Good afternoon, everyone.

It's four o'clock, and this meeting of the Rochester Public Utilities Board is now called to order.

As a reminder, this meeting is recorded and recording will be available on the city's website.

The first item on the agenda tonight or this afternoon is approval of the agenda.

May I have a motion to approve the agenda as presented.

I'll move approval.

I'll second.

Thank you.

It's been moved and seconded.

Um discussion.

Otherwise, all in favor, please signify by saying aye.

Aye.

Aye.

Any opposed.

The agenda is approved.

Next, we have our safety moment.

And our safety moment today is brought to us by Siobhan Eastley, manager of purchasing and warehouse.

And Siobhan, when I saw your name on the agenda tonight, I called up my old colleague in banking, Shauna, and I asked Shauna, how many Eastlees are there in running around southeastern Minnesota?

And she said she knew you and uh um just absolutely enjoyed working with Shauna for years.

Wonderful person and uh nice to meet you, and thanks for presenting tonight.

So nice to meet you too.

Thank you.

My uh that's my sister-in-law.

So we've been sister-in-laws for 31 years tomorrow.

So yes.

Well, thank you for having me.

Um, so I am the manager of purchasing a warehouse.

And so what we're gonna talk about today is a little bit of warehouse safety.

Oops, sorry, I guess maybe I don't have uh keep moving.

Okay, keep going.

This stuff we don't even need to talk about, right?

All right.

I'm guessing most of you have never been in our warehouse.

So this is just a really quick picture to show you kind of what our what a normal aisle looks like within the warehouse.

Internally, we store electric and water materials.

Um we recently had an LED light upgrade, so you can see it's super bright in there.

The goal every day for for the staff, and we have five people in the warehouse, four to five, five right now in the busy season, is to make sure that there are no injuries to them.

They go home safe every day and that we limit any damage to materials and equipment.

So this is a one warehouse aisle.

You can see on the bottom there, there's some yellow guards that we put on the racking just to make sure that that gives some extra protection, just in case you'd have a forklift incident.

So there it's organized and clean, wide aisles where we can.

We've got some narrow ones.

Everything is organized by bin location.

And oops, um this is another picture of where we store our wire and cable.

Inside storage when possible of cable is really important because it keeps the cable dry and it's must much easier to pull off the roll and distribute.

Um, if you've got cable outside, it gets cold and wet, it makes it very difficult to pull off and also take the cable um coating off.

So the cable is accessible 365 days a year, and it's easy for them to grab off the roll and then distribute what they need to.

So again, you can see it's nice and bright in there for the LED lights and much easier for our people to get to.

And this is just one picture of a little bit of our stockyard.

And the stockyard, obviously, outside.

Again, we've got a lot of equipment, uh, larger equipment, heavy equipment.

And this is just one particular aisle.

We've got um employees coming in and out every day.

They store their trucks there, so there's a lot of traffic.

We've got contractors coming in and out, and we have our staff.

So again, there's a lot of movement in and out.

We're always wanting to make sure that we we keep an eye on where where people are so that everybody is safe at the end of the day.

And so basically, this the uh the choice every day is to make sure that we figure out how to how to pick the material the easiest and the safest.

So here's our options for material handling.

We've got rolling ladders for our narrow aisles, those lock in place, and so you can grab stuff off the top shelf where you can't get a forklift in, especially for smaller little boxes.

So it's a nice safe way to access product.

Then we have an electric forklift.

Of course, we're an electric utility.

Why wouldn't we have an electric forklift?

Um, this is for inside use only.

It's very maneuverable.

We can grab up to 4,000 pounds with these.

It's got fork extensions and then can side shift off to the sides.

We can get in tight spaces, um, but not all.

The all the aisles are are a little narrow, but most of them we can get to this with.

And then outside, we have a couple different options.

This is our largest uh piece of equipment that we use.

This uh JLG or the this is a Manitow uh forklift has got up to 16,000 compound capacity.

It's got a 16-foot boom extension to reach out and cantilever over uh racks, it's got front wheel drive and then also all-wheel drive.

So the guys in the stock room have a lot of options.

So, in the end, that's basically what the warehouse is all about is safety, making sure we we properly handle equipment and product every day and uh and then go home safely to our families.

So I have a crew of five, and they handle about 16 uh hundred transactions and receiving every month.

So that's just the product coming in.

That's not the product going out to the jobs.

So that's all I have for you today.

So thank you.

Any questions about the warehouse or what we do?

Well, thank you so much.

I just want to point out when we had our my orientation tour, they walked us through the warehouse, and I was just absolutely astounded at how organized and clean and it wasn't brightly lit like it is in those pictures because you hadn't got the LDA lights in yet, but just really nice job, well run.

And and uh when I was 14 working at a little steel company in Dodge Center, I dumped a whole rack of uh I beams on myself with a forklift.

So I'm happy that ended up fine.

It was a long time ago, so absolutely not reflective of the business today.

But uh yeah, you can't be too careful with racks and forklifts, and that was scary.

Thanks for presenting.

Okay, and next we're gonna move quickly to the consent agenda.

Uh that's item number three, uh, the consent agenda, specifically 3A through 3C.

And the consent agenda includes minutes from the June 23, 2026 meeting, a review of accounts payable, and board policy 32 financial policies.

Do I have a motion to approve the consent agenda as presented?

I'll move approval.

Thank you.

I have uh motion.

All second.

And we have a second.

Is there any discussion?

Hearing none, it's been moved and seconded.

Uh, all in favor of approving the consent agenda, items 3A through 3C, please signify by saying aye.

Aye.

Aye.

Any opposed.

The consent agenda is approved.

Next, we move to the open comment period of the meeting.

Uh, open public comment uh is limited to 20 minutes total, each person having two minutes to speak.

Anyone not having the opportunity to be heard today will be the first to present at the next board meeting.

And Aaron, do we have anyone signed up for open public comment period?

There is one person signed up, Chris Acunia.

Wonderful.

Chris, welcome.

Do I have to hold this or leave it in the okay?

Great.

Um, hello everyone.

My name is Chris Acunia.

I am a local SEER Club organizer here in Rochester.

Uh first off, I wanted to thank the board and staff uh for making tremendous progress on our community uh renewable energy and now water kind of quality goals as we move forward.

Uh our entire community benefits from this cleaner air, cleaner water and lower bills associated with cleaner energy and do planning.

Um our Sierra Club Rochester members uh want to ensure that our air is breathable for the next generations.

This last week has been a kind of stark reminder that climate change is here, it's getting worse and it's not going anywhere.

Um we all know how I and our members feel about uh additional fossil fuel um infrastructure.

So I won't really talk about that, but I did want to uh say that we hope that RPU continues and greatly expands its programs that help residents and businesses become more energy efficient, save money, and decarbonize by expanding our rebate programs, demand response and rate structures that support electrification and equity at the end of the day, people who can't afford air conditioning, air filters, uh changing out gas stoves to electric stoves are the ones that are hit most locally here in our comedian, not to mention all the other socioeconomic factors that factor in.

Um and the cheapest electricity is the kind that we don't even have to turn on.

Um I know that there's also been long talks about a public dashboard for our community and leaders to track our progress.

And I know that there are a lot of challenges with that currently with how reporting works with Simpa.

Um, but going forward as we move into our own power supply, I think that would be a really good uh way to build public transparency and build transparency and public trust um through our government processes.

Um yeah, just wanted to thank you all for your hard work and for putting us on a better path towards better future and for taking the time to hear from our community.

Thank you.

Uh thank you so much.

Appreciate it.

Uh now we will move to the informational uh section of the meeting.

Um we have uh the first item for a uh power supply plan update with our director of power resources, Mr.

Bill Bullock.

Good evening.

Um we get to see Chavans presentation.

There we go.

Okay.

Um so I'll give you an update tonight.

We have made uh thank you for recognition of the progress we've made from the Sierra Club.

Um we have always looked at it as a balance between having reliable capacity um so that we can deliver the renewable energy uh that helps us achieve our 100% goal.

Um we are well on our way to achieving that.

Um and on both sides, we're about uh two-thirds of the way there.

As you can see, the summer um the summer is our our real peak.

Uh I think we may have hit that peak yesterday at about 294 megawatts or so.

Um we are uh we do have uh both our existing generation and the new plan generation in order to uh to to meet that goal.

Um where we're the only the hashtag area is what we need.

We need about a uh about uh 40 percent more in order to meet our 300 megawatt goal, and on the energy side um on renewable energy, we're about uh two-thirds of the way there.

Um but this is not as straightforward as you know we would like.

Um the and I've uh compared this to a game of snakes and ladders, um, as the English version of shoots and ladders.

Um but what we're finding is that there the ladders we have are you know the the good decisions that we've made on um public uh power purchase agreements, battery storage, um, and then the firm capacity that firms that up.

Um we have done with the support of the board, uh, some of those PPAs that have preserved the safe harbor tax credit so that it reduces the overall cost of that of those resources.

And we also have some supply diversity.

So we're not relying on one contract, um, though some are larger than others.

Um and as far as the snakes on the board, these are the things that might set us back a bit if they happen, uh, and some of them are happening.

Um tariffs and inflation are continue to to gnaw at contracts because no one wants to take on the uncertain risk of those things.

Um so it tends to increase the cost of things.

Um tax credit expirations are seem to be uh firm now.

There are still some tax credits available on different technologies, storage, um, some um non-combustion uh technologies.

Um the there are emerging permitting issues.

They're not emerging, they've been around for about a year now.

Um, and then there is an a market accreditation issue that could also set us back on some of the energy storage uh projects, as well as some of the renewables.

Um the the first reliable capacity project, Mount Simon.

You understand you authorized us last week to enter into the interconnection agreement.

The good news there is that we've saved um about 75% off of that interconnection agreement.

So instead of 20 million dollars, it's five million dollars, which is uh very good for the project.

Um we are on schedule with the permitting um and construction, and we know we'll be ready for the 2030 accreditation.

Um this is mostly uh good for us.

Uh the the Mount Simon station is affirming resource, so it it enables us to rely on um uh non-dispatchable resources and intermittent resources like wind and solar that uh we cannot uh tell when to operate.

We just take the energy when it's available.

That's what allows us to achieve the 100% net renewable goal.

Um we also have the battery projects, those are are moving along.

Um so that we have two 10 megawatt uh 40 megawatt hour batteries uh on the distribution system.

Um, we have authorized those who are moving forward with them.

The uh the start date may be moving out a bit, um, but we know we can make the Q3 of 2027.

Um, and then the snake year is uh the future accreditation uh in MISO rules that is variable.

So even though we have a 10 megawatt battery, it may only get uh accredited at 55%, meaning it's really a 5.5 megawatt um contribution to our to our um capacity obligation in the market.

Um so this is still what the the accredited capacity picture looks like.

The purple lines are before 2030 are the what we're getting from Sherco, uh the simple uh contract.

Um and then you can see GT1 at the bottom that was you red.

We can't uh we've had it in the last few years, but it it uh it is being refurbished uh and should be returned to service for the 2829 season.

Um and then we have Cascade Creek, West Side.

Um, and where we have the battery, we have some wind and then Mount Simon and the dark purple.

The light blue past 2030 is is what we need to fill.

Um, so that is still an open um uh square on our matrix.

Bill, do you mind if I just inject something here?

Oh no, absolutely.

Uh there's a point on this chart that I wanted to call the board's attention to.

Uh I think some of the council members that heard this presentation were looking at this, but there's some context here that I'm not sure we've really explained.

If you look at the black line, it represents our miceo capacity obligation.

That's set by our summer peak hour.

This is just a summer view.

So it's that one hour a summer where we have to meet our peak obligation.

We need the stacked bars to be above taller than that black line.

If you notice going from planning year 3132 to 3233, it steps down.

And I don't think we've ever explained to this board what that is.

And it's a decision that predates most of the current board members.

We sold 25 megawatts of surplus capacity to another utility.

And so because we've made a commitment to sell that capacity for 10 years, that adds to our capacity obligation.

That step down is when that contract expires.

And so rather than we still have the generation that we have, but our capacity obligation drops down.

So that is a future con a current contract that rolls off in the future.

It doesn't mean we're anticipating load drop or uh a reduction in demand.

It's just part of our obligation as we've made a commitment.

The board supported this to sell 10 years of capacity, and it is connected actually to the last, the previous GT1 overhaul and the time frame where that was previously overhauled.

It was made a decision to sell that capacity for 10 years as a way to monetize and pay for the original one.

So that's uh it's a fact there that we don't really point to very often, and it does impact our future um load obligations in a positive way, is we don't have that obligation to meet that 25 megawatt commitment beyond that time frame.

This also doesn't represent the batteries that we've made a commitment for as well.

So the 20 megawatt battery project isn't reflected here.

You can just kind of add that to the stack.

Um, and so I just wanted to point out those two things there, because we haven't really um brought that to the board's attention.

Otherwise, accurate and reflects our current assumptions.

Um we probably will get GT1 back by the 27-28 planning year.

So that's going to be one year earlier than this one was anticipated as well.

Thanks for that opportunity, Bill.

No, no.

Thank you.

So the first renewable energy projects that we entered into were um that are operating, are the restore renewables.

One is a 20 megawatt Adams wind.

Um approximately that was not operating when we contracted to it.

So the developer has uh refurbished those uh wind turbines and they're currently operating.

About 50% of them are operating.

So the 22 megawatts is about 11 megawatts.

Um we continue to work with the developer on getting those others uh up and running.

And then there was a 40 megawatt Dodge Center wind project.

That one um hit an unexpected snake um in that it uh it was contracted with uh with other utilities, and they have it participating as a load modifying resource, which means it's behind their meter, and we cannot get access to the node in the market in order to sell the energy into the market.

It just modifies the load of the utilities uh and their two of them that is behind the meter of.

So uh until we can get that node to be in front of the meter, and it would require some upgrades to the turbines.

Um, we would not be able to get uh market credit for it.

So for now, the contracts with the existing off takers are staying in place, and we're looking for a solution, uh, market solution with the developer.

Um the North Hills wind project, Howard County um is uh 180 megawatt in northeastern Iowa.

Um, it is the largest in our renewable portfolio.

We did save harbor those tax credits.

Um the expected start date has been delayed due to a permitting issue.

The permitting is being held up at the federal level.

Um it's waiting for its determination of uh no hazard by the uh federal aviation administration and the department of war.

Um there are currently 165 onshore wind projects that are waiting for this clearance.

So, you know, we're not alone, and there are there's a lot of um um market pressure building to try to change us either through the legislature or through um through uh uh lawsuit and like judicial option.

So we're we're working with the developer, they want to build the plant, we want to get the off take because we need to clear that final hurdle in order for them to start constructing that project.

And um hopefully that will clear soon.

Um there's also as you may know, a good news story of the uh cooperation between the city and RPU on putting solar on public buildings.

It is there's a grant program that we were made aware of late last year that had um significant uh funding for solar on rooftops for commercial customers.

So we did take were able to take advantage of that.

Uh Peter and and uh Jake in um marketing were able to to work very quickly to get all the applications in, and we were awarded um um uh almost almost two million dollars for for all of the projects.

Um and uh it was the the remaining amount would be credited through an investment tax credit if we can get the investment tax credit from the federal government.

Um but it it is a good story, even at a 70% um uh uh coverage rate, the 30% investment is a good.

It's only 0.1% of our load, but every little bit counts.

Um and it does also help the city save money.

Um, so that's another positive.

No snakes on that one.

So um so this is where we are.

We're about two-thirds of the way up to the 100%.

Um there are more snakes.

There are some ladders that we can take on the way to 100%.

Um the fact is we need to um to find more ladders, we need to minimize the impact on rates.

And that only means taking more uh dice rolls.

So we need to roll the dice more times.

And that's where the next RFP comes in with uh, you know, we'll be going out for an all uh all of the above strategy for that um, asking for um for other utilities that might have some extra capacity that want to sell it.

Um if they have projects with excess wind or recs uh that they're willing uh to sell to us, we hope they offer that into the RFP.

Um and the idea is to get as many options as possible because we know um you know the the road is treacherous and there are things that can go wrong.

But I think if we get enough um uh tries, we can have a short list, be able to analyze what the lowest cost option is that are complementary to the current assets we have in the the portfolio, and that will um you know sort itself out.

But the RFP, we should have recommendations by the end of the year from the from the uh consulting company that's doing that.

We have contracted with them, we have a kickoff meeting tomorrow, uh Wednesday, uh Thursday, sorry.

Um so we will be uh kicking that off very soon.

Um with that, um, you know, there are too many snakes on on this plan.

So I won with that up.

If there are any questions, I'm happy to answer them.

Thank you so much.

Any questions or comments for Bill?

Don't let them off easy since we won't we won't see them in much longer.

Yeah.

Some questions.

Go ahead, Wayne.

Um, a couple things.

One, the wind.

So the green in our capacity graph is that the I'll include all three of those projects.

Yes.

So we're still there's some at risk there, is what you think I hear you.

Yes, because the wind, because you can't tell a window run offers very little um actual capacity.

Right.

Right, understood.

Just making sure I understood that that's you know what that was.

And then the other thing I wondered, where are we at two-thirds for our renewable goal as well?

Okay, yeah.

For both the in fact, the capacity is a little lower because the wind was disaccredited.

So got it.

Got it.

Okay, thank you.

And then just before I since thanks for your work here.

And oh yeah.

I appreciate the support of you know the executive team and the the board has been wonderful to work with.

And I think we've done a lot of good things together.

So I leave with a good legacy, I think.

Thank you, Councilmember Keene.

Yeah, I just again uh following up on um Ms.

Terry's questions.

The wind here, again, we have 240, you know, full like nameplate, but here we're getting what about 40 megawatts.

So it it does disturb me then when I think of if we're at like we say we're 67% or we got a third left to do, but if but if it's renewable, it'll come in it's dramatically lower than what it's what it's nameplate will say it can do.

That's makes me feel like we're not more we're not even halfway.

Can you kind of talk me off of that?

Yes.

So um we are allowed under the current rules to bank the renewable energy certificates.

So we we can never time it exactly.

So what we'll be doing is we'll you need to match as a load serving entity the amount of megawatts you sell to the amount of renewable energy certificates that you have banked.

Um, and then you retire them as your load goes up.

So even though the wind produces more in the winter and in the spring, um it will and it less in the summer when our load is higher.

We've probably accumulated more wrecks in the winter and spring that we can retire against the load we have in the summer.

Okay, I I think I understand that.

And I and again, I I I do get gratified when I say that when the wind is blowing all that, we're we're gonna have more than what we need on our average day.

But I'm still looking, then is there something wrong with how I'm being presented this?

Because I'm looking at that 30% and saying, wow, if we have 245 uh megahertz of wind and it only gave us 40, like what was that like 20% of what it was giving us, which I I understand why it would be it makes me think that the rest of it, we're probably gonna have to um qualify as dispatchable because we're just not gonna be able to create that much new renewable with that with that sort of accreditation.

Yeah, I mean, I think there are the accreditation is one thing.

It it is generating um over 50% of our overall load, our annual load.

Um, so it does uh match in that way.

So even though it's not providing that much capacity in the summer, it is providing a significant amount of energy and the associated recs.

Um there are what different ways to balance.

So like more solar uh would offset some of the um some of the uh the wind in that solar generates more in the summer than it does in the winter and spring.

So there is some complementary nature with that.

The the issue is with tariffs and inflation, the cost of solar has gone up.

And with the retirement, but we're hoping that this uh my hope is that this RFP shows some uh some cost advantage to solar.

And if it if it the idea is it will find the lowest cost uh way of meeting the plan.

Okay.

If I could just add a little bit, yeah, I would encourage you to look at this chart and think about each year as representing just one hour because this is what happens on a hot summer afternoon.

So this rep this reflects like Thursday at four o'clock on July 20th in 2030.

I don't even know if that's really a Thursday, but that's likely what's going to be meeting the load on that hour.

Um, I just looked at MISOENERGE.org.

It is almost exactly what's meeting the load today.

And wind, although it's plentiful in MISO, it's not plentiful on a day like today.

So we will be leaning on our dispatchable resources on a on an hour like this.

This one hour is one of our planning obligations in MISO, and what we're not showing here is the balance of renewable energy over the entire year.

And on the entire year basis, it does balance to 100% based off of the plan that we have in place.

But there's more of the renewables in the spring.

There's more of the renewables in the winter that balances this one hour in the summer.

So this is you it's hard to grasp, but this is just a one-hour snapshot of meeting the load and keeping the air conditioners running on a hot day.

Yeah.

No, I appreciate it.

And I do understand it that way, and that we do have to meet this.

And it's not just we have to meet it for some arbitrary thing.

It's important that we have enough for those days.

Um last question just on um the battery stuff and the the fact that again we didn't reflect in this charts, but we're getting like, is it 55% of that?

Uh it is going to change from year to year, but currently um for a new system coming on, it gets a 55% accreditation.

But currently for a new system coming on, it gets a 55% accreditation.

So I'm glad to hear that we did, and I'd say like dabble into doing these two 10 megawatts things, and there's a you know business arrangement behind them.

But I've also heard of these as being dramatically larger in the in the region here.

Is there some reason we went with the smaller battery?

Is this something we see as technology changing, or is that the only opportunity we had?

Yeah, we didn't want to get into an interconnect queue with MISO.

So we cited them at on our distribution system.

Um and we wanted to really learn how to uh operate them and dispatch them because it is the it's kind of an art and a science to doing the dispatch on them.

So it was like a proof of concept, but we wanted to get them in, take advantage of the um the tax credits that were existing.

Okay.

Um those tax credits still exist, but there are a lot of foreign entity of concern limitations on uh which uh equipment qualifies for the tax credit.

So we went before they put any of those in place, we went with the least restrictive um tax credits to make it as uh as economical as possible.

Is the battery the one area where there's still technology changing in a big way, or is it is that sort of stabilized?

I think it will continue to change.

I mean, right now the problem with lithium ion is uh the the duration.

Um so you can get a four hour, but the you know the conversion efficiency is good.

Um, but if you you need to make it double the size if you want to make it an eight hour duration.

So there are different chemistries that are being evaluated.

There's iron air, there's you know, sodium batteries, um, but none of them are quite as you know, you have a lithium ion battery in your phone and your computer.

Um that technology is much more advanced than these others.

I think there'll be more work done on developing these technologies, but we know this is mature.

We know it'll work when we put it in and do what we think it will do, and it's not a science experiment.

So thank you.

Good questions.

Any other questions or comments for Bill?

Bill, I got one last one, then I'll let you go.

Um I assume that through the rest of this year and the near term, we're still in a viciously competitive capacity world and energy world.

And we are a relatively tiny fish in a massive energy ocean as our entity size.

So moving quickly is important, being opportunistic is important.

Yeah.

Yeah, and I think that's what we what we've done.

And yes, you you have.

You've done a good job with it.

The AI trade has made it a lot more competitive in the energy market.

You don't see anything changing near term.

That's the state of the board.

Well, I I don't know what I can't forecast what will happen with the AI companies, but um fair enough.

Fair enough.

Thank you so much.

Yep.

Perfect.

Um, the next two items I'm just going to introduce together because they are related.

But uh item 4B, informational item and item 4C.

Uh 4B is the water supply master plan update and 4C is a 2025 Water Division Engineering and Operations Report, both presented by assistant general manager, uh, Mr.

Todd Bloodstrom Blomstrom.

Thank you, Todd.

Uh yes, good afternoon.

Going to get us queued up on the right slide deck.

I wonder if we have these switched around.

Okay.

Um, so uh appreciate being on the agenda today.

Item four B is an update to the water system master plan.

So this was uh one of the two agenda items on a city council study session yesterday.

Um, and so we do have the same slides today, just because we want to be um sharing consistent information with the public on this topic.

Um, but yesterday at the study session, it was really one of the first times we've had an opportunity to be in front of the city council and explain this project and give them some background information, which they didn't have a whole lot before.

Um this board has reviewed a fair amount of this information already.

Um last year you reviewed the scope of services and awarded a contract to two consulting firms uh that are helping us through.

And then just as recently as February, we reviewed the uh water demand forecasts.

And so I I know that this body has uh has more background than the city council.

I'm gonna move through the slides.

I'll probably be a little brief on some of them because they that you do have the background, but I do want to focus on the process um and where we are in the process, and I think that would be of greatest value uh to the board here today.

So um obviously we all know what what we do here at RPU.

Um, but when we get into these studies, um we tend to there's a tendency to get fixated on on just we're trying to secure source water.

But we do have some core responsibilities here at RPU and how we manage the water system.

And it's not just volume.

Our really our number one core responsibility here, at least from staff's perspective, is making sure the water is safe and making sure that we uh we comply with all of the drinking water, safe drinking water act regulations, and that is a big part of what we do.

Making changes to a water system of our size takes time for planning and design and construction.

And so that creates a need for us to always be trying to look as far ahead as possible in forecasting our demands, uh, forecasting what we need for infrastructure so that we have a good runway and have time to make those changes that we need to do.

We are here ultimately to try and secure uh sustainable water supply for the utility.

Um, but it is not just a matter of grabbing what supply is out there today.

We have to go about this in a way that we're ensuring that we're protecting the environment and not uh having unintended uh environmental impacts in the way we obtain water.

Um, so being good stewards of both the system and the environment.

And then lastly, it does come down to a lot of infrastructure work and planning.

And we use uh a number of computational models to do that.

We have a hydraulic model for the water distribution system, and then over the last few years, we've been developing a groundwater system model, and I'll share more about that here today.

So I think all of us have seen the graph on the right.

Um we talked about that back in February of our demand forecasts.

Um we do here at RPU have a bit of an unusual demand history, and I've got the last 20 years on the left side of the graph.

Typically, in a community like Rochester that has had very steady and predictable growth over the last 40 years, that line is is just an upward trend.

Um, we've had a little bit of a downturn here for 10 year period.

Um, part of that is conservation, which is good, and a lot of work that Patty's group and others have done.

Um, but another part of that is some changes in industrial land uses.

And um, we've had uh some decline in industrial use is just by the change of industrial land use here in the community.

Um, and that has offset uh a lot of the demand that would normally come with growth.

And that's a good thing.

It's given us more time to prepare, um, but nonetheless a little bit unusual.

I do see just in the last five years, though, that that uptake in industrial uh decline is starting to be overtaken again with with growth.

And that is a normal trend that we're we're starting to to uh to become more accustomed to.

This forecast through 2065 uh is for dry weather years.

Um, when a utility plans uh water system, they don't plan for the average year.

You have to plan for the drought years, and and that is what we've done with this demand forecast.

And so overall, we're we're a little bit below 5 billion gallons a year of our demand, um, and that is predicted to increase up to a little over 8 billion gallons a year here through 2065.

Um, and on the red line, just a quick refresh.

Um, we operate under a water appropriation permit from the state that's administered by the DNR.

Um, and at that point, at the point in time there we are today, that is set at 5.7 billion gallons a year.

With these predictions, uh, we're looking at potentially reaching those in a dry year within the next five years.

Um, I emphasized uh yesterday, we are not in a crisis.

We have time to plan for this process, um, and we are working very closely with the DNR to come up with a solution.

So, aside from pure quantity, uh, like I'd mentioned, um, we need to make sure that not only do we secure a good source of volume of water, we have to continue to have a good track record of protecting water quality.

And that is part of this study because water quality will be highly dependent on what source of water we ultimately decide on.

Um, there are some structural changes to the system that I believe are on the horizon, depending on what the results of this study is.

And so we've talked with the board that there's really two parts to this overall planning effort.

There's the groundwater modeling and determining what the appropriate source is.

And the second part is how do we need to modify our distribution system to accommodate those changes?

Um, and not just identifying the infrastructure changes, um, but we what we are going to deliver to the board here at the as we come to the conclusion of this study is a sequence of how those changes need to take place and what is the estimated cost, so that we're positioned to then move into financial planning and how execution uh will look into the future.

Another diagram that our figures that we've seen previously, but the figure in the upper right is the bedrock geology of Olmstead County.

And if a cross section were cut directly across the county from west to east through the center of the county, passing through Rochester, and that section was turned on its end, you would see the cross section essentially that's shown on the bottom of this diagram.

So we've previously talked about how there are strata or layers of geo uh geologic formations under the ground surface.

Some of them are very dense and they have very low uh porosity, and there's not as much water in those layers, and water, while it does move vertically, uh, it is confined to some extent.

Other layers are less dense, much more porous, um, the unconsolidated material of fractured bedrock, those contain large volumes of water, and those uh water bearing formations are generally what we describe as aquifers.

So over the last 100 years for RPU as we've grown as a city, um, the city and RPU has drilled wells, and we've drilled wells into that upper yellow layer, and that upper yellow layer is the Jordan aquifer.

Been a very good source of water for us, generally good water quality, high yield in that in that formation, and that has served us well.

Um, we've been fortunate, uh, at least uh throughout history here in Minnesota that there seems to be plenty of water, groundwater for all of us.

Um, but that uh is changing to some degree.

2024 was the last time we drilled a new well.

It was well 42, it was drilled right into the Jordan aquifer, that upper yellow layer that I'm showing there.

Um, and we applied to the DNR to finally get permitting to commission and put that well online.

Um, and the DNR uh had raised some concerns, they ultimately did issue a permit, and well 42 is online, uh, but they have indicated some concern about what is the sustainability of the Jordan aquifer and are we reaching that yield capacity?

So the permit came with uh two rather strict conditions, and I've I've listed them here.

One of them is that we're prohibited from drilling any future wells into the Jordan aquifer until we can demonstrate that we've evaluated other sources of water.

So they're asking for us to, as RPU to look at other groundwater sources and also consider uh potentially at least a partial conversion to a surface water system, at least consider it.

The second part, and it's a requirement is that uh future growth uh in Rochester, we're gonna need to demonstrate that if we are continuing to increase our groundwater withdrawals, that we can do it without unacceptable environmental impacts, and that we're consistent with sustainable yield capacity.

That seems a little bit nebulous, um, and one might ask how exactly do you define that?

Um, but the good news is that there is already good structure uh in the state of Minnesota, and it really comes from three parts uh that are established in state statute.

So 103G, um, one part talks about safe yield.

And so this section of state requirements lays out how if a water utility is going to continue to withdraw water from an aquifer, that it has to have a safe, it doesn't exceed safe yield.

So we're not depleting these water bearing formations beyond what they can recharge in any given year.

The second one is that pumping does not exceed uh the point at which it could impact streams and other surface water.

So there is migration vertically from the surface down to these aquifers, and when an aquifer is depleted, it can get to the point where it actually starts to impact surface waters.

And so that section of state statute um prohibits that and it and there's guidance on how we determine exactly how that is determined, and I'll explain that.

And the last one is calcareous fens.

We've talked about those also.

Um unique type of wetland formation that is uh highly dependent on stable groundwater levels, and and they are probably the most susceptible to impact if there are changes from pumping.

So those three pillars, so to speak, really form the foundation of how we're going to uh conduct this study and and go about determining what the appropriate solutions are.

I listed the the various alternatives that are going to be considered.

I believe the board has seen this before.

One of them is uh a baseline scenario that what happens if we continue to increase pumping from the Jordan aquifer and what impacts may that have, may result from that.

Other alternative is Mount Simon on that previous figure, the very lowest layer down 1,000 eleven hundred feet below the ground surface is also a good source of water.

It's highly protected because it's deep and it is reserved from a regulatory standpoint for domestic water supply.

So there are a lot of advantages to considering the Mount Simon.

And there are intermediate aquifer formations, the Wanawak, the Tunnel City formations, and we are considering that.

I will say, just to give a little bit of context, if if we were to convert to something of the Wanawak or the Tunnel City, those intermediate, they do not produce the same volume of water for each well.

It would almost require two wells for what would otherwise be required from the Jordan or the Mount Simon.

So there that's just an example of advantages and disadvantages.

Surface water alternatives, we've talked about a lot of cities of our size and larger, Minneapolis, St.

Paul, similar sizes are a little bit smaller, St.

Cloud and Duluth.

Those are cities that have eventually converted to surface water systems.

The advantage they have is they're directly adjacent to very robust surface water sources, which are not necessarily the case here.

But we are going to consider the South Fork of the Zumbra River.

Also moving north where the confluence of the South and Middle Forks converge.

That's just a much larger watershed.

There's greater opportunity to yield a larger volume of water.

And then we're also considering the Mississippi River.

So now that we have uh source water demand or source water projections, and we know the criteria for which we need to evaluate those, we have um we're working on developing the groundwater model.

The figure that you see on the screen is just an illustration of the model uh grid.

Uh, it looks like green shading, but if you zoomed in, it's very small squares.

Those are the points, the thousands and thousands of points for which we'll evaluate both uh vertically through all those layers uh of geologic formations, as well as horizontally.

So, where is all the water actually being uh extracted from those systems?

So it's a three-dimensional model.

Looks like it's shaded green in some areas.

That's where those grid uh points get so tight that it looks like shading, um, but it's a variable grid so that we have higher accuracy both within the city of Rochester and those streams that we're we are evaluating.

So we feel like we have a very robust groundwater model that will give us dependable results.

The domain or the study area uh is large.

It goes from uh Dodge Center on the west to east of St.

Charles on the north, Sumbrota and and uh Mazeppa, all the way down to fountain.

So it's about 1,500 square miles uh that is that is being involved in this modeling process.

This diagram just shows the streams, all the tributaries uh to the creeks and streams that will be evaluated as part of the analysis.

Uh the blue uh are the streams and creeks that are not designated as trout streams, the red are those uh tributaries that are designated as trout streams.

So those are even more sensitive than others, and and we'll be taking a close look at those.

Um, a couple of things that I wanted to just point out.

The purple squares are those areas where they're gauging stations that have been maintained by both the DNR and the USGS uh collecting years and years of data, and that data is is the raw source of information that we need to evaluate base flows and streams and what impacts may or not may not occur on this modeling effort.

And then lastly, you'll see some yellow triangles.

Um calcareous fans are somewhat rare.

Uh we are fortunate to have somewhere between 11 and 15 all in in uh Olmstead County.

Nice thing from an ecology point perspective, it makes it just another level more complex in the work that we need to do uh with the analysis.

And then I won't go through the details of this table.

I wanted to just put this up here as an illustration.

Um, we talked about that um one criteria of making sure that we don't do not impact the base flows of streams in those gauging stations, those purple squares.

Um, this is this one little table was approximately a month of consulting work, um, but it is is an analyzing years upon years of stream flow data to come to an agreement with the DNR to determine what the August median base flow is at each one of those points.

These are almost the control points that are will really determine the destiny of what alternatives are going to be most viable.

So I just wanted to put that up there as an illustration.

And I also want to mention to be fair that the DNR has been very cooperative and helpful.

They have given us uh the data that we we need.

Uh, they've been very supportive of us throughout this process.

They've designated a point person uh to stay focused on the work that we are doing.

So they have been a very good partner over the the last year.

So that's gets us to really where we are today.

We have a model built, we know the criteria we need to control.

We have the water demand projections, and now it's really a matter of of starting to run that model with different alternatives, trying to access different aquifers for our future water demand, where the wells are located geographically will will determine the impacts and we know the standards for which we compare and judge our compliance with those uh requirements and criteria.

So we're in a really good place.

Uh the next eight weeks uh will almost be solely just running different simulations and alternatives till we find one that we think works best for us from a functional standpoint, and the DNR feels adequately is doing a good job protecting the environment.

So that's kind of where we're at today.

I do want to mention a couple of things that it is not again all about volume uh and capacity, but it is a lot to do with water quality.

And it's also not only about growth.

And I don't want that misconception to to expand in the community.

We have some challenges today.

So, in terms of water quality, the board has talked about that we have to comply with the Federal Safe Drinking Water Act and the primary drinking water standards.

There are over 90 compounds that we test for, and we have standards.

If we exceed any of those standards, we are required to issue public notice to all our customers.

And that is a good thing because it should instill confidence in our customers that if there are issues with water quality in any public municipal water supply, that that information is shared with customers and it is not kept from being open and out in the public.

We definitely want to avoid exceedances of primary drinking water standards in those concerns or those notices.

Um, but there are also 15 other compounds that are not enforceable, but they are strongly recommended by the EPA in terms of maximum contaminant levels.

I didn't want to list 90 compounds on a slide and try and walk walk through them, but we did pick six as an example.

Four of these are primary drinking water standards, two of them are secondary drinking water standards.

Combined radium and gross alpha are primary drinking water standards.

They're measured in pico curies per liter.

Um, and the standard for combined radium is five.

We hit 4.9 last year on one of our wells.

So we were within one tenth of a picocurie per liter of having to issue a public notice.

Um that was on one specific well.

Um we've taken that well uh and curtailed its use, and we are doing analysis to figure out what that is and if there's a trend because we want to avoid certainly exceeding the maximum contaminant level on that for both gross alpha and combined radium.

The bottom two are PFOS compounds.

Those are the newest additions to the primary drinking water standards.

And I should have put a footnote on this slide, but you see that uh PFOS is exceeded.

That was not exceeded in the water distribution system.

We have a well that has been offline that we've been reviewing and considering, and we wanted to test that just to see how that did, and it actually exceeded the primary drinking water standard.

There was no public notice because that well did not produce water that went into the distribution system.

My point of those is that we spent a fair amount of investment building a well 42 in 2024 to add a well for additional capacity, and we have lost two wells in the last five years due to our need to maintain water quality standards.

So we've to some degree almost stepped backwards, and and that is a trend that that is a little concerning.

Um the middle two iron and manganese um are really aesthetic issues.

Um, but as you can see, we have a very broad range, um, and it has resulted in a fair amount of water quality complaints in the community.

Rusty water, red water, stained plumbing fixtures, stained clothing and laundry.

Um, and we struggle with that.

It is not uncommon for groundwater in Minnesota.

It is the reason that many water dis water systems in Minnesota have iron and manganese gravity filtration, which we do not have here.

We treat with uh chlorine uh to prevent microbial pathogens in the system, and we do a good job at that.

We add a little bit of fluoride uh to meet the state standards.

We add some orthophosphate to try and sequester iron and manganese, in other words, keeping it in soluble form so it's not turning red when it comes out of the tap.

But there are limits to how much orthophosphate can uh screen in terms of iron and manganese.

Beyond that, there is no centralized conventional treatment here in Rochester.

So that is a large part of what this master plan will be considering, not only because it's the Jordan issues and the challenges we have today, but uh water quality in the Mount Simon and those aquifers are different, and they may require treatment just to meet primary drinking water standards.

So with that, um that's kind of the summary.

Uh as I mentioned, uh the modeling work will continue.

Uh by late October, I think we're going to have some really good results, and we're excited to be back to the board and share those.

Um by then, I think we will be seeing uh what alternatives are going to work to meet our future water uh demand projections and a lot to share.

Uh that's Q4 of this year, Q1 of next year.

Um will be a lot of the the system configuration cost estimates, capital estimates, um, which then will again be back to the board and share.

I just had one more slide.

Uh, and this was uh likely a little bit more important at the city council meeting than the board.

Um, but we talk about the the whole planning, the infrastructure and the cost estimates, um, and those are coming Q4, Q1 of next year.

Uh, and just to avoid any confusion, in fact, it is on your same agenda today, and that is there is some short-term needs.

So growth doesn't stop while we conduct these long-term studies.

Um, we are fortunate to have a very strong economy and great growth in the community, uh, but that comes with a lot of infrastructure expansion in terms of trunk water main upsizing.

We did a budget amendment uh last year because of the extent of work that was done, uh, the advanced metering replacement, uh, an extension of a joint project with public works for sewer and water to the southwest portion of the community, and the Calmar booster station, which we've talked about previously.

Um, those are just big projects.

Uh, it seems like we're in a bit of a spike in our growth pattern, uh and we need to weather that.

Um, the water utility has historically avoided debt, um, but we do need some short-term debt here to to bridge through this this uptick in development and expansion and get us through.

So with that, available for any questions you might have.

Well, thank you so much.

Any questions or comments?

A couple questions.

Um, one, I just curious because I'm just thinking ahead of, you know, are there water reduction opportunities?

Do we know we're at like four is 4.8 billion gallons per year?

Is that our dry weather number?

Or is that a peak?

Uh 4.8 is probably closer to average.

We almost broke five billion gallons a year in 2023, and that was a fairly dry year.

So let's just say 5 billion.

How many, how much do we know how much or about how much that is from like one once through contact cooling water or watering?

Do we know the percentage of that?

We do, and we can see the patterns.

Um, AMI is going to give us even more visibility in that.

Um, but we certainly look at average day demand, peak day demand, and what is the ratio between average and peak?

Usually the peak day demand is a combination of cooling and irrigation and what our average to peak ratio is.

It's it's right sort of in the average of what you would expect for most communities.

So it's like 20% during those low flow or high flow.

Thinking average to peak, I think there's a peaking factor 1.5 to two.

Okay.

Okay.

And then are any of the other wells, are we seeing sort of concerns?

I know not exceedances, but concerns with like PFOS or radium and any of our other wells.

Uh we have a few minor detects.

We're talking about parts per trillion as you call in PFOS.

So the standards are extremely low to begin with compared to what we all are exposed to in the environment each and every day.

But um, that being said, um, we have two wells that are specific concern.

The rest of them are fairly good.

Okay.

Well below even the 90th percentile of the MCLs for primary.

For iron and manganese, it is very variable between wells.

Some wells have lower iron content, some have very high, same with manganese.

Got it.

Okay.

I just have to throw in.

I also know that the Mganese is causing problems at the wastewater plant, and they're likely going to get a limit, which is going to be very difficult for them to treat and cost a lot of money.

Maybe they might be able to work through that, but they're working through that.

That's very interesting.

If I had to guess what the next compound that hits the primary drinking water standards, I mean guess manganese.

I think it will be.

Yeah.

Sounds like an opportunity for a contribution from the sanitary storm funds towards our future.

Not my worry anymore, but it's we're all the same rate bears.

Excellent.

The other Council Member Keene.

Thank you again.

I went through this yesterday with you.

But I I just was thinking there's you mentioned the two um wells that came offline compared to the one that went on.

Um I I know our system isn't probably balanced, it's because it's distributed, but I've also remembered that we had a well where we did testing into a not just the Jordan, but into the other things, and we're we're collecting data on that over the last couple of years.

Is there any insights that's bringing towards us that says, you know, when you start talking about these other aquifers that they're they're um positive negative nature, there the other ones are like off-limits, or that's that could come out as something we need to study more?

I I appreciate the question.

So that's well 16, and we are sampling from that.

Um we that that well uh has um has been reconfigured so it has individual sampling from four different aquifers.

It is really a unique testing uh facility for us, including the Mount Simon, and we are extracting water from those formations and running them through lab samples today to help give us insights on what the water quality is and those other sources.

Yep.

Okay.

Um when I looked at those, it's difficult, and I know it's got to be simplified to show the Jordan is like this.

I'll just I'll just make this up like five to six hundred feet down.

I believe Mount Sinai is another 400 feet below that, but the oversimplified picture made them look consistent and flat.

I imagine they're not, or are they truly like stratified like that that if you went down in um the west edge of Olmstead County into the um into that, you would have the same depth uh if you were at the it uh Dover?

Yeah.

So well, so there's a couple of things.

One, they are not perfectly flat, and that's that's a good observation.

Um, the other thing is the ground terrain is varying uh more than actually the datums of those strata.

So depending on the terrain, it's how deep uh but but when a well is drilled and you in the targeting a specific aquifer, they will monitor as they're drilling and they can tell which formations they're passing through, and that will tell them when they hit the target formation because they know what the characteristics of that formation is.

So yeah, well, very interesting.

Yeah.

Um and you mentioned the industrial, which is probably the higher water users have are not doing business now with this.

Um, is that also true if you look at the regional area?

I mean, if I look at Rochester being 80% or 75% of the population of Oz A County, would you expect water to be a similar usage, or is water dramatically more used in the urban area because of lawns, or or is it dramatically less because it's not agreed?

Yeah.

So when we look at um what's called the per capita demand, so you take the total water demand of the community divided by the population that gives you the volume of water per capita uh in that we've been doing a lot of plant joint planning through this process with cities like Byron and Stuartville and Orinoco and the other um communities, they have a much lower per capita water demand, but it's because um, you know, when you when you look at Rochester's population divided consumption by population, you have one site mayo that generates multiple millions of visitors to a community.

Um, you have industrial and commercial bases here that are not even proportionately the same in smaller communities.

So Rochester has a much higher per capita water demand, and and that's logical because there are other other consumers that aren't factored into that denominator that is just pure population.

So in terms of changes for industrial uses in other communities, I can't really speak to that.

We've worked with those communities, they have pretty steady growth in their water demand.

They I don't think they have seen a slight downturn like we have just because they they didn't have the industrial base that that changed or existed to begin with.

Okay, to some extent.

And just enough, any observation on ag compared to um municipals?

So the groundwater model is not just uh the municipal pumps in Rochester.

It is in the same municipal wells in Stewartville and Byron and Orinoco and Chatfield and all of those communities are built into this model, as well as the egg wells and the private domestic wells are all factored into this model.

So it's probably possibly the most robust groundwater model that we've seen in Southeast Minnesota, but it includes all of those demands in that model so that we're getting accurate results.

Okay.

And are that I mean, is the water usage dramatically heavier in ag or is it not unless it's really dry year?

Uh that's a good question.

I'd have to, I'd have to look at the data that we're feeding into the model.

I don't remember that off the top of my head if how that varies from year to year.

I'm sure there's some variation based on precipitation.

Yeah.

All right.

Thank you.

Yeah, I don't think a lot of the farming you see around doesn't feature any um irrigation or any you know irrigation trenches or you know, uh those uh pivot systems or anything like that.

So I but maybe it's pulled out in ways we don't see.

Yeah, good.

Any other questions?

Otherwise, we'll go right to 4C, the Water Division Engineering and Operations Report.

Again with Mr.

Bluffstream.

I'm guessing that's Rochester City Water.

Of course it is.

Of course.

Okay.

Um it is hard to believe that it has been a year uh since we presented this, uh, but it has.

Um last year we had made um some significant strides in how we develop and present uh ENO report for the water division.

I think in the past it's been a lot of raw data and facts about the system.

Um, some of them are a little bit protected, so we really didn't have a product that could be published on the website and for customers to see, and that changed last year.

Um, both on the way that we formatted and the information uh that we included in the report, but we really wanted to create a tool that wasn't just a score sheet, but something that really helps guide in how we make decisions uh here in the future.

And so that that process uh continues this year.

Um, just a quick reminder um that we build this off of key levels of service that we're trying to achieve, so that it's not just random performance data.

Uh, it gives us focus in what we are trying to achieve for the value of the customer.

Um, we've just had a fairly extensive conversation about water quality and how important that is, and that that reflects here in the report.

Um we also have uh standards that customers expect in terms of the pressure for the service we deliver to them and then the flow, as well as fire flow throughout the community and keeping um public safety uh adequately provided for.

Um, the third piece is asset management, how we are managing our capital infrastructure, uh, how we're conducting preventative maintenance to ensure that we're uh being good stewards of the system.

Uh the fourth piece is service reliability uh and conservation.

Uh there are outages, uh, those are unavoidable systems fail, and and that really measures how quickly we can respond and how we are managing those to minimize outages to customers.

And then the last piece is really centered around financial stability.

Are we making wise financial decisions?

Uh, do we have revenue that supports long-term demand, or are we just pushing off asset management liabilities to future generations, which we're not, and then also how affordable we are, not just to the average customer, uh, but there are KPIs in there about uh affordability for the low lower quartile um median household income and how that compares.

Um that is really the foundation.

Uh, but to measure how we are doing against those five areas are what we use for key performance indicators um and how we are complying with those those goals that we have.

There are again this year 28 uh key performance indicators to support each one of those levels of service.

Um and we we talked about at length last year that we don't sort of just hand pick those K KPIs that make us look good.

There are very um much industry standards for the things that water utilities should be looking for to give a true reflection of how we're doing, uh, both good and our strengths in the areas that we need to work on to improve.

So um we have continued that process this this year.

And again, this is not intended to be a score sheet.

This is intended to give us staff and give the board information on how we make decisions on identifying priorities, developing our operating budgets, and preparing capital improvement plans.

So I am not going to go into the tedious detail that we did last year, but I did roll up the top, the top uh really positive KPIs that we've had and continue to do well on this year.

One of them is disinfection residual.

So we very closely monitor how we're feeding uh chlorine into the system, uh, that it is enough to prevent microbial pathogens in the system and not too much that uh it impacts taste and owner of the water and that it's safe for our customers.

We also collect over 1,200 water samples uh each year and testing for total coliform to ensure there is not bacteria in the system.

Um, and we had 100% negative on the total coliform test.

That's a good thing.

You don't want total coliform in your system.

And out of those 1200, all 1,200 indicated we were in compliance, which is quite a feat uh for what any water utility.

Um we talked a lot about uh the Safe Drinking Water Act compliance.

I know there are some things we're watching.

We've had to pull a few wells offline, um, but we had uh full compliance with the Safe Drinking Water Act on the primary drinking water standards.

Um we have done a good job maintaining the minimum uh regulatory system pressure.

Uh we do have a few areas of the city that are on right on the boundary between pressure zones, and we probably need to work on a few of those, um, but nonetheless, they do uh we do maintain the minimum regulatory system pressure.

And while I know we have a source water challenge out in the future, uh we still have a good capacity margin for this year, next year, and and in a few years uh from here.

So we're sitting good with that.

Our out-of-service hydrants may seem like a weird thing to monitor, but that is uh an important factor for communities to ensure that fire hydrants are there and they're operational and they're available for fire firefighting, um, and we continue to do well.

I will talk a little bit about we've had an elevated level of water main breaks last year, um, a fairly elevated level, um, but nonetheless, we still had good performance on system average and customer average interruption duration index.

Um, Scott talked a lot about how important that is on the electric side.

We we monitor those same things on the water side, and and those performance indicators are good.

And then also the residential cost of service.

Uh, our service charges on average for residential customer per month are almost half of the national average and in the affordability index um factors are very good too, partly because our router rates are very low, and secondly, even the lowest quartile median household income in Rochester is higher than the national uh lower quartile.

So those are all sitting good.

Um, we talked about the federal drinking water uh standards already uh for combined radium and gross alpha.

Um, we generally look at if it's getting within 90% of the NCL, that's starting to red flag for us.

Um, we did comply, uh, but it is certainly something that we're watching out for and we're taking action to make sure that we're not uh putting anyone at risk.

Um talked about that.

We talked about iron and manganese uh on the previous agenda item, um, same issues.

Uh but iron and manganese is uh is not just a theoretical issue.

It it results in a higher customer complaint rates.

So every customer complaint that we receive, we log in what type of complaint that is, if it's uh system pressure or flow, which is relatively rare, or if it's a water quality complaint.

Almost all of these complaints are red water, orange water staining my fixture.

They're they're essentially iron and in some cases manganese levels.

We're approaching uh looks like a little over 4.5 complaints per thousand accounts.

Generally, national averages are somewhere around 1.1 to the 22.1 range.

So it's elevated, it's not a surprise.

It's the nature of groundwater in Minnesota if it's not uh filtered.

Uh one thing I did want, because I we're not hiding the performance.

Um we did, while we did have a very low number of out-of-service hydrants when we know about it, we jump on it and fix it.

We also have strides to inspect 50% of all of our hydrants each year.

Uh we fell a little short of that task.

It wasn't because we didn't know that we had to get the work done or it was a priority.

Uh, it is a matter of resources.

We had the AMI project going.

Um, we have the elevated level of failed water meters because the batteries are dying as we transition transition into the AMI replacement project.

That consumed a fair amount of staff time.

We had to put staff time to the lead service line replacement program.

We had one of the larger years of water main construction last year that we've had in probably a decade.

In each one of those projects, pull staff in to coordinate to be overseeing the installation and testing and bringing those new water main sections online.

And then I'll get to the water main breaks, which were quite elevated.

So we're hitting a point here where we just purely don't have the resources to cover all the preventative maintenance that we need to do.

And we can't let that continue as a trend or it was result in higher failures for us.

This is the classic graph that we show every year of water main breaks.

The red line is showing the number of breaks per 100 miles.

That's just how the water industry measures it and and benchmarks that we were a little high above the average of about 10.5, I believe it is.

We were about 11.7.

That was one of the three highest years over the last 35 years.

So that is a lot of water main breaks that we had.

And that did uh pull a lot of staff time in to address those.

I wish I could make logical sense of the shape of that red line.

Um I wouldn't call it a trend.

It's something we watch very closely.

Uh, if that started a continuous trend upwards, that would be a concern that we we certainly need to replace older water main.

Um, but uh to some degree they almost feel a little bit of an anomaly from year to year.

Some of it is temperature fluctuation throughout the year, how cold it gets in the winter.

Um there is not a universal formula to predict these things.

But it was elevated last year and it consumed a fair amount of time.

On our height, uh I have the wrong heading here.

This is water main age that's hitting 100 years.

Uh, that number creeped up a little bit from last year.

I think it was 12.5, 12.7, and got up to 13.2.

Um, and so that's something that we're watching, but I will say a positive side of this is last year, and I when I say last year, the last year's report for 2024, we had less than a half mile of water main replaced in 2025.

Uh, we replaced almost three miles.

So that was a substantial increase.

We're making good progress.

Um, but the point of this graph is that we really do need to keep pace with that because this is the easiest it will ever be.

If you look at the bar chart for the next 20 years, it seems fairly steady, and then it almost grows exponentially.

So there is a big challenge out in the future.

It is a couple of decades out in the future, but it's important now to stay up with it so that the utility is prepared long into the future when that challenge becomes much more greater.

So just a few takeaways.

Um, one uh I gave you a sample, the whole report is attached to the agenda, um, but give you a sample of a uh preventive maintenance indicator that we've fallen short of.

We do need to figure out a way to pull in more resources.

Uh, we're not suggesting any more staff changes for 2027, but what you will see at least as a proposal from staff in the 27 budget is uh some additional uh funding to provide some augmentation really in the area of utility locates.

Right now, the electric utility um has a third-party locate utilities.

The water has been doing it ourselves.

It's very time consuming.

Um, our proposal will be for the board to consider of having that same company locate water main and that frees up staff to try and gain ground on our preventer maintenance.

Um capital investments, uh, greatly appreciate uh the rate increases we've done just in terms of revenue and our capacity to deal with aging infrastructure.

It makes a significant difference, and we appreciate that support.

And then I know that we have some water quality concerns, but that master plan will we'll be addressing some of the water treatment processes that we may need to consider here in the future.

So with that, that was a lot, but I can be available for any questions.

Thank you, Dodd.

Appreciate it.

Any questions or comments on this uh report?

Well, um, let's see.

One, I'm just curious.

How many did in order to stay on top of replacing the water mains?

I guess it's 100 after 100 years.

How many do we should we do a year?

How many miles?

I think we found the at least the stable rate right now is somewhere between 1.5, 1.75 miles per year.

So we doing three was we exceeded that.

And so that's that's ground gained, as is what I I consider that.

Um if we could continue that trend for some years, I think we'll start to really um beyond the uptake on that situation.

Okay.

It's ground gained, but it's not necessarily addressing our highest priority of water main breaks.

It is, and it gets um that was sort of my next question.

I mean here's where it gets complicated.

So we look at water main and classes.

Um so there's the very old water main pre-1920, 1920 through the 1970s.

One would assume that the oldest water main has the highest break rate.

Actually, that is not true.

It is the era from the 1920s to the 1970s when they discovered how to make water main pipe without pit casting it, they thin the walls because it's more efficient to build pipe.

The old well, the old pipe with really thick walls actually has lower water main breaks.

So while we monitor those segments that are getting more than a hundred years old, and it is an important uh index.

Um, it's not necessarily the true indicator of what our risk are.

So if you you know had all the money in the world, well how much what would you?

I mean, where you know, in order for us to keep ahead and continue to kind of have the stay at the average for breaks, how what would you how many miles would you do?

If we could stay between three and five miles, I think we'd be in good steady progress.

We'd be in a stable situation that they wouldn't um put us at risk.

Yeah.

Okay.

Can I add to that as well?

Sure.

That's our desire.

That would get us towards uh stable asset management plan, but there's the citywide project coordination aspect of that as well.

We typically try and replace water main and coordination, as you know from your former world with coordinated projects.

The capacity of the city with tax levy funds and other investment is probably not at the three to five miles of roadway resurfacing all at the same time.

So part of our future strategies, I think is looking at some trench list methods for water main replacement that might not have to be coordinated with roadway surface restorations at the same time.

And it's it's somewhat intentional that we've moved some of our asset management water main priority projects forward just because of the rate of other development happening and the need for us to coordinate citywide projects.

East Center is a great example of that that's happening right now.

It was one of the higher priority lists and a joint project made a lot of sense.

There's a lot of investment in the uh areas of the community that are growing as well.

So we've we've started investing there, but we need to pick back up on some of those water mains, and that has to be done in coordination with the six-year CIP with the rest of the city divisions as well.

So there's a lot of good work happening there, a lot of internal coordination happening behind the scenes.

And I Todd won't say this about himself or the team.

We've made some incredible progress on doing that type of coordination across the city organization here in the last couple of years, and I'm very proud of it.

Just credit where it's due.

Um, going from a half mile to three miles, some of it is our credit, some of that is public works has become very good at delivering much better at delivering projects on time and and the way they've scheduled them out.

And just as the general manager is explained, if we were going to sort of go it alone and start replacing water main without coordination with public works, the cost of those projects would be much higher.

It's the better thing for the city, right?

Umly I think only one other thing.

So you you know, you had some reds, you know, and and you've acknowledged that.

And so you have a plan in 2027.

Do you think that's really are you're gonna get to a uh some a request in 2027?

Yes, if and and I know it's difficult because it you know, we're we're trying to keep the budgets lean, but if if that budget I'm gonna make my pitch right now.

No, I want to hear that was what I was trying to come up with a way to ask that question.

If the board could find a way that we could we could get those those services upset, I am confident by those resources being freed up, we can absolutely overcome some of the PMs that we're falling short on.

So yeah.

Thank you.

Thank you.

Any other questions or comments?

Thank you so much.

Appreciate it.

Um that concludes the informational section of the board meeting.

Now we'll move on to uh next item up is a regular agenda.

Um, this is item five A, which is the approval and consent to issue short-term water utility revenue bonds.

And this item will be presented and discussed by assistant general manager of administration, Mr.

Peter Hogan.

Welcome, Peter.

So I don't know that I really need to say a lot because Todd just um you know made the ask and the pitch for the budget for next Tuesday as well.

So I sure appreciate that.

But uh the uh this action item is is uh requesting the board uh to rec authorize and recommend short-term borrowing uh as a result of uh some of the impacts that we're seeing.

When we did the budget back uh a little bit over a year uh ago, uh you know, we didn't anticipate some of the uh increased expansion and construction.

We'd made some decisions around doing an advanced metering and uh we're drawing down you know, cash and reserves to to try to do that without borrowing uh with the new construction and expansion impacts coming in on top of that.

Now it's kind of like, okay, we need to back up a little bit and take a look at that.

And um that's that's really what's driving and some of those decisions back then where we thought we could make it through this period of time.

Uh it's quite evident now with some of the uh increased um costs of the growth and development that uh we do need to have some additional short-term funding uh to do that.

And the and the plan, and we'll talk about this more next week in the budget process is to do short-term uh borrowing while we're completing the uh the water comprehensive study.

So then we can step back and look at the long-term planning uh beyond that.

And I anticipate the funds that we're requesting here will get rolled into a long-term uh borrowing, uh, probably in the end of 28-29 time frame.

So uh the there's multiple um you know pieces here, but this is really a short-term effort right now.

The request uh is for up to 10 million dollars.

Uh in the I I can kind of give you a preview into next week's budget.

We're anticipating about a two million dollar uh advance each of the next three years, including this year, uh 26, 27, and 28.

And the the difference between that six and ten is really we're budgeting based on what we know today.

Uh there could be further emergent things down the road.

So we're we are building in a little bit there, so we wouldn't be coming back and going through this this cycle.

So we're building in a little bit of flexibility there as we're going through the master planning process and also being able to respond to some of the um immediate development needs that we're seeing.

With that, uh the the resolution uh written by the lawyers and there'll there will be uh if the uh board approves this resolution, all debt is issued in the in uh by the city and authorized by the city council.

So if the board approves this, uh the plan is to take this forward to the city council on August 17th uh to authorize the issuance of debt or and most likely these will be private placement, which means uh instead of going out into the the market and and and bidding as we've done usually on our long-term debt.

More than likely this would be uh a quote process where we go out and get a number of competitive uh quotes from a number of banks essentially, and then work through this process until we get to the long-term uh financing plan.

With that, I'll answer any questions.

Is uh is that amount kind of normal for that?

It seems low to go to market for, but um, so basically the authorization that we're going through now is not actually going to the market.

So we're just going to you know, we'll we'll go to banks basically.

And uh you could consider this to be like a you know going in getting a line of credit.

Gotcha, line of credit instead, yeah.

Yep, gotcha.

And actually, that's exactly what we did on the electric side back in 2015-2016 when we started the West Side project.

We did the same thing.

We went in and got about a 20 million dollar essentially line of credit uh with a bank.

And then when we got to the long-term financing, I believe in 2017.

Yeah, Judy's gonna tell me yes, no.

Um, then we rolled that in and paid that off.

And that's that's what we're doing.

That makes sense to this as well.

That makes sense, yeah.

Any other questions, comments?

Well, well explained.

Um in that case, uh do I have a motion to approve item 5A as presented by Peter.

I'll move approval.

Thank you.

We have a motion and is there a second?

All second.

Perfect.

Any further discussion?

If not, all in favor of approving the resolution on board packet page 170-171.

Please signify by saying aye.

Aye.

Aye.

Any opposed.

That resolution is approved.

Thank you, Peter.

Very good.

Thank you.

Clarifying question.

Just on the report narrative, it says one of the projects was Kelmer Booster uh Ponderosa, but it says 18th Street, Southwest Water Improvements.

I wasn't sure if that's 18th Avenue project, or is it 18th Street?

You're correct, it's avenue.

That's a miss.

That's a mission.

I thought it was in the narrative.

It probably wasn't in the resolution, so I wasn't worried about it.

I'm three years in and I'm still learning the difference between streets and avenues in Rochester.

Somebody gave me a good mnemonic, and I forgot to use it.

Um perfect.

Uh now we'll move to uh the board policy review section.

Uh item number six, and uh to discuss upcoming board policy reviews, I'll turn it over to General Manager McCullough.

Uh no change to the suggested schedule.

We held our ad hoc uh group meeting for board policy four right before this meeting.

So um we're right on schedule to bring board policy four for board discussion next month.

Otherwise, the schedule as it is is reflected in my general manager report on the back page.

All I have.

Perfect.

Then moving quickly to item number seven, the general manager manager's report, which again, General Manager McCullough.

I'll handle this on an exception only basis.

I sent a summary by email with some highlights, and there's a deeper dive there if there's anything that you'd like to um go into, but otherwise uh I'll handle it by exception.

Any questions or comments?

Just a comment.

Circus and carnival.

Oh, thank you for reading that.

Uh I will get this on the record in a public meeting.

Uh there is a significant difference to those who care of what a carnival and a circus are.

And f as someone who grew up in the carnival, uh, it was not a circus.

So uh carnivals bring rides and games and circuses have elephants.

So that's the that's the core distinction.

Very good.

Any other questions, comments?

Otherwise, we move to the division reports and metrics section.

Item number eight.

Are there any questions or discussions from the board on division reports and metrics for July twenty twenty-six?

Okay, hearing none.

Is there any other business that is due to come before the board at this time?

Hearing none, um, the next item on our agenda is item number ten, uh, executive session, which will be closed pursuant to Minnesota Statute thirteen D point zero five, subdivision three A for the performance review of Rochester Public Utilities General Manager Timothy McCullough.

This closed session will take place in the RPU boardroom.

We will return to the community room at the end of the closed session to continue with the remainder of the July RPU board meeting.

So at this time we're going to move into uh closed session.

For purpose of reviewing item number eleven, uh, reports and recommendations, which is a summary of the closed session of Rochester Public Utilities, uh, General Manager Tim McCullough's performance.

Um, and this item will be discussed by myself as board chair.

Um, we met with Tim uh in closed session.

Appreciate the great work that's going on here in Rochester, the job that he's doing, uh, provided feedback on the role and uh expectations.

And uh as a result of that, uh, may I have a motion to accept the performance evaluation shared with Tim and approve a three percent annual increase merit adjustment for Rochester Public Utilities General Manager, Tim McCullough.

I think it's a lump sum.

Thank you, Councilmember Keene.

Thank you.

Appreciate it.

It's moved and seconded.

Do we have any further discussion?

Hearing none, all in favor of accepting the performance evaluation and approving a three percent uh annual increase.

Um, please signify by saying aye.

I me opposed.

I'll make a motion to adjourn.

Uh, all in favor say aye.

Aye.

Opposed.

We are adjourned.