Okay, I'm going to go ahead and call to order the council study session for February seventeenth, twenty twenty-six.

Mayor Scott Anderson.

Here.

Vice Mayor Chuck Bongiovanni.

Here.

Council Member Bobby Buckley here.

Councilmember Kenny Bucklin.

Here.

Council Member Young Kaprowski.

Here.

Council Member Monty Lyons.

Here.

And Councilmember Jim Torgeson.

Aquaram is present.

Thank you.

We have one item on the agenda presentation and discussion on agricultural agriculture water rate framework.

Lauren.

Reclamation released a draft plan in January detailing five alternatives for operating the river.

The only alternative reclamation stated they believe that they can implement without an agreement is shown here on the screen.

And if river conditions continue to decline, this no deal alternative shown here could result in Arizona taking up to 77% of reductions while barely reducing the other basin states.

We continue to advocate along with our Arizona partners that the no-deal alternative is incomplete and has many legal concerns.

However, the need to reduce demand on the system is more real than ever with this year's dismal winter conditions.

The current record low runoff projections indicate a high likelihood that Lake Powell will decline below the minimum power pool level by the end of this year.

This is the elevation at which the dam can no longer generate hydropower.

With or without an agreement, reclamation has stated they will move forward with new guidelines by October 1st, 2026.

These current hydrologic and political conditions on the river emphasize the criticality of Gilbert's response to these uncertain shortages through water resiliency projects such as the Northwater Treatment Plant Reconstruction as well as the well development program.

So just wanted to take the time to update you on what's going on on the river.

This is important context as we discuss the main topic of today's study session, which is the agricultural water rate framework.

Next slide.

Oh, sorry.

Okay.

So let's see.

There we go.

So we're here today because of a request to look into options to ease the rate burden for those who large residential properties that support livestock and local food production that are key elements of Gilbert's rural character and small town charm.

And so we've identified the goal has been to identify options to ease this rate burden while ensuring fairness for all customers.

So today I'm going to go through research and background information, the proposed rate, eligibility criteria, as well as next steps.

As part of our background research, we looked into comparable municipal programs.

We were able to find five different comparable programs among cities in the western United States.

A couple in California, one in Honolulu, one down in two, a couple down in Tucson, as well as some options that neighboring cities do to allow residential properties to be on a landscape water rate.

As we evaluated these programs, we saw that there were really just a handful of communities that have gone this route.

There's a wide variability in the eligibility criteria, but they do tend to focus on local food production at either a commercial or nonprofit level.

And the ones that are closer to home, the neighboring cities here in the valley, they have allowed residential customers to be on a reduced rate, but they require an additional meter, which is a high upfront cost.

And so we really haven't found an industry standard.

They were all really developed to meet the needs of the individual communities, which is how we've taken the approach for what we'll present to you today.

In addition to the background information on comparable programs, we also wanted to go into important background information as far as Arizona and Gilbert water policy and history.

As many of you are aware, the Greater Phoenix Valley, including most of Gilbert, was farmed primarily using surface water from the Salt and Verde Rivers.

And these historical water rights and canals continue to support those agricultural uses, even as the valley has developed and water policy has evolved.

The main evolution of our water policy took place back in 1980 with the Groundwater Management Act.

This act adopted was adopted due to drastic declines in groundwater levels seen throughout the areas shown on the map.

And it established water rights for all types of uses, municipal, industrial, agricultural, etc.

And an important piece of it was that it limited agricultural acreage to what was in production between 1975 and 1980.

This also led to the development of the shared and adequate water supply rules, which Gilbert is subject to.

The shared and adequate water supply rules require us to prove seven different criteria that develop a hundred-year assured water supply.

I want to focus on number seven, which is meeting the management plan.

And what the management plan does is it requires conservation through many different techniques.

One of which is that it stipulated that Gilbert adopt its conservation code.

This established water efficiency requirements for specifically non single family residential properties.

So every new development outside of the single family lot has to go through and meet our conservation code.

Some of those requirements are listed here.

I won't read them all, but just to highlight a few.

So this is just important context as we consider an agricultural water rate.

Oops.

So as we look to the proposed rate, we identified some key outcomes of this proposal, and that is to reduce rates for legacy agricultural users, promote water conservation and efficiency, maintain equity amongst our customers, and also protect the solvency of the water fund.

Our approach is that is to actually use an existing rate structure, and that's because a new rate structure would be required, would require a full rate study, which could take up to a year to enact.

And therefore, to expedite a program by April 1st, 2026, we're proposing to use an existing rate structure for these properties.

Excuse me one second.

So the proposed rate is to establish criteria that would allow qualifying properties to switch from the tiered residential rate to the landscape water rate.

Why the landscape water rate?

Because it's an approved rate that doesn't require a new rates structure through a rate study.

It was selected because the water that these residential properties use is used outdoors, which peaks in the summer and has a greater impact on the water system.

It's what is charged to commercial customers for their outdoor water use.

And we are proposing that it will apply to all water use by the customer because if it applied to if we did separate billing between indoor and outdoor use, we would require a new meter to do so.

So let's take a look at what that would look like under the proposed option A that you'll see later today.

And here are the tiered residential rates, and here's the non-residential landscape rate.

The non-residential landscape rate comes in just above the third tier from 21 to 30,000 gallons at 649 per thousand gallons, and the non-residential landscape rate is at 658 per thousand gallons.

So let's take a look at what that would mean for a customer who may be eligible, which we'll go through the eligibility criteria later.

And right here on this graphic, we have on the x-axis the water usage and on the y-axis the water volume cost and comparing the residential rate to the landscape rate.

And you can see that the break-even point is at about 45,000 gallons per month.

So if the annual usage for a customer who's eligible into the program uses at least 45,000 gallons per month, this rate would save them money.

So let's walk through a couple examples.

So if we're looking at a customer who uses on average 60,000 gallons per month, they would, if they switch from the residential tiered rate to the landscape rate, in the winter they may be at 20,000 gallons per month.

And they would actually be spending a little bit more per month at 56 per month increase.

In the summer, if they're using 100,000 gallons, they would actually be saving 210-ish approximate dollars per month.

But on average, they would save around $57 per month or $690 per year.

If they're slightly or a much higher user at 125,000 gallons per month, in the winter, if they're at 50,000, they'd be saving about 20 dollars per month.

In the summer, if they're at 200,000 gallons per month, they'd be saving about 590 dollars, and on average they'd save around 305 dollars per month or about 3,600 per year.

So that's the proposed rate.

Let's dive into the eligibility criteria.

We've developed the criteria into four different categories, including customer requirements, property characteristics, water use and efficiency, and compliance requirements.

So starting off with customer requirements, we're proposing that it apply to existing residential water customers that are located within the town limits.

This is because county properties are not subject to the town code and they may not comply with all of Gilbert's land development code, nor the Gilbert adopted building code requirements.

Also, the town and its citizens are the ones that bear the risk of the utility.

Second, we're proposing that it apply to those who have an active animal or agricultural based business that is tied to the water use as of December 31st, 2025.

This type of water use, tying it to a business need justifies the transition from a residential rate to a non-residential rate structure.

And the prior date establishes that we're looking to assist existing businesses and existing residents.

Property characteristics.

We're proposing that it only apply to those who have a property that's greater than or equal to 35,000 square feet.

This meets the land development code for raising livestock and agricultural uses for commercial purposes.

We're proposing that it not apply to those who have an exempt well on their property since that is more than sufficient at a maximum of 10 acre feet per year available supply, and that is more than sufficient to meet most agricultural water uses.

We are also stating that they must comply with the 1980 ground water management act, which is state law.

Water use and efficiency.

We're proposing that there be a maximum area of ornamental grass at 10% of the lot size.

Ornamental grass irrigated with potable water is limited so that it's focused on the water being supplied for the agricultural and livestock uses.

We also have grass removal rebates to assist customers in complying with this criteria.

These historic water rights have enabled these properties to maintain the heritage and they should be used in order to do that going forward.

However, if properties have severe limitations in using this flood irrigation, we will allow them to demonstrate that to us.

We are also limiting water use to the highest of the prior three years' annual use.

This improve ensures that the program's not funding expanded water use and is assisting current needs.

We will establish this at the time of enrollment.

Lastly, we have compliance and audits, and these are just some check boxes we want the customers to go through to ensure that we've evaluated that there's no possible contamination from the non-residential use on the property through a cross-connection audit, that the property go through a water efficiency checkup to ensure that they're using water as efficiently as possible and finding ways to further reduce their bill, and that we review the land development code specifically for the quantity of livestock on the property.

So this slide just shows a summary of all the criteria that I just went through.

And after looking through all the criteria and through this evaluation, we do believe that we've achieved these key outcomes of reducing rates, promoting water conservation and efficiency, maintaining equity, but we're still evaluating the impacts on the water fund because we haven't implemented the program yet, and we are proposing it as a pilot in order to really evaluate that.

Excuse me.

Dry mouth.

Do an annual review.

And we're proposing that they cannot participate in the program while also participating in the utility discount program.

Um that it does not transfer upon the sale of the property.

I'm gonna get a mint real quick.

I apologize.

Take your time.

We can make Eric come up and finish.

Water shortage in my my uh mouth here.

Okay, much better.

Anyways, okay, so next steps.

We are proposing that this program be established as a pilot program.

Um if council recommends us to bring it forward on March 3rd, we would recommend um adopting a resolution, and then on April 1st, we would have the program officially launch, and then we would implement the program um reaching out to eligible customers, adding information to the website, and tracking program participation, and we would come back to you within at least a year with data on the program and how it's been going.

Okay, and that's that post-nasal direct, not not fun.

Sorry about that.

Questions for Lauren.

I have a question.

Councilmember Buckley.

Thank you.

Uh Lauren, thank you so much.

You guys did a a lot of work in a short period of time, so we appreciate that.

Uh, I I my question I have do we know how many, do we have a number yet of how many acre lots that are considered like little farms, you know, many farms or whatever they want to call them?

We've been able to do some preliminary research and look at some of the criteria, and so we know there's about 500 properties that are in the 35,000 square foot size or larger and use about 45,000 gallons per month, but we don't know yet how many of those are actually farms.

We think it's likely significantly lower than that number, but we've done some prel preliminary analysis, and we know it's significantly below that number.

Okay, did you search a certain area or a certain demographic?

We didn't for those.

We were actually able to reach out to the two farmers markets that are within the area as well, and we um there were only about five farms that are run out of Gilbert that um sell at the local farmers market, and then we've been working with a handful of residents on the program as well.

Okay, okay.

Uh is there a maximum on the number of um, you know, you're you're saying they have to be over 35,000 feet, but what what if there's one that comes in that has you know 10 acres that's considered uh you know a small farm or ranch or whatever?

We don't have a maximum size, however, there starts to be more um requirements from the state.

I think once you become a farm of 10 acres or larger, and I don't believe we have any properties larger than 10 acres within the town that operate this way on a single family residential property to find that in there that you know larger than 35,000 square feet, but not but uh but not over a certain um square feet because that's probably gonna come up.

Yeah, we can we can definitely look into that, but I do think the as far as the single family residential properties, um I I'm not aware of ones that were over that 10-acre threshold.

Okay, so it has to be a home, uh a lot and and a home where someone lives, so someone just has a vacant land that doesn't qualify.

Correct.

Correct.

Okay, so they can't just buy a 10-acre parcel or a 9.9-acre parcel and put their animals out there and expect to get this rate.

Yes, it would be needing to be a residential property that's currently on the residential rate structure, a current water rate uh water customer on the residential rate.

Okay, so now and I did catch when you uh were talking in regards to this does not transfer when the home is sold.

And is there a reason for that?

Is there a particular reason because that could be a value to people that sell their home?

So we're tying in this proposed structure, we're tying it to a business that is located on the property, so it's because they're operating that specific business, and therefore if they sold the property, the business would no longer be operating there.

Now, if they transfer the business and it continues, then we would likely consider that.

But if it changes to a different business, then they would have to um it wouldn't have been established as of last year.

Okay, so so the per the family or a farm or whatever, they have to have do they have to have a business license in order to be on this?

So a business license is one way of showing proving that you've been operating a business.

However, um agricultural and livestock raising type um businesses are not sub, they can't they're exempted from getting a business license from Gilbert because of state law, so we can't charge a fee for them.

Um so they would have to prove to it to us otherwise through tax records or um say they're on a vendor list at a local um farmers market, those types of things.

Okay, so so they obviously have a business but not connected with their home.

Is that what you're saying?

I'm they wouldn't have to get a Gilbert business license because they're exempted per state code, but they would have other ways that they have established their business through like an LLC or some other paperwork.

That's what I was looking for.

Yeah, all right.

Well, well, thank you very much.

I just kind of wanted to clarify those things.

Thanks.

Thank you for your questions.

Councilmember Lyons.

I just wanted to clarify, and I believe you you acknowledge this with council member uh Buckley.

But you guys did do some crosstalks with citizens that came in if I understood what you guys shared with us, and their general feedback from what you had shared with me was positive toward this, correct?

Yes, um, positive feedback.

Um there's still some hesitancy of not sure if it will benefit everybody.

Obviously, that water use threshold um under this rate structure doesn't apply.

You know, some people may be under that threshold.

Um just questions about the criteria, but once we explained there was some general acceptance and positivity about it.

All right, did you get any negative feedback from any of them?

No.

Okay, thank you very much.

Vice Mayor.

Thank you, Mayor.

Um thing I'd like us to consider um that deadline you have for 1231st.

I'd rather see us um come up when we decide to when we we do vote on this, reconsider that date because maybe we might be able to get some people that are doing a business now that isn't necessarily I want to say licensed or taxed or those kind of things.

Maybe we can make a couple of people a little bit more honest if they come to the table a little later um with that.

It's just something for us to us to consider.

Yeah, I definitely appreciate that comment and question.

Um we definitely if there's just ways for them to prove that they've been operating a bit as a business, there's various ways they could prove that to us.

So we're just our intent was that it's assisting existing business currently in operation.

People can be existing but not paying taxes and such.

I'd rather see people be a little bit more honest with that.

If that's this is gonna put them in that threshold to make an advantage for them, yeah.

Thanks.

I have just one more question.

Yes, Councilman Quakley.

No, I hope I didn't lose that question.

Uh oh my gosh.

I'm gonna have to come back to it, but it was uh okay.

I'll come back.

I'll I'll come back to it later.

All right.

Thank you.

Any other questions?

No.

Thank you, Lauren.

I think uh we can just give general direction here.

Is that correct, uh Chris?

That to go ahead and uh providing the mayor and that's correct.

If the council wants uh would like staff to bring this forward as an ordinance or as a resolution, yeah, then we'll do so.

Okay.

Do we know how soon that would be we're proposing to bring it on March 3rd?

March 3rd.

Thank you.

Any other questions?

Thank you.

Thank you.

Well done.

That was our only item on the uh study session, so I'll take a motion to adjourn.

Maybe we are adjourned.

We will uh readjourn at six o'clock for the uh schools regular meeting at 6 30.

So fast is