All right, thank you.

Not yet.

Someone calling it?

I thought that the guy heard where I have said that.

Like that picture of the city hall.

I took that picture myself.

Other cactus is there.

Yeah.

Oh text message.

Hello, lady.

Good evening.

No.

Hi, good evening.

Welcome to the Eloy City Council work session.

The date is Monday, April twenty eighth.

Time is approximately five PM.

Madam Clerk, may I have a roll call, please?

Councilmember of Altraska.

Here.

Councilmember Curtis.

Here.

Vice Mayor Tarango.

Here.

Councilmember Schneider, excused.

Councilmember Garcia, excused.

Councilmember Galindo, excused.

Mayor Sutton.

Here.

Thank you.

At this time I'd like to stand for the Pledge of Allegiance.

One nation under God, individual with liberties and justice for all.

Okay, do we have any unscheduled public appearances?

Okay, item number five on discussion items.

I'm looking for a Dan Jackson.

Hi, Dan.

Oh, Brian.

Good evening, Mr.

Mayor, members of the council.

Um tonight, uh Dan Jackson is here from Will Dan to present the council with a um a rate study for water and wastewater.

Uh this presentation this uh rates study back in um it was September 2024.

We brought it to council to um initiate the contract with uh Will Dan.

At that time, back in about two thousand twenty-two when the council adopted the water wastewater uh five year rates study.

Uh council at the time directed staff to uh do like a little mid-view review to make sure rates were meeting the marks of everything.

So that's how we came to the point of getting uh Will Dan to come back out and do a uh rate study.

And upon this rate study tonight, what you'll hear for this workshop is um kind of where we're at um the how the rates are looking, how it's compared to other communities, um, really diving into our capital improvement plan when it when our how our rates are gonna be looked at.

Four scenarios are presented to council tonight.

Um, and so he'll go over each of those.

Um staff is here to address any of the questions that uh Mr.

Jackson may not have, but at this time, just uh without further ado, I'll let uh Dan begin the rates study on this, the presentation.

Thank you, Mayor, members of the council.

My name is Dan Jackson, vice president of Will DAN.

Um I have had the privilege of being the City of Eloy's water and wastewater rate consultant for going on 20 years now.

I've done several studies for the uh city over the last 20 years.

I've gotten to know the city, its residents uh and its uh governmental system very well over the over the last uh two decades, and I really appreciate the continued confidence that you have uh in myself and in my firm.

Um, as uh Mr.

Wright indicated, tonight we're going to do a hopefully relatively brief presentation outlining the findings of our latest water uh and wastewater rate study.

Um rates are much more than just a financial decision.

The rate decision is as much a policy, community and social decision as it is a financial one.

Therefore, the decisions that you make with regards to what projects you want to finance and how you operate your system are going to have a major impact on what ultimately your rate plan is going to be.

It is always an objective of any city to try to keep rates as low as possible.

Everybody wants lower rates, nobody wants to pay more for anything at any time for any reason.

But the properly managed utility is a utility that m that balances the desire to keep rates low with the need to invest in your system to ensure that you have a high and acceptable level of quality to your ratepayers.

Um I do work for about 40 cities here in the state of uh Arizona, even though I'm from Texas.

Um of the cities I work for have incredibly low rates, but they have low rates because they don't put any money into their system.

So is that really a good way to run a system, keeping your rates low while letting the system deteriorate?

Not necessarily not necessarily.

But that being said, there's a lot of variation in how much you spend in your utility in order to manage it properly.

And that's what we're going to go through in this hopefully well, hopefully brief presentation.

I'm going to start out by talking a little bit about your rates in general.

Then I'm going to talk about your customers and volumes, and then I'm going to talk about your current and forecast cost of service.

In other words, how much water are you producing and how much does it cost you to produce that water?

Then we'll present the proposed rate plan under four different capital improvement financing scenarios.

And then we'll summarize by just talking about the next steps in the process, because the the development and the adoption of a new rate plan requires adherence to state laws, and I'll go over that real briefly at the end of the presentation.

So whenever I do a presentation like this before either the city of Eloy or any other city in Arizona, I always like to start out by talking a little bit about the industry in general.

Water and sewer rates are going up all over the United States.

The American Waterworks Association forecasts that water and sewer rates are going to triple in the next 15 years.

And why is this?

Well, remember, you try to run your water operation like a business.

In other words, you want the revenues from your rates to cover all the costs of providing that service.

And guess what?

Like any other business, your costs are going up.

Heck, cost of everything goes up by at least 3% a year just due to inflation.

But other factors like the need to invest in your system and the need to replace assets are further causing your rates to go up even more.

The average water and sewer utility has been raising its rates by at least 5 to 6% every year.

And that trend is expected to continue.

Now, one of the things that we're going to do in this presentation in the next couple of slides is I'm going to do a comparison of what people in Eloy pay as opposed to what people in other cities here in Arizona pay.

But keep this in mind.

30 to 40% of utilities right now charge rates that do not cover their costs.

So just because a neighboring utility's rates are lower than yours, that doesn't necessarily mean that they're running a more efficient operation or that they're smarter or anything like that.

It may very well mean be that they have decided to subsidize their rates with their general fund.

Now it's not illegal, but it's not necessarily a good financial policy.

So keep that in mind.

Okay, we've talked a little bit about the industry in general.

Now let's talk about the city of Eloy specifically.

As Mr.

Wright indicated, you did adopt a multi-year rate plan in the year 2022.

The idea of the was the rates was to be affected with automatic rate adjustments over five years.

Well, that rate plan was based on a forecast.

A forecast is not a guarantee, it's a prediction based on a series of reasonable estimates.

So the purpose of today is to see where we are as opposed to where we thought we would be in 2022, and see if we need to recommend any changes to the existing rate plan.

Well, one of the key changes that has occurred is that the cost of your capital improvements has gone up significantly in the last few years.

Now that's a phenomena I have noticed with cities all across the country.

Capital improvement costs are going up at an alarmingly high rate right now.

The latest estimate from your engineers is that it's going to cost you as much as $95 million in water and sewer capital improvements over the next five to ten years.

Believe it or not, that number is not out of proportion to what I see with other utilities.

The costs, it costs millions of dollars to build a water and sewer system to push water through your streets to get it to your ultimate end users, and to ensure that whenever anybody wants to get a drink of water, if it's even if it's at 3 o'clock in the morning, they can still do it.

That costs an awful lot of money to build, and it costs a lot of money to maintain.

All of these factors above is causing you to have to reassess your rate plan, as we're about to see.

Okay, just a real background here.

What do people pay for water and sewer service?

Well, if you're a water customer, you pay for your water service in two ways.

You pay a monthly minimum charge, and then you pay a volumetric rate for every thousand gallons of water you use.

Most customers right now pay a minimum, a minimum rate, the charge of $21.52.

And then they pay a volumetric rate of $3.44 per thousand gallons for the first 10,000 gallons.

That rate goes up to 431 for between 10 and 20,000 gallons, and it goes to 538 for above 20,000 gallons.

This is what's known as an inverted block rate, is an intended to encourage conservation.

The more you use, the more you pay.

That gives you a financial incentive to use as little water as possible.

On the sewer side, residential customers play pay a flat charge of 40 a month.

Commercial customers pay a minimum charge and a volumetric rate.

Now I think the key question a lot of people ask is well, how much do I actually pay for service in a month?

Well, the average customer here in the city uses about 7,500 gallons of water and sewer service in a month's time.

That average customer pays about $87.57 for that $7,500 gallons of water.

This chart right here compares charges for $7,500 gallons in Eloy with other communities here in Arizona.

As you can see, your rates are right about where you'd expect them to be.

You're higher than some, you're lower than others.

You are a little higher than cities like Coolidge and Sholow and Benson, and you're a little lower than cities like Wilcox and Florence and Murana.

In other words, you're right about where you would expect to be.

Now, the purpose of this chart is not to say, well, you know, if we're lower than other cities, then maybe we ought to raise our rates.

No, that's not what we're saying.

The idea is to answer the question of whether or not people in the city of Eloy pay a disproportionate amount for water and sewer service per month when you compare them to other cities.

And obviously the answer is no.

You're not, you're right in line with what others are paying.

Okay, let's just uh give a little bit more background on the system here.

Right now you have about 2,900 water customers.

To no great surprise, the vast majority of them are residential.

Only about five to ten percent of your customer base is non-residential.

On the wastewater side, you have about 1,900 wastewater accounts.

This chart right here shows what the usage level is in it in a typical year.

In the past year, you sold about 411 million gallons of water.

About 55% of that went to residential customers.

What's interesting is that only about 5 to 10% of your customer base is non residential, but they used about 45% of your total water.

So you've got a pretty healthy commercial or non residential usage level here in the city.

Okay.

As I said, when we did the study in 2022, and then when we did this update here in 2025, we based it on a 10-year forecast.

Forecast is not a guarantee.

It does depend on a series of reasonable assumptions.

One of the key assumptions is how much growth is there going to be in the city.

In my long period of service for the city, there's been a lot of speculation about how much growth there's going to be coming to the city.

Well, when you do a financial forecast like this, you always try to be as conservative as possible with your growth estimates because you don't want to depend on accounts that don't exist yet.

So it's better to aim low and hit high than it is to aim high and hit low.

So for that reason, we're recommending or we're assuming for the purposes of the study that growth is going to continue to be fairly fairly nominal over the next 10 years, 50 to 60 new accounts per year.

You can see that we're projecting that your current water accounts of 2900 are going to go up to about 3400 by the year 2034, and your wastewater accounts are going to go to about 2,000 by the year 2034.

That's about a 1 to 1.5% per year growth rate.

Water usage.

Well, water usage tends to vary a little bit based on the weather.

Obviously, in wet years, people are going to use less water, and dry years are going to use a little bit more water.

In the current year, you've used about 411 million gallons, which is a little less than what you used in 2024.

But we're projecting that that's going to modestly increase over the next decade.

Now, in reality, what's actually going to happen is some years it's going to spike, other years it's going to dive just due to weather.

But on average, we're anticipating that growth is going to nominally increase over the next 10 years.

Okay, we've talked about your customers.

Now let's talk about your costs.

What are some of the assumptions that we used in our cost model?

Well, first of all, we assume that most expenses that you incur are going to increase by about 3% a year.

Reasonable to assume inflation rates 3%, so all those costs are going to gradually increase over the next uh 10 years.

But our forecast model has the ability to take every line item in your budget and forecast it based on what we call an accelerator.

And there are certain expense items that are probably going to go up at a rate a little higher than inflation, like chemicals, utilities, gas and oil, workers' compensation.

We're anticipating that all those costs are going to go up.

Health benefits, they're all going to go up at a slightly higher rate.

So we've built that into the model also.

However, your electricity costs, by and large, are going to dip a little bit because of your so the solar panels that you all have installed.

That's been a benefit, and that's going to offset a little bit of your costs.

We are anticipating that you're going to add some additional personnel over the next 10 years, and we've got that built into the model as well.

Plus, your Central Arizona project and your Central Arizona groundwater replenishment district costs are forecast to increase as well.

They put together a forecast that they gave to us that we have been able to incorporate into our forecast.

As you can see, your CAGRD costs are going to expect to go up 3% to 4% a year, as are your CAP costs.

So those costs are built into our long-term forecast as well.

Now, while it is reasonable to expect that your operating costs are going to go up nominally over the next 10 years, what's really driving the bus in terms of what your forecast costs are going to be are going to be your capital investment in your system.

Now those costs can vary a little bit.

One of the key challenges any utility faces is reconciling the need to invest in your system with the willingness of your ratepayers to pay more.

And so that's a balancing act.

We have looked as was indicated earlier.

The engineers have indicated that as much as 95 million dollars of capital projects are going to be necessary in the system.

That doesn't necessarily mean that you have to spend 95 million dollars.

How you finance it, that is going to be a combination of a lot of different factors from non-rate fees to uh to uh unrestricted reserve, but also it is gonna involve the issuance of additional debt.

So what we've done is we presented you four different scenarios based on the amount of investment you choose to make in your system.

The first scenario assumes that you issue capital improvement related debt of 13 million dollars.

That's our base scenario.

The second scenario assumes that you issue 23 million dollars in debt to fund capital improvements.

The third scenario assumes that you issue 33 million dollars in debt.

And the fourth scenario assumes that you issue $63 million in debt.

So this isn't rocket science.

The more you invest, the more debt you issue, the higher your rates are going to have to go.

And that becomes a policy decision on your part as to how to balance your capital investment needs with the willingness to impose higher rates on your ratepayers.

So this relatively colorful chart right here tries to show you the impact of the four different scenarios.

What you've got is you've got a bar chart here, a stacked bar chart that shows the forecast operating and capital expenses over the next 10 years.

The green portion is your cap water costs, and that kind of goes up nominally over the next 10 years.

And then the orangey part is your current debt.

So all of those costs are pretty expected.

Now we get into the future debt, and that's what is going to be the big indicator of what your rates are ultimately going to be.

Under scenario one, your future debt increases your cost of service from $5.3 million in the current year to $7.5 million a year by the year 2034.

It goes up.

That is the debt service to fund $13 million of new debt.

Now, if you want to fund $23 million of new debt in scenario two, your total cost of service goes up to $8.1 million a year by 2034.

That's the gray portion.

You can see it's more debt, higher cost of service.

Scenario three is $33 million in debt, and then your cost of service goes up to $8.7 million a year.

And then the fourth scenario, which is $63 million in debt, your total cost of service goes up to $10.6 million a year.

So we see the impact of the four scenarios.

The more debt you issue, the higher your cost of service, and the higher your rates have to be.

So let's take a look and see what our four rate plans are.

Let's look at the first scenario.

This is the first scenario where you issue $13 million in debt.

We call this the status quo or base scenario, because under this scenario, you would not need to change the rate plan that you currently have into effect.

You implemented a rate plan in 2022 that had rate adjustments automatic in 2022, 23, 24, 25, and 26.

You have the 2024 rates in effect right now.

Adopted an 11% across the board increase in water and wastewater rates in 2025 and in 2026.

If you go with scenario one, you would not have to change either of those rate plans.

So your rate plan as it exists today would be good through November of 2026.

It would then require you to do an adjustment in November of 2027 of 9% across the board, 3% in 2028, and 3% in 20 uh in 2029.

So under scenario one, the current rate plan stays into effect in effect, and then you would need additional adjustments in 2027, 2028, and 2029.

Now, let's assume that you decide to do scenario two where you tack on an additional 10 million dollars in debt to fund additional capital improvements.

Under that rate plan, you would have to adjust your water rates to a 13% increase in 2025 and a 13% increase in 2026, a 13% increase in 2027, and 4% increases in 2028 and 2029.

The good news is that the wastewater rate plan would not have to change.

It would stay the same.

It would continue to have the 11% increase in 2025 and 2026, followed by an 11% adjustment in 2027 and 3% adjustments in 2028 and 2029.

Now the good news is I'm going to show you a comparison, a scenario comparison slide in a couple of minutes.

Let's take a look at scenario three, where you did a $33 million in debt.

Under that scenario, your water rate adjustment would have to be 14% in 2025 and 2026, followed by 12% in 2027, 10% in 2028, and 6% in 2029.

The wastewater scenario, once again, you would not have to change from the current plan, stays at 11% in 2025 and 2026, and then 11% in 2027 and 3% in 2028 and 2029.

Then finally, if you decide to do the fourth scenario and go for 63 million dollars in debt and basically fund everything, you would have to do 18% water rate adjustments in each of the next three years, followed by a 16% adjustment and a 14% adjustment.

And you would have to do 11% across the board adjustments in for wastewater.

Okay, that's a lot of numbers.

What does it mean in terms of what the impact would be on ratepayers?

This I believe is probably the single most important chart in the entire presentation.

Because this shows you the impact on an average residential ratepayer who uses 5,000 gallons of water service a month.

That customer who uses 5,000 gallons a month right now pays 78.96 cents a month for that service.

Under the current plan, that customer's bill is already supposed to go up 11% in 2025 and 11% in 2026.

That's scenario one.

And then their bill would go up by 7% in 2027 and 3% in 2028 and 2029.

If you went with scenario two where you increased your amount of debt by 10 million dollars, your 11% increases would have to be 12%.

It'd be about an extra dollar a month.

As you can see, that customer pays $78.96 a month.

Under scenario two, it would go up to 88 dollars, whereas it was 87 in scenario one.

So it's only an extra dollar.

And it's only an extra dollar in 2026.

And then you'd still see higher increases in 2027, 2028, and 2029.

If you did scenario three, now your increases be a little bit higher, it'd be 12.5% in 2025 and 12.5% in 2026, followed by 11% in 2027, 6% in 2028, and 4% in 2029.

And then finally, in scenario 4, you're looking at double digit increases in each of the next five years, which you'd have to do because you're fun, you're funding $63 million in debt for your system.

This the slide just shows the same impact at 10,000 gallons a month.

And as you can see, same basic percentage increases.

So once again, the key here is to look and see how much you're willing to invest in the system and compare that to how much it would mean the ratepayers would have to contribute to your system.

So you'll be happy to know I'm in my last slide now.

And I do want to mention a couple of things.

Look, obviously, it's never an easy thing to do to ask ratepayers to pay more.

Nobody wants to pay more for anything.

But kind of keep this in mind.

First of all, the contributions you're asking from your ratepayers is going to be for money that's going to go directly back into the city of Eloy.

The rates that you charge your customers are going to be used to invest anywhere from 13 to 63 million dollars of investment in the future of this city.

So while it's not easy to ask ratepayers to pay more, what they're really doing is investing in the future of the city of Eloy.

So now the question just simply becomes how much do they want to invest?

And how much do you want to invest in ensuring the highest level of quality in your system?

That's what we're asking the council to consider, looking at these different four options and deciding which of those options they believe is in the best interest of the ratepayers.

Once you decide what option is best, then you would have to under uh undertake the process mandated by state law 9511 to institute a rate plan.

What that means is you'd have to pass a notice of intent.

The city council would have to pass a notice of intent to adjust rates.

60 days later, you'd have to do a public hearing where you get to have me come back and say this all over again, which I know you can't wait for.

But you would do a public hearing where you uh would solicit input from your ratepayers, and then after that you would make a final decision on the rate plan.

The rates that we're talking about would not be going into effect until about the November time frame.

So it was done with the expectation that it would give you enough time to undertake the state process to uh rate uh raise the rates.

But the bottom line is that I know there's a lot of information for you to look at, but the but the decision is a pretty simple one.

That is how much investment do you want to make in the future of the city balanced against how much you're asking your ratepayers to contribute?

So that's what I hope that this presentation will help enlighten you with.

With that, I'd be happy to answer any questions you have at this time.

Can you go back to the comparison slide, please?

This one?

Yes.

Because the slide before that, when we had the increase in percentage, I thought that was going to be a whole lot higher.

Like for instance, on scenario three, going from 7896, going from 8765 down to 88.

And that could 33 million dollars into our system.

Right.

And it does, as you can see, by the time you get to the fifth year, um, you're up to 124 a month as opposed to 118 under scenario four.

It just phases in a little bit longer because part of the part of the rationale is that you're not going to issue all the debt at once.

You know, you're gonna issue it in stages.

And what that does is by issuing it in stages, that helps you minimize the rate increases because it means that the principal and interest won't be due for another couple of years.

So that helps it kind of ease it in a little bit more.

Anyone on council have anything?

All right.

Yes, thank you, Mayor.

Um, first off, I want to say is I thought this was about future rate increases, not increasing the rates we were already increasing even more.

So I guess that's where I'm a little bit confused, because that was a question I think some of us asked about this new rate structure.

Um only half of us up here pay all of these increases.

Um I pay water, wastewater, and trash because I live in Eloy proper.

Um, and so that I that's more of a question, I guess, for city staff, not for you.

Again, I thought this was about what we were going to be looking at in 27, not asking to come back for more increases at the end of this year.

So I guess that's not really a question, that's a statement.

So Mr.

Mayor, Vice Mayor Trango on that.

So our current rate plan right now is the I'll just go back to oops this slide.

So on this, just going right here on scenario one.

Our current one calls for issuing debt of up to $13 million in 25-26.

So that 11% is your scenario one, which means no we're we we have capacity right now in our current rate structure of issuing up to $13 million in debt.

Scenario two would give us an additional 10 million dollars moving into the 27, 28 or 29 year.

So it is looking at the future.

If we since we brought this forward to council over three years ago when we issued the five-year rate increase, at that time, the rate plan that uh was presented or the capital improvement plan presented to council was about $13 million.

They funded the whole $13 million as part of the rate structure to where we're at today with our rate plan.

Since that time, a change of public works directors, staff.

We've developed a much more forward thinking of how our water system, you gotta think everything out there with our water system, and that's where we've come up with a much larger CIP.

So when we present it to council, this is what we're looking at expanding uh water and wastewater out to areas that could be for growth.

That's that's looking at that.

That's part of the rate structure.

So this is kind of the forward thinking of scenarios two, three, and four is looking beyond what we're at currently.

If council goes through and says, you know what, we're happy with our current rate structure, the 11%, and that's for the next two years.

Scenario one would still cover that.

It just scenario one allows us to look at all the cost increases over the last three years with inflation that the current rate study didn't take partake in.

And that's kind of expanding on that.

So staff's thought was bring this forward.

If council agrees or likes one of the rate structures, we would then amend our current resolutions with a new five-year resolution for water and wastewater.

So it is kind of one that we're still bringing, we're still looking at for our capital because things change the dynamics within our our rates, our capital improvements, and just the maintenance of our systems from the nitrates to you know the wells, you know, headworks, uh, what we're doing out out uh with growth.

It's come on to where there's a lot of air uh a lot of thought of let's I'm gonna use Batagula Road of out here with Esperanza.

If to kick that off, we would need to invest in expanding our sewer line.

That wasn't part of the last rate study, so we're bringing it part of those capital improvements, so it's all looked at and thought of with it.

So it's kind of the a mix that it does.

We do look at the beyond, and that's what scenarios two, three, and four do.

And we're just giving those different scenarios to council.

So you said the average water user here in Eloy uses 7500 gallons, yet you used a 5,000 gallon um example for the increase.

Why is that?

Why wouldn't you have given it?

Yeah, I used a five and a 10,000.

So to try to get the range, because um, I could have used the 7500, it might have been that might have been a more appropriate to look at.

But I wanted to show that what it really meant was for the vast majority of ratepayers under this plan, um scenario one would be an increase of somewhere around eight to ten dollars a month.

And that's but you see, it's it's eight dollars a month under five thousand, and it's ten dollars a month under ten thousand.

So that means it's somewhere around eight to ten.

You know, in retrospect, maybe I should have used uh 7500 that might have been a more appropriate uh comparison.

And the next time I come back for the public hearing, I'll probably do that.

Why are we not compared to the apple?

Yeah, also keep in mind if 7500 is the average gallonage, that means anywhere between 70 and 75 percent of monthly bills will be 7500 gallons or less.

If the average is 7500, because what it means is you have users who use more than 7500, but not that many of them, and that pulls the average up.

So the 7500 feature says that this means that the majority of bills are gonna be that amount or less.

This might be a Brian and Matt question, but um the so I I get the numbers, they all make sense.

Thank you for that presentation.

The 13 million debt, is that something we're already planning on spending right now in our current budget?

And then the other scenarios, what additional, like I know you said you know, forward thinking into the future, but what exactly are we saying we're gonna be taking out 23, 33, 63 million dollars in debt to fund, like what actual improvements need to be made to our system to spend this vast amount of money?

I'll answer the first part of it.

Uh Mayor Sutton and Councilmember Curtis is so the the 13 million going in the 2526 budget.

Yes, it's programmed in that budget to go to WIFA, go to another, you know, GATA USD of funding source to seek up to 13 million dollars in uh for new for debt.

So we are moving that in the 2526 because our rates that we will be moving forward will support that debt limit.

So moving into the 2526, yes, we will be seeking up to uh the 13 million in in uh debt obligation for based upon our rate study that we already we currently have.

And then the your other question, I'll let Matt talk about some of the the things that uh you you asked.

Brian, do you want to talk about the 13 million on top of the or I'm sorry, the 23 million on top of the 17 million that were already committed?

Well, yeah, so in our 2526, we have the uh $13 million obligation, but we're also transferring because part of uh in the 2526 budget, we had some ARPA money that we're that's been in the general fund that we're transferring over.

So we're actually using um on the water side on the wastewater side, it's around 9.4 million that's coming from the general fund on improvements that is not affecting rates.

uh $13 million obligation but we're also transferring because part of uh in the 2526 budget we had some ARPA money that we're that's been in the general fund that we're transferring over so we're actually using um on the water side on the wastewater side it's around 9.4 million that's coming from the general fund on on improvements that is not affecting rates and then another I want to think I say it's about 1.9 million that is on the water side that is then is part of the ARPA money that is going to be used for water improvements those so that that's almost about oh what are you gonna say about 11 million dollars that's not affecting rates then we are also using um some of the fund balance within water and sewer to complete additional projects on that that aren't part of the rates because those are things that have were in place that were not part of the analysis of the rates study in the past and some of those projects that are that we're talking about is the uh gravity main from the plant to 11 mile corner and then Marlowe shoes water project then you have uh design starting designs for some um um water expansion out on Sunland gin we also have um it's gonna be brought forth in the budget is we talked about paying off some of the debt you know some general fund contributions to reduce that it's part of Dan's thing about that debt kind of sliding down in the future um let's see which one was that this slide right here where it showed the on that yellow orange but kind of decreasing that's because that's when a couple of those debts mature and are off our our our our uh books but that's those are the ones that we would say let's pay off so now we have additional capacity so we have some projects that are not gonna be affected by the rates if we actually said you know what we're gonna let the rates tackle on these we would be asking really recommending like scenario three on it to get up to the 33 million dollars and not using some of these the general fund money for those types of projects so you know we've been pretty um you know straight with council that hey we have this money that we're using cash for it we have a 13 million that's part of the rate package to fund additional um water and wastewater improvements but to continue this and keep improving our systems and looking at moving you know expanding some lines for water and wastewater for for growth we actually need to look at you know the next phase of it which would be either scenario two three or four so it's kind of the policy of the council of do we want to continue with that or uh let's stick with our current rate plan and bring it back in two years with it you know the kind of the history with our rates studies and Eloy for the last 20 years is it's been tough.

We'll bring it to council and you know past councils have sat on it for one to two years pushing it off and you know this is something that we figured let's just bring forward to council again we have you know a good uh a plan to keep expanding we're being looked at hard but we have to make some tough policy choices to be progressive with it so this kind of this rate update provides those uh opportunities Mr.

Mayor Madam Councilmember Curtis uh some of the projects that we've identified that were not in the original capital improvement plan include new tanks to service different areas of the city uh as well as expanding water lines along our main section lines um to to provide for additional growth further east and further north as well as tying into some engine and and getting that area ready for development uh one of the other projects that we had too is is in going back through and looking at our existing system we found that a lot of the the water lines that we have in service now are are between 60 and 80 years old so we're we have a more uh more comprehensive replacement plan with that than what was originally presented in 2022 thank you anybody else on council questions comments so um go ahead sir uh just on say mr mayor so what happens now is after the the presentation is um we'll bring it back at uh the meeting uh here in about 15 minutes for you know more of a the decision and and guidance on the the funding scenarios um this was just more the the workshop to present it uh drill into a little more with the the presentation the rates and uh the questions you asked so that's the next step in this if uh council wishes to to do that we will then bring back a resolution like uh mr jackson mentioned for the notice of intent and following the the ARS statute uh nine uh five one one on it so mayor you know mine mayor members of council uh I also want to point out too that you know we still are in our MDOS status with ADWR meaning that

So that's the next step in this.

If uh council wishes to to do that, we will then bring back a resolution like uh Mr.

Jackson mentioned for the notice of intent and following the the ARS statute uh nine-uh five one one on it.

So mayor mind mayor members of council.

Uh I also want to point out too that you know we still are in our MDOS status with ADWR, meaning that ADWR has not made a determination on whether to continue to provide us with our allocation of 48,000 acre feet or reduce that allocation.

One of their primary drivers in the determination of keeping the 48,000 is how much is ELI doing to show that it can deliver 48,000 acre feet today and in the future.

So having uh robust uh rate plans that show increases year over year um to help fund funding scenarios that provide expansion of the uh the water system are all really great ways that showcase our ability and commitment to servicing our citizens and future citizens, and ADWR looks very favorably on that.

They stressed that in numerous meetings I had with them, that that the financial piece is pretty much the key component.

The financial piece, number one, how are you going to finance?

And number two is what does your CIP look like that showcases your ability and commitment to build out infrastructure in your city?

Um, you know, like Brian and and Dan said, it's been tough.

Um we we have you know, we're constantly being looked at.

We're getting new and uh McKinsey's working on new industrial and commercial partners to come in our city who are water demand.

Well, we're still struggling to get those residents.

Um we really need those residents, and unfortunately, the development community that we have that is looking at Ely isn't doesn't have the funding either to make significant investments in infrastructure improvement projects that will deliver a mile or two mile water line or wastewater line to those developments to get a 1500 home or residential master plan community.

Should that occur in the next several years?

And you know, in Dan's projection, like he mentioned, it's very conservative.

But say in the next two to three years, all of a sudden BayM Esperanza happens and we get 1800 new homes.

Um, we could absolutely reload at the rates at that point and make adjustments to the increases that are comparable to the increase in residential customer usage that we would have with such a development.

So I mean, why we see it today is it it is the conditions that exist today, looking at getting new residential developments in our community will comparatively help either stabilize or potentially lower, hopefully lower those rate adjustments and you know, as we as we grow.

Thank you, Mr.

Mellow, which and preserving our 48,500 acre feet with ADWR is very important, especially if we want to entertain, because that's a nice carrot on the stick when we want to entertain new growth, whether it's industrial growth or whether it's uh residential.

That's uh it's a big selling point for Eloy.

So once again, council, go ahead, councilwoman.

So David, uh your comments just made me think of another question.

So in these scenarios, if we um, you know, assuming they were based on just 50 home increase year after year, so say we do go to one of these two, three or four scenario, and we do get a bigger subdivision and the rates, we can relook at the rates.

Does it also become another option to pay down some of the debt that we're incurring here if we end up making more money because of increased homes?

Is is that kind of what ended up happening with us being able to pay off some of the debts recently?

Uh Mayor Sutton and uh Councilman Chris, like with the WIFA, they so when you issue like a new debt, the one that we just entered into for um the putting the solar panels and stuff, what it goes into like the first 10 years, you really they they don't uh it's it's like a no payoff policy.

It's a 20-year rate plan or a 20-year loan.

So I mean, on some of them, we still have if we paid off part of the what I brought forth the council, um the two water and two wastewater, we still have three more on the wastewater side and two more uh water that if we ended up um having an influx, we could look at those older ones instead of the newer WIFA loans that we would take or or debt obligations that we would take on.

So council?

It would be a good problem to have if you if you did end up generating more revenue.

And yes, you could certainly take another look at the rate plan at that point in time.

I mean, if you have a game-changing development like that.

Thank you, Mr.

Mayor.

Um, the water that we're selling, or the rights to the water that we're selling to the city of surprise.

When was that last increase?

Or are they regularly increased?

Are they paying more?

How is that working out?

It has not been increased in a long time.

It's Brian and I are smiling because we've had that discussion.

We're we're looking at what that rate increase could be or should be.

It's one of the con uh one of our talking points with our water turning that we have a regular meetings with to see what we could do.

Because quite honestly, you know, they're getting this a really, really good deal.

At the time that we did that agreement, there wasn't the need for water demand like we see in the state today.

So the water that we sell them is basically at cost.

We we net nothing with it.

Um we would definitely have to have a conversation with the surprise folks and talk about what an increase like that would look like.

I need to need to better understand that market from our water attorney before approaching them and having that serious conversation because I think all of us sitting here would much rather see an increase in that cost rather than a net neutral.

I'm sorry, does us selling those rights affect anything with um with the state right now and our agreement that we need these rights, but no, that it does it, they just see it as another piece of our water portfolio that we're investing in.

Um should they decrease our what the only time it would be beneficial, and Matt can jump in is should they decrease our water allocation, then there may be a need for us to just terminate that agreement with surprise.

And there is pretty pretty it's it's not a it's not a hard stop, but it's it's a good neutral.

Hey, all we got to do is give you, I think that's like six months notice that we're gonna terminate the agreement, and either party understands that.

So that part of the agreement was well written.

And just to piggyback on that, if we decided to do that, if the Department of Water Resources reduced our our designation of an assured water supply, then we could use the surprise money that there's that we could use the the water rights that we sell over to surprise to offset that that reduction.

Good point.

All right, council, Dan.

I'd like I'm sorry.

So um one of the concerns I have is that yes, I see the potential for Eloy to grow.

I see it growing in industry as well as in housing and population and stuff, but one of the one of the benefits that Eloy has is it's affordable to live in.

It's got a low cost of living, people want to come and invest in homes, invest in permanent residency here, because they can afford to live here.

I know I I get a a lot of questions about the water bill and how large the water bill is, but then I ask them to compare their sewer and their trash collection, and they realize that it is affordable to live here.

So just in going forward, I would like to see that consideration being taken.

There Eloy proper, especially in Toltec, have a lot of committed and long-standing residents, and I would hate to push them out because we're constantly increasing the cost of living here, their their utilities.

Um I'm sorry, I just lost my train of thought, but um I just want to make sure that that that is balanced.

And I understand that if we do get more industry, we do get more housing, and we are being able to bring in more um income to the general fund, then you know that can be offset, but I just want to make sure that that's being taken into consideration if for some reason um that uh that we do approve this rate, and that um to understand that we just because it's written just because it's in the plan, just because we're we have it set for till 2028 that there's always that consideration about well, do we have to increase so that's just my concern, and I hope you take that in consideration.

Okay, we're about five minutes from regular meeting.

Uh Dan, I'd like to thank you.

Very well put together, very informative.

Thank you.

Thank you, Brian.

Thank you, Matt.

So with that, I want to close this work session, and we'll take a quick five minutes and come back here for regular council, okay?

All right,