensive? >> We're we're we're managing our solids better. We're keeping the solids in the facility better than what we have in the past. And so I that's why we're collecting more solids
than what we have been in the past. >> What collecting more meaning less are going out with our discharge? >> Yes. Yes. Yes. >> Oh, I see. >> We're retaining more. Retaining is better. >> So, you have to uh >> So, because of that, it's necessary.
>> So, so that'd be reflected in sort of better numbers on the at the outlet. >> Yes. Better numbers on the plant affluent >> going into the lake and bigger numbers going to Duth. >> Yeah. >> So, it' be a lot cheaper just to dump it
into the lake. DCA catches us. Yes. >> Well, no, but I mean that's that's the old way. That's the >> only on a very windy day. >> No. >> North wind. >> Just to be clear, I'm not suggesting that's a good idea. >> Understood. >> Not at all. Not at all.
Yeah. Uh okay. So, I have one more sort of numbers question. um the depreciation it it it shows up as as an expense on this and I can see where that's where it belongs. How how actually does that
work? Because you have you buy a certain set of equipment, pipes, uh components, whatever they might be. Uh and over time those become less valuable and so there's depreciation expense.
>> Yeah. >> Where Is it is there is this so that does that like say on the on the sewer side 157,000 is that >> somehow go into a fund or what where
like >> is there money actual money transfer there is that simply a thing let's start with what like why is it that way versus >> um we're using acrruel accounting which is not the same as typical household
checkbook book balancing accounting when we pay for things that we intend to depreciate a capital expense. >> Y >> like we spend $700,000 replacing sewer pipes in Fifth Avenue. Uh that $700,000
that we spent in cash doesn't show up as an expense the year that we did it. So you could see like that would be that would make a real big difference on an $800,000 budget to show a $700,000 charge, but we still have to show the charge on our expense book at some
point. And the way we do it is through depreciation. We establish an expected life for that asset. And then we just use straight line depreciation. So, if we think that $700,000 sewer line's going to be a 30-year or a 50-year asset, then we'll take that charge
against it for a depreciation for 30 or 50 years. >> Yeah. >> Then what do we do with that to show it on the expense side as an expense? It sounds like we're paying a check out to somebody, but all we're really doing is showing it as an expense, meaning we
need to have a corresponding revenue. So we're collecting that money in revenues, the 157,000 if our revenues and expenses are the same. So what do we do with it? Is it a capital budget reconciliation at the end of the memo? So we collected
that 157,000. We also collected 48,000 to pay for debt service. So we have that 205,000 of we'll call it capital money built into our expense side of the budget. And what are we doing with it? Well, we're
writing checks for $178,000 to pay for debt payments. And the remaining 27,000 in most years, we would be accumulating in our fund balance. This 2026, we're actually suggesting we're not going to try to accumulate it in our fund
balance. We're actually taking a negative charge on the expense side of 27,000 equal to this difference. But most years what that paragraph would say is the remaining 27 is available pay for future capital projects and we'll suggest a few uh that we're going to do
and it does get built into our fund balance. So on a monthly basis you have access to a report that shows what was our actual expenses by line item what our actual revenues were and also what's
our cash balance in the fund and in the wastewater fund and the water fund that the cash balance is not significant that it's not enough where we could say we can fund our capital projects into the future for a long time and the reason is
because we just made some big ones, right? >> Both replacing pipes in the field, but also doing work in the plant. >> Water plant primarily. >> In the water plant primarily. Yeah. So, when we have couple hundred,000 worth of
projects in the water plant in 2025, that's not we wouldn't show that on the expense side of the budget, saying we need to collect $200,000 in rates in 2025 to pay for those projects. Instead, we use our cash fund balance to pay for those projects
and then try to replenish it over time by having a few less bills on the debt side than we're collecting in depreciation and debt service to keep building that balance back up. >> I see.
So, it has to do with basically money transfer into the this fund balance, right? And that money ultimately comes from whatever revenue there is. >> Yeah. >> From hall from the
from I guess on the water side there's there's only water bills. On the sewage side there's water bills or the sewage charges plus. >> Yeah. But both of them the larger
you know water almost entirely but in sewer it's still significantly larger >> is rateayers money that's where most of it comes from we also make some revenue on interest but that's interest on rateayers money that we've already collected >> then in the water side I think maybe the only other thing we do to get
significant revenue is get grants occasionally >> I I looked at I pulled up my most recent water bill trying to figure out well what would the the proposed changes what would they result in and
on on my bill anyways and I'm who knows how typical I am probably not that typical but um it seems like the the I would be paying $6
more maybe per month. Uh I think my water use is pretty constant through the year, but anyways. Um six to we'll say 6 to $10 a month more. Does that does that sound like would be sort of typical or I know you say that
there's hard to know what's typical, but >> I hate to try to draw typical when it comes to utility usage because it really really varies, >> right? The fixed fees go up 10 10% also. >> Yeah. >> So that's like what? $4 maybe.
>> No, this is everything be everything. Yeah. So I'm paying like 60 bucks >> sewer and water. Everything totally. >> Oh, with your fees >> including the fees. Yeah. >> Okay. >> Oh, just on sewer water. >> Sewer plus water. Yep.
>> So >> yeah, >> you know, 10% $6. So um I don't know I just I'm just trying to think what the impact of this would the felt impact right for people pained nose
and how much of a how much I don't know pain or how much they're going to feel this sort of well I know it's not I mean it's not something that you obviously want to do. Nobody wants
to do, but it is, you know, we have we have things we have to maintain and fix. And if we keep kicking that down the road each year, it just gets more and more expensive to fix and replace. And we're kind of
like maybe running into that this year, you know? I mean, we have done increases of 2% 3%. And that's kind of like to maintain our system, maintain things. >> But now, you know, we we have to take a
look at some of the stuff we have to do to the water plant. And a few of those items are pretty expensive. And fire hydrants, digging up and fixing and replacing are pretty expensive, and we haven't really budgeted for that kind of stuff. We have
>> we have but we never you know it's just >> part of it is >> how much can we do >> is um that list of what we think we needed to do is grown >> right >> part of it is that >> part of it is that we've moved things up
on the list off schedule you know particularly Fifth Avenue that we made a really significant uh investment in replacing you know million. >> A lot of stuff in Fifth Avenue >> in Fifth Avenue. And that wasn't
something that we had on a 20-year plan to do. It was an opportunity that we had to take advantage of, >> right? >> And so, but that doesn't mean we can wait longer on some of these other things. We still have to do them. So, it's it's more of uh an acceleration of
our capital plans. That's both things moving up before we thought we had to do them, but also seeing that the list is a little longer than we thought it was. It's kind of both. Okay. And how uh as you say this isn't like we're going to do this one year,
we'll be done with it. But uh what what what should we be anticipating for you know 20 27 28 29 are we like is this going to be uh another 10% another 10% another 10% I
mean and the future's hard to predict as as I've heard >> yeah there's we've got some clues in here we can't really say right but there's some clues in here, >> right? >> Um, one of the clues is that we've got a negative charge on our capital reserve
on both water and waste water for a budget in 2026. We're artificially lowering the expense number. And if we were to remove those, you know, we'd be talking about a 15% rate increase >> or, you know, 12 in sewer and 15 in
water. Mhm. >> So, we've already kind of held it back to try and be somewhat sensitive to the impact on customers. That means that bill is going to come due sometime. So, I wouldn't say we're right on track now. We're looking
at 3% again in the future, >> right? >> I think though that question deserves a much more thorough examination. So if we've now increased our capital project list and accelerated some let's
go look at it together and you know study that and figure out okay we now we need to kind of reshuffle and redo this capital schedule when we thought we were going to make these improvements and what does that imply in terms of what our rates need to be in the future. >> So let's
um keep talking about that. You know we were not going to wait till November next year to talk about that. that we're keep looking at it. >> Yeah. But it's not Well, I and we I think we talked about this last time. It's not it's not like it's going to be 0% next next year. >> No, but it think so.
>> It may not be 10%. But uh but likely it's going to be sounds like five would be uh maybe unexpectedly low number 5% for next year. >> Well, I don't want I don't want to put a
number out there. Um, you know, the water fund here is probably needing this rate increase right now a little bit more than the sewer fund, >> but we know what's coming on the sewer fund, and it's a much bigger number than what we're dealing with right now. So,
we talked about if if we're going to pay just2 to$3 million of a $10 million project at the wastewater plant, that probably requires a 25% rate increase. Now we're making 10 of it today. >> Yeah.
>> We got 15 to go in order to afford if we end up having to pay that $2 to3 million share of that $10 million project. >> Yeah. >> So yes, there's more increases coming. >> Yeah. Yeah. And again, I'm just trying to
think of what you know, kind of what what's the story here. I think the story is that uh there's maintenance that perhaps has been deferred for too long and that
needs to be addressed. Prices are generally up everywhere and we are in both the fortunate and unfortunate position of
being relatively isolated. So our the the the cost of contractor services is higher for us than it might be for other communities. >> It's that I mean all of our costs really are higher than for other communities which
>> is true of our customers too and it makes it even harder to go through and look at a rate increase knowing that we all have other >> right >> expenses that are difficult up here. Um the the story is also that we have staff
in place that have a real clear understanding of what needs to happen at these plants and are making plans to do it >> and we will be able to do it with these resources. And so we're really guaranteeing good performance in the
future by moving in this direction as well. >> Yeah. And good performance when it comes to water, drinking water is absolutely crucial. You know, this is a health and safety consideration and we don't ever want to get it wrong
and when it comes to good performance on the wastewater side, it's absolutely crucial. It's the protection of the reason that we all live here. So, >> needs to be done. >> Yeah. Well, and and I think maybe I brought this up just
briefly is I wonder if sort of from a how it how it feels point of view if we perhaps could get into single digits rather than double digits for the increase just and
it you know it's sort of I don't know cosmetic in a way but I just feel like it it would feel better to say yeah we're we have to with all these things we are anticipating needing to have an eight or nine% increase
rather than 10% and I realize you know that pushes the burden down the road a little bit but um I don't know that's that's a thought I had >> if I mean if you're willing to push the burden down the road we can it's it's your burden as much as anybody is meaning next year we're coming back and
saying instead of five we need seven because >> right >> so the the actual result of 1% in the water fund is between $4 and $5,000. Right.
>> So, and in the sewer fund, it's between6 and $7,000. >> Yep. >> So, that 1% change is 10 to 12,000 of revenue that we won't be collecting. Right. >> That's uh it's significant, but it's not
a deal breaker. >> Yeah. Yeah. And Yeah. And it's well, as we've discussed, there's going to be uh probably significant rate increases
in the next few years at least. Anyway, right. So, >> yeah. Anyway, I just I feel like it's a little more swallowable for it will feel that way, but maybe
maybe I'm making it too much of that. That's up to you. Yeah. Yeah. Don't know what you think. Well, knowing that Scott is fairly new on board here and he's been digging into
all the things that we need to address. Um, I uh I think that if we did do the 10% on water sewer, I think we'd be in a better place next
year to at least examine what, you know, how did that play out and we'd have a better feel on usage with the new buildings that have been constructed in our community that are increased quite a few units and maybe we
have a better feel of water usage and sewer processing. Um I don't want to get in a situation where we don't do enough and then got to do more
possibly more again the third year you know I don't know I just Um, I think Scott and Mike have kind of >> Yeah.
>> of kind of scale because you were like originally like, you know, what have we done to get it to 10%. You know what I'm saying? >> Yeah. We brought it down to that. >> Yeah. And at the same time, the 10% is I mean
not not not pulled from nowhere, but but it's arbitrary. It could be 11, could be 12. >> Um, >> and that would change that 27,000 number, >> right? So, >> uh, so it's sort of a number that we're
picking that seems like it would kind of get us plus or minus to where we need to be. The 27 number though is not arbitrary, right? And so although it does result in a 10% increase, that number comes from the difference between
what we're collecting in depreciation and what we have to spend in debt. It's basically that number. So it yes, it's arbitrary in the sense that um there's not an exact match between our revenues and expenses here anyway. And so we could float it a little bit if you
wanted to if that was an important part of it. we we could do that. Um I think both things are true right now and this is why we have a board right to wrestle with this difficult question. Yeah, >> we want to think about the impacts on our customers >> the the way it's portrayed. We also want
to make sure that there's enough resources to do the work that needs to get done, >> right? That's the >> Yeah, but I mean I'm just saying it's arbitrary in the sense that >> you could say, okay, let's let's have a 12% rate increase and that will put us in a little better position for next year or you could say we could have an
8% increase and then we'll say that would put us in a little worse position for next year. >> Yeah, you for sure we could. And I think though the what Craig's trying to say like what have we done to get it to where it's at that um if Scott had
unfettered access to resources he'd do a lot more faster on some of these projects. >> You're saying we need to rein Scott in. I have bring Scott in and and uh I don't I don't like to have to do that because
he's not talking about things that are, >> you know, luxury items on these plants. And uh he's talking about important things that we're going to have to do at some point. So now it's just a matter of trying to make that balance where we give him what he needs to get the job
done and we can keep the rates in a place where they're not too burdensome. >> Right. Right. Well, I think just to put a proposal on the table, I think all all things
considered, I would say my preference would be to push them at least slightly before below 10%. So maybe 9% that'd be and just hope that that still is going to be
sufficient to keep us operating and fine and see what happens next year. >> Okay. So you got a a motion for we need we need more people to vote on this. >> Yeah. Basically, you got a motion for 9%
increase on water, 9% in sewer, 0% >> well, >> for electricity. >> Okay. So, with the electricity, I mean, maybe we I mean, I I know that that doesn't those balances are those those operations are separate, but you know, maybe we have a couple percent there and
in a sense, the city is in a little better spot. I don't know. And then >> if we could find a way for the electric fund to pay for more things in water and wastewater, that might be okay. >> Uh we typically don't. Those buckets stay pretty separate. >> Uhhuh.
>> So I'd say um if you want to move the rates for water and waste water down below 10, still leave the electric at zero. And I suppose then from the uh you know like public perception part we
say well look uh we are increasing water sewer but at least we're not increasing the others the electricity at all. So that's should be some comfort. I think it is because electricity is a big thing nationwide and you hear a lot
of places aren't maintaining a 0% increase in electricity. We're fortunate to be able to do that this year. Agreed. Um cuz I was really not expecting that. I mean, you know, you go to the meetings
simp and those kinds of things, but other companies have been merging and doing certain things and raising rates and so that's a plus for the utility user in our community is to see electric rates stay the same. >> Yeah.
>> Two consecutive years at least in a row. >> Yeah. >> I don't know. What did we do last year for electric? Was it >> 2%? >> 2%. Yeah. So it's kind of nice. >> Mhm. >> So >> did you finish that motion?
>> Set your motion. >> I so move >> 0% for electric. Did you say nine? >> Nine. >> Nine on sewer, nine on water. Okay. Well, I guess um that's your motion. I'll second that.
And um all in favor? >> I'm in favor. >> I and I. Okay. >> Okay. >> So that's what we did. >> Thanks for the good conversation. >> Yeah. >> Yeah. Likewise. And I just I want to be clear that I I'm fully supportive of the
efforts you're making to keep things on a track on a good track and keep the keep the operations in a state that they can be relied up upon for you know for tomorrow but also for next year
and the next year after that. So that I think that's excellent. Okay, >> that's it guys. >> Conclusion of the meeting. Thank you.