Check check one two.

All right.

It is six oh seven p.m.

on Thursday, June 11th, calling the Committee on Finance to order.

In attendance is counselor at large, Ian Abrew, Council of Ward 2, Scott Pemberton, Councillor of Ward 1, Leo Choquet, City Council President, Councilor Ward 6, Ryan Pereira, Councilor at Lodge, James Roy, Councilor at Lodge and First Vice President.

Shane Burgo.

And Joe Hopes, Counselor of Ward 5 and the Chair of Committee on Finance.

We do have two letters to be read into the record.

The clerk will read the letters.

Dear Council Lopes and honorable members of the Council, I am writing this letter to inform you of my possible late arrival to the Committee on Finance on Thursday, June 11th due to a prior commitment.

I ask that this you read this letter into the record to make my colleagues, those in attendance and the public aware of the reason for my delayed arrival.

Sincerely Neil McCarney, Councillor at Large.

And the second is from Councillor Gomes.

Dear Chairman Loebs and Honorable Members of the Committee, I am writing to inform you that I will be unable to attend tonight's committee meeting due to a personal prior commitment.

Please read this letter into the record to make my colleagues and the public aware of the reason for my absence.

Item number one is a communication member city council submitting it.

Oh sorry.

Note this meeting is being live streamed and recorded.

City Council committee meetings can be viewed on the City New Breforts homepage under quick links, then meetings.

Oh, Eric J.

I apologize.

So Sean, do you want to give us a brief overview on the on uh item number one.

Good evening, everybody.

Thank you very much.

Chairman Lopes.

So the um the city is proposing to make modifications to section sixteen, uh chapter ninety-four of the city's code of ordinance.

The current code um was written around um wastewater rates with an interpretation that um only one year at a time can be voted through by council.

Uh in 2019, we attempted to put through a five-year ordinance rate um smooth.

And uh that's when uh that interpretation came out.

So unfortunately we were only able to move forward with one year at a time.

And the goal of what we're trying to do here is to allow the council to implement multiple year rate increases at one time.

Up to five years, which is directly written into directly written into the into the ordinance change.

Um so what that'll do is it doesn't preclude the council from um only allowing one year rate increases, but what it does is it allows the council the flexibility to implement up to a five-year rate increase at one time.

And the driver behind this is that with doing one year rate increases, um the rates are set based on the budget itself, right?

So one year you might end up with a 3%, the next year you might end up with like a 15% rate increase, and the year after that you might end up with an 8% and back down to 3 and so on and so forth as we move through our implementation of the CIP.

But with a multiple year rate increase, what it allows us to do, it allows us to smooth the rates out.

So by smoothing the rates out and avoiding that sawtooth pattern that I had just talked about, it's easier for the ratepayer to be able to budget monthly for their sewer bills annually with knowing what that annual percentage is going to be.

Secondly, um the changes that we're making, uh the changes that we're making don't preclude council from making modifications to the rate.

So as an example DPI comes forth to you, or the wastewater division comes forth to you with a budget.

Council approves a rate modification.

Um say it's two years, right?

We're allowed to do it two years.

And it's say five percent both years.

Year two comes by, you would expect that the rate would be five percent again.

However, as a result of changes in the budget or council wanting to make modifications to the rate, say the budget comes in lower.

The council would still be able to make modifications to that second year rate, even though it was set the year before.

So it's again, it's not setting it in stone over that multiple year rate time period.

It's just allowing the council to be able to actually implement that over a multiple year period.

Again, giving flexibility in terms of creating that smooth that smooth pattern while still giving uh council the um the changes that if they want to make changes over time, they can do that.

Um the other change that we made is that um it establishes a minimum rate increase of the consumer price index modification.

So if the uh sewer rate uh ends up being lower than the CPI, then the CPI index would kick in.

Um secondly, if there was no rate increase proposed for that year, then the CPI index uh would kick in.

This basically eliminates that potential to create a structural deficit um by not outpacing inflation.

Um as we all know, inflation uh is is certainly rampant right now.

So um it avoid it mitigates that issue as we move forward.

So with that, uh DPI is proposing that we make modifications as proposed to council for section 16 of in uh chapter 94 of the city's code of ordinance.

So two things.

Welcome to Council Carney, Council Oliver, Council Baptiste.

Can I get a motion to receive in place and follow the package that's on your desk?

So moved.

Thank you.

Made by Sean, seconded by uh Scott Perminton.

All those in favor?

Proposed, the ayes have it.

We have questions for you, Sean, Council Pereira.

Thank you, Mr.

Chairman.

Sean, good evening.

I have um I think when we had met um and we I had been given a brief overview, I had a few questions.

I still have them.

Uh I'd like to hear what my colleagues think.

But first is the uh the five-year allowance.

I think I would feel something more comfortable to start in the three-year range.

Uh I have uh where where this is brand new, I have some uh concerns about allowing a five-year rate set and and not seeing how it plays out on a shorter term, where I think I think I'd ultimately be comfortable setting two-year rates, but I would say allow us to go up to three, but I would generally want to set twos.

And then my other concern, and and uh this is where if you could explain to me a little bit better.

I do have a concern about the automatic adjustment for the consumer price index.

I have a I I I just would like to because my concern is yes, I I understand the need to increase the the rates so that there are no structural deficits built in.

But what happens when we have major loans coming off debt service from in the wastewater fund.

And so the rates not increasing the same, but then we have huge expenses dropping off.

Now that might not happen for a while, but if we have some expenses dropping off and the rates gonna go up, there could actually be huge surpluses now generated.

So I do have some um I would much prefer it trigger an automatic council review or something to that effect where the council would then enact it or be allowed because as y'all point, you can still make adjustments.

I just have a concern about that automatic increase.

And then the other I think we I asked uh in the meeting, it don't but uh it the rates only went up, never went up.

Uh how do I want to phrase this?

In the past like five or six years, the consumer price index only went higher than the rates one time?

Correct.

That was last year.

Last year.

But other than that, the rates have always increased on a higher scale than the CPI.

Yes, correct.

Okay.

Um when appropriate, I did have a question for CFO Extram regarding the same principle.

I don't know if you had anything to add about the CPI portion of my questioning.

Um, nothing to add.

I think you articulated it pretty clearly.

Um I think that again the the basis behind this is we want to give council the opportunity to uh provide input into the rates and annually we do do a rate impact analysis to assess where we stand in terms of debt service payments required, revenue required to pay the bills and anything else that's that's impacting the rates, uh new projects coming up in the CIP.

And if there's ever a time when the rates would be lower as a result of, as you suggested, significant debt service coming off the books, um I believe that the commissioner would certainly reach out um to the council and have that discussion.

Uh and I believe this commissioner would.

Yes.

My concern also is future commissioners who might not.

You know, and I have no doubt Jamie is is forthcoming with that and say, hey, look, no I know he that no one in that in this department um is is trying to get one over on the the council or the residents or the ratepayers, but I do have concerns about future uh the uh commissioners of the department and what that would imply, because this as an ordinance is is unlimited until change.

Do you know?

Understood.

Okay.

I uh Mr.

Chairman, I yield for now, but I would like to speak with CFO extrament at the appropriate time.

Thank you, Council Pereira.

Council Roy, was your question for um Sean or is it for somebody else?

It's for Sean.

Perfect.

Go right ahead.

Hi Sean, how are you?

Good concept.

Nice to see you again.

You too, likewise.

Um I was wondering if you could explain to me the pros and consum uh between a setting the rates for two years, like the counselor from Ward 6 um suggested, or between the five year, the five-year rate, five setting the rate for five years.

Could you just touch on that for a second so we can get a good understanding of you know the benefits of changing it?

Sure.

Um first off, I I tend to agree with uh Council Pereira on the rate setting.

I don't believe that if the council were to set a five-year rate, I don't believe that we would make that recommendation.

The language in the ordinance just provides the flexibility to to do that, okay.

In understanding the council Pereira's point about if it's written into the ordinance, then it can happen.

With the current leadership at DPI, we would not make a recommendation to ever make a five-year.

That's not something that we would recommend.

There's too many potentials for changes over time, changes with regulations, changes with the agencies that could impact your plan.

Um if something breaks out in the system, you know, you have to be able to make those changes and modifications.

Um in terms of a two-year rate increase, um, that would be more in line of where where we as a department and our financial team would be comfortable with that two to three year range is where we're kind of the sweet spot as to what we what we would really like to target.

And you'll see that as we progress forward with future discussions.

But between what about between a two and a three-year or two and a four year old?

I'm so sorry.

James, what about between a two and a three year and a three and a two and a four year?

Like what what are the what are the benefits of of setting a rate for four years versus setting a rate for two years or three even?

Um it it's just additional smoothing, right?

So it allows you to spread your costs out over a longer duration.

All right.

Can you uh uh uh smoothing, I I get it.

Can you just go into it a little bit more?

Sure.

So when we when we implement a CIP, right, there's various costs on an annual basis.

And the same thing with the budget, right?

Um those costs require revenues which then dictate a rate modification potentially.

So one year you may end up with a rate increase of three percent, the next year you may end up with a rate increase of 15 percent, and then following year eight percent, and then back up to sixteen percent and down to two it's it's all over the place, right?

By doing that smooth option, it allows the council to set a consistent rate increase over that time.

Where when you take the average, it may end up being like a five percent rate increase over time.

So what you do is you build up surpluses and you use retained earnings to offset that delta between you know the rate that you need versus the rate that you actually have.

And it just it provides the department with greater flexibility as well in terms of managing its program.

All right, thank you.

I yield, Mr.

Chair.

Thank you, Council Roy.

Anybody else have a question for Sean?

Seeing none, Council Pereira has a question for CFO Extram.

Bob, if you wouldn't mind going to the podium.

Council Pereira, the floor is yours.

Thank you.

So, Bob, when we are when we are seeing, obviously, in the wastewater department large loan orders.

For dealing with our uh administrative order from EPA.

My question is in years where major debt service is coming off and and new service isn't increasing at the same rate, or there is big decreases in loans coming off, and this ordinance mandating that the rates rise at least the high the height of of the consumer price index.

What happens when the rate doesn't increase the same as the uh uh CPI, but they they have a lot more room in that budget now because loans are coming off.

Now I understand to his point, we have good leadership right now in uh Sean's point, excuse me, we have good leadership.

I that's not a concern right now, but it is a concern for the future.

How would that look from a budgeting standpoint?

Well, obviously, with the certainty of a rate uh in effect for the next two, three or five years, that's makes it easier to budget, to tell you the truth.

Uh we do look at debt service.

I don't have the numbers now because I didn't anticipate that you would go into the specifics, but we have a model that forecasts debt until maturity for water, wastewater, airport, umtown parking and general fund, including the school.

So we we know what those numbers will be for the next five, ten, fifteen years.

One of the things you could consider with uh in uh marrying to this ordinance change is perhaps setting up a whether it is just wastewater or other funds too, setting up a debt service sinking fund or debt service um stabilization fund.

So you could then uh take years where you have excess because of the the down uh because of the debt service being lower, we would fund debt service, we would fund the stabilization fund, and then we would draw on the stabilization fund in years where the spike goes higher.

Because it isn't very smooth, right?

We have got a lot of issues going on some have 30-year lives, some have 20-year lives.

So it's not just a steady trend on debt service going down.

It spikes up and down, as Sean alluded to.

Oh, actually, he said it with the rates, but it applies to wastewater uh it applies to debt as well.

So coupled with a stabilization commitment, that would alleviate any concerns.

Yeah.

Something to think about.

That that would alleviate a lot of issues with then in the future, if that fund builds up, spikes in debt service to help smooth that out on top of the ability to forecast out longer rates.

Just my concern is the automatic increases based on CPI when when you know if the council enacted a f a four-year rate and a huge piece of debt service comes offline, and now not only is there a 10 million dollar budget decrease from last year because of that, but now the rate has to increase, you have huge surplus there, so that all just turns into free cash for that fund.

Yes and then it would do that too, right?

Right.

Or allow the department to make improvements or something with all of that.

But I just have concerns just with the the that notion and and maybe the state some sort of stable debt service stabilization fund would assist.

I I was looking for the reference too, but currently in the in the ordinance is that cost of living increase is already built in.

So there is a minimum cost of uh uh uh cola increase for wastewater rates right now.

But a lot of times the it is set by the council annually, so normally that doesn't come into it.

My concern is automatic because the rate has been set three years ago.

Yes, yes.

Okay.

Sure.

So Council Pereira, I think this doesn't get to your point about the automatic increases, but I think it will get to your point about what happens if significant debt service falls off.

So our financial team, when we look at the rates, we don't just look at them one year at a time.

We actually look at them on a 20-year basis, focusing on five years at a time.

So we know what the city's debt service schedule is for those five years based on when they come on the books.

We get the information from either Mass DEP through their Schedule C's or working with Bob's uh department uh on any generally obligated money, and we run that through our model.

So we know exactly when debt service is coming on and off.

So if there's a huge chunk of debt service that's coming on, that would then be um realized in the projected rate that would be needed for that for that year.

Okay.

Thank you.

Um I'm good.

Thanks, Papa.

Thank you.

Council Pereira, you also?

Yes, Mr.

Chairman, thank you.

Thank you.

Do we have any other questions for either um CFO Extram or City Engineer Sean side?

Seeing none, I need the pleasure of the I make a motion to amend, Mr.

Chairman.

Make a motion to amend the ordinance has been made by Council Pereira.

Council Pereira?

I make a motion to amend Section 1, the second paragraph, where it says for multiple periods of up to five years, striking the word five and replacing it here in with three.

Made by Council Pereira, second by Council Burgo.

Before I take a vote on that, Council Pereira, can you provide the clerk with the verbiage if you don't mind?

Yep.

Thank you.

Now that we're there with that.

It's been seconded just on a point of information.

Can attorney Jakes just verify that that would be sufficient to doing what I would want to do.

I don't have the audience.

I just don't want any ambiguity solicitor and just want to take a look at the.

If I understand you correctly, all you're going to do is strike the word three.

I'm the word five and substitute the word three by amendment and then move it forward.

Correct.

And that would just allow us to set rates for up to three years.

Correct.

Okay.

Just want to make sure I understood the question.

Yes.

Okay.

Thank you, Attorney Jake.

So now that we have clarification, anyone have any discussion on the question?

Council Carney on the question.

Yes.

Thank you, Mr.

Chair.

So this has come before us on numerous occasions since I've been sitting on council.

And we have always reverted backstand to the one year.

I am opposed to going anything but the one year.

This is our way to just keep an eye on things and for our our taxpayers and our ratepayers.

City Council doesn't have a lot of say on a lot of stuff that goes on in the city, but it does here.

So for that reason, I oppose.

I'm sticking with the one year.

Um and that's my feelings on that.

Thank you.

Thank you, Council Kearney.

Seeing no further discussion, roll call vote on the amendment.

And then if that goes, we'll do on an amended ordinance.

Counselor Abreu.

Yes, Council Baptiste.

Yes.

Yes, Council Burgo.

Yes.

Yes, Council Carney.

No.

No, Councilor Shulkette.

Yes.

Yes.

Councilor Lopes.

Yes.

Yes.

Council Oliver.

Yes.

Yes.

Council Pemberton.

Yes.

Yes.

Council Pereira.

Yes.

Yes, Council Roy.

Yes.

Yes.

Passes 9 to 2.

Passes 9 to 1.

I need an ordinance.

I need a motion to Motion to refer to the full City Council as amended.

As amended, made by Council Pereira.

Seconded by Council Abrew.

Roll.

Anyone on the question?

Seeing none, roll call vote.

On the ordinance as amended.

Councilor Abrew.

Yes, Council Baptiste.

Yes.

Yes.

Council Burgo.

Yes, Council Carney.

No.

No, Council Shulkek.

Yes.

Yes, Councillor Lopes.

Yes.

Yes, Council Oliver.

Yes.

Yes, Council Pemberton.

Yes.

Yes, Council Pereira.

Yes.

Yes.

Council Roy.

Yes.

Yes.

Item passes 9 to 1.

Number two is a communication memory to City Council submitting an order for the proposed wastewater rates for fiscal year 27 and fiscal year 28 and the proposed wastewater annual base charge for fiscal year 27 to take effect on July 1st, 2026.

The item was referred to the Committee on Finance on May 12, 2026.

2A is the order.

Motion to receive in place on file.

Made by Council Roy.

Second by Council Pepperton.

All those in favor, opposed, yes, have it.

Anyone on the question?

Or would like to speak to anyone that's in attendance?

Council Pereira?

Sean, if you wouldn't mind going to the uh podium.

Thank you, Sean.

Thank you, Chairman Lopes.

Again, good evening, everybody.

So tonight I'm going to uh talk about the proposed wastewater rate increase as a result of implementation of our administrative order.

2017 integrated plan and our upcoming uh 2026 integrated capital plan modifications.

Unfortunately, the Commissioner could not be here tonight.

Um as a result of a medical emergency.

So I'm going to be doing the presentation for him.

So an overview of the capital plan.

As I just mentioned, uh, the city's been working through uh implementation of a 20-year capital improvements plan that was developed under a report that was submitted as part of a 2012 administrative order by the EPA called an long-term CSO control and integrated capital improvements plan.

Now that's a mouthful.

Uh we simply call it an integrated plan.

And basically what it is is it's a large document, it's about that thick, um, that outlines all of the city's Clean Water Act obligations for addressing regulatory compliance, ensuring that our infrastructure is properly maintained, it makes sure that we continue with our combined sewer overflow reduction process, uh, ensuring that our beaches are clean, we can swim and fish in our in our in our receiving waters.

So it's a very important plan that we work through.

And in 2019, uh EPA codified the first seven years of that plan in a new administrative order.

And since then, we have been um working off of um our CIP to implement implement those projects.

And one of the key aspects that I like to always talk about as part of this plan is that the plan focuses on using existing systems that we have.

We don't like to build new facilities that we have to take care of.

We want to take care of what we have and build on that and make changes to those things.

Um, basically reinforcing the backbone of the system and coming up and identifying high value, lower cost, low-hanging fruit projects to to address the needs and issues and public health issues that we have out in our collection system.

Unfortunately, in as I mentioned, 2019, shortly thereafter in 2020, uh COVID-19 pandemic struck, and um what happened was uh as we were working uh to move the move the program forward, um we missed some Mass DEP deadlines.

Um funding it was a challenge, revenue was decreasing, people are out of work, totally understood.

But what happened when we missed that that Mass DEP deadline, and it caused us a two-year delay in our in our implementing our AAO projects.

And what that did was it basically pushed all of our projects out two years, compounding projects that were supposed to be implemented during that time frame with projects that should have been implemented uh two years prior.

And we call this basically a snowpile.

It it created this mound of projects that needed to get implemented all simultaneously, which becomes a challenge, one to manage all of those projects, but secondly, to financially pay for them because now you're paying for all of these projects all at the same time.

Next slide, Adam.

In addition to that, we've also been managing um challenging funding um issues with the SRF program.

Uh MassDEP recently enacted a CAP on wastewater funding uh of $50 million annually by communities.

And in addition to that, they've eliminated the potential for having carryover projects or spreading costs of a project over multiple years.

So what this is doing is it's a forcing us to do even smaller scale projects than what we have now, and it's eliminating limiting the funding that's available to communities within the commonwealth.

So it's becoming much more challenging uh for us to be able to obtain SRF funding.

Um we have used generally obligated funding in the past.

We will continue to use generally obligated funding in the past uh in the future, supplemented by SRF funding, but that mix may change, and we have to monitor our budget and work very closely with the Mass DEP to ensure that we can continue to receive those low interest loans, which are important to our program.

And then lastly, I want to add that all of the work that the DPI does uh within the city is coordinated with other activities that are going on.

That we work with Eversource, we work with the water department, we work with our our pavement management plan to make sure that we implement cohesive projects, minimize disturbance to neighborhoods and the residents, get the work done in the street and get out of there so that we can pave it and then move on to the next area.

It's definitely it takes a little bit longer to implement things, but it's certainly much more coordinated.

Next slide, Adam.

So this slide shows the next five years' worth of projects.

And what you see here is you can see sort of that in that 27 and 28 uh timeline, extremely large significantly larger dollar values than what you see in the outer last two years.

And that was that snow pile that I talked about.

We're still working through the challenges of trying to trying to manage that snowpile from that from the COVID-19 pandemic and the two-year delay.

In addition to that, there's also newer projects that are that are baked in here.

And new priorities have come up, and we need to address those priorities as well.

We have failing infrastructure that we need to address.

So this five-year plan addresses that.

But again, continuing over that five-year period, we're really working hard to get it down to a manageable amount of funding on an annual basis versus that large uh you know $62 million, which is not sustainable, obviously, um over the over the long term of the over the long term of the plan.

So that's why we wanted to get down to that more of that $12 to $14 million per range.

And that also sort of calms the rate increases down as well.

Uh here's a um funding breakdown of our capital plan.

You'll see that the first five years, that big yellow chunk is combined sewer overflow or CSO funding.

We really want to focus on uh trying to reduce combined sewer overflows as much as we can.

Uh the red area is focusing on the treatment plant.

The new treatment plant is now 30 years old.

Um so it's no longer new.

Um although it's been well maintained by our contract operator in the city.

Equipment just gets tired and it needs to be replaced.

And there's equipment that's becoming end of life.

And you'll see that in the pie chart to the right, the funding that's been dedicated, that red area has grown.

Because over the 20-year life of the of the plan, equipment's going to continue to get older, and we need to make sure that we invest in in one of the city's most valuable uh pieces of infrastructure.

But then again, that yellow area is really still big because we want to still focus on combined sewer overflows.

And then the other colors are smittering of like um other different types of investments, um investments within the within the city's collection system.

So in order to continue to finance that, we're asking.

Oops, sorry, I have the next slide.

So in order to continue to finance the program, DPI is requesting approval from the council for a $20.4 million appropriation uh to continue to move forward with projects as being outlined in our update to our 2017 plan, which will be coming out in June of next year.

This funding focuses on treatment plant activities.

As I mentioned, the plan is getting old now, and equipment is getting tired, and you'll see that the majority of spending here is focusing on the treatment plant.

We have gravity thickeners which address uh residuals treatment or sludge treatment at the plant.

There's four of them.

Uh two are non-operational, they don't function at all.

One is being held together by bubblegum and duct tape, and the other one is is functioning.

And to operate a f of a facility of that side, if that one goes down, the city is in trouble.

We won't be able to meet our permit, we won't be able to treat our sludge.

Uh generators at the plant are need of some repair.

We have to um we have to make sure that we that we take care of them.

Uh they definitely need some updates.

And thirdly, odors.

Um, I know odor is a big big thing at the plant.

We want to make sure that we continue to maintain the odor control system so that um odors at the plant are contained where they should be.

And then we have a uh pump station upgrade as well as and then another project at the plant to begin to optimize the process.

Based on the CIP that I showed you three slides ago, uh this is the spending that's projected on an annual basis, are the revenue requirements I should say.

It starts at about three million dollars this calendar year and then goes to 14 million dollars in in uh in fiscal year and fiscal year 3031 goes to 14 million dollars.

So the line, that red line that you see that's cutting across the slide there is uh the current revenue that DPI is generating based on the existing rates.

So I'm gonna take a little step back in time to set some context as to how we ended up with the rates where we're at right now.

Next slide, Adam, thank you.

So this is where my previous discussion about smooth rates come in.

Um so last year we had talked about uh doing smooth rates potentially for over two calendar years at 7.8% and 9.8%.

Um ultimately, because of the way that the ordinance is written, we were only able to do that.

Um actually it came in at 3 million dollars uh 3%.

Um the year before that we came in at 4.3%.

But the reason that came in that low is because the rate was bought down by cash as well as a reduction in the wastewater budget.

And when you start infusing cash into the into the rates, what happens is is that's revenue that still needs to be generated and continues on in its eternity essentially.

Um it comes out eventually, like we have to manage that situation.

And the $3.9 million dollars in cash that was infused over the past two years has essentially created a structural deficit that is now sort of coming to roost in 2027, which we're calling a catch-up year.

So we need to address that revenue shortfall of the $3.9 million, plus the debt service needed to pay for the projects that are currently ongoing and mandated by our administrative order, in addition to the uh the several uh the $20.4 million dollars in wastewater projects at the at the plant that we need to do to keep that that facility up and running.

So to assess those impacts, next slide, Adam, please.

To assess those impacts of how we deal with that shortfall and the new projects and that lump of projects that's still ongoing, we assessed uh several alternatives in terms of rate modification.

We looked at what it would be for a single year, uh no smoothing, obviously it's only one year rate.

We also looked at what it would be for a five-year, no smoothing, so basically based on the revenue that you need on an annual basis.

We assessed a five-year smoothing option.

Um we also assessed a uh two-year smooth option.

And I do want to point out that both the five-year smooth and the two-year smooth, if you recall in my prior uh discussion, I talked about how some years we'll have some some reserves and other years we're gonna have some deficits that we'll need to take out of retained earnings in order to fund that, which would then get basically replenished when uh a future rate increase provides the revenue to do that with the smoothing option.

Uh the five-year smooth requires $3.4 million in cash, and uh the two-year increase requires uh about $150,000 in cash.

So it's not it's not too bad.

Um I do want to point out that uh I believe there's a transfer that's coming forth to council, and once that transfer happens from free cash to retained earnings, it'll put the wastewater uh retained earnings balance at approximately 4.1 million.

So when you think about using 3.4 out of that 4.1, it's getting us down really, really low.

Next slide, Adam.

This table outlines the percentage increases needed over time.

We'll get into the weeds a little bit on each of these over the next couple slides.

But you'll see that um the five-year smooth has that uh significant infusion of cash of like two and a half million dollars in the third year, but then you make it up in the in the outer years.

Um similar to the two years, two-year smooth, um the 150,000 comes out this year, but then you make it up next year.

I do want to point out that in the third year of the smooth option for two years, there's a projected increase right now of 15.9 percent required.

We have the opportunity because we continue to assess rates on an annual basis to smooth that out as well.

The lower amounts that I showed you in the CIP in the outer years continue so that when we begin looking at that year, we can then move forward and smooth that 15.9 percent.

So the opportunity we have an opportunity to address that, and we will continue to work with council and have discussions about the best path forward for doing that.

But we do have an opportunity to smooth that 15.9 percent out.

Um this is a breakdown of the one year and uh next slide, Adam, sorry.

Oh boy.

There we go.

Um we do this is the uh one year and five-year no smoothing.

You'll see for one year it's the 12.1 percent.

Um and five years, again, it fluctuates annually with 12 and then 10.4, 16 and a half, and then it drops down to 3% um in the in the two outer years.

Um but again, not really um not really needing any cash to offset budgets.

Um rate increases would average between two and eleven dollars per month with this alternative.

Next slide, Adam.

Here's the five-year smoothed option.

Again, I would not recommend doing this because of the prior discussion we talked about, too many opportunities for changes in the climate that's out there.

But again, and this this averages about six and uh six dollars and fifty cents on average.

But as you can see in the third year, you need that really huge amount of cash, um, which is going to impact our stabilization.

So again, not recommending this one.

Here's the next slide, Adam.

Thank you.

Two-year rate alternative.

Um this is our recommended alternative.

Um it averages um a little more than six dollars uh per month uh as an annual increase with a rate increase of eleven and a half percent.

Again, that 15.9 percent in year three, we definitely have opportunities to further smooth that out in outer years.

Um based on that, uh we're looking at, again, like I said, between a six and an eight dollar per month increase over that time period.

So totaling in two years around $14 per month.

So in conclusion, uh we're requesting um a couple of approvals from council tonight.

Uh one being uh vote for the 20.4 million dollar appropriation by June 30 by June 30th to uh make sure that meet uh we meet our master EP deadlines.

Uh secondly, uh we're looking for a modification of the ordinance, which was previously voted to pass to council.

Thank you.

Um and lastly, uh we would recommend a two-year rate increase uh based on the numbers that were shown here, uh two-year smooth increase um at the 11 and a half percent per year um increase over time.

And with that, I will turn it over to the council for any further questions.

So, Sean, if the body doesn't mind, I think we should take two and three together.

As item number three is the 20 point 20 million four hundred thousand that Sean referenced earlier.

So without objection, taking two and three together and allowing Sean to discuss the loan order for number three, and then we'll take questions for two and three if nobody has a problem.

Yeah, he already discussed that's why I was just gonna say the 20 million dollars that he already did.

Yeah.

So without objection, we'll take two and three together.

Sean, if you want to continue, and we'll do it number three is the communication amendment to City Council, submitting in loan order appropriating 20 million four hundred thousand for the purpose of financing the cost of projects outlined in the city's long-term CSO controlled and integrated capital improvement plan.

It was referred on May 12, 2026, and the loan order was referred on May 12, 2026.

Motion received by some five.

Let's go find me.

Second by Council Roy.

All those in favor?

Opposed, the ayes have it.

Sean, you can continue if you'd like.

So I did touch on this previously in the last present um during the rate presentation.

Um again, this is a loan order to continue compliance with our administrative order and begin to implement planned projects that are within our upc upcoming capital improvements plan that was forthgoing to uh EPA and Mass DEP for approval.

Thank you.

Again, focusing on you know treatment plan and other things.

Does anybody have any questions for Sean or Bob?

Because Bob is also here.

Council Carney?

Yeah, I I just wanted to go back when is when you were talking about your presentation about the co COVID.

Um I thought that um we got a an extension um during COVID and we were pushed out two more years because of the COVID.

So you're saying we weren't, so those projects had those that two years had to be done.

The four the four years had to be done in two years?

We did get an extension in 2025.

Right.

So, and then it pushed, I thought it pushed it out so we didn't you talked about a snowpile of getting everything done in four years.

That didn't affect that extension.

We it's sort of a balancing act, and I I'm gonna I have Richard Davis here who can also speak to um to that discussion as well, which I don't know if you mind talking about that.

Richard, thank you for being here today.

Appreciate you coming down.

The podium is yours.

It's it's a pleasure.

Thank you.

It's good to see everybody this evening.

The um the extension in 2025 allowed us through June of 2027 to finish projects that were in the original AO.

So in that sense, it gave us some grace.

And it was mostly COVID-related.

Um what it doesn't do is um cover the aggregation of of costs as efficiently.

So those those the costs of those projects um built up and needed to be extinguished over time, over a longer time than the two years really to finish the projects.

So there's there is there is that.

But we did get a two-year grace uh for a couple of the three, I guess three of the main projects, and we are on track, I believe, to to make good on those.

Right.

I I was just confused about the spending in that four years, if we could extended the extra two years, then we should still been on track if we're two years out.

That's an I'm just you know confused.

I think councilwoman, and I may actually defer to some to folks who are economic as opposed to legal on this, that um the difference between the original deadlines of 2025 and the extended deadlines of 27 did not relieve us of the economic burden um of having to do all those projects at the front end as as we did it.

And I believe there may have been some additional Adam, do you have a thought about how to discuss the delta between when we complete a project and how we pay for a project?

Yeah, thank you.

Yeah, Adam Simonson from uh CDM Smith.

Um we've been working with the city on the financial analysis on this.

I I think the the simplest explanation is is that um the debt service associated with those projects.

That is uh the payments for that are coming due now, essentially.

So the they've been the completion of those projects has been delayed, but the bills are coming due now to pay for them.

Okay, so that's been delayed slightly, and that's when Sean's referring to the snow that snow pile effect, that snowpile is here now.

Right.

So okay.

So um we got delay, we we got the extensions, so we didn't have to do those those projects in the first and second year of our extensions, but we still have to do the projects.

I get that.

We just would delay two years out.

So you're saying that we did all those four projects that we could extend it, say, oh okay, so let's just use numbers.

Say we had four projects that to complete.

And we got the instinction for the two years, so we pushed the two projects out.

So that's what I'm getting at.

Is that we did them all in those two years?

The projects?

I'm not sure.

No, it's just the projects that I just use an analogy of like four projects.

And we got the two-year extension.

So we did those four projects within those two years.

We did four.

I would just use that it could have been ten, twelve, whatever, and I'm just using that for easy math.

If we had to finish four projects in that time period, and then COVID comes, and then they said, okay, you got two more years, and we were doing a project a year.

I was wondering why it was snowpiled.

Because you have you have you also have new projects that were supposed to be starting within the same time period as well.

Right, exactly.

That was my question.

Yes.

That was my that's what I meant.

Those new projects didn't get stended out.

It's just the old projects that were done.

Yes.

They didn't go to the end of the pile.

They stayed and started to work with the new projects.

Yes.

EPA only gave us extension on certain projects based on the process.

All right, see, that's what it was.

It's certain projects.

So we didn't get an ext two-year extension because I know we had the 20 years to get everything done.

We had under the city.

Seven years to get everything done under the 19 order.

That gave two more years, so that gave us the nine years of selling.

All right.

So all right.

So that makes a little more sense.

I was just kind of confused on that.

Okay.

Thank you, Council Oops.

Council Boy.

Thanks, Mr.

Chair.

Sean again.

Uh you know, uh I'm looking at the screen and I'm looking at the ask.

We need to borrow 20.4 million dollars to do these projects to keep up with our administrative order from EPA.

And by doing this, our rates are going to go up and the regular everyday consumer is going to have to pay more money a month.

So if I'm watching this right now, I'm wondering what are these projects?

I was wondering if you just can go into a little bit more detail on what a gravity thicker thickener is or or or or what we're paying 600 grand for nitrogen optimization.

Yes.

Is it not on?

Oh.

You need to talk into it.

Oh, I thought it picked me up.

It doesn't pick me up.

Oh no.

Um, I'll go again.

Or or are we good?

You're going to explain the project, Sean?

I think you can explain the project.

Yes.

So the question uh by Council Roy Roy was to explain the projects if it wasn't heard by everybody.

Um there are four projects on here that are associated with the city's wastewater treatment plant.

I had mentioned previously that the plant is now 30 years old, um, and some of the equipment is getting tired.

The plan has been well maintained.

That's not the question at hand, but equipment just gets tired and needs to be replaced over time.

So gravity thickeners are key process in management of the plant's residuals.

Uh the treatment process generates what's called residuals.

We also call it sludge.

It's not a very nice term.

Um in order to manage that, you have to try to get as much water out of that sludge as you can before you dispose of it.

The more water in it, the more expensive it is to dispose.

So we want to get as much water out as we can.

To do that, we basically let it settle.

Okay, and we let it settle in these things called gravity thickeners.

There are four of them at the plant right now.

Two don't work.

Non-functioning.

One is held together by bubblegum and duct tape, and the other one is functioning.

So there's essentially one that's working properly.

If that goes down, the plant can't manage that process.

We will violate our permit and get in trouble by the EPA.

Richard, please come help us.

In addition to that, the tanks are falling apart.

They're concrete.

They're in a corrosive environment.

Literally, we're finding chunks of aggregate in the downstream process of the concrete tanks falling apart.

We have to go and restore those tanks.

So all of that put together, these need some TLC.

They're just getting tired.

Generators at the plant.

We have two generators at the plant that power the plant.

And in case of a power outage, again, those are 30 years old.

They are operated monthly to make sure that they run properly.

But again, there's parts of them that are just getting old and need to be replaced.

We can't get parts for some of them because they're so old.

So it's time that we go through and we start to rehab those.

That's what that 4.8 million dollars is for.

We need to make sure that those function.

We lose power at the plant, no generators, we're in some real trouble.

The nitrogen optimization, that is right now, the city has really made uh good progress in terms of improvements to the process to help clean the water that's coming out of the plant.

As part of that, we try to remove as much nitrogen as we can.

Uh nitrogen in the receiving waters creates algae, it kills eel glass grill grass.

It has a lot of environmental detriments.

So we try to take out as much as we can.

This is a basically a study and small improvements to the plant that we're going to try to make to even lower that even further.

Get as much out as we can with what we have, what we're working with.

It's really important, by the way, for the agencies that we continue with this as well.

The agencies love to see us make progress with this, and when it comes time to renegotiate our permit with EPA, they will definitely look favorably upon this type of work.

The Cove Road Pump Station, um, we have a leaking force main that's been leaking for more than ten years.

This is one of the largest pump stations in the entire city, and if that fails, we will end up with a significantly larger emergency repair than 2.8 million dollars.

We need to go and address and repair this leaking force main.

And finally, the solids um building odor control.

Um wastewater treatment plants are a corrosive environment.

They are odorous.

Our plant does a very good job at maintaining odors because most of it, actually, practically all of it, is covered.

There are no open tanks.

Like if you go to Fairhaven, they have all open tanks.

We have none.

They're all covered.

Um we need to make sure that our odor control system keeps that odorous air, that hydrogen sulfide within the system and not let it release.

These ducts are corroding.

We need to replace them.

Um that's what this project is is for the Sean.

Thank you, Council Roy.

I appreciate I appreciate I think I think these more detailed descriptions will help folks wrap their heads around what we're borrowing money for.

Thank you, I yield.

You're welcome, Council Roy.

Anyone else have any questions?

Seeing none, we're going to take two separate votes.

Item number two and item number three will be voted on separately.

Council Pereira.

I make a motion to refer item two and two A out to the full city council.

Made by Council Pereira.

Second by Council Burgo.

Roll call vote on item number two.

Council Pereira.

Yes.

I'm sorry, Councilor Abrew.

Yeah.

Bottom to the top.

Counselor Abro.

Yes.

Yes, Council Baptiste.

Yes.

Yes, Council Brugo.

Yes, Council Carney.

Council Shukek.

Yes.

Yes, Council Loops.

Yes.

Yes, Councilor Oliver.

Yes.

Yes, Council Pemberton.

Yes.

Yes.

Council Pereira, yes.

Council Roy.

Yes.

Yes.

Item passes nine to zero.

Item number to adopt item number three, which is the loan order for 20 million four hundred thousand made by Council Pereira.

Second by Council Abrew, roll call.

Anyone on the question?

Seeing none, roll call vote.

Councilor Abrew.

Back to leadoff again, huh?

Yes.

Yes, Council Baptiste.

Yes.

Yes, Council Burgo.

Yes.

Yes.

Council Shoket.

Yes.

Yes, Council Gomes.

Council Lopes.

Yes.

Yes, Council Oliver.

Yes.

Yes, Council Pemberton.

Yes.

Yes, Council Pereira.

Yes.

Yes, Council Roy.

Yes.

Yes.

IO passes nine to zero.

Seeing no further business in front of us.

Do we get a motion to adjourn at 701?

Made by Council Abrew.

Second.

Second by Council Chikett.

All those in favor, opposed.

We are adjourned at 701.

Thank you, everyone.

Thank you.