All right, it is 6 30, and I call the June 4th Environmental Services Commission meeting to order.

We'll first start with a roll call.

Commissioner Lutterman.

Present.

Commissioner Laxon.

Present.

Commissioner Margolis.

Present.

Commissioner Heinosh.

Present.

Commissioner Tyson is absent.

She's an excused absence.

And Commissioner DuPertis.

Present.

Thank you.

Good evening and welcome to the June 4th Environmental Services Commission meeting.

Uh first topic is the approval of the agenda.

We have a motion to approve.

I move to approve the agenda.

I have a second.

Second.

Thank you.

Are there any objections or proposed amendments to the agenda?

All right.

Hearing no objections, the agenda is approved.

As motioned.

We'll move to oral and written communications.

Oral and written communications are now open.

Remember that there is a three-minute time limit per person and 30 minutes total per meeting.

Public comments shall be limited to matters relating to the city of Bellevue government and to subject matters encompassed within the power and duties of the commission.

Persons participating in commission meetings must not engage in speech or conduct that disrupts, disturbs, or otherwise impedes the orderly conduct of any meeting.

Disruptions may include and are not limited to failure of a speaker to comply with the commission bylaws concerning public comment.

First of all, Joe, are there any written communications?

There are no written communications.

First up, Mr.

Zimmerman.

First up, Mr.

Zimmerman.

Come to this meeting for many years.

Yep.

I don't come to you because you look to me so very dirty.

Damn Nazi fascist busted.

I come here to meeting every meeting.

Yeah, commissioner.

Yeah.

Only because I want what is people listen to me.

Because situation what is we have right now is absolutely critical.

Yep.

So first what is I talking?

Why you don't show us faces?

I think you don't show faces people who speak here only because don't want what is people can recognize Alex Zimmerman, but everybody knows me right now.

Everybody.

Yeah, it's number one.

And you freaking critina, you have to.

No, perdon.

You know, Krettina.

You're the Billy, you know what this means.

Yeah.

Never change this rule.

On one show faces.

I never see like this before, yeah.

For four years.

It's okay, no problem.

In second time is uh the rules, what is Mayor Robinson's goals?

This is in her.

Record, yes, under camera.

She's stopping people speak.

Yeah, 12 year old.

30 minutes, 10 people.

The reason for this only because Alex Zimmerman is very bad.

Guys, I try understand.

Okay, but I am very bad by freaking critina.

Don't want what is 150,000 people can speak.

Yes, I don't understand.

Are you very quiet?

You are real debile.

Yeah.

Because you can change this.

Easy, but you don't want it's a problem.

Work for government.

Free food.

You buy everything in your life for free food.

Yeah, you're very nice people.

Free food, very important.

Yeah.

She trespassed me.

And I call her uh for three years.

Last week, three year trespass.

Expire, you know what this means.

She trespassed me because I can't do that against here.

Yep, that's a crime by definition, you know.

You know what is meant?

When you're doing like this, it's a crime.

It's realize country supposed to be good to jail.

I call her Chip Dory Prostitute, you know what this means.

That's exactly what he does.

Absolutely.

But situation about right now, very critical.

Everything what is happening in Bellevue under Merrill Robinson for seven years is absolutely absurd.

They bring City to total collapse.

I live here forty years and I go to council chamber for 35.

I know everything.

More than you.

Yeah.

So, viva Trump.

Viva New American Revolution.

Sit down, sweat, and happy cow.

Guys, right now, situation not only about politica, right now, situation about money.

Democrats stealing a dozen and dozen billion dollars.

A thief a bandita are killer.

Thank you very much.

It's for you.

So you remember what is constitutional.

Thank you very much for your time.

Uh next up for um oral communications.

I believe it's is it Mr.

Henry He?

Please.

Good evening, Commissioners.

My name is Henry He, and I am a Belleville resident and an AP government student.

I commend the city for cutting municipal emissions by 52%.

However, as you review the upcoming capital improvement program and operating budgets, I want to highlight a major implementation bottleneck regarding our 2050 communication uh community goals.

This afternoon, I surveyed 21 local households within our student body.

The results showed a stark gap between city policy and community reality.

Ninety point five of our household surveyed were completely unaware of Belleville's 95% emissions reduction goal.

When asked about barriers, the top responses were a lack of information and overall convenience.

These households belong to AP government students who actively study civics and hold the highest relative policy awareness.

If the informational gap is this wide for them, it is likely even wider across the broader Bellevue public.

Furthermore, the students in Bellevue's classroom today will be in their uh the prime of their lives by 2050.

We are the future homeowners and taxpayers who must ultimately sustain these climate systems.

This gap represents a clear failure in our linkage institutions, the channels connecting city plans to everyday residents.

Therefore, I urge the commission to allocate utility budget resources toward grassroots youth outreach at our uh school districts partnerships.

Empowering student groups to lead localized campaigns can bridge this gap and scale the climate challenge tracker straight into Belleville living rooms.

Thank you for your time and considering the youth perspective tonight.

Thank you very much.

And we thank you for your thoughtful comments and for taking the time to come here.

Could you leave that with us, please?

Yeah, your notes.

Thank you.

Alright, that is uh all the people that have registered for oral communications.

I'd like to open it now to the audience, whether in person or remote.

If anyone would like to in attendance would like to speak, uh if you're attending remotely, please use the raise your hand feature in Zoom.

Or if you're joining via phone, press the star nine button.

Is there anyone?

No one online.

All right.

All right, then that will conclude our oral communications.

Uh now we will move on to City Council Community Council Boarding Commission updates.

Uh I don't see Commissioner Council Member Newenhouse, so no updates there.

Joe, any staff reports this evening?

Yes, I'd like to ask uh uh Lucy Liu uh to come up and give a staff report to them.

Oh, thank you.

Thank you.

Good evening, Chair.

Uh Commissioners.

I uh just want to provide a quick update on the utility bill assistance uh program expansion briefing that we did with city council this week.

Um, so on this past Tuesday, June 2nd, uh utility staff re-city council on the affordability of utility services for households in our community, as well as the different options that the commission studied to expand bill assistance for our community members in need.

I appreciate Chair One for joining us and also appreciate Commissioner Heinas for joining us.

Chair One presented the commission's uh recommendation and shared some valuable insights on the key factors that uh the commission considered and uh used to inform your recommendation.

Council did direct staff to include the commission's recommendation into the utilities budget to be presented to council for consideration in the fall.

And council deeply appreciates the commission taking the time to uh study um this uh topic over three different meetings and and really taking into consideration the needs of a community members that are in need of uh utility bill assistance and balancing that and considering the impacts uh rate impacts to the other households that pay their utility bills.

And also I also um want to, on behalf of ratepayers, thank the commission uh for um helping us arrive at this uh strategy to expand bill assistance.

Um, we are recommend your recommendation is going to open long-term assistance to approximately 15,000 households who may um be able to benefit from this program.

And so we look forward to seeking final approval from council in the fall as part of the budget process, and uh look forward to implementing the new program next year.

Thank you.

Thank you, Lucy.

And I'll just echo um pretty much every council member uh mentioned they were very thankful to the commission and the commissioners for all the time that the commission spent studying working with staff and going through all the various options.

Option one, option two, option B one, option B two.

I think there was option three and four.

We didn't make the screen, but they know we studied it a lot, and they were very thankful.

Absolutely.

Thank you.

All right.

Okay.

Uh let's move on to the approval of minutes, please.

Uh we're uh going to approve the May 7th meeting minutes, may have a motion to approve.

I move to approve the May 7th minutes.

Thank you, Commissioner Letterman.

Any uh second?

Second.

Thank you.

Commissioner Margolis.

Uh are there any changes or objections to the minutes?

Uh hearing none, uh, the minutes are approved as motioned.

We have no unfinished business to continue from the last meeting.

So we will move on to tonight's new business.

The first item for tonight's uh new business is the election of the commission chair and vice chair.

So let me just uh read off the uh rules here.

The ESC bylaws state that there shall be a chair and vice chair elected from the membership of the commission.

The bylaws specify utilizing Robert's rules, newly revised for the election.

This process identifies that nominations do not require a second.

Any commissioner may nominate any other or self-nominate themselves.

Uh the current chair will close the floor to nominations when no other nominations are forthcoming.

Nominees may decline the nomination or position before the vote.

Nominees will be voted in the order in which they were presented.

As soon as one of the nominees receives a majority vote, which is four votes in this case, uh the chair will declare that person elected.

No votes will be taken on the remaining nominees for the office of chair.

Commissioners must cast their vote, either a yay or nay for each nominee.

Failure to cast a vote means that your vote will be counted in the affirmative.

Uh a couple of other things I think I should just mention.

Election to an office becomes final immediately if the candidate is present and does not decline, or if they are absent but have consented to their candidacy.

If the candidate is absent and has not consented to their candidacy, the election becomes final when they are notified of their election, provided that they do not immediately decline.

And if the candidate does decline, the election is incomplete, and another vote can be taken immediately or at the next meeting without further notice.

And I mentioned these rules only because we do have one commissioner who is ill today and not present.

So Commissioner Tyson is not here and but can be nominated by anyone else here.

And we would then go through that procedure.

All right.

So with that, nominations for chair are now in order.

So we'll be taking nominations for the chair position.

I nominate Commissioner Juan for chair.

All right.

Thank you, Commissioner Letterman.

Any other nominations?

All right.

I don't hear any.

So at this point, uh nominations are closed, and we'll vote uh on the one nomination.

Um please vote yay or nay when your name is called.

Uh so this is for myself, Commissioner Juan.

Uh Commissioner Lotterman.

Yay.

Commissioner Heinosh.

Commissioner Laxon.

Yay.

Commissioner Margolis.

Yes.

Commissioner DuPertis.

Yay.

All right.

Thank you.

The vote is five in favor and zero against.

Uh so the yes have it, and I guess I will serve as chair again for another year.

Uh all right.

So uh same thing now.

Um, we will now go through the um uh nomination for the vice chair position.

So I will open it up for nominations for the vice chair.

I nominate Commissioner Lutterman for vice chair.

All right, Commissioner Letterman.

Anyone else?

All right, hearing none.

Uh I should have asked myself this question, I suppose.

But Commissioner Lutterman, are you interested in willing to serve as vice chair?

I am willing to serve.

Yeah.

Thank you.

All right, then uh let's move ahead with the vote for the vice chair nomination of Commissioner Lutterman.

Uh so Commissioner Heinash?

Yes.

Thank you.

Commissioner Margolis.

Yay.

Commissioner Laxon.

Yay.

Commissioner Dupertis.

Yes.

Thank you.

And uh myself is also a yay.

So uh we are also five in favor and zero against.

Did I do my math right?

Yes.

So uh Commissioner Letterman, you are uh nominated vice chair for the following year again.

Thank you.

Well, that was easy.

Uh then with that, we'll move on to our second order of business tonight, which is the utilities 2027-28 operating budget and 27 to 32 CIP budget proposals.

Good evening again.

Uh we um have a full team here tonight, and so I'll kick us off, uh, and then we will bring our assistant directors up.

Um so uh with me tonight is uh utilities the executive team, in addition to Joe Herbert, who is our deputy director.

We also have uh Scott uh uh Edwards, our deputy director who supports our resource management and customer service division as well as our corporate functions, and of course our fiscal manager, Matt Hobson, who you've met multiple times, and then uh we will I will soon invite up Dave Beich, our assistant director over engineering, as well as uh uh Chad Beck, who is our assistant director of operations and maintenance.

Um, so uh before we get started, I first like to just acknowledge the critical uh role that the commission has in reviewing utilities budget and rates.

Our council certainly counseling you to do do a detailed review of our capital plan or both are operating in uh capital budgets as well as the rates that are necessary to fund the proposed budgets.

And so the budget proposals that are before you tonight, what we're gonna do is we're gonna do a highlight.

You have the details in your packet that you'll have time to review.

So we're just this is the beginning of it.

You'll have the next month to review it before we actually will be seeking your direction.

But what you are you will see is that these proposals are focused on us staining our levels of service to the community for for the over the next two years while also responsibly setting aside the resources for long-term sustainability.

Um our team is carefully reviewed and evaluated our base budget, and where possible we right size the budget to the extent that we can, uh while also continuing to make sure that we have the ability to continue service delivery at the current levels.

And as a result, the requests that you will see will have additional resources only when they're needed, and we'll highlight those for you as we move along tonight.

Um, so tonight we are this is just an information at this point.

No action is required by the commission tonight.

Uh, the goal is that by your next meeting, after you've had a chance to review everything, materials and make sure they have all your questions are answered, then we will be ready to uh if you're ready to offer your recommendation uh to the uh with a recommendation to the city manager on utilities budget as she forms her recommended budget to council, which will be provided to council in the September time frame.

Um we are here to review tonight.

Uh, here's our agenda.

We're here to review both the utilities operating budget request as well as the capital budget request, and you'll see that the cash budget request is us really packaging the CIP that you've reviewed uh in detail into package of proposals for the budget process.

Um, and as I mentioned, you find details in your packet for tonight with more detailed information on what we're requesting for the budget for the next two years.

Um tonight we'll walk through the proposals and answer any initial questions you may have.

Um before we get into the budget proposal, just a quick refresher on the commission's role.

Um, as I mentioned, you play a very critical role in the budget development process.

Um, towards the end of the process, you may recall for some of you, the commission will hold a separate public hearing on the utilities budget and rates, and this is in addition to the three public hearings that our city council will hold on the city's budget, which the utilities budget is a part of.

Cities like Bellevue are very fortunate to have a commission like this commission that focused where your your main focus is actually on the utilities budget and rates.

You're the only commission in the city that actually has budget and rates per view.

It uh really provides the necessary time to do a thorough review of utilities budget, and it's time that our council does not necessarily have to review at that level of detail.

So this is very very uh important work and is a very uh useful uh review for our council.

Um before you review the budget in detail, I just want to remind you that the um for the on the next slide, the utilities budget is really premised on the strategic direction set by our council and the city financial policies that have been adopted by council and that guides our business as well as our budget development.

The budget is also informed by our asset management program, which informs our needs in the capital side as well as on the maintenance of our infrastructure.

And at this point in the process, the department has been working on the budget over the last eight months or so, starting with the on the capital side.

You've received a number of foundational briefings.

Um at this in that time, we've gone through a thorough budgeting approach where each section of the budget is reviewed by the department, and um so that we also have been looking at what our budget has been, what our actual expenditure needs are, just to make sure that we are careful and right-sizing each area and each function that we have within our budget.

Um, so by the time we bring the budget to you, we've done a lot of careful review to make sure that we ask for the right and critical resources we need for the next two years.

And what you will see is that, as I mentioned, most of the proposals are to maintain existing levels of service, but you're going to see areas where the key enhancement enhancements are to um are to increase services for our customers, like our rate assistance, for example, and investments to ensure the long-term sustainability of the utilities.

So this is the next slide is a just a recap of the commission's budget review calendar.

So this is a continuation of your review of our budget.

This is the fourth meeting on the budget this year.

You after you have reviewed everything and have your questions answered, as I mentioned, our goal is that by your next meeting on July 2nd, we're looking for your early input by providing a recommendation to the city manager.

During the summer, the budget proposals will be reviewed by the city's leadership team, which comprises of the city manager, the deputy city managers, and the department directors.

And that will result in a recommendation to the city manager to inform her recommended budget to council.

In September, we are going to come back to you with any updates to the budget because there are still pieces of information that we are needing updates on later on to inform the budget process, such as some of the inflationary guidance that we will have.

Say, for example, on our staffing cost.

So we will, as we see any updates to the budget, we will keep you informed along the way.

And then the commission will develop your recommendation ultimately after you hold the public hearing, you would avail your recommendation to council on the budget and rates in the fall and uh and in October time frame somewhere.

We would be asking uh Chairwan to share the commission's recommendation to council on utilities budget and rates.

So that is the schedule that that we have ahead of us, and then budget adoption is targeted for mid-November, November 18th is the tentative date that I uh that I heard from our finance and asset management office.

And so with that, I am going to turn it over to Scott to introduce our operating budget, and I'll also invite our assistant directors up.

By state law, each of the utilities, water, sewer, storm, and solid waste must be financially self-supporting and cannot cross subsidize each other.

And for this reason, each utility operates as a standalone business.

Operating in capital budgets and rates as well as the decisions supporting them are made at each utility or fund level.

The way the budget is packaged for the city's overall budget process is by what are called proposals.

Each budget proposal represents a set of services we provide and generally encompasses multiple funds.

The operating budget is comprised of six major proposals.

The largest proposal is wholesale taxes, franchise fees, and support services.

These expenses are largely outside the control of utilities and determined by long-term wholesale service contracts, state and municipal tax code and utilities allocated share of citywide support services.

There's four operating proposals directly supporting day-to-day operations for utilities, and you can see them on this slide: operations and maintenance engineering development services, customer service and outreach, departmental management and support.

We also have CIP support, which includes the recurring operating funding and staff support to execute the six-year CIP and long-term asset management program.

Before we dive into the detail by proposal, we'll provide an overview of how the proposed 2027-2028 budget compares to the current adopted budget.

As you can see in this chart, primarily in blue, the total operating budget is increasing by 10.6% in 2027, and it's increasing by another 8.2% in 2028.

Please note that this is a budget increase and does not equate to the same percentage rate increase for many reasons, including one-time expenditures, and because we are able to smooth increases through our long-term forecasting process.

Budget drivers are depicted on the right in this table or this slide.

And working from bottom to top, you see base compensation adjustments and changes to indirect support costs are expected to add four-tenths of 1% to the budget in 2027.

The need to build rate capacity for our aging infrastructure contributes 2.9%.

Planning prudently for aging infrastructure replacement remains a priority for us as it must avoid rate spikes and achieve customer intergenerational equity.

Wholesale sewer and water supply cost increases will contribute 2.7% and 1.1% respectively to the 2027 budget.

The cost of additional state and local taxes assessed on planned rate increases as well as specific inflationary adjustments to electric utility expense and standby pay tied to labor agreements will add 2.2%.

Utilities has reviewed its base budget to right size expenses.

However, we are unable to fully absorb the rising costs experienced in utilities capital programs and local operations.

We've been able to contain our local operations to inflation with the exception of a few key investments, which add 1.3%.

These include extending LTEs or converting them to FTE staff to sustain existing operations, as well as the expansion of the bill assistance program, which the commission is aware of.

You'll hear more about each of these key drivers in detail during this presentation.

And with this, yep.

Next, we'll highlight the 2027 to 2028 operating budget requests.

With this next slide, it provides a high level overview of the proposed operating budget based on the proposals.

The biggest part of the budget is our financial obligations and represents the bills we must pay to others.

This includes wholesale costs in red and taxes and support services in yellow, which make up about 259 million dollars combined.

Next, we have 179.4 million, or about a third of the budget actually, is for capital investments to take care of our system infrastructure.

And the smallest amount that you see, about $73 million, funds local operations for all of the activities we do to operate and maintain the utility systems to deliver service to the community.

Next, we'll review the budget proposals for each of these categories in more detail and highlight key changes for the upcoming biennium.

This slide presents a mid-level view of the proposed two-year operating budget for our four lines of business.

In total, the operating budget, as you can see, is about 511.8 million, which represents the funding necessary for the next two years to pay for our operating and capital support needs.

Starting at 12 o'clock and moving clockwise, you see wholesale costs in red total 174.9 million or about 34% of our biennial budget.

Next, we'll focus on two pie slices, taxes totaling 49.5 million, and support services totaling 34.9 million.

And combined, these represent about 16% of our operating budget.

For the 2027-2028 budget, it should be noted that taxes are included with wholesale costs and a single operating budget proposal.

However, for the early outlook forecast presentation from last month, you may recall taxes were combined with support services separate from wholesale costs.

To be consistent, we're depicting taxes separately from wholesale costs for this presentation, and we've shaded the taxes pie slice in orange with yellow dots to demonstrate its alignment with what we shared with you for the early outlook forecast.

The next pie slice in teal is CIP support totaling 179.4 million or about 34, excuse me, 35% of our operating budget.

And then there's local operations in blue, which totals 73.1 million or about 15% of the operating budget.

Before we review the budget proposals, let's take a moment to orient you to this slide, as we'll use this general format for each category of proposals that you'll see tonight.

On the left, we provide an overview to identify the major activities represented by the proposal category as well as any key changes from the prior budget.

In most cases, each category will consist of multiple individual budget proposals, which will be depicted by the pie chart you see on the right.

At the center of the pie chart, we provide the total dollars and staffing represented by the budget proposal category.

As a reminder, the dollars shown are for the two-year biennium.

The first budget proposal category is for wholesale costs, taxes and support services, which represent the bills that we have to pay to others and totals about 259.3 million.

There's no staffing associated with this budget proposal category.

Starting at 12 o'clock and moving clockwise, the biggest proposal is for payments to King County for wastewater treatment and to cascade for water supply and regional capital facility connection charges or RCFCs.

This is reflected in the dark blue and light blue sections of the pie above.

Also included with this proposal shown on the teal slice are the taxes and franchise fees that we pay for the state, business and occupation tax, state and local utilities taxes, and franchise fees for neighboring communities to provide water and wastewater services and their respective jurisdictions.

The last group of budget proposals shown in purple represent the payments that we make to the general fund for support services, such as management of our fleet, IT services, insurance, rent, and our share of major repair costs for city facilities.

Like all parts of our budget, we review these expenses in great detail as well as allocation methods and make every effort to control costs.

Looking at the key changes for these proposals, you'll you'll recall from the early outlook forecast presentation in May, the cost from King County is projected to increase by 12.75% in 2027 and another 12.75% in 2028.

The cost from Cascade is projected to increase by 9.3% in 2027 and increase by 9% in 2028.

Also, we're anticipating higher support services costs from the general fund, which is primarily due to the rising insurance costs, IT charges, and facilities costs such as rent and major repair expenses.

While costs reflected on this slide represent the most current estimates from our external providers, some may change between now and the final budget.

We'll keep you informed as we get more updated information.

Any questions about this budget proposal category before we move on?

Yeah, I have one on the inner funds.

Just wondering how that number is arrived.

Is it a percent of expenses or revenues or that?

Yeah, so uh I'll talk to some of the major pieces in the interfund.

So uh the largest portion of our in of our indirect support will be at what we call indirect support, uh indirect labor support, and that's the wage and personnel costs that are our fair share from the city attorney, from the city manager's office, HR, and that's allocated as a function of FTEs across the city.

Um the next major one will be facilities uh maintenance, which is allocated as a function of square footage amongst city facilities, both here in City Hall as well as our operations center.

And then our next largest one will be information technology indirect fees.

And that's assessed as a function of active devices across the city.

The last one which Scott referenced earlier is one of our largest drivers of new costs is uh general insurance liability, and that it has nothing to do with utility specific claims.

Um, it is being driven increased by across the board citywide increases in premiums.

Um, both we are self-insured, so premiums to ourselves, it's self-insure insurance, as well as a third-party um contingency insurance as well.

Both of those premiums are increasing, and we receive a share of those costs as a function of historical claims.

Okay.

Great.

Thank you, especially for addressing that last one because I just I was wondering if utilities was getting a higher share of the costs for those insurance increases.

Um, I know that the water side has seen a lot of insurance hits.

Not in Bellevue, but in the industry as a whole.

Yeah.

Thanks.

So is it would it be accurate for me just to think about this?

This is a chunk of the budget, but you just don't have much control over.

What we pay to others primarily.

It is what it is.

I do actively advocate for interfund windows and we are at the table, so to speak, on the methodologies and as they refine them over time, and so it is something we actively participate in.

So it's not as if we don't have any influence, but yes, it's external to us.

Okay.

The next budget proposal category is for local operations, with this slide providing a functional overview of the different activities we perform to operate and maintain the pipe utilities.

On the left, you can see utilities manages a large number of assets across a range of classifications, including pipelines, reservoirs, pump stations, pressure zones, storm drains, and maintenance holes.

Utilities are complex and require a robust suite of asset management activities to operate and maintain these systems at acceptable service levels and with minimal service interruptions.

To the right of the slide, the local operations budget proposals are grouped into the functional areas that you see on the pie chart.

And this next series of slides will highlight the proposals in each area.

As you can see in the center of the chart, the local operations category represents about 73.1 million and 148.8 FTE overall.

And the next slide will focus on department management.

The first local operations budget proposal category is department management and support, which totals about 15.4 million and 18 staff.

4.5 million of the 15.4 million is attributable to scheduled vehicle and equipment replacements.

The remaining 10.9 million is comprised of recurring operating expenses, most notably wages, benefits, and the information technology licenses and service contracts.

As this category consists of only one budget proposal, there is no need to provide a pie chart.

The proposal consists of the utilities director's office, business systems management, and fiscal management functions, effectively managing four lines of business: water, sewer, storm, water, excuse me, stormwater, and solid waste collection.

This proposal funds the director's office, which oversees utilities as a self-supporting enterprise with a more than 75-year planning horizon.

This large and complex department represents a diverse service portfolio requiring strategic vision, vigilant financial management, and sophisticated technology solutions to sustain essential infrastructure serving our community.

This area provides the leadership and policy guidance to ensure we fulfill utilities' mission and vision.

And we achieve this by implementing industry best practices and prudent management of our resources.

This proposal also funds business systems management, including maintaining the information technology that supports the department's engineering, operations and maintenance, and business operations functions, support for our key systems such as the customer information billing system, Maximo, which is our work management system, GIS, and a number of systems like water modeling and CCTV, and implementation of AMI from a technology and systems integration standpoint.

Lastly, this proposal funds fiscal management, including financial functions for the department, such as our financial analysis, forecasting, budget development and monitoring, rate making, and accounting functions, and with four lines of business and each required to be financially self-sufficient.

This means we build separate forecasts, budgets and rates for each utility, and thankful for Matt Hobson and his team every day.

Key changes with this category include increased costs associated with software licensing and interlocal contractual obligations.

This includes software as a service costs for customer information and billing systems.

It converts one LTE engineering technician position to an FTE position to sustain GIS data maintenance and system support for utilities.

This role ensures accurate, up-to-date asset records used for operations, emergency response and planning, while maintaining service levels and supporting ongoing system modernization efforts.

We're also replacing an end-of-life GIS geometric network with Esri's utility network platform to sustain utility operations.

This transition ensures continued system support, improves data integrity, and enables reliable asset management, modeling and operational decision making across water, wastewater, and storm systems.

We're also leveraging AI technology to provide a fast, consistent AI-powered customer service tool to support our billing functions.

The solution addresses wait times, agent churn, and consistent peak time service and customer demand for service or self-service, I should say.

It includes four automated workflows and CIS integration to support support scalable customer operations ahead of utility monthly billing.

Next, we will focus on the customer service and outreach proposal categories, which represent about 11.6 million and 21.5 staff in total.

We'll review each proposal category starting from the 12 o'clock position.

The first proposal funds our customer-facing service programs, which is shown in dark blue and represents about 4.3 million.

This includes our customer care team, which prepares utility bills and answers calls for about 39,000 customers.

This also includes our utility locates program, which marks and protects about 1600 miles of Bellevue's infrastructure and is commonly known as the 811 call before you dig.

Key changes from the last budget include right sizing supply and services budgets based on historical and projected spend patterns resulting from greater subscription for online building services, billing services, which is resulting in things like less postage.

So we want to make sure we're adjusting our expenses going forward.

And we're also extending two LTEs to sustain utility billing and customer service operations following major system and process changes.

These positions maintain current service levels, support increased call volumes, and ensure timely customer assistance related to billing accounts and new services.

Recent service changes and new services like the online customer portal generate higher inbound call volumes as customers have questions or need assistance to navigate our new services.

These new services have also translated to a higher baseline of call volumes.

Specifically, there's been a 28% increase in January 2026 compared to January 2025.

Current staffing levels are maintaining KPIs for answered call rate and average hold time at target levels.

Next, we have the second proposal, which is for utilities bill assistance program, something very familiar for this commission, which is shown in gray.

It represents about 5.1 million and provides assistance to about 1,100 residents through our long-standing programs to serve the needs of qualified low-income seniors and disabled residents by providing either a 70% discount or rebate on their utility bills, which depends upon whether they are a direct or indirect customer, such as multifamily.

It also has the emergency assistance program that provides temporary relief to low-income residents regardless of age or physical ability.

This program focuses on residents that have experienced a financial shock and struggles with the ability to pay their bills.

We also recognize not everyone experiences a financial shock but may still struggle in paying their bills and are at risk of having their water turned off.

So we've implemented the Neighbors Helping Neighbors program in 2024, which provides additional resources to our low-income assistance programs through community support.

The initial program is seated or was seated with $50,000 in utility rates with an annual match of up to $50,000 in donations.

Key changes from the last budget include expanding the bill assistance program, which represents the largest new budget request for our local operations.

The additional budget request supports the ESC recommendation, which was option B1 as you recall, to support the expansion with about $3.5 million over the biennium, including expanding the water, sewer, and stormwater long-term assistance programs to all households, up to 80% of AMI.

Seniors and individuals with permanent disabilities with income up to 50% AMI would continue to receive a 70% discount on basic utility costs.

All other eligible households would receive a 35% discount on basic utility costs.

The requested budget includes the additional staffing costs and costs associated with issuing rebates to multifamily residential customers.

The cost of discounts to customers with a utility account will be realized as lost revenue instead of an increase in appropriations.

Next, the third proposal is for our solid waste management and environmental outreach programs, which represents about 2.2 million in total.

And this includes managing the solid waste contract with Republic Services, currently about $37 million annually, and waste prevention and recycling education and technical assistance programs.

This also includes outreach and education efforts to prevent stormwater pollution to protect our lakes and streams and local programs to encourage responsible water use.

We outsource most of our water conservation outside to Cascade, who does this for its members.

This is why you see a smaller budget for water conservation outreach for us.

The expansion of the Solid Waste Bill Assistance Program to multifamily residential households who pay for solid waste services as part of their housing costs is also included.

Are there any questions about the customer service and outreach proposals before we move on?

I had a question on the you know the expansion of the utility bill assistance program, and it says we're gonna hire two new LTEs, so limited term as opposed to FTEs, I guess.

You are evaluating that with the council action this week, which obviously expanded it beyond initially what we were envisioning with with the budget proposal.

The initial budget proposal was established, I think, based upon the original recommendation of this commission, but does include, but it does include uh funding sufficient to uh provide flexibility for us.

So whether or not those are LTE or may actually become FTE based upon the expanded program.

We also are evaluating other uh staffing model requirements to support the program going forward, and we have sufficient funding built into the proposal to evaluate that, gives us some flexibility.

So you see LTE in there, but we may end up converting those to FTE before it's all said and done.

Yeah, I mean, because I can imagine there are startup costs, you know, to expand it this much, but at the same time, we're trying to reach almost four times as many people.

Exactly.

And that's what we're just this week we're evaluating in earnest.

What is that staffing model necessary to stand up this program over a reasonable period of time and have it become obviously increasingly effective in reaching our community?

Great.

Okay, thank you.

I have a general question.

Um like LTUs are brought up.

I'm just curious like what the maximum term for an LTE position is before like it either needs to get terminated or converted into an FTE.

Typically we've done three years, but it may be five.

Maximum is five, but typically three is the standard.

Okay.

Thank you.

Any other questions on this one?

Uh, if you can go back to the customer service slide, I had a specific question regarding the 20,000 meter reads monthly.

And maybe I'm confused, but I thought that number would be far less since didn't we convert to um AMI AMI, and therefore we don't have to send people out as much to do meter reading?

The meters still have to be read, it's just the manner in which they're read.

So whether it's read manually or via the AMI system, there's still 20,000 reads that are happening on a monthly basis.

Okay.

That makes sense.

Or I should say the read in the sense of the AMI case is more the billing system going in and pulling a read out on a certain day to generate a bill from the data that we have for the you know, every what 24 reads per day over the course of every day.

So uh that read is not um, it's not a human going out to the residence.

As long as they have an AMI meter, yeah, correct.

Yeah.

So I understand your confusion with that one.

There are still 20,000 billing reads that are conducted on the monthly basis because half of customers are billed in any given month since we do bills every two months.

Okay.

Thank you.

We could, if yeah, a different way to put that is uh what 18,000 AMI meter reads per month and 2,000 uh manual.

Yeah, okay.

Thank you.

That's very helpful.

I just checking in community commissioner DuPartis.

Any questions for you so far?

No, thank you.

Okay, thank you.

If no other questions, then the next series of local operation slides will be presented by Chad Beck.

All right.

Operations and maintenance programs work to ensure the residents and businesses receive safe and dependable drinking water, reliable wastewater collection, and a dependable stormwater system, an effective water quality and pollution control services with minimal unplanned interruptions.

As you can see from the slide, utilities manages a large number of assets across a range of asset classifications.

In addition, our systems are complex and require a robust suite of asset management activities to operate and maintain these systems at an acceptable service levels with minimal service interruptions.

On the next few slides, you will see a mix of preventive, reactive, and corrective maintenance activities.

These activities work in concert to maintain system reliability, address system failures, and extend the useful life of our assets.

The investments can be categorized into one of four program areas as outlined in the pie chart.

I'll discuss each of these proposals starting at 12 o'clock and going clockwise.

The water OM program works to ensure residents and businesses receive safe and dependable drinking water continuously with minimal unplanned service interruptions.

These programs maintain over 610 miles of water mains with over 40,000 metered connections.

OM mitigates the repairs, mitigates and repairs on average 30 water main breaks and 200 water service leaks annually.

These range from unplanned repairs on more severe water main breaks to planned shutdowns where we can notify our customers ahead of time to fix more minor leaks.

While some leaks find us, others we have to dig to find.

Often we use the use of leak detectors, which help us pinpoint the location of the leaks.

Digging and fixing leaks is half of it.

Restoration of the right-of-way include asphalt or sorry, including asphalt is also a big part of this program.

In addition to repairs, we have a mature preventive maintenance program across several asset classes.

Each year we survey and maintain approximately half of our 5,800 fire hydrants, half of our 10,000 valves, and 20% of our reservoirs.

Our preventive maintenance programs are guided by our asset management strategies and in accordance with published standards and industry best practices.

We install or replace 200 meters annually as well as perform an average of 1,500 labor hours of meter maintenance.

Key changes from the last budget include converting two limited-term employees that expire in 2027 into full-time meter technician positions to sustain ongoing manual meter reading, validation, and critical AMI system support functions.

In addition to reading isolated meters, these positions perform field-level troubleshooting, maintenance, and issue resolution for AMI hardware and communication components to ensure accurate billing, system reliability, and timely leak detection.

It renews two limited-term employee maintenance aid positions to sustain Bellevue Utilities' long-standing workforce development program.

This program provides a structured entry pathway into utility operations by training and evaluating candidates across water, wastewater, and stormwater systems, creating a reliable internal pipeline of qualified applicants for critical full-time skilled worker positions.

We are increasing electric utilities budgets for water and sewer funds by half million dollars to account for pass and expected rate increases from Puget Sound Energy, and increasing overtime budgets for all three utility funds by $800,000 to support a change in our recent labor agreement.

The wastewater OM function is responsible for ensuring a healthy environment by collecting and conveying wastewater away from homes and businesses to the King County Wastewater Treatment for Treatment.

Our sewer OM activities are categorized into four primary programs: condition assessment, preventive maintenance, and corrective maintenance, and pump station maintenance.

The condition assessment program assesses the inside condition of sewer pipes and identifies defects and needed repairs using video inspection equipment.

We inspect on average 8% of the system annually, completing assessment of the entire 640 miles of sewer mains every 12 years.

In addition, asset management uses this information to inform the CIP and RR funding model.

The preventive maintenance program provides regular cleaning services of the sewer collection system to ensure lines are kept clear.

The goal is to minimize blockages, service interruptions, and ultimately claims.

We target cleaning approximately 20% of the sewer collection system annually.

The corrective maintenance system or sorry, corrective maintenance program repairs sewer mains, maintenance holes and laterals in the right-of-way.

Crews perform an average of 125 repairs on sewer main lines, laterals in the right-of-way, and maintenance holes annually.

The goal of these repairs is to extend the service life of the system segments and minimize service interruptions.

The pump station maintenance program provides for regular maintenance of the city's 47 wastewater pump stations to ensure continual operation, minimize failures, and wastewater overflows.

Regular pump station maintenance includes a minimum of a monthly inspection and cleaning of the wet wells at all wastewater pump stations, as well as regular service and repair of multiple pumps at each station.

Key changes from the last budget include extension of two LTE skilled worker positions for approximately three years to complete AMI upgrades for two approximately 2,000 remaining customers.

These customers currently require bimonthly manual reads and receive reduced service levels.

Completing upgrades eliminates approximately 12,000 annual meter manual reads, enables daily usage visibility, supports leak detection alerts, and ensures equitable service across all customers.

The sewer utility budget also includes the adjustment for overtime and electric utility costs as mentioned in the prior slide.

The storm and surface water OM function is responsible for protecting public and private properties from flooding and pollution through management and conveyance of surface water drainage.

We do this by maintaining a complex system including 400 miles of pipes and 360 detention facilities, as well as 80 miles of open streams and 864 acres of protected wetlands.

This represents a mix of the built and natural environment to convey storm and surface water to our surrounding lakes.

Surface water management is performed under environmental regulations from the State Department of Ecology and federal legislation such as the Clean Water Act, which includes the National Pollutant Discharge Elimination System, or as we call it, NPDS permit, and the Endangered Species Act.

Much like sewer, there are a mix of condition assessment, preventive maintenance, and corrective maintenance repairs.

Our condition assessment program uses video to identify condition and defects of storm drainage pipes to prevent repair, or sorry, prioritize repairs and inform preventive maintenance schedules.

Asset management also uses this information as a component to inform the CIP and RR funding model.

We currently inspect over 20 miles of storm mains annually.

This represents approximately 5% of the system viewed on an annual basis.

Our preventive maintenance programs maintain the surface water conveyance system by working to keep the system free of debris and sediment.

In addition, we utilize multiple facilities that trap oils and other pollutants from roadways before it reaches the city's streams and lakes.

We use vacuum trucks to remove sediment and pollutants from these facilities.

The work is performed under the mandate as part of the NPDS phase two permit, which is enforced by Washington's State Department of Ecology.

Finally, our corrective maintenance program includes repairs and installation of public owned portions of the drainage system.

Again, the majority of the maintenance repair activities are mandated by the NPDS.

These repair activities include catch basin rehab and correcting pipe deficiencies identified by the condition assessment program.

Key changes from last budget include consolidation of operating budgets related to two part-time positions to support one full-time environmental scientist position in the engineering department.

This change is a budget and operational efficiency that is expected to broaden the scope of work provided by the department at a lower operating cost compared to today.

Our water quality and pollution prevention proposal funds the work done by a team of highly technical program managers that provide in-field subject matter expertise across six specialized regulatory compliance programs.

Bellevue's drinking water is regulated by the Federal Safe Drinking Water Act, with Washington Department of Health having the lead on regulating and implementing the Safe Drinking Water Act.

Major areas that include the lead and copper rule, coliform monitoring, and the disinfection byproducts rule.

To protect the public health, utilities conducts 150 routine coliform bacteria samplings per month throughout its service area.

Additionally, under the disinfection byproducts rule, 12 samples collected quarterly to verify that our water is fresh and of high quality.

This program also produces the annual drinking water quality report that is published every summer.

The surface water compliance with the federal NPDS is a federal Clean Water Act requirement overseen by Washington Department of Ecology.

It requires municipalities to implement a citywide stormwater management program to protect the water quality of our lakes, streams, and wetlands.

We have two compliance programs administered under our permit, including illicit discharge response program and our source control program.

Finally, we administer three private utility systems programs, including cross-connection control, private drainage inspection, and our FATS oils and Greece program.

Our approach to these programs is to bring about high compliance rates through strong education and awareness efforts.

Once our customers understand the why and the benefit of these programs, by partnering with our customers, we are better equipped to ensure these programs are successful.

For cross-connection control, the Department of Health requires programs work to protect public health by preventing backflow contamination of our drinking water supply.

Backflow assemblies installed in businesses and homes use check valves to ensure that non-potable uses of water supply don't backflow into the potable drinking water.

These devices are required to be tested annually to ensure the continu they continue to protect the drinking water supply.

Common examples include heating boilers, fire sprinkler systems, and lawn irrigation systems, but there are many others in commercial use.

For our private drainage inspection program, inspection and education to our commercial customers with privately owned storm catch basins and detention facilities in need of maintenance and/or cleaning, reduces pollutants and surface water.

We have approximately 1,500 PDI sites in Bellevue, and we inspect about 700 annually.

Finally, our Fat Soil and Grease program is to reduce sewer blockages and overflows due to grease buildup in the sewer collection system, which is about 600 plus sites and increasing.

This program works to educate our restaurants on ways to reduce fat soil and grease discharge, which can result in blockages both to our customers and in the public sewer maids.

With that, are there any questions on the operations and maintenance budget proposals?

I just had one.

This is probably a math question on electricity, the prices or increases.

How are we?

Or, you know, I mean, with PSC, right?

Is that our electric?

I'm just curious what the projection is for increases just because I know we just got our bill, it's going up.

It's not usage-based.

Yes, I think in the past, over the past by NM, we saw I believe a 30% increase, and they're projecting a 15% increase in the 27-28 years.

Okay.

So, and compounding, so that's it is painful.

That's a lot.

Yeah, and that's a big ticket item for operations.

So, and much like uh as uh Commissioner Margolis brought up, that's external.

We don't really get to control that.

Yeah, yeah.

Okay, thank you.

Thanks, Shed.

I'll start by reviewing the engineering development services proposals.

The utility department is responsible for working collaboratively with the city's development services department plus the transportation fire department to support economic development and ensure that quality public infrastructure is designed and built by the private sector and other governmental agencies for current and future generations.

Because this infrastructure will be owned, operated, and maintained by the city.

We want to ensure these projects are designed to meet Bell V's engineering standards as well as local, state, and federal codes and regulatory requirements, and are built with high quality.

There are no changes except for general inflationary increases.

I'd like to highlight some important aspects about each of these proposals, which adds up to about 5.4 million and includes about 15 staff.

The next four slides will highlight each of the proposals shown in the pie chart.

The information delivery proposal is highlighted in the chart, and the proposal supports staff work to provide development customers with information regarding properties, projects, codes, and standards.

Plan review and inspection procedures, development records, permit processes, timelines, and fees.

The customer service activity allows our customers to interact with our staff every day to obtain the information they need to do business with the city.

Our goal is to provide information in a timely and efficient manner through an in-person permit counter on the first floor of City Hall and online virtually as well.

About three and a half FTEs of staff time is devoted to this body of work with a budget of 1.3 million.

Highlighted next is the policy code and consulting services proposal.

This supports the implementation of city-state, and federal policies and regulations through city policy and code development, as well as making updates to standards and procedures.

This function of Utilities development Services provides resources to meet community needs by implementing strategic growth plans such as the Wilverton and Bell Red neighborhoods and delivery of council's vision for affordable housing, economic development, and environmental stewardship initiatives.

This proposal covers staff time and outside services for code policy development and implementation.

The budget of 0.7 million includes 1.6 FTEs.

The review services proposal provides for engineering review of project applications and design submittals from private developers and other agency customers.

Our staff review and permit the water, sewer, and stormwater infrastructure elements of this project that Bellevue will own, maintain, and operate when completed.

I'll stress that this is a critical function of the utilities development review section as a careful design reviews and working with the developers and their engineers, ensures that thousands of development-related utility designs meet the city's engineering and quality standards, while our review staff also provide excellent customer service to the development community.

This work is budgeted at 1.7 million, includes 4.6 full-time employees.

The last of the development services pieces is inspection services.

The proposal provides for utilities construction inspection on all private development and other agency projects where our utility infrastructure is being built.

Our construction inspectors ensure that utility projects built by development contractors are quality built to perform as intended for generations of residents, business owners, and community members.

This proposal has a budget of 1.6 million and includes 5.9 FTEs.

Okay, next we have CIP support, which includes three major budget proposals need to ensure continuity of utility services now and into the future through delivery of the utilities capital improvement program.

As you can see in the overview on the left, Bellevue's utility infrastructure is a major system investment worth roughly 10 billion across three piped utilities.

This updated value is based on current replacement costs in 2025 dollars and reflects the capital infrastructure renewal and replacement update we recently completed and shared with you in January.

Major elements of our infrastructure system include over 1,600 miles of pipe, 24 water reservoirs, 68 pump stations, and 18 miles of submerged sewer lake lines.

Our infrastructure is essential to provide water, wastewater, and stormwater services.

It is also aging and needs to be kept in good condition through renewal and replacement while supporting Bellevue's growth and economic development.

This slideshow shows the capital-related proposals.

This is related to but different from the six-year CIP plan that we reviewed and discussed in detail with the Commission back in April.

These proposals represent the operating transfers for our overall capital program, as well as the capital project delivery activities to support it.

For the upcoming biennium, this is a total of $179.4 million, made up of the three budget proposals shown in the pie chart.

The $111.1 million transfer to CIP shown in dark blue covers the funding for projects in RCIP over the next two years.

The light blue area shows the transfer of $55.2 million to the renewal and replacement or RR account.

This is for future infrastructure needs in all three funds.

The last proposal is $13 million shown in purple color, which funds the internal staff resources needed to deliver the CIP program for the upcoming biennial.

We have more than 100 projects spread over multiple programs in the biennual budget proposal, including projects currently underway, some of which will be completed during the next biennium, plus new projects starting up in the next year.

Since all utility rate revenues go to the operating budget, transfers of rate revenues to the capital budget is needed to pay for capital investments.

That is the reason you see proposals to transfer operating funds to the capital funds and to the RR account.

For the most part, CIP delivery staffing is housed in the engineering division, and staff perform many critical functions, which I'll highlight in the next slide.

Key changes from the last budget include the addition of one FTE to sustain and advance utilities asset management program by maintaining critical data models and decision support tools.

This position ensures accurate risk-based planning, capital investment prioritization, long-term financial forecasting to support reliable utility services at the lowest lifecycle cost.

Utilities has made significant investments in asset management tools, risk models, and long-term renewal forecasting.

As program maturity has increased, so has the need to maintain and continuously update these systems.

The position provides dedicated capacity to manage data, maintain models, and support ongoing analysis required to sustain accurate risk-based decision making across our capital planning and operations.

Additionally, this budget includes an increase to the level of RR contribution consistent with our long-term strategy for sustainably investing in our infrastructure.

As Lucy mentioned earlier, and as you heard from our asset manager's presentation to the commission in January, the utility's 75-year renewal and replacement projections were recently updated.

In all the funds, we identified the need for increases in planned investments.

In many areas driven by system needs and in all areas impacted by an in-depth evaluation and update to the current construction costs.

I'll now dive into the capital project delivery and asset management proposal.

Drawing your attention to the left side of the slide, this highlights the major elements of this budget proposal.

Internal staffing resources are needed for utilities system planning, asset management analysis, and delivery of the utilities capital program.

Our CIP projects range in size and complexity from small quick projects of 100,000 up to large, complex, and multi-year projects of much more than 10 million.

To deliver our capital projects, we engage the services of professional design consultants and construction contractors.

Bellviews project managers are the project team that leads.

As such, they perform project management to oversee the project planning and design control project scopes and manage schedules and budgets.

They manage design consultants, perform design reviews, conduct community engagement and outreach work, coordinate with other city departments and external agencies, obtain local, state, and federal permits, and oversee real property work when needed.

The construction staff perform CIP construction contract management and field inspection of construction work performed by contractors.

These are critical quality control activities, ensuring that we are adhering to state-mandated public works contracting regulations and achieving quality in the constructed projects.

Bell V's internal staff ensures that our CIP projects have quality designs, our purpose-built, high quality, meeting engineering and regulatory requirements, and can be readily operated and maintained by decades to come by our OM division.

Finally, managing the whole CIP portfolio is the work of the portfolio and budget management.

Our CIP portfolio over the two-year CIP requires robust development processes, expenditures, and schedule tracking and ongoing management.

While technically not part of the operating budget proposals, we thought it'd be helpful at this point to connect the CIP support elements of our operating budget with the six-year CIP program that was presented presented in detail to the commission back in April.

The capital improvement program is a critical component of utilities' ability to continue providing water, wastewater, and stormwater services to our customers.

It's a six-year plan that in which we invest funds into capital improvement programs and projects and is updated every two years as part of the biannual budget process.

Investing in CIP addresses critical needs for renewal and replacement of our aging infrastructure, ensures that we continue to support growth in our rapidly developing city, and provides for environmental stewardship of our watersheds, including the city's creeks, lakes, and wetlands.

For CIP projects, help help us to keep in compliance with local, state, and federal regulations, and lastly, the capital program improves the reliability of our infrastructure to support excellent utility services for our customers.

As you recall, on April 2nd, we presented the preliminary 27 through 32 CIP budget, totaling about 478 million.

Based on the most current project developments and recent bid results, costs and schedules of a few of the projects were further refined.

We have updated the CIP budget accordingly to capture these changes.

This table lays out the proposed budget for each of the funds as we presented back in April, as well as updated budget today plus the difference.

We have reduced the proposed budget by about 19 million total.

These changes were principally due to fine-tuning cost estimates and schedules for projects and six programs.

Water main replacement program.

We updated the cost estimates and schedules to line with our current project development work and reflecting recent bits.

We've got some favorable bids on our water main projects, and that results in about a 10.7 million reduction.

Reservoir rehab and replacement.

We updated project costs for crossroads north and south reservoir recoding project.

Somerset Highlands pressure and flow improvements.

We've had a scope change due to reduced improvements required to address the current problem.

So this we redefined that project and reduced the budget for that one.

Sewer pipe and repair, we've adjusted the budget by minus 0.3 million.

Sewer pump station programs and the stormwater pipe and repair replacements.

We've adjusted by about $2.5 million down.

Schedule and associated costs from several projects were refined address schedule risk and our ability to deliver, resulting from a budget appropriation shift from 27 to 28 or beyond.

So you'll see originally we had about 100 million in 2027 in the gray here, and then in blue is now our current proposed refined proposal.

We've shifted quite a bit of money just out into later years to help our ability to deliver as well as meet some of the needs of some of the projects.

So some of the larger ones are I mentioned where Somerset Highlands Fire Flow.

We shifted 5.4 million from 27 to 28 and reduced that budget.

And then also main Bower South Reservoir.

Based on when we anticipate the spend for that project to be, we've shifted 5 million from 2027 to 2028.

There's typically a bell curve with construction on large projects.

And so there's sort of a slow ramp up, then a heavy spend in the middle, and then a and then a slow decline after that.

And then there's quite a few other minor projects where we've shifted some budget from 2027 into 2028 or 2029 to help our delivery.

The updated proposed 2027 through 32 budget total is now 458.5 million.

The water fund is the area with the most investment, and the budget is about 270 million.

The sewer funds budget is about 104 million, and the Storm and Surface Water Fund is a proposed budget of 84 million.

Next, I'll highlight some of the key drivers in each of the three utilities for the proposed 27 through 32 CIP.

The water fund is the largest fund with 17 programs.

The proposed six-year budget is 270.5 million.

There's some key drivers for the proposed change.

We're continuing to replace five miles of pipe per year on average with an accelerated project programming for years 2026 through 2028 to meet system needs.

So then after that to adjust and average out of five, we're going to reduce our spend in future years.

Main Bower South Reservoir costs have increased due to increased sizing.

We've doubled the size and design development to meet our future storage needs for growth in downtown Bell Red and Wilverton neighborhoods.

Increased investments for the reservoir rehab and replacement, including the addition of crossroads north and south, and an early start on the Somerset 2 water pump station project.

For the 27 through 32 wastewater budget, CIP budget is about 104 million, which includes funding for 70 projects and 12 programs.

The key drivers of these proposed 27 through 32 sewer utility include increased funding for major rehabilitation and replacement and nine water wastewater pump stations and minor rehat rehab at six pump stations and sewer pump station improvements.

Increased funding for sewer pipeline and repair and replacement.

On average, we added about 2 million per year, and added funding for design phase and first priority of the lake line replacement program.

The total storm CIP budget is 84 million.

It includes funding for 65 projects and 10 programs.

The key driver of these uh the storm and surface water CIP include new projects and flood control program and stormwater quality retrofit, increased funding for the stormwater conveyance infrastructure rehab, uh costs incurred for the stormwater emergency project, Lakemont Boulevard culvert replacement, and the Lakehurst Creek emergency culvert repair, and cost increase of the Kelsey Creek culture project.

Those are expensive projects.

The figure shows proposed 27 through 32 CIP budget by proposals, also known as the areas of investment in line with council's strategic target areas.

The utility continues to invest over 75% of the CIP for renewal and replacement at aging infrastructure, shown in blue on the pie chart.

The proposed CIP includes 65.8 million and increase of 28 million more investment in capacity for growth category, shown in orange.

This is the fund the new reservoir and associated infrastructure needed to provide drinking water storage for planned population growth in downtown Bell Red and Wilburton areas.

The proposed CIP also expands investment in the environmental preservation category by about 25 million, shown in purple.

The increases are attributed to the several new projects proposed in flood reduction and water quality improvement programs, while continuing to fund fish passage and stream improvement projects to preserve and protect our natural resources.

For some of the smaller slices of the total CIP, we have proposed budget to renovate Eastgate Yard, as well as continuing to fund for land acquisition and construction of the new North End OM facility, shown in dark blue.

We will also continue with the funding for projects that rehabilitate and improve existing groundwater wells and associated infrastructure for the emergency supply, shown in green.

Similar to the utility operations, rate revenues are the primary source of funding for the CIP.

The amount of water sewer and stormwater rate revenue is shown in dark blue, light blue and teal respectively.

We've also received funding from the King County Flood Control District for some of our flood mitigation projects as shown in blue, as well as some planned use of the RR for storm and water CIP.

Pause and ask if uh there's any questions on this proposed CIP budget and operating funds.

I'm all for spending as much as we can and what we need.

I just want to make sure we can do it and implement it right.

So if maybe you could give us a perspective of how much we actually did in the previous year, like 25, and then what we're doing, so we can have that.

The projections are what 73 million in 2027 and 66 million in 2028.

So relative to those that's a great question.

So relative to that.

So in 2025, uh we delivered I think it was about 45 million, 46 million, and so compared to our overall budget for that year, it was about 66%.

However, uh, about 8 million of that was reserved for land acquisition for a new uh OM North Yard, and so we've had a lot of challenges with finding the right property that meets our needs for that.

Um, and so when you take that out, we hit about 75 percent of our overall expenditure rate versus our budget uh for last year.

Now, when you look at um cumulative our spend over the last five years, uh, because that gives us time to catch up when projects get delayed or if there's carry forward from previous years.

Our 20 uh 21 through 2025 accomplishment rate is 91 percent.

So, and we've been trending up for over the last 10 years, our our previous from 2016 through 2020, we were down around sixty eight percent.

Uh, and then our our next moving five year from 2022 through twenty twenty six, we're projecting a ninety-eight percent sort of cumulative of uh rate.

So we've been trending in the right direction, and and yeah, we fully anticipate we'll be able to deliver on the project.

So if we're asking for it.

Fantastic.

Thank you.

Okay, next Scott will present the staffing changes that go along with operating and capital budget proposals and talk the to the next steps in the budget process.

Um, yeah.

Okay.

Okay.

That was a failure on my part.

I didn't press the green button.

Do you want to go back?

Would you like us to go?

Can you hear us now, Andy?

I can hear you now.

Uh uh, please don't uh uh go back.

We'll we'll move forward.

Thank you.

Okay.

All right, we're in the QA final QA.

Uh go around, see if anyone has any questions.

Commissioner Ludwig.

No?

Commissioner Hayesh.

Commissioner Marcos questions.

No, all right.

Commissioner DuPertis, any questions from you?

Okay, thank you.

All right.

Um I just uh let me just ask a couple clarifying questions.

One is I s obviously we had discussions about some of the budget.

I think CIP included involves some of the lake line work.

Uh and obviously it's a six-year uh plan, so it it includes forecasting what we're gonna do with the lake lines progressively every year.

Is that correct?

Yeah, it's good the lake line program is gonna be a capital intensive and very long uh program.

And so we're just in the start of the planning stages.

So this six-year budget just starts to show some of the design.

Uh and I don't even think it incorporates any of the construction yet for any of the first parts of that program.

So we're just at the at the very beginning of uh laying out what that program's gonna look like.

Uh we're breaking sections up into reaches and talking about there's gonna be a lot of policies about um ownership and how we're gonna pay for it, and uh so there's gonna be a lot more fun discussions about that coming, but right now we're finalizing that implementation program uh plan with uh with a rec providing some recommended policy and packaging and financing uh strategies that we'll bring uh and present to the commission.

And so we're anticipating uh that will be ready by in next year, and by the end of this year, we'll it'll be ready for leadership to start reviewing.

So uh forthcoming soon, we're just a little too early on seeing the hit for that budget.

That that kind of makes sense because I was like the increase don't seem terribly significant given what I thought the price tag was going to be for this type of work.

So I do recall Commissioner DuPertis, you may recall too.

We had a quite in-depth discussion on that.

Uh I think it was two years ago during the last budget cycle.

So um uh look forward to that discussion.

Uh and then I think I don't know if any other commissioners feel it's it's of interest to them.

For me, I know you you showed a slide with the projected increase over the I don't know how many years uh for the budget.

Um for me, it might it's useful for me to also see the increase compared going backwards to the at least the last budget cycle.

So how we're going up X percentage, how much did we go up when we asked for when we went through the budget cycle last time, the prior years, yes.

Just as a comparison.

That is getting back to at least the slide that we presented that information, and you can see historically at least going back to 2025 adopted.

I know that's not very far.

I'm gonna turn the green.

I'm slow.

Yeah, yes, we can certainly provide that.

I will tell you right now that if you compare it historically uh to the next two years, you're gonna see uh a faster clip in in expenditure growth in 27 and 28, and it's going to be almost exclusively tied to the wholesale cost increases.

Um we were favorable to be seeing four, five percent annual rate increases for Cascade, and you know, four and five percent annual rate increases for for metro up until recent, which is just not the case looking forward.

Okay, yeah, and I know that that was uh a discussion even at the city council, not this one a few days ago, but last time I was there about the um increases at uh King County for the sewer treatment, because that's what we're going to present, and uh trying to figure out how we influence or what their plans are to manage the increase because we are just recipients and passing through the cost to our customers, and the customers are feeling the brunt of that without much control over how that expense.

Yeah, I mean if I can just speak briefly, and then I met with um uh King County Metro this morning, and one of their recommended strategies moving forward beginning next year, um, is they will begin uh adopting a two-year rate schedule as opposed to annually.

Um, that was at direct request of member agencies like Bellevue and and regional committees, as well as the county executive and the county council to provide some more rate predictability to agencies.

Um, and there was added discussion in that meeting this morning about making uh adopting a two-year and having what they called a soft commitment third-year rate increase.

So, just giving us uh a little more along a rampway to plan for rate increases as opposed to seeing sharp spikes in like we experienced or will experience next year.

Sure.

In a 12.75%.

Matt, is there any was there any discussion about the root cause of the rate increase and how to mitigate those?

Yeah, that cost uh yeah, yes, uh, and um, I guess the the main cost driver for King County uh ties to their capital program in response to the um sewer combined sewer overflow projects along Elliott Bay.

Um we're one regional system, even though that infrastructure lives in Seattle, we are a regional system, and so um we all contribute to the system.

Um that's a that's a very complicated capital project indicated by the EPA um with a hard deadline in the late next decade.

Um I will put a plug uh later on this year, the county will be um facilitating a regional, a second regional rate affordability summit um that involves looking at not just where sewer utility rates are going, but you know, electric, water, um, solid waste, and as a region, thinking about how we can come together uh and come up with strategies to slow the rate of growth or make it more predictable at the very least.

Um, and so as we get more information, we can share that with the commission.

Okay, thank you.

Can I ask one question, please?

One request.

So in two weeks, we're coming back here with the corresponding rate forecast um that's consistent with the budget proposals that you uh saw tonight.

Um, we are mindful of creating that content that allows you all to see the trade-offs and the rate impacts of these choices.

Um, on our minds, top of mind right now is we will be providing you all with um the month monthly bill impact for a single family customer as well as for a multifamily customer, and that's in response to the changes from the sewer equity analysis that we know there's going to be different rate growth for those customer classes.

You will also see for those bill impacts the incremental impact to each example bill from the sewer equity analysis relative to the other cost increases we're seeing from cascade and what you know.

Uh, we'll be providing a um comparison of regional typical bills.

Um, where we would stand next year relative to other um utilities in the area.

Uh and then we'll show you also the corresponding bill impact from the bill assistance program expansion.

My question to the group is um we're trying to anticipate kind of those information pieces that you all would like to see off the top of your mind and via email later on.

If there's any other dissections of the data, um manipulations information that you would find helpful in considering in your recommendation.

Um, love to hear ideas at this point.

My recollection last time we talked was that the correct me, the bills are bi-monthly, not monthly, and we asked to see that impact.

What does it look like on a real bill two months two months?

Luckily, we'll have some time to do that math.

Yeah, okay.

Commissioner DuPartis.

So I'll be I'll be candid.

You you guys are too good for this.

Well, what we're seeing is we're passing the buck for wholesale price increases.

We're not rising above it.

So you guys know the math, you guys know the facts.

You're experts in this, and the challenge is just like getting your first A on your paper.

It proves we can do it.

So we need to rise above this stuff.

Uh we need to push this into the background and provide a rate forecast for our ratepayers that overcomes the uncertainty.

If there is a working session that we need to go through the math, I'm happy to facilitate that.

Uh, but we don't need to go reading it again as uh Commissioner Long said last year or before.

But we we have to overcome this.

We are no longer in a position where we can tell our ratepayers that the we are beholden to a wholesale rate to uh uncertain wholesale rates, and that's causing variability in the rates that we're charging, and we can't provide predictability.

The fact is that we can and we should.

So go ahead, Commissioner Marcus.

Um one other thing that I'd be interested in.

I'm not sure if it fits into what you guys would present, but I'd be really curious to see um messaging.

How are you thinking about communicating this to the ratepayers?

So certainly, yeah.

I don't know if that's part of the budget approval, but it's somewhere along the lines once we finalize the approved recommendation.

We want to see what the communication is.

I understand it's different, but it's it's a piece of this that's gonna be the communication piece is gonna be really important.

Community engagement is a piece of our budget development, yes.

Okay.

As well as a public meeting is there's an ESC public meeting as part of this process as well, too.

So yeah, my uh in response, yeah, we will provide next in two weeks.

Well, it's part of the presentation kind of work we have done to date on outreach and we'll be doing uh over the next several months as well.

You know, I just string together that seems to be a common theme.

Uh, because we also heard that feedback from council on Tuesday about uh public outreach and communication.

And in fact, our second speaker tonight also talked about uh communication and households not knowing what types of tools are out there.

So I do think that's something we should probably uh zero in a bit more on uh as well.

Um, and then I'll make the same request.

Uh, not since we tonight we're talking about budget, but when we talk about the rates, I'd love to also see the rate increase compared to you know, last five years or something.

Um, because the ratepayers don't come to these meetings, they don't hear all the what goes in it.

They just know, hey, my bill went up X percentage, and that's all they see, and then they're gonna have a reaction to it.

So I think it's useful for us to see what they're looking at.

Thank you.

And what a wonderful opportunity to talk about the rates in the next two years will be going up this amount of percentage, and we have an expanded ratepayer assistance program.

So those two messages can be messaged together.

Sure.

All right.

Any other comments from the commissioners?

If not, then uh let's move on to second to last item, which is review of the commission calendar, Joe.

Thank you.

Uh just wanted to comment and give appreciations to the ESC for the work done uh the last couple of months.

There have been multiple meetings the last couple months, so we recognize that it's a lot of work to get through all this.

Um a couple comments on uh we will be back on the 18th with the revised rate forecast as noted.

Lucy and Scott both did a great job walking through the calendar.

So I'm not gonna spend a lot of time on it.

Um, but I did want to highlight the fact that the ESC will be making a recommendation on the proposed changes to the utility connection charges.

So we've met on that a couple of months ago, and we'll revisit that looking for a recommendation.

Um, and then July 2nd again uh the budget recommendation of to the city manager from the ESC.

Um we just touched on uh public outreach.

We will have a public hearing in September.

So I'll highlight that as well.

And then finishing out the fall, you know, in November uh final uh adoption of the budget will take place, and then council, just jumping down here.

Um as you know, the bill assistance just went to council earlier this week, and then in July, the Cascade uh water alliance will be coming with the budget rates of the in the Cascade water Supply Program.

I will leave it at that.

Um we'll have a recess in August on the ESC calendar.

Um any questions, we can take them now.

But it's uh as I say every time it's a full year, so thank you for your work.

Thank you, Joe.

May I have a motion to adjourn?

Oh, Commissioner Departis.

Second motion.

Oh, thank you.

Okay.

So I'll assume I make it been you made the motion.

Okay.

Very good.

Uh it is 8 09 and the meeting is adjourned.

Thanks.