Good morning, everybody.

Welcome to the Echo Plant.

This is just our big our big plant.

And it is the meeting of September 10th for the Sacramento Area Sewer District.

I think we have members here that are ready to sit down and participate.

Yes.

Okay.

So we have some technology we're working on today, and I have asked Director Kaplan to help me.

So you push your little white button for request to speak.

And Lisa will see your name on our little screen here.

Maybe, yeah.

Okay.

Let's call a roll and make sure we have a quorum.

Good morning, everyone.

Directors Desmond.

Dickinson.

Hume.

Here.

Jennings.

Kaplan.

Here.

Kennedy.

Orasco.

Plucky Baum.

Rathel.

Here.

Robles?

Rodriguez.

Sander.

Cerna.

And Chair Kapinski Costa.

Present.

You have a quorum with the members present.

Let the record reflect that directors Jennings, Kennedy, Orasco, Rodriguez, Sander, Cerna are not present for this meeting.

Director Soon is here too, though.

Thank you.

Yeah, I didn't hear you call the directory.

Director Soon.

I apologize.

For the record, Director Soon is just for today.

You do have a quorum.

And uh for the record also, Member Orasco has arrived.

Okay, we're going to ask Director Soon to make sure he's here to do to lead us in the pledge.

And over hard ready pledge.

And so we just stands.

One nation.

Invisible.

So our first item.

Oh, you have a uh public comment thing to read.

I have announcement.

Yes.

Madam Chair, this meeting of the Sacramento Area Sewer District is live and recorded with closed captioning.

It is cable cast on Metro Cable Channel 14, the local government affairs channel on the Comcast and Direct TV Uverse Cable Systems.

It is also live streamed at Metro14Live.sackCounty.gov.

Today's meeting replays Sunday, September 14th at 9 a.m.

on Metro Cable Channel 14.

Once posted, the recording of this meeting can be viewed on demand at YouTube.com forward slash metro cable 14.

SACSUER board members are compensated 100 for their participation in board meetings.

Excuse me.

Compensation for Sacramento County Supervisors and City of Sacramento and Citrus Heights Council members is paid to the counties and cities respectively to partially offset the cost of those governments.

Compensation for the other agencies is paid directly to the individual board members.

Compensation for these legislative body meetings is verbally disclosed at each board meeting in accordance with California Government Code Section 54952.3 to make an in-person public comment.

Please complete a speaker request form and hand it to the clerk.

The chairperson will call your name when it's your turn to make a comment.gov.

Your comment will be routed to the board and filed in the record.

This concludes your announcement.

Thank you.

First item, please.

First item is consent matters items one through four for approval.

Do any members want to pull any items or have any questions or comments?

I see none.

See none.

Is there a proval of consent?

Is there any public any public comment on those items?

We do not have any public comment.

Okay.

Moved by Kaplan seconded by Desmond.

Robles, was it roll this?

So we vote by roll call.

Yes, ma'am.

Director Desmond.

Hi.

Dickinson?

Aye.

Hume?

Kaplan?

Aye.

Orasco.

Pluckybaum.

Rathel.

Aye.

Robles.

Cerna.

I'm sorry.

Soon.

Hi.

And Chair Kapincy Costan.

Yes.

And Viegas?

Your motion passes.

Okay.

Unanimous.

Next item, please.

The next item is comments from the public on issues not posted on the agenda.

And let me check our queue.

We do not have any public comments at this time.

Okay.

Next item.

Next item is miscellaneous district engineer matters.

Presenter Christoph Dobson.

Good morning, Chairman Board members.

Welcome to the Echo Water Resource Recovery Facility.

Thank you for taking that trip down here.

Or maybe it was even shorter if you live in Elk Grove, but for some of our members.

Just a couple of quick things.

First of all, our meeting on the 24th is two weeks from now.

We do have that meeting.

So we'll have both meetings in September.

And also we are looking into the October meeting because I hear that that is that may be a conflict with League of Cities.

I don't know if that will endanger our quorum or not, so probably do a little poll.

I'm getting I'm getting the no-go uh symbol from uh Kaplan.

So but we'll we'll we'll check and see.

Um I I know we do have a fair amount of items on that agenda, but we'll have to take a look and see how uh how critical those are, and then also get a poll from you all.

Um and then just last thing I just want to mention that this item uh previously we have combined uh it's been the kind of the miscellaneous district engineer and director matters, and we've separated those two on a suggestion from Chair Karpinski Costa to um keep them separate, it just makes it a little bit more straightforward.

So this is my part of it, and then uh you will have an opportunity at the end of the agenda to um have any comments on our miscellaneous matters, and then also if you need to bring up anything for uh future future meetings.

So that's how we're doing it.

That's all I have.

Thanks.

Are there any questions or comments on our that report, our miscellaneous report?

Seeing none, next item, please.

Next item, madam chairs number seven, approved memorandum of understanding with local 39.

Presenter Christoff Dobson, direct district engineer.

All right, back again.

Um this is one of four MOUs that we are in the process of working through.

Your board has already approved the first one that was with our uh professional association.

Um this MOU is with our field group, and it's local 39.

It's the union that represents them, and then we have two more coming uh that are we're looking for probably the uh second meeting in October, and that would be our administrative staff and the uh supervisors.

So that would uh at that point we will have wrapped up all of our MOUs, have everybody uh under contract.

So this one just uh give a few highlights.

Um equities uh were recommended basically through our uh salary survey that we did.

Um the consultant was called Gallagher, and they did this compensation study.

Um there were nine classes that indicated uh equities were appropriate uh out of the total of 35 classes.

So what we're seeing uh as we're using our comparable agencies that is that some of the classifications were right in the ballpark, and others uh were not, probably because they weren't being compared with the right uh types of classifications previously.

So we're bringing these all up to the market, that's our goal is to get to the median of the market, and this is over three years, so three fiscal years.

So the the equities are phased in to get to the to get to the market, um, and then similar to our MOU we already had with the professional association, uh we added uh 2.5% longevity pay uh at 15 years, so that is a a new benefit.

Um, and then we increased the uh the we increased the medical subsidy.

Uh we used to have 80 percent of Kaiser, and we've moved that up to 90 percent.

That gets us again very close to our comparable agencies that we are benchmarking with.

And then the last thing, and I think this is an important one is that we're adding the a matching contribution to 40 to a 401A plan.

So if an employee puts in 1% of their salary towards their deferred comp, there we have a 457B plan already, then the district matches that 1%.

And in this case it's up to 3% matching.

And that's really important because our employees very rapidly are becoming all PEPRA employees with the lower pension benefits, and so we're trying to encourage employees to uh contribute to their retirement and make up that difference.

So I do have uh a correction to be made there in the financial summary, it um has longevity pay listed as $21,000.

There is a typo there, it is it's missing a zero, it's two hundred and ten thousand dollars.

Um you may have catched that, it seems seemed awfully low.

Um, and that brings the total to uh three million three hundred and seventy thousand.

So I just wanted to make that official correction there.

And with that, uh that's all I have.

I'm happy to answer any questions.

Are there any questions from our members?

Uh board members.

Board member Sewen.

Thank you, Chair.

Thank you, Christoph, uh, for trying to uh bring equity to all the employees.

I was just curious, uh I think I know the answer, but I want to I want to get your take.

You're taking three years to establish equities and you know, just there's I think people are needing every bit of their salary now.

I was just wondering why three years and not maybe something faster.

Um basically we looked at our long-term projections and the um basically the process of budgeting, and it was not clear when we embarked on this how much how much this was going to cost, and there's a significant cost to it.

So by bringing in an over three years, it's an opportunity to essentially have a gradual ramp up on the budget.

Um, and we also we took that approach with uh the executives and unrepresented when we did that study early on, not knowing you know what the full financial impact would be, and so um we're taking that same approach uh and bringing it over the three years.

There are some equity increases uh that are pretty substantial, and so we felt it was appropriate to to do that over three years.

So when they shift over, are they uh had they stayed at you know with the county per se, you know, lack of better term, they would they have been at a higher compensation rate?

So they taking a pay cut in other words to come over to Saksua right now and then three years to get back up to where they should be?

No, so they they came across at the same at the exact same salary, so they started at the same place.

Um I would be surprised, and I can't say in every classification because I haven't done a comparison with the county, but I would be surprised if anyone is ending up lower than their where their county uh counterparts were are.

Okay, thank you.

Second, okay.

Before we vote, is there any public comment on this item?

We do not have any public comment at the same time.

Uh it was moved by Dickinson and second by Kaplan.

Thank you.

I'm just curious.

Did you push the little light guy?

Did it work?

It did.

Okay.

Because they're testing the technology.

Okay, let us vote.

Desmond.

Dickinson.

Aye.

Hume.

Jennings.

Kaplan.

Aye.

Orasco.

Aye.

Rafel.

Aye.

Roblis.

Soon.

Aye.

And Chair Kapinski Castet.

Yes.

Your motion passes unanimously.

And then uh uh Sandy is also arrived.

In place of uh supervisor offered.

Big C Sandy, okay, thank you.

Okay.

Next item, please.

Your next item is item number eight, Echo Water Resource Recovery Facility Biosolids Management Plan Update.

Presenter will be Sunny Lundy, Director of Echo Water Operations.

Well, Sunny makes his way up to the podium.

I have just a couple of quick opening uh comments.

The first one is that just keep in mind what uh Sunny's gonna share with us today.

Um you've been hearing little bits and pieces of the biosolids or the solids emergency that we've been having and sort of the operational things.

This is now the capital, the implications on the capital side.

This is some significant infrastructure we're gonna have to build.

And it I want to make it very clear that this is because of our 2010 permit and the echo water program that we built, and we felt like we were we were done building that created some new facilities that changed the makeup of our solids, and it's created this new need now to address the solids, basically to increase our capabilities to handle the solids.

So it all ties back to that 2010 permit.

Um, and then one more thing.

I just want to give some kudos to staff.

They put together a remarkable product, the um uh biosolids management plan that they built was uh led by staff, not by consultants.

We had some some national experts come in and participate on the on the technical advisory committee, but staff put this together and they were best positioned to do that.

It's a it's a very um well-thought-out document, and um they they um uh put a lot of effort into it and did a very good analysis of the alternatives, including some very tech uh cutting-edge technologies, and basically came to a recommendation that is not only the cheapest lifecycle cost, but also it was superior in terms of social and environmental factors as well.

They did a full analysis of that.

So, with that, I'm gonna turn it over to Sunny.

Good morning, Chair, members of the board.

Um, my name is Sonny Lindy, the director of Echo Water facility, um, director of echo water facility operations.

Today I'll give you an update on the future of our biosolids here at Echo Water.

Um, this is only an update, the no board action is required at this time.

Um, as we progress through the presentation, we'll talk about our current biosolids challenges in the future.

Um, I'll talk about some immediate um and interim actions that we've taken to date, and then we'll talk about the the development and recommendations that came from the biosolids management plan and staff's efforts, and we'll also talk about the implementation costs and alternatives for implementation, and then the schedule of the project, and then finally uh a conclusion.

Um in 2010, SACSUER received a new stringent uh treatment requirements for its its liquid stream, notably the national pollution uh discharge elimination system in NPDES permit required the removal of both ammonia and total nitrogen from our treatment processes, and it also required Title 22 equivalent equivalent water, essentially recycled water equivalent.

As a result, uh Echo Water set out on the Echo Water Program, which consisted uh of three major projects that that affected our biosolids.

These were the biological nutrient removal project, BNR, commissioned in 2021, uh tertiary treatment facility, TTF, commissioned in 2023, and then lastly the nitrifying uh side stream treatment in ST, which was commissioned in 2018.

Uh implementation of the B the biological nutrient removal and the TTF required a need for the a permit to meet permit requirements caused significant biosolids issues here at our uh resource recovery facility.

The new BNR sludge is less biodegradable uh during the digestion process throughout throughout the digestion process.

The new solids um do not settle as well in the in our solid storage basins.

Therefore the we've lost some capacity uh in our solid storage basins, and then thirdly, uh slightly more solids are being captured as part of our new uh treatment processes.

Essentially, uh our biosolids um exceed our available disposal capacity, roughly about 40 percent more disposal capacity is needed for our biosolids.

In early 2023, about 18 months after BNR came online, the plant started realizing a significant process upset.

Solids began to accumulate throughout our processes in our ponds and through our various treatment processes.

At that time, we were approximately uh three weeks away from having to discharge some of those solids to the unfortunately to the river and violating our discharge permit, which is not a good thing.

We avoided that.

We implemented some immediate uh mitigation measures.

You can see one here up on the right is um protecting of the overflow of our solid storage basin uh overflow so the solids that you can see outside the boom area here don't overflow and return back to the treatment plant and and continue to um increase the risk of losing our process.

On August 10th, 2023, an emergency declaration was uh made by the district engineer to your board.

Um this allowed us, yes, yes, yes, yes, yes, yes, yes, yes, yes, yes, yes, yes, or reconvene.

Can you continue where you left off?

Madam Chair, may I do a roll call to resume?

Oh, all right, to make sure we establish a quorum.

Nobody ducked out.

Okay.

Dickinson.

Hume Kaplan here.

Tuck it bomb, Rethel.

Robles, soon, here.

Vixie Sandy.

Recording in progress.

And Chair Kapinski cast it present.

Internal president.

And sir.

Member Snowden?

Yes, here.

It's present.

Member Roscoe.

Member Orasco?

Yes.

You have a member uh have a quorum with all the members present.

Thank you.

Great.

Let me resume.

Okay, I will continue.

Thank you.

So on August 10th, 2023, um, emergency declaration was made by the district engineer.

Um, this allowed Echo Water to start implementing phase one, which was emergency funding of five million dollars for removal of biosolids from our solid storage basins.

Um subsequent to phase one, we embarked on phase two.

Uh phase two was competitively bid process, and we were to remove additional uh biosolids using the same process.

Um both phases used a process uh to extract and place biosolids in geotubes.

There's a geotube dewatering process.

The pictures here show show that process, which occurred between summer of 2023 and summer of 2024.

A total of 120 dewatering geotubes were used.

These geotubes were over six feet tall, 30 feet wide, and 120 foot long.

So uh quite a quite a large operation.

It spread over over 20 acres on one of our dedicated land disposal sites, and these sites are about 40 acres.

So it was took up over half of one of these sites.

Pardon me, Mr.

Lindy, I do apologize.

We have to take another recess due to technology issues.

We apologize.

Madam Chair.

Recess the technology.

Okay, we reconvened.

Let's do roll call again.

Okay.

Dickinson.

Hugh.

Kaplan.

Here.

Arasco.

Rafel.

Robles?

Vice Chair Cerna?

Here.

Soon?

Here.

Vixie Sandy.

And Chair Kapinsky cast it.

Present.

You have a quorum with the members.

Okay.

Go for it again.

We start with the ignore.

Thank you.

Phase one, phase two.

Phase one, phase two dewatering process.

While the this dewatering process served to get a lot of uh biosolids out of our ponds very quickly by removing 12,000 dry tons of solids from our solid storage basin at a cost just under 10 million dollars.

It was uh it was a very challenging, very challenging process.

Um the significant debris uh resulting from cutting the bags open and spreading it spreading out the biosolids impacted equipment um damaged some of our some of our equipment.

The compaction of the field was was a concern.

The weight of the biosolids compacted our fields to a point we had had to deep rip them to and to resume uh normal harvest.

And in addition, the the use of one of our DLDs hindered our normal summertime harvest production for this process.

Phase three uh dewatering by belt press in April 2024.

Biosolids emergency update was presented to your board and identified the need for continued supplemental biosolids harvest operation until a long-term solution could be could be identified and implemented.

In December of 2024, a multi-year contract was awarded for dewatering and disposing of 14,000 dry tons per year using a mechanical dewatering process.

This the mechanical dewatering process consisted of dredging from our solid storage basins, piping it to a belt press, and then and then separating the liquid from the solids.

Um site disposal of the solids occurred during the summer months of up to 9,000 dry tons, and we hauled off during the winter months due to field saturation of up to uh 5,000 dry tons.

This was um implemented starting in 2025 and is current is currently going on now as it looks right now out in the field.

Phase three and subsequent phases will be using this uh belt press process.

At the top of this photo, there's the polymer mixing tanks.

Solids uh sludge is pumped from the solid storage basin, mixed with polymer in these tanks, and then pumped over to the belt filter presses.

The belt filter presses essentially squeeze, squeeze the the sludge, separating the water and the solids, and deposit what we call uh what we know as cake onto a loading pad.

This cake is almost the consistency of dry cake batter um out of a box.

Um, it's then loaded from a front loader and dumped into trucks that are weighed to determine how much is being has been deposited and processed and then spread on site on our line DLD sites alongside our normal uh summertime um harvest operations.

This is a close-up picture of the belt press.

Um, the solids comes up to the top, goes through with the belt press, squeezed out, the centrates returned back to the process.

The cake is is piled up and and deposited, uh disposed of on site.

Supplemental harvest um does come at a cost.

Um phase one and phase two implemented in fiscal year 23-24, had a total cost of just under 10 million dollars.

Uh phase three operation, which started in uh fiscal year 24 25.

We got about a half a year's oper operation on this on this phase at a cost of about $7 million.

Phase four and subsequent phases that'll be needed will have an annual annual cost of about 14 million dollars a year.

We expect at least two more years.

The contract allows for two more years of supplemental harvest by contract, but likely we'll have to go well beyond that until a permanent solution is constructed.

That permanent solution was identified through our biosolids management plan.

Staff staff that we mentioned earlier, mostly predominantly in-house staff with the support of some external experts, national national experts, got together and evaluated long-term solutions.

We had a planning horizon of 2048, which synchronizes with our planning horizon for our liquid side, done with the ECOWater program.

Recently completed.

These firms served as technical advisories committee.

They helped review documentation, they partnered in several workshops and ultimately ranked and helped recommend a final recommendation for the future of our biosolids.

The selection process that we used, we identified a total of 16 different alternatives, new technologies and processes that are out there.

From those 16, the technical the team and the technical technical advisory committee shortlisted and ultimately selected the recommended alternative based on weighted substantial factors.

Really, it was a it was a quadruple bottom line that was used, financial financial analysis, and then some three final three non-financial analysis, including social, technical, and environmental.

It was it was it's important to note that the selected alternative was not only the lowest lifecycle cost, financially the best project, but it had the highest ranking as far as social technical and environmental impacts.

This will help uh increase our ability to digest and uh and avoid future expansion of digesters.

Also, it is dewatering facilities.

This will help this will help dewater the biosolids into a more solid product and allow us to dispose of more of that on site.

It's 50,000 dry tons per year.

Um it's likely can consist of uh centrifuges, odor control, and supporting tanks and equipment.

In addition to that, we we may be needing a 7.25 biosolids warehouse.

It's an enormous warehouse, and this is this is so we can store biosolids in the winter during the winter months.

We estimate needing to store uh up to four months of winter storage.

Staff is looking at options, other options to this, such as storage on our DLDs, and we'll be piloting and looking at those and seeing if we can limit the size or even eliminate the warehouse.

Other projects include upgrade to our extraction well system that's in and around the plant, and a fifth waste activated sludge thickener prior to digestion.

Um in addition, in the future, we will likely have to decommission our solid storage basins.

The level of decommissioning is yet to be determined.

We're working with the water board to determine what that entails.

We did look at many new technologies such as gasification and pyrolysis and other high heat alternatives.

Unfortunately, they're largely unproven.

Um, the EPA's tentative assessment, uh risk assessment identifies as land disposal on dedicated land disposal sites as the preferred method for disposal and handling of potential contaminants such as such as PFOS.

Um the EPAs assessment also indicates that that pyrolysis and gasification are more so considered a pilot scale now and need future testing in order to determine efficacy of of such things as PFOS.

We looked at uh implementation, whether we implement now or or we try to defer, but the primary sludge thickening and the digested sludge dewatering and the and warehouse it's recommended that we we emit it we implement immediately.

This is a cost savings to the district.

During this time, this it'll take about eight years to implement this.

We will need to continue to do supplemental harvest operations in order to stay ahead of our biosolids accumulation and not get back in a situation where we're risking plant process.

Again, the SSBs will likely have to be decommissioned.

How we do that will be determined in the future.

And we expect this facility, the future facilities eight years from now to require about eight additional staff total to operate these facilities.

Capital cost the total capital costs of this program are approaching 450 million dollars.

The the projects are listed out here, primary sludge being at about 130 million, digested sludge dewatering facility and warehouse being the largest of projects at about 300 million, and then the other projects uh totaling about about 13 million.

Operational expenditures, primary sludge uh thickening facility will increase our annual uh operations and maintenance costs by 1.4 million a year.

Uh digested sludge dewatering facility and warehouse will increase that cost by about five million a year.

Um the supplemental harvest is a temporary cost of 14 million, and it will sunset in about eight years when these other facilities come online.

Uh biosolids 10-year funding projections uh look like this.

You can see the darkest, the darkest gray or blue line is the actual the capital expenditure of about 450 million dollars.

The the green line on top of that line is our current supplemental harvest operation that will continue for the next eight years.

And you can see at year eight that goes away, and we start a new annual operating cost in the magenta color for our our future biosolids efforts.

These are accumulate the red line is accumulative cost over a period of time.

All these costs are escalated to the midpoint of construction.

Total program caught 10-year program costs are approaching uh 600 million dollars.

These costs are included in our long-term financial plan.

While while we implement these future projects, staff will be looking to optimize our current processes.

Part of doing that is you know, we we do that anyways as part of our normal normal business, but any anything we can optimize now may reduce the size of these future projects.

We'll explore alternatives for biosolids uh storing during the winter months.

We'll improve uh digest, we'll look to improve digester performance, uh, so we can reduce some of the size of these projects, and we're gonna look to streamline uh the harvest water operations or take this take this operations uh on ourselves versus paying a contractor to continue to do this.

So in conclusion, um additional plant upgrades and funding are needed to meet our biosolids disposal demand due to our 2010 permit requirements.

Uh funding needed to present to uh presented today in the long-term financial plan.

It's included in there, and the biosolids management plan is on file, and the executive summary was part of part of your your board packet, but they can't all both can be found at saxewer.com under this our sustainability page.

With that, I'll I'll open it up to questions.

Um member Hume.

Thank you, Chair.

Um Sonny obviously being hit with a $600 million dollar bill seemingly out of nowhere encourages a lot of armchair quarterbacking.

So I'm gonna resist that urge, but I do want to have a better understanding of of how we got here because this seems like a pretty significant overshot, right?

The Apollo astronauts are still floating off into space, they're not getting brought home.

Uh, how did we get here?

What is so different about the biosolids after the the nutrient removal that has created this situation?

Um, how does it behave differently?

Because when I remember this first uh kind of aired its head, it was the fact that the biosolids in the SSB were making islands and not allowing for the appropriate flow the way it was modeled, and we were gonna put in like a an agitator to spread them back out so that it would flow.

I mean, how did we go from what we thought was going to be the solution to now we have to tack on 600 million dollars worth of improvement?

And then my my colleague brought it up.

Uh, if in looking at your expenditure slide, at the end of this, we're still at a seven point something million dollar annual expenditure to run the new operations.

How is spending 600 million dollars to spend seven million a year better than just continuing to spend 14 million a year?

I'll answer the last question first.

Okay.

Um the the 14 million dollar a year only only gets only gets us about 14,000 dry tons removal.

Okay.

We need 50,000 dry tons.

Okay.

Um to maintain and and get back capacity and for future growth.

So it's a significant difference between what we're doing supplementally and what what we ultimately need of 14 to 15 uh thousand dry tons.

Um the first question, um, how did we how did we get here?

Um the the biosolids the characteristics of biosolids was an unintended consequence of of our BNR process.

Um we the the pilot we had a pilot project, the pilot the pilot project for the B for the our processes estimated um a production of solids that that is similar to what we're getting now.

What what we didn't see at part of the pilot project was the characteristics, the bulking, the bulking of the biosolids and the indestructibility of the pilot biosolids.

The um there's during the pilot project that those technologies weren't were not piloted, so they weren't there was no way at that scale to see that effect um in in our processes.

Um nor was there an opportunity to look uh outside of our plant and look for another opportunity.

We're our plant is is very unique in the fact that we went from a high rate, high pure oxygen biological process to a biological nutrient removal process with on-site disposal.

We no other plant that we know of has done that.

So there was really no blueprint for us to follow to follow there.

And so am I gathering from what you're saying then that the resultant biosolids from the change in process that they actually act differently and don't break down as easily and result in a completely different quote unquote product than what we were getting previously?

Yes.

And we couldn't anticipate that at scale.

We did not work.

It worked in the pilot project at the at the sort of reduced uh impact, but we couldn't anticipate it.

Correct.

Our our biosolids, our both our solid storage basins and our biosolids uh processes are real, as the current plant sits, very wide spots in our process.

So even even in our even in our current operation of the full plant, it took us many months to actually see this as a result.

18 months after BNR came online, then we started seeing this accumulation of biosolids.

There's no way at the at the pilot level that that we would have seen that.

Now, had we had we have piloted that separately at that scale, it it still would have been very difficult to see.

It's very similar to what what we saw 18 months after we we had here at the treatment plant.

So the characteristics, uh both the um non-destructibility of the biosolids and the bulking uh of the biosolids, non-settling of the biosolids, is really the the reason why we're here we're here.

Okay, thank you.

Can I add one piece of clarification?

I think there was one point that you made, Director Hume, that I don't think Sonny addressed, and it was um we we had uh you were describing how we had been doing the agitating of the ponds and um that whole process uh and maybe we didn't communicate that well, but that was always a temporary fix to try to get through this initial emergency, and there was always the knowledge that there was something coming we just didn't know what it was and so that was the process that they embarked on to do this plan and figure out what is the what is the long term fix.

Member Desman Thank you madam chair and thank you uh director Hume piggyback uh a little bit on his points I mean this is obviously a bitter pull to swallow this amount of money uh Christoph you and I talked a little bit last week um about how so many other treatment plants they they rely much more heavily on transporting their their solids off site but I'm curious any other plants either in California or throughout the country have they been experiencing a similar situation with their biosolids because you talked a little bit about how it's also we've seen a a change in the ability to break down these biosolids I mean there's there's something has changed with the biodegradability.

Can you just talk a little bit about what other treatment facilities are experiencing in this regard as well.

Well uh what we were talking about is the difference between our facility where we're keeping it all here and it's having these impacts to the process whereas some of those other facilities are taking it off site and so they're just seeing it as a a larger volume it's not impacting their processes.

But I think the significant difference between us and some of those other facilities is that as Sonny mentioned the high purity oxygen so we had a different system that we started with and that we changed to so it wasn't just that we created this new process it's that the system that we had was different than those other comparable ones so the changes were more dramatic in in this case unfortunately than maybe some of those other facilities and I I don't know if Sonny do you know know which other we did uh visit some other facilities didn't we that had a B and R or um that was during the design of the process was before my time but I'm sure Jeremy you may recall that we visited others other facilities but with the BNR process with BNR with BNR process yes and we had and we had um experts with with that had participated on other BNR BNR projects as well.

But the the to answer part of your question too is the the BNRs that are out there they are experiencing similar similar type uh non-destructibility of of biosolids um the in current you know literature and research um indicates that um whether that was known 15 years ago um when we embarked on this I I'm not exactly sure.

Thank you.

Thank you chair uh so uh a few comments and um a question I guess uh first of all I appreciate director Hume's um point I think we're all kind of feeling the same uh same way about this and certainly during my briefing I expressed to Christoph my surprise and um disappointment.

But um you know when when you think about the answer to the question the 14,000 uh tons versus the 5000 tons um just to put a finer point on that how close did we actually get to an emergent situation um fairly recently uh in terms of not being able to do uh you know what was necessary to keep us from violating our permit and I guess I'm looking at our director.

Yeah well that's the the the three week the the three weeks yeah so um that would have been a major violation of our permit um and not really an acceptable um situation and what we were about three weeks away so it was we uh kept calling it kind of a slow moving emergency it wasn't an emergency as in you know snap your fingers today but um we knew that it was coming very quickly if we didn't do something and that was set up over a an 18-month period or so where um this was slowly accumulating and we're starting to see problems and then you're trying to troubleshoot figure out what is the problem, what's causing this, but it came uh so that was building a lot of momentum behind it um in terms of the that emergency situation was getting worse and worse.

So in terms of the the actual proposed facility, what I'll call the world's most expensive warehouse, uh what what if any uh cost consideration is uh part of what you've showed us in terms of what you today um or estimating uh relative to applied technology for odor control.

I'm playing the part of an elk growth city council member now.

Well, there definitely will be odor control facilities as we do have on all of our processes, but in terms of are you looking for a like a quantity or percentage?

Well, no, I'm just uh what can the community surrounding community expect in terms of I hope the answer is little if no change, right?

Um, but it's gonna be that's a lot of material to have warehoused um on the property.

And you know, the narrative that we're hearing today is that we're uh we're a guinea pig, and it's just a it's a product of just the unique circumstances circumstance we find ourselves in that dates back to 2010 when we got the edict from water quality to you know elevate our um processes to tertiary level.

Um and so that that's why I think much of the response has been well, you know, we really couldn't have seen too much into the future because we are the future.

Um I remember back in the days of the pilot, it was really mostly if I'm not mistaken about um comparing um media in terms of filtration and and getting the monia extracted.

So I guess I want to understand um how will the the surrounding uh public not feel any um impacts or or maybe better expressed uh feel the product of minimized uh impacts because again this warehousing is to me feels like kind of new technology.

That's not the case.

Um I know we have some examples.

Maybe I'll let Sunny address this, but there are there are some examples at the scale?

Probably not the scale, but let Sunny go.

There are other examples not at this guy that we looked at.

There are smaller warehouses, you know, acres of acres of warehouse that that have odor control units on them.

Sometimes they're enclosed, sometimes they're open atmosphere with air draw, but there's um odor control systems designed specifically for those situations.

This is a little similar to when we did the the um harvesting bio bio geotubes.

Um we stored that in geotubes, let it dry, and then we opened up a whole bunch of geotubes, and we didn't we were worried about odor controls and the impact to to residents at that.

So we put some odor control measures in place in case we had those odors.

We did not experience any significant odors above what our normal odors are at that time.

So and that's that's a real life, you know, small small little bit smaller scale pilot here without odor control.

And that was direct release to atmosphere, right?

I'm sorry, say it again.

That was direct release to atmosphere, correct?

It was, yes.

Okay, um, and then finally um again uh going back to my briefing with uh Christoph.

Um I think uh there's probably never been a greater challenge for uh our communication staff here with um with the district because uh this is gonna be something I think is obviously gonna draw a lot of media attention, and it's gonna be critical, at least in my humble estimation, it's gonna be critical for uh there'd be a lot of thought put into how the um explanation, the narrative, going all the way back to tw uh to 2010.

And it's not a it's not gonna be about hey, they made us do it.

You know, our position should be it's the right thing to do by now, right?

Because we've been um investing as long as we have now uh for well over a decade to get us where we're at.

Uh but I do think uh our um PIO staff, they need to be very um thoughtful about how to craft all of that, how to explain uh the necessary um new um amended revenue streams that are gonna be uh required to uh pay for the 600 million dollar price tag um and uh that should not be a last minute consideration that should be something that um I think uh they should be considering um today uh in terms of how how best to to get that message out and be at least be prepared uh but be proactive about it.

This is not something that we um I think want to be caught flat footed and um be completely reactive to what I think we have to be responsive and responsible for um the our own story and why this is necessary and how it's gonna be paid for and the technologies involved and who's gonna be impacted and who's not gonna be impacted and what benefits uh come with it if if any so um there's that um and then lastly the we're gonna take suspended solid basins out of commission correct so what's it do we know roughly what the total acreage is of that Jeremy do you recall the total acreage of our SSBs yeah this uh Jerry Boyce senior civil engineer here at the Ecola uh operations department uh we have about 20 basins and each basin on average is about five acres in total is there is there any benefit to our our um systems processes um that can we can we make uh uh lemonade out lemons here is there any beneficial uh use that we can put uh that acreage to once the those basins are decommissioned has any thought been given to that though those those basins could potentially be future lined dld sites um because of their size if if we needed to expand our on-site disposal we could potentially repurpose those basins for that for that purpose okay uh christoph I don't know if you wanted to respond to the to the messaging slash um public affairs or public relations part of what I had to share.

Sure just quickly based on our previous conversation I did talk with Nicole and I know that she is working on developing some talking points or already thinking about that um and trying to capture some of the key points that Sunny has talked about today and and also we can incorporate some of the questions that you've had because those are probably the same types of questions that the public would ask we're gonna be your best devil's advocate always so thank you perfect thank you member suin thank you chair uh I'm follow our start off by um thanking director Cerna for raising the issue about odor as as an Elkro one of the Elkro representatives um wanted to uh follow up with uh Director Desmond's comments you know we we mentioned Sir referenced uh other facilities what they're doing and uh we we we embarked on this pilot program we we know now you know it's gonna require another six hundred million dollar investment in over ten years that's 600 million reasons why to ask is this still the right path and I know it's 10 years time but um you know there's there's sunk costs that you you if we need to pivot to something that's more efficient and and financially uh advantageous for the future it's worthwhile to examine and have you taken a look at that the the evaluation of alternatives included just a many factors along that lines what's our what's our ability to adapt giving future regulations that come down come down the road this was um the best alternative for for adapting to those things the the process for dewatering and sl and sludge thickening by centrifuges is a is a very common well-known process out there in the in the industry and then disposing to land disposal although not on site off site is is very well known as well the both all of this serves as building blocks for any future regulations that could that come that come to us so this is is kind of setting setting that that groundwork for those for future um adaptability so do you feel that other facilities are run will run into this these similar challenges that that we're facing as well uh I believe there are facilities that are will run into similar challenges now are we went from a a process that other facilities didn't have to a new process so they may not have the magnitude of that challenge but they're really we'll have similar challenges that are out there and we'll we'll learn from one another.

Okay thank you uh directors please thank you chair um I also want to thank our colleague vice chair Cerna for those questions because it was because of the responses that some of my questions were erased um I did want to know I know in the last nine years of my sitting on this board are one of our biggest sensitivities is how we protect the ratepayers from impact and we talk at length about our sewer lifeline program and making sure that vulnerable communities are not filling the brunt of these immense uh investments um with that stated I mean we're talking about the general public and and feeling the the impacts of the odors that might have been which apparently weren't as um astronomical as one can imagine but what about the decision that we make here and and how this might impact the generations of folks and obviously you know doing it the right way or doing it a certain way has its price tag as we're all feeling the shock here but how is that going to impact uh our ratepayers um and other impacts on operations that we're pouring into the future so our next presentation TEPA is going to go through our long-term financial plan and address specifically the impacts to ratepayers so that you get a sense of the magnitude of the cost for them and keep in mind too that these are planning level numbers they do have a lot of contingency built into them it's a long time before we get to actually bringing forward contracts and and designs and things like that.

So at every opportunity we're looking for ways to reduce those costs and the impacts to ratepayers um but this is this is where we stand today and and TEP is going to be able to share um uh how that looks from a financial perspective.

Thank you.

Anyone else wishing to speak is there any public comment on this issue inside I mean we do not have any public comment for item number eight okay so there's no action just receive and file then we'll move to the next item please madam chair item nine is receive the 2025 update of the long term financial plan and approve the capital funding projection for fiscal years 2025 through 26 through 2034 through 2035.

Presenter Tepa Banda director of finance could we bring up the PowerPoint all right there we go.

Good morning chair and uh members of the board and everyone in attendance here my name is Depa Banda I'll present the long term financial plan the update for this year 2025.

So that's uh an overview of my presentation uh give an overview of the the state of the economy very broadly um and critical issues that's risks uh some of it we're just talking about in the last presentation I'll present the capital funding projection which includes the biosolids um improvements that were just presented um and then I'll share some assumptions some key assumptions driving our focus and then some a summary of our results um which hopefully would address uh the questions from uh Membel Roscoe about the impacts and fees and and rates and then uh a debt management plan and some action items for us stuff and then we'll have I'll end with uh recommended actions that we'll be uh uh seeking from the board uh so in general, which is a good thing given all these biosolids uh emergencies that we're talking about, is that uh Saxo is an excellent financial condition, um and and that's puts us in a really good place to deal with all these um uh problems that we're talking about.

Um the last few years since COVID, the region has been growing briskly, and so that has a good effect on our revenues.

Uh the rates that the board approved last year, 2024, we had a three-year rate plan that was increased that helped stabilize our financials uh coming out of all that high inflation that we experienced during the COVID years.

Uh but because of these additional pressures, we are looking to some more rate increases.

Although I would say these rate increases that I'll share in a few minutes here are much more um you know, mutant compared to what we had.

I think the last ones we had, we had a $10 increase in three years over the treatment system rates, and we had a $7.50 total increase on the collection system rates.

Uh, the ones we're looking at over the next 10 years are much much lower than that.

So, and that's uh in big part to where we are right now.

We expect more grant revenue from the California Water Commission.

Uh, we are not pricing, we're not focusing them in in our focus right now, trying to be conservative, but that could also be a positive that would help the picture that we're about to share here today.

We obviously have there's a lot of policy uncertainty at the federal level as as we all know from the news.

So how that plays out, we don't know.

How it affects if it affects interest rates, then it affects our costs of doing business.

If inflation goes up because of some of this, then it also affects our cost of business.

So we'll be keeping an eye on those, and uh as usual, we come back with uh with a financial plan update every year.

So you know, uh we'll keep building those in as they unfold.

Uh critical issues, which essentially are risks, and the very first one is very makes a lot of sense now.

Um regulatory compliance changes um our permit, which was uh updated in 2010, which gave rise to the echo water project.

I think that is up for renewal in 2026, which is next year.

I guess we'll keep our fingers crossed that we don't have uh uh requirements that that are very costly.

But we do have clean reg uh uh clean fleet regulations that we uh I think staff are still studying the impacts of those.

Uh so those are some of the risks that we have to uh so at this point we don't exactly know what the financial or other impacts are, so we're not really uh modeling those in our financial analysis, but that's something that could uh affect what we're uh looking at today.

Uh lawsuits, of course, um with all these, especially the capital projects, and now that we're an employer, those are two sources that could um, you know, in the course of business could you know generate uh lawsuits that could impose significant costs on the districts.

Economic conditions, I alluded to that.

There's a lot of that that's out of our control.

How well our economy is doing locally and how well the regional economies doing, all those uh potential uh risks that we have to that could derail um our plan here, natural disasters, aging infrastructure.

We have a number of big projects in our long-term financial plan to address aging infrastructure.

Uh, and some of those things uh can be accelerated by you know natural disasters.

And the staffing services initiative is uh almost complete at this point.

This is the process we've been through over this past few years of separating our operations from the county of Sacramento.

Uh at this point, we're only down to a few, you know, system installation uh implementation issues with our financial management system, our payroll systems.

Most major issues have been fixed.

We're still tying up a few loose ends at the end, but that so far things are going well.

We are still tied significantly to the county because we we still use DTEC, the Department of Technology for our internet, you know, for online and internet infrastructure.

So the so we are still exposed to to any issues that might come from from the county's operation of those systems.

So that's in summary, some of the major issues or risks that that could uh we might have to deal with over the next 10 years.

And so here I summary of our capital funding projection.

I'll present the collection system, and the next slide will be the treatment system.

As you know, we have to keep the finances of these two systems independent.

Uh so for the collection system, over the 10 years, the the projection of our capital spending is a total of 217 million, and much of those coming in the first five years about 177 million.

And that's just a summary of the key projects or rather key project areas that the plan deals with.

The big part, the big chunk of that, or more than a little over a third of it, is the system capacity.

These are projects that uh you know help to to increase capacity for the growing region.

Um as we have seen these past few years.

Uh, the the region has grown significantly, continues to grow.

So there's a continued need for these projects to happen to improve the the size of our system to do with the increased flows.

And then, of course, the rehabbing main lines is another big almost a quarter of our plan here is to keep our main lines and narrows in good condition so we can avoid all those uh disasters that could happen with pipe bursts and things like that.

Uh the NESI rebuild, which is the North Area Corporate, um, I think if maybe the last board meeting, there was a presentation on on how that was.

So that's a big driver also of the collection system costs, which is also included here.

Uh I think out of that 48 million, the actual cost for the for the necessary boot is about 40, almost 42 million at this point.

So going over to the treatment system, uh that one's much bigger.

Uh we have much bigger scale projects on the treatment system, a total of 1.4 billion over the next 10 years.

Uh the with over a billion in the very first five years, largely in part to the introduction of the biosolids improvements.

As you can see, it's the biggest uh chunk of our capital funding right there.

Almost a third of our biosolids is going to be to address these capital improvements.

Hopefully, it comes down, and as we uh just heard, these are engineering level estimates at this point, and hopefully as as more refined planning gets underway, maybe we we see some uh cost reductions uh in those costs.

But right now it's it's the bigger it is the lion's share of our uh funding projection.

Uh, the harvest water is underway right now, so the cost that you see there is what is remaining uh over the next few years as they continue to to implement the remaining segments of the project.

So it's still sizable, about a quarter of our uh our long-term uh funding projection of the next 10 years.

Uh, we got some big interceptor projects included there.

There is um the central interceptor rehab, which is about 160 million, over 160 million, and then a new interceptor proposed for the East Rancho Cordova area to to provide capacity for for that growth in that part of the county.

And then we have a lot of uh projects right here on this facility that you know are meant to keep this facility working.

Uh a few key ones are the digester rehabs that you know that have to continually happen to keep the digesters in good shape.

Uh, there's a chiller replacement project, about more than 18 million.

There's a lining of the of a landline of the landfill, about 25 million, and a few other rehab projects.

So, in short, that's um an overview of our uh capital funding projection for the treatment system.

Uh next, I'll just uh share a few what I think are key assumptions driving our.

So we take the capital funding projection, which is essentially our capital spending, and we layer on our operational spending for for salaries and services and supplies and debt service and all those things.

And that's how we come up with our um our long-term financial plan.

So these are uh driving mostly on our on our um, so the the growth, the assumption on growth that's a big driver on our revenue estimates.

Uh, we're fairly conservative.

Generally, our approach in these forecasts have been conservative, which I think has helped us find ourselves in this excellent position despite all the problems or the big ticket items that we've had to deal with uh over the last few years.

So our growth over the last um uh few years has actually exceeded the the 0.5, but we're we we're sticking to that because I think it's it it it helped it works in our favor in the long term.

We think interest rates are going to fall a little bit.

But with all the uncertainty, both sides, we feel that it remain elevated.

So we're assuming around three to four percent you know interest income on our cash balances.

Uh it's it's it's one of our major sources of revenue, especially for our non-rate non-fee programs.

We do have grant receipts, significant grant receipts that we are factoring into our forecast here.

About 33 million was received was approved for septic conversion projects.

This is on the collection system side.

We have about four projects there converting septic systems in a few communities, uh rural communities around the county.

Uh, and so far I think we have received almost 370 million for harvest water.

Um, and there is um potential for more.

Um, so that that would also uh help our situation.

Um, and then we have an assumption for some funding that we're expecting.

The IRA, that's the inflation reduction act, it provided funding for some of our that we qualify for because uh you know renewable energy project, the bio gen.

Uh, we're being very conservative here as well.

Uh, from the analysis of our uh our tax consultants who are helping us because the funding is coming as a tax credit, although we don't pay taxes, we would get it as a direct payment.

Uh, they're estimating anywhere from 28 to 51 million as possible um payments that we could receive another IRA for this project.

Uh so we're just going with the low estimates here.

Realistically, it could be close to 40 million, um, because there's some key uh uh key aspects that they I think are not very solidified, whether we'll meet all our domestic steel requirements.

That's a key one that's driving uh that assumption.

We over our different cost, you know, cost items or wages, uh, other services and supplies, they escalate at different, you know, um rates.

And so generally our our escalation rates for inflation are between two to five percent, which we think is reasonable.

Uh and then we do have these targets for our debt service coverage ratios.

Uh these are key because in our bond convenants, we have certain minimums that we have to meet.

So we set those up.

The 2.5 there that you see that's for our collection system.

It's we set it a little bit higher because that gives us the higher the ratio means the more money you have after you pay operating costs, and that money is you can use it to service debt or to pay your capital program.

And because we self-funding the collection system capital program, we have a we have a much higher target there to make sure we have uh cash really to fund our capital program on that end, and of course, to meet our debt service payments.

And we're a little bit lower on the col on the treatment system, which is the 1.45, because we do fund, we do issue debt uh for some of the big projects.

We plan to issue debt for some of the big projects uh because they're new.

They're sort of set up for debt financing.

Uh, and so that's uh that's the driver behind those.

Our legal minimums, which is uh you know, codified in the board confidence is 1.2, so those ratios are well above that.

So they provide us enough cushion uh to deal with any um adverse uh changes, uh and and we do have to maintain positive and reserved cash balances, and we have to fully fund off our designated reserves.

So all those assumptions sort of drive what our long-term uh focus looks like, which which you have in your uh in the report.

So with all those, with the capital funding projection uh and those uh assumptions that we use to estimate to focus uh the next 10 years.

This is sort of a snapshot of uh where that leaves us.

Uh so operating revenues would grow about 1.9 percent on average.

Uh this is um down from about 3.2 in the last iteration that we presented last year.

That was driven mainly by the you know the increases that were approved last year.

Uh the the additional rate increases that we're proposing are much lower, so you see a lower revenue growth.

Uh uh operating expenses are focused thing to grow at an average of 4.3 uh percent a year.

That's also lower than uh last year when we had 5.1% uh focused uh over the 10 years.

So both as all those things are you know, at least the the costs are trending in the right direction.

There's a delta there, but it's okay because our cost basis is much smaller than our revenue basis.

So though the percentages are different, you know, the the actual revenues would be enough for our to cover our growing costs.

Um our cash balances would remain above target, our debt coverage ratios would be able to maintain those throughout the period.

Uh, but we would need uh what I alluded to some modest rate increases to maintain our coverages and to provide the financial resources to cash fund some of our needs.

So at this point, we are looking at another four years.

Uh in this coming 10 years, next year we have the third increase that was approved last year.

But after that, we're looking at four more years of an average of a dollar fifty a year, which is a total of six dollars.

As you recall, last year we asked for ten dollars over the last uh over these three years ending next year.

Uh we're looking at another uh one dollar fifty cents.

That is mainly driven because you know, the bio uh solid improvements will need to issue some debt to to pay for that, but that obviously brings up debt service on that debt, so we need some extra revenue to help pay for that borrowing that we're going to do.

So that's really the main driver here.

Uh uh, and then for the collection system, we were also looking at some uh increases uh of about 0.7575 cents a year, uh total about three dollars over four years.

Uh, the goodness, well, maybe it's not so good, but at least the if you look at the timelines, they they are one after the other.

So the first four years where we need some treatment system rate increases, we don't need increases on the collection system, and then the collection system increases come at the tail end of our ten years, and that's in part because of how our current debt portfolio is structured on the collection system.

We will start paying more um uh principal on, and so our debt service costs are actually going to go up in those four years, which match uh this increase.

So this is driven a lot by that increase in our debt service costs, debt that was acquired a while back, but the the structure was it pushed out some of the principal repayments, and so we'll have about the three million dollar increase in our in our debt service on our existing debt.

Uh so that's driving a lot of that uh additional increase needed to maintain our coverage ratios, and of course uh to keep our cash balances uh for funding the capital program.

And as I alluded to, we would be looking to issue debt in next fiscal year and the following fiscal year.

So last year when we presented the long-term financial plan, we're only looking at one debt issuance, which was mainly driven by the harvest water project.

Uh and we had about we were assuming 225 million then, which we were going hoping would require this calendar year 2025.

Uh but the harvest water project construction costs have trended in the right direction.

There's been some readjustment downwards, so and then we have gotten additional grant funding, and so our need for debt financing for the harvest water has come down, which has helped the situation.

So from the one from the 225, we've revised that issuance estimate down to 150 million next year.

But because of the biosolids price tag that's come up, we're looking at an additional about 280 million uh to help with the biosolids financing in fiscal year 208-29.

So that's uh a summary of you know where the long-term plan is is is looking like at this point.

So I'll go over a little bit on our our debt, and of course, we do use a lot of debt, so so on the collection system, we have existing debt, and as of August 1, our outstanding balance was $153 million.

I pointed out this before that currently we're paying about $13.6 million in annual debt service as principal and interest.

But over the last four years of this 10-year period, that amount will reset to 16.6 as we accelerate the repayment of principal.

So that's a three million dollar increase without doing anything.

So in the last four years, we'll be paying three million dollars more just to service our existing debt.

And that's um what's driving uh our proposed increases or projected increases that we might need to make uh in those fiscal years.

Uh we do have uh one of our outstanding um bonds is the Buy America bonds, which comes with a subsidy from the federal government.

Right now it's about 2.3 million.

It helps us uh offset some of our uh debt debt costs.

Um in this plan, we're not looking to issue any debt for the collection system.

We have sufficient cash resources to pay our capital program using pay-go revenues.

Uh but we do have some opportunities uh to refine now some of these debt.

So maybe that 16.6 million comes down if we are successful.

Uh looking at what the numbers we've we've been seeing um with the analysis, you know, with our uh financial advisors and our investment bank uh partners, we could generate savings of up to seven percent, which is above our uh debt policy.

We we we put the threshold for about three percent.

If we can save three percent, then it's we consider that a worthwhile refunding um transaction.

So we think we're in good place to refund our 2015 bonds, so that would help uh with our uh ongoing costs on the collection system.

And we're also exploring the 2010 um BABS, Bi-America bonds.

Uh, right now the economics don't favor a refunding, it might come at a cost, so we might not.

But then the the uncertainty on federal funding, you know, which might jeopardize that subsidy is still a driver for us.

So if we can get, if we can get conditions where we can get some minor savings, we might go for that to eliminate that risk from the federal government funding going away, and then of course, maybe to shave off some of our cost on uh debt financing.

So that's our plan on the collection system.

Uh and the treatment system has a lot more debt because largely because of the echo water project, which we just finished, uh the gift that keeps on giving.

It's the echo water, out of that 1.85 billion outstanding as of June 30th, the Echo Water Project accounts for about 85% of that is money we borrowed to implement the.

It's a combination largely of the SRF loans.

We we got almost a billion dollars from SRF, which was very um good debt because it was 1.6, 1.7, so very favorable terms.

But we also issued the district also issued some revenue bonds in the at the beginning of the project.

I think it's on 2020, 2021, what's it 2014 and 2020, which adds which uh which is still outstanding and we're still servicing.

Uh currently our debt services are about 128 million a year.

But with those issuances that I talked about, the 150 that I do show them there, and the the 280 our debt service is projected to go up.

And at that at this moment, we're looking at 153 annual debt service costs at the end of this um 10-year plan.

Uh as we have elaborated on our debt policy, we will continue to use pay-go to fund rehab projects.

So all this new debt that we're issuing as as I show there is really for new projects.

Uh we have significant rehabs, the central rehab projects and significant rehab projects here at the plant.

We uh we are able to cover those with with uh um with our cash, our uh cash reserves as well as uh these new rates that we're asking.

Um and so in in to in summary, this is some of our big big ticket items on what we'll be working on uh to manage our finances.

Uh, we'll be looking to refund the 2015 bonds um as long as conditions stay the same or at least stay favorable uh we will be going through with that most likely next year uh and then we will continue monitoring conditions to whether we can uh refund the 2010 bars as well and of course our team is led by the policy and planning are actively you know pursuing additional opportunities um to get more grant funding uh we just learned a few I think it was last month uh that a big project that received funding from the California Water Commission uh the what project was that the Pacheco Reservoir project by Valley Water in in um in Santa Clara they had a big um uh 504 million in in in funds from the from the water sector investment program that which we get our uh big funding for for the uh harvest water that they they with they canceled their project and they withdrew that funding so that funding is likely to be redistributed and you know this uh SAXO is is I think in a good place to get some of that funding how much we'll get we don't know but it could be significant and so that is is something we're hopefully looking forward to to help our financials conservatively we are not showing it yet here but I think when we come back next year we will we'll probably know how much we're getting uh at that point and so that might that is expected to have a much better um uh impact on on what we're presenting here um and so we and we'll be working on issuances uh for the harvest water and the biosolids uh the harvest water coming up sooner uh we have 150 here that we're showing for for for harvest water but if we do in fact get additional resources from from the California Water Commission from that redistribution of the Pacheco uh project location then that 150 might actually come down so maybe our actual issuance may be much less than that so there's some uh good tailwinds coming out of this and lastly we will be looking at our investment portfolio as you all know we we withdrew our funds from the local investment uh fund with the county and we have been investing them on on our own but uh from the time the board authorized us to do that we have we were moving our funds slowly uh starting in September 2022 uh we finally withdrew all our cash reserves in January this year so during that time that we're making that move we had funds with our external investment manager uh and we had funds still in the local uh county fund and so we had some diversification there in terms of who was our managing our funds for us or managing our investing for us but now that we've completely gone out of the county we um we find ourselves with just one manager uh with oversight of our 300 million dollar portfolio so just good so this is not asset diversification this is uh would be looking at manager diversification maybe adding a manager or two to diversify our risk because right now our execution risk in our investment portfolio is concentrated in this one manager that we have so we'll be exploring that and you know of course when we do uh get to decision point uh that that's something would bring to the board to add maybe one or two uh managers to help just diversify our risk uh associated with just one manager uh so that's the end of my presentation uh if there are any questions or comments I will take comments at the time Director Kaplan thank you Mr.

Banda uh I want to go back to your forecast assumptions um on two of them I want a little bit more uh detail where you said the customer growth rate is a half a percent and actuality, how many customers does that that equal when you're when you're assuming a half a percent?

I will have to to do my numbers.

Um, if anyone can crank some numbers real quick there, that would be helpful.

Uh our service area in terms of ESDs for the treatment system, which is the larger one.

We have about six hundred, oh is that and thirty ESDs.

So 0.5 of that is would be a so.5 of about say six hundred and forty ESDs, 40,000 ESDs.

So a percent of that is.

Thank you, Mike.

Uh so that's that's about three thousand ESDs.

So it's basically about three thousand residential esque units that you're estimating, and this is for the greater region.

Right.

I did added net added every year.

Okay.

I just wanted to, just because housing, um while we've been in a little bit of boom uh is getting harder to finance.

So I think that's something you should watch and not just keep as the estimated growth through 34, 35, that that should be looked at yearly and adjusted as we're heading into a recession.

So 3,000 uh new residential units might actually be a lot when I know as a region we're supposed to be building 10 to 15,000 a year.

I just want to keep that on the forecast that uh I don't want that to remain uh stable for for the long term range forecast.

I want that something that we start looking at actuals for the yearly, and then the cost inflation factor uh you put a range from two to five percent.

Um I can tell you construction factor is five percent to ten percent a year.

So I I uh I wish I could uh actually believe your cost inflation factor numbers, but I don't, um, and I'm not sure we're being accurate or conservative enough when we're looking at certain things.

So um, yay, if we can keep it at two to five percent, but I would also like that factor to be looked at and potentially adjusted yearly just because I know if we're heading into projects, um I work in a different side of the construction industry, and there's a massive inflation and growth factor and delay in supplies that uh isn't isn't hitting the five percent.

Well, thank you.

Very great points um uh director Kaplan.

Can I can I address that?

Uh so those are not the construction projects.

So construction projects we've we've done costing and we actually project out to the midpoint of construction.

So if it's gonna be you know middle construction is 2028, then we would look at what the cost would be in 2028.

Those numbers are significantly higher than two to five percent.

But that's talking about um labor costs, services and supplies, those sorts of things.

Just okay, because it just didn't clarify, said annual cost inflation, so uh especially as we're talking about construction projects here, um, you know, where that probably has to be updated on construction uh yearly.

Continually updated, and you'll see those as we get closer to actually constructing, we'll be sharpening the pencil.

Okay, thank you.

Yeah, thanks, Christoph, for that clarification.

So, yes, those are not including the capital program.

So the capital program is the cost that we already showed you, which uh accounts for those larger increases, um, and a few other things that are helping us keep that.

So this is like an weighted average.

So part of it is a cost savings.

With a biogen project expected to go in online in 2028, 27 on 28, there's uh significant cost savings that that we're expected to realize from that.

And so that's kind of baked into our overall cost escalation, some of these cost savings, and maybe helping us to mitigate um some of our inflationary factors.

And then just to confirm, when you talk about uh the modest rate increases, we've got increases coming through 27-28, and then with the long-term financial plan, these new increases of uh $1.50 a year from 28 to 31, and then 75 cents a year from uh 2032 to 2035.

So basically we are increasing our rates every year from now until 2035.

Right.

Okay.

And for the growth rate, thank you.

I think that's a good uh comment.

3,000 units might be aggressive, but over the last uh three, four years, we've been growing at almost one percent.

So this would actually be half would be halving what we have seen over the last uh few years.

So for a region, I agree, keeping you would see one percent.

I'm just very concerned about the recession and what I'm hearing from developers in my area.

Thank you.

And I think that's the the why we have to do this every year, where we have to update the long-term financial plan every year because a lot of things are in flux and constantly changing.

So, you know, we'll see what happens over this coming year, and we'll update those um projections next year.

Thank you.

Uh any other questions.

Anyone else want to speak on this item?

Is there any public comments on this item?

We do not have any public comments for item nine.

I couldn't hear you, please.

We do not have any public comments for item nine.

Okay.

I believe it is an action associated with this.

Yes, so we uh, essentially two actions.

The first one is just to receive and file the long-term financial plan application.

We can do that.

Okay, good.

And then the next one is to approve the 10 year capital funding projection, which we presented, the 1.4 billion over 10 years for the treatment system and about 217 million for the 10 years over the collection system.

So for for that one, which includes the list of projects.

Um I believe it's part of the must be table eight and seven and eight in your in your in the report.

So for that one, we are looking for a motion to approve the funding projection.

Christopher, oh, Chris.

Oh, I'm sorry, I can't see you.

That's all right.

I did the tap.

So it's a communication through through capital.

Um now I'll forget what I was gonna say.

Um, let's see.

Capital.

Oh, I just want to make sure that you understand that when you're you're approving this capital funding projection, it is just to get it on our program so we can plan for it.

You still have several opportunities to review and approve these projects as they go through the process, and some of them come at much lower cost than we project here, but this just gives us an approval that this list of projects that we're showing here, we have authority to continue working on them.

How often is this plan updated?

How often do you do update it in five years to say we have a new 10-year plan?

We update it every year.

So next year, uh the biosolids was not so big last year, and here we are.

It's it's a really big item.

Maybe next year, something we'll get a positive surprise.

So we update it every year.

Okay.

Right, thank you.

Oh, move approval of the 2025 stocks to our 10 year capital.

Second.

Roll call, please.

Okay, it's been moved and approved by Kaplan and Suen.

Director Desmond.

Aye.

Director Dickinson?

Aye.

Director Hume.

Aye.

Director Kaplan.

Aye.

Director Orasco?

Aye.

Director Pleckibaum.

Director Director Rathel?

Director Roblis?

Chair, Vice Chair Cerna?

Director Soon?

Aye.

Director Vixy Sandy?

Aye.

And Chair Karpinski Karpinski Casta.

Yes.

Yes for me.

The item passes unanimously.

Thank you.

I don't like the word eyes.

You know, just like.

Okay.

Is there another item?

Yes, just item 10.

It's miscellaneous director matters.

Um, director.

Do any of our directors have any miscellaneous items?

Yes.

Uh my colleague just pointed out if everybody could load their trunk with some biosolids on the way out, that would help with our.

I should think there'd be a market for it somewhere.

Don't wash the line.

Okay.

Are there any other important items to bring up?

Okay.

Seeing none.

Um, is this time I bang the gavel and adjourn?

Yes, ma'am.

Or adjourned.