I'm calling to order the meeting of the public infrastructure and utilities committee.

It is Wednesday, May 13th at 3 30 p.m.

Madam Clerk, please call the roll.

Alderwoman Boyd.

Alderwoman Clark Hubbard.

Here.

Alderwoman Sweitzer.

Present.

Alderman Devotee.

Here.

Alderwoman Cox and Twee.

Present.

Alderman Browning.

Alderwoman Boyd.

Alderman Browning.

You have four present.

You have a quorum.

Thank you.

Thank you, Madam Clerk.

Thank you, members of the committee.

We will move on to approval of the minutes since we do have a quorum in front of us today.

We have the minutes from Wednesday, March 18th, 2026.

I would accept a motion to adopt the minutes of that date.

So moved.

Second.

It's been moved by the Alderwoman from the 8th, seconded by the Alderman from the 5th that we approve the minutes from Wednesday, March 18th, 2026.

Madam Clerk, please call the roll.

Alderwoman Boyd.

Aye.

Alderwoman Sweitzer.

Aye.

Alderman Devoty.

Aye.

Alderwoman Cox and Twee.

Aye.

Alderman Browning.

Alderwoman Boyd.

Alderman Brownie.

You have four aye votes.

With that, we have approved the minutes from Wednesday, March 18th, 2026.

We have a really full agenda today because we do have a presentation from the water division later in the uh hearing.

So we are going to move though quickly through the board bill to review unless there are any questions and we need to slow it down.

But we'll start with item number one, board bill number two.

This is a board a board bill that I am carrying, and it's very simple.

It is an ordinance recommended by the board of ENA allowing the city to accept a community water fluoridation equipment repair and replacement funding.

It allows the city to also appropriate said funds and expense and funds so forth.

So it's basically just accepting some funding.

If folks have any questions.

So my name is Nirge Patel.

I'm the director of public utilities.

Thank you.

With that, do we have anyone here to speak on this bill, madam?

Anyone from the public.

There's no one online.

Let me check my roll call sheet.

No, there are no speakers.

Okay, thank you.

Um members of the committee will go through an order of seniority for who is present.

Alderman Clark Hubbard, any questions?

No questions.

May I please be added as a co-author.

Thank you.

Um we we have to sign up to speak if you'd like to speak in the public.

This is on board bill number two, which is a grant and not the presentation.

We'll hear later from the water division.

Okay, so we'll keep moving with the members of the committee.

Alderman Devoty, any questions?

No questions, please add me as a co-sponsor.

Thank you.

Alderwoman Cox and Twee.

No questions, but those presentation of the board and please add me as a co-sponsor.

Thank you.

I should mic on.

Thank you.

Um, so no questions from Alderman Cox Antwerp, and she asked to be added as a co-sponsor.

Um noted.

Thank you.

I have no questions as it is my bill.

And with that, I will entertain a motion for a due pass recommendation of board bill number two.

I move that we pass board bill number two with a due pass recommendation.

Second.

It's been moved by the alderwoman from the eighth and seconded by the alderman from the fifth.

That we uh we put a due pass recommendation for board bill number two.

Um discussion hearing none, Madam Clerk, please call the roll.

Alderwoman Boyd.

Alderwoman Clark Hubbard.

Aye.

Alderwoman Sweitzer.

Aye.

Alderman Devotee.

Aye.

Alderwoman Cox and Twee.

Aye.

Alderman Browning.

Alderwoman Boyd.

Alderman Browning.

You have four aye votes.

Thank you.

With that, we have sustained the motion from the Alderwoman from the eighth, and we have a due pass recommendation board bill number two.

We will move on to item number two, board bill number 11.

Alderman Shame Clark Hubbard, you are recognized.

Thank you, Madam Vice Chair, members of the committee.

Board bill number 11 is uh continues to speak to the nuance of how we have to do um the speed hump requests in the city of St.

Louis for anyone who might be wondering why this is the second bill now I've done uh for this block is simply because um this is a lengthy block and only one speed bump was uh installed on this block.

The neighbors um are crying out still for some traffic calming on this block.

And so instead of me being able to just request and uh approve another hump, I have to go through the entire process again.

So again, I'm looking forward to us changing that and I'm asking for your favorable consideration and a do pass recommendation to install additional speed humps um through board bill number 11.

Thank you.

Is there anyone here from the public to speak on board bill number 11?

No, we don't have any speakers at this time.

Thank you.

Um, since this is a pretty traditional speed hump bill, I'll simply ask if anyone from the committee has any questions to raise your hand.

Let me know.

Seeing none, um Alderman Clark Hubbard, you're recognized to close.

Thank you.

I renew my ask.

Thank you so much.

I will accept a motion for a due pass recommendation of board bill number eleven.

So moved.

Second.

So move by the alderman from the fifth, seconded by the alderwoman from the eighth.

That we have a due pass recommendation for board bill number eleven.

Madam Clerk, please call the roll.

Alderwoman Boyd.

Alderwoman Clark Hubbard.

Aye.

Alderwoman Sweitzer.

Aye.

Alderman Devoty.

Aye.

Alderwoman Cox and Twee.

I'm sorry.

Aye.

Alderman Browning.

Alderwoman Boyd.

Alderman Browning.

You have four aye votes.

Thank you.

But with that, you have sustained the motion for the alderman from the fifth, and we have a due pass recommendation for board bill number 11.

Thank you, Alderman Clark Hubbard.

And thank you, members.

You're welcome.

Thank you, members of the committee, for moving through those bills quickly so we could get to really the meat of this presentation or of this uh committee hearing today.

Uh today in front of us, we do have the water division, as many people know, probably everyone watching this hearing.

The water division has uh put forward a rate proposal uh for um increasing the rates that water uh users pay in the city of St.

Louis.

Uh there's been a lot of um open houses so far.

I'm sure they'll tell us how many, um, but uh uh several at least, um, one in the first and third ward in particular, um, and many others across the city and opportunities for public comment.

Uh but I will say that this is really just the beginning of this conversation.

Uh, as of right now, there isn't a board bill that is in front of the board yet, which is a key part of moving forward any sort of rate increase.

At right now, we're just at the the part where the um the um proposal is in front of uh folks.

People are getting the chance to ask questions to learn more.

We're holding this hearing, a public hearing uh to have just yet another opportunity for the public to hear from the water division, see what's been proposed, uh, talk about what the um capital needs are in the water division, how these rates together uh with that.

Um, but again, you know, we'll have uh any any actual rate that is proposed um that will have any chance of moving forward does go through the board of alderman process.

So there would be additional opportunities for public comment.

Um so with that, I will go ahead and turn it over to the water division.

Commissioner Patel is here to speak with us.

Um after this presentation, we will have opportunity for public comment.

So make sure if you're here to speak for public comment, please uh make sure you've you've signed up.

Um with that, uh Commissioner Patel, thank you for always coming in front of our committee.

I think you've been uh already many hours in front of the board of aldermen this week with the budget hearing as well.

So thank you.

And I'll let you take it from here.

All right, thank you.

So uh my name is Nero Spitel.

I'm the director of public utilities.

You know, this presentation today is to outline uh our annual update that we provide to the uh public infrastructure and utilities committee is a result of the last water rate increase, but also uh to provide the results of the rate sufficiency study.

Um, you know, we always start with our mission to provide safe, reliable, and economical water.

Uh, you know, it's ingrained in everything we do from our values to our revision to the employees that we have.

Um I'm actually going to pass it over to uh our deputy direct uh commissioner Spencer Gould for the annual update portion.

Thank you.

And thank you to the board for having the water division here today.

Um, introducing myself, my name is Spencer Gould.

I'm the deputy commissioner of water.

As Alderwoman Schweitzer said, uh, we've been in front of the board now twice.

We've had two separate public halls, uh town halls, as well as many opportunities to talk in front of the public.

And so uh we do have an annual update.

This is a requirement out of the rate ordinance.

I'm gonna try to keep it kind of short in the interest of time, and then provide you guys information on where to go to collect additional information to dive deep if that's something you want to do.

So, as I mentioned, uh the annual report is uh a mandate that comes out of ordinance one 7168 through section 12, and it requires us to outline the current projects that we're working on, projects we've completed, and provide updates to multi-year projects that we're doing.

Uh, it also puts forward some accountability on the water division.

It was put forward after the 2023 bill uh when we had increased rates to ensure that we were accountable to the board as well as the public when we talk about uh what projects that came out of that.

Uh so ensuring that those revenues that we collected were put towards critical infrastructure, operational improvements, as well as uh things that are meeting the needs of the city.

I do want to have one kind of comment here.

Uh traditionally, and I think per the ordinance, these are held in May.

We are going to ask in the future that and put this in our proposal to move it to a later month, just so it doesn't coincide with both budget and the start of the legislative session to give us more time, myself more time to talk about this later on in the find our annual report.

I have a picture of our website here.

Um there's uh a new website if you hadn't a chance to see it.

And along that top tab, there's an about us.

You can select that projects tab, it'll bring you to where this information is.

There also already is posted online.

This is a couple minutes ago or uh 15 minutes ago, showing the uh link to that annual update already on our front page for people to access.

This is what that page looks like when you get there.

It's multiple pages you can scroll down, but high level, it gives detailed information on these projects.

So it talks about the project we've completed, it talks about the projects that we're in the middle of doing or have started, and those multi-year projects that aren't summarized within just one single fiscal year.

Uh so this page is updated yearly, and it shows all the work that we're doing in accordance with the ordinance.

Very high level, these are kind of our core focus areas.

Uh, it's treatment and supply, it's distribution, and it's innovation.

So, treatment and supply.

You've heard us talk about this.

I'll say it again.

You know, the water division is in an existential crisis right now.

We have our revenue that is not high enough to cover our expenses that's existed for seven years.

And so I'm going to talk about the projects that we've done.

We're continuing to move things forward, we're continuing to correct problems, but it's reactive.

Uh there's 12 million dollars in projects.

I'll show kind of a quick overdo of what those look like per section.

But all of those are done in response to an emergency.

They are not proactive, they're not looking forward.

And when I talk about these three pillars, we have innovation there at the bottom.

It is shifting our our sort of mentality from this reactive response to one that's proactive.

So treatment and supply, it's going to be all those projects dedicated to uh maintaining and refurbishing that critical infrastructure that's past its uh respective required life or intended life, distribution, maintaining that system that provides safe, reliable water to your homes, and then finally putting money towards those long-term projects so that we can become more efficient, serve the community better, and ensure that the future projects that we're doing are uh targeting the longer term things that we need to be doing.

What that looks like as a breakdown.

This is just showing kind of some of the projects we have by section.

You can see it's spread all across the water division.

It's not just one area, about one third of that is going to those innovation projects in our IT admin sector, um, as well as some smaller ones in our distribution team.

Uh and then we also have a distribution sector, which is primarily projects looking at replacing those mains.

You've seen us out in the community fixing these.

Uh that is, you know, our money to fixing mains that are broken.

And then finally, the secure purifying as well as power and pumping.

Those are projects that are plants to fix those issues of equipment that are long due, long overdue for repair that are breaking and we are required to fix to continue to provide water to the city.

I'm going to pass it back to Director Patel, and he's going to talk a little bit about how we got here.

All right.

Thank you, Spencer.

All right.

So I've talked about the size of the division, you know, the population it was built to serve.

You know, there are economies of scale there.

You know, this is kind of an excerpt from Journal AWWA, the American Waterworks Association that shows that when you have these drinking water systems that are sized for larger populations, you do get a decrease in unit cost with the increase in production.

And we are going in the opposite direction with our utility.

We have decreasing production, decreasing rate base, decreasing demand, and increasing unit costs.

All right.

So this is a lot of information on this, but uh it's pulled from our annual annual audited financial data.

Um I don't intend to you know have you guys understand all this without contextualizing it, but um at the top there, it's our revenues, our budget, uh, and the treated water that's pumped.

And then we do have uh metered customers, wholesale customers, and flat rate customers.

Um, you know, this information is in our audited financial data, but uh we often hear what does it really mean?

And so 47 billion gallons of water produced.

Um, you know, the operating revenues that we receive from the sale of this water is about half from the flat rate uh customer base, uh, about 43% from the metered, and about 6% from the wholesale, and then a small amount other revenues that the division receives.

Um, you know, the breakdown of what that looks like for the treated water that is pumped.

And there are some assumptions that go into this chart, but the metered water uh that is measured is known.

It's around 10 billion gallons of that 47 billion gallons.

Um, you know, the estimate that we've used, uh, the water master plan has a demand projection based on this.

Um, you know, it is contextualized uh and and was thought through.

What does the average unmetered customer use?

It's a hundred gallons per person per day that we land on.

There are measures that are higher, there are measures that are lower, uh, but there is no incentive to conserve water, and so we're comfortable with that.

We think it is a good backing.

That's about 10 billion gallons a year as well for those 80,000 accounts that are unmetered.

Uh so about equal on the consumption and about equal on the revenues there as well.

Uh the wholesale is there, uh, four and a half billion gallons a year, um, and again, about six percent of our revenue.

Um, you know, so uh that that is a component, but the largest piece of that pie is non-revenue water.

You know, this includes leakage and loss and the water used by city entities where they don't pay for water, uh, but they use the water.

This is the parks and the features and the parks.

You know, this is uh the city buildings that use water.

Um gallons a year is there.

Over 40% of that water, and it's paid for by the ratepayers who pay for the water service they receive.

All right, so here's what we're doing about these problems.

Um, you know, one of the things is uh, you know, we are planning the work right now.

And as we are planning the work and the water master plan, the rate sufficiency study, uh, you know, a future cost of service study, uh, you know, change how we look at the division, um, you know, modernize the division.

Uh, we know we're gonna have to be ready to work that plan.

Um, our key hires, you know, are in multiple sections in the water division, but you can see we have made progress there.

We presented this to the budget committee, we presented this to the public information uh or uh infrastructure and utilities committee.

You know, our vacancy rates are dropping as we are adding positions to our table of organization, our full strength roster.

Um, and here's just a few examples.

You know, we have an analyst position that we added.

This is to evaluate our processes, you know, understand the data that lives in the division and contextualize it to solve these problems.

Uh, you know, we have a new distribution executive that comes from uh a long background and history with multiple water systems that uh, you know, frankly are better funded than us and have been doing things in a different way.

This will help a long way to have our distribution section operating in tip top shape as we you know kick off and initiate capital renewal work to replace water mains.

Um, and then our water maintenance technicians, you know, the department of personnel has been working to seek and find these candidates.

Um, you know, we certainly uh like to think of ourselves as a great place to work.

So some of the key project initiatives, you know, our temporary assistance program is ongoing.

It is, you know, still has plenty of funding available.

We know we have helped over 700 people with this program.

But we are shutting water off.

You know, over 1,300 accounts have been shut for delinquent balances.

Most of these accounts contact us to get their water turn back on.

You know, they enter into a repayment plan or pay the balance in full.

This is working to reduce the delinquent balance owed.

This is not for given debt.

This is still debt that is owed, and we've reduced reduced that number 11% from the peak at 14.5 million dollars to 12.8 million dollars.

You know, we continue to work with our customers uh, you know, to get that balance drawn down and keep essential water service on.

Uh the water master plan I mentioned is one of the most important projects that we're doing right now.

This is planning for the work of the future, the strategic plan for the direction the division needs to go in.

Um, and we are working to make sure we have staff ready, but we also need to make sure we have revenue ready to support that.

And so um, you know, the rate sufficiency study and the presentation we'll give uh in a little bit here to go over those recommendations uh is going to go a long way to kick off and lead that work uh to have the funding available.

Uh our lead investigations continue as well.

This is grant dollars that we've gone after in federal funding.

Um, you know, it is important that we do that as well.

Um, as we're talking about a proposal to raise water rates, uh, you know, supporting our at-risk customers is extremely important.

Um, you know, affordability is you know certainly a challenge in water utilities across the country.

We have one of the most affordable rates out there.

It's less than 1% of the median household income, whereas the EPA defines an affordability challenge at two and a half percent.

Um, but median household incomes aren't enough.

You know, we are looking at the bottom of the income scales, you know, the people that have age uh you know considerations or you know, maybe natural disasters uh have affected this, obviously with the May 16th tornado.

Um, you know, we are working with elected officials to figure out uh how to address this to have an affordable rate for those uh folks when we do put a board bill out there.

So uh addressing misinformation.

Um, you know, there's a lot going on in the division.

Uh, you know, day-to-day we are dealing with a whole lot of change, trying to deal with revenues that are not sufficient.

Um, but just to go into some of these, um, you know, the cost increases will not go to pay.

Um, you know, any water rate increase is going to go to do more project work, is gonna go to do more of the cost of operating um and maintaining and being proactive.

Uh our salaries are set by the department of personnel.

Um, our pay is public because we are a municipally owned water system.

Um, you know, residential customers are not subsidizing the use for large.

Uh, we showed that with the revenue uh, you know, being 49% and 43% for the unmetered versus metered, and the usage being about the same.

Um, you know, there is a uh economy of scale though.

The more water that is used by a single customer, uh, you know, the less it costs to supply water to them.

It costs the most to supply water to the residential customers because the asset base there.

The water mains that are residential, you know, are the majority of the system.

Uh, the transmission and distribution mains that are connected to for the larger customers uh you know are less costly to uh support.

Um unmetered customers uh do not pay twice what metered customers pay.

Um, you know, we've run the numbers, and again, you have to make some assumptions, but at 6,000 gallons per month, um, you know, a number that is used uh in the industry.

Uh, you know, that we know that the unmetered customers pay about $6 more for unlimited access to drinking water.

Um, you know, we think that's a pretty good deal.

It's one of the lowest rates still, you know, in the region and the country.

Um, and you know, this structure is uh something that we hear people enjoy.

Um, you know, they can use water as they need to without worrying about fluctuations in the bill.

Uh, unfortunately, sometimes uh leaks do occur in the home and the internal plumbing as well.

Um, and those aren't paid for by those unmetered users because we're not measuring what is being consumed uh in the home.

So, you know, the last rate increase is not funding for meaningful capital renewal.

Um, you know, it was emergency.

It was reactionary.

We are looking to be proactive right now.

Um, so you know, simply the the last rate increase was thought to be able to stabilize things, uh, and to some extent it it did.

It allowed us to continue operating, but we still had deficits uh year over year, and you know, including last year and this year.

Um, you know, large customers do not use uh significant portion of the water.

I think we showed that with the uh the pie charts from earlier, but uh, you know, we've heard that uh the large cut system customers do use more, um, and certainly some of the largest ones use more, but it's about equal.

The metered customers, all of them combined use about the same as the unmetered, uh, you know, based on some of the assumptions we've made uh in the study.

Um and lastly, uh, you know, water meters are an important uh piece here too, but we simply do not have the funding to address that all at once, but we are working on legislation.

Uh, you know, you'll see a lot of things changing in the water division, but uh, you know, to to address that when it makes sense, you know, when development is occurring, when construction is occurring, when major renovation is occurring, but the water division would have to pay for and install all of those meters, and the uh customer, the property owner would have to pay for the infrastructure where we would install those meters.

And lastly, you know, this is kind of what we're talking about.

Um, what are the impacts?

What are the implications of not acting here?

Uh one of those photos you see is the 60-inch water main break that flooded the highway, uh, highway 40.

Um, you know, in Michigan, uh a boil water advisory that affected an entire community.

Uh, we've certainly had those here in Jackson, Mississippi, a water crisis where the water is not safe to consume.

Uh, you know, a complete system failure due to uh issues with utility management, issues with funding and rates not being set adequately and aging infrastructure.

Uh and very recently, just this uh past Sunday on Mother's Day, um, you know, a a system, the the Great Lakes Water uh, you know, authority uh going on air saying that we have a crisis.

This is not a drill.

We will run out of water today for an area approximately 35 square miles, you know, half the size of St.

Louis City.

Um, you know, they had a single water main break on a 42-inch line uh that was gonna take over a week to repair.

Um, you know, they were evacuating elderly.

They were reaching out to the hospital systems, they were putting uh, you know, uh no no water use restrictions uh other than essential to maintain emergency access for firefighting uh to maintain public safety.

Uh, you know, this is a crisis that is happening uh, you know, in a in a city uh that's real, impacting residents.

Um this is not something that you know we are immune to if we are not taking care of the assets that we we own.

Um and with that, uh, you know, the rate sufficient.

Thank you.

Thank you.

I might pause you right there.

I'm gonna pause you right there and just go through questions on the annual report first from the members of the committee because they're just two separate things and they're related, but I just I saw some furious note-taking over here.

Um so I just want to make sure that we are able to separate that out a little bit.

Alderman Clark Hubbard, any questions so far, knowing we will be talking about the rate sufficiency study next.

Yeah, thank you, madam chair, uh vice chair.

I do I have some questions, but I also want a little more context shared, I think, to take advantage of this public platform and this opportunity first uh to thank uh director Patel and um Commissioner Gould for the the tour that I received of the uh China Rock's water treatment plant.

It was um sobering.

Um it was fun for me.

Everybody knows I'm a history nurse, so learning a lot of the stuff um and seeing a lot of the stuff, but also going so many feet below uh the river and just all of the different things.

I think people need to really know um as was stated here that seeing it with my own eyes.

Um I concur that this is not a drill.

I shared that in a meeting um in the neighborhood, one of my neighborhoods think of the Boliver on Monday.

Um I think that we should share the dates, right?

Um, when these plants, what when they were built and even some of the updates.

Um listen, the what commissioner uh Gould shared that some of these um these structures and these uh plants were built, they brought those things in on mules and buggies.

Okay, so it's real how old and dated this stuff is, and knowing that that critical infrastructure um piece is so important now.

I I hate um that it this can has been kicked so far down, and I do believe that this is the board, and we are the ones that will get this right um for our for our water department.

So I do if if you please indulge me on that, not just the history nerding me, but I think our residents need to know because when you hear the dates and you hear what they need some of these needs are, then it'll make it make sense why we cannot wait any longer.

And also, if not in this um questioning in the next line of questioning, please talk about um what you all share with me about the real threat of a state or a federal takeover and what that would mean um if we do lapse enough or have enough of gaps in there where someone can where they can come in and um take it over that way.

Sure.

No, thank you, uh Alder Woman for that uh you know question.

And certainly the plants are aged.

Um, you know, 1894 for the Chain of Rocks plant.

Um, and it has gone through, you know, a few iterations of major overhaul.

The 1904 World's Fair brought uh you know some some big improvements over there uh in 1913.

The filter plant and the secondary treatment train went online.

Um, you know, and then in the 1950s, uh the pumping was electrified from steam.

Uh Howard Bend plant, you know, dates back to 1929.

That pumping was not electrified until the 70s.

Um, and so these are the aging assets that we're still relying on for drinking water service today.

Uh, you know, a filter plant from 1913 and 1929 uh and pump stations from the 50s and 70s.

And also uh, you know, just to speak to the the risk of uh inaction, the risk of failure.

Um, you know, water service is critical.

Uh we are regulated to provide safe drinking water.

Um, you know, if we are not meeting our regulatory requirements, um, and that is at risk, then you know, we will have a an EPA coming in uh, you know, or uh a state regulatory agency looking for outside help, uh, and that will come at a large expense to the customer base if the utility is privatized or uh if we are mandated to um you know go onto a schedule of improvements.

And I will say the the consultant that we have uh for the rates of sufficiency study, uh, you know, uh they've offered to come in, and I do think they have a time requirement um if we are able to get to them at some point.

Okay.

Thank you.

Thank you.

Thank you.

And one more thing, I think that better um aligns with this uh presentation versus the next.

When you talked about um the assistance program, is there any grace for businesses or commercial commercial properties um within their bill payment or any kind of granting um that were in the tornado impacted area?

And if there's something that can be answered today, I just wanted to flag it because I have heard from a few off of one of our off of one of the major corridors uh in the 10th war.

Sure.

We are uh, you know, always uh thinking about the the people who are having trouble paying the bill.

Uh, you know, we can't forgive the debt, but we can go into a uh structured uh repayment plan, maybe structure some payments differently to make sure that people can pay uh that balance down if they do have a past due balance and want to avoid uh you know being shut off.

Uh, you know, we bill quarterly, we can talk about a monthly structure that helps a lot of people.

And just for clarity, make sure I said it right and asked right.

I know we had that for residential, but I was asking this time about um business and commercial properties.

Is it the same?

Yeah, we offer that for all of our customers uh, you know, who have uh past due balances and and are trying to get back on track.

Again, the goal is to get that paid down uh, you know, uh and and get them back into paying regularly.

Um but we do work with with uh commercial and industrial customers too.

Okay, thank you so much.

Thank you again for the time um for the tour to time today.

For you, uh what I saw and during during that tour and after that tour, I've um I felt bad about the way I text you, Director Patel, because with you managing all of that, and then I text you about water main breaks in the middle of the night and you respond.

No problem.

That makes uh, you know, that makes all the difference.

So again, I would never want to miss an opportunity to publicly thank you, listening for the pup that's watching.

Um, I literally saw money going down the drain, right?

Because this in the filtration plant, this this is water that has already been uh filtered, treated, all of that.

And when you go down into the bowels of it, you see clean water pouring down from again critical infrastructure needs that need to be repaired or or or a new structure, a new uh plant, you know, whatever we need to do.

I just think now that we we can't say it enough.

We can't share it enough.

I know we have the number one cheerleader and auto woman slices, so she knows I'm part of her squad, been part of her squad, but even now more than ever seeing it with my own eyes.

I almost liken it to the the initial blow of people not saying that we're getting rid of um recycling, right?

But once they learn the amount of money that we were losing um with the way we were doing it and trying to turn around and do it the right way.

Many of the people I know that I dealt with on a day-to-day interface with, they get it.

Our residents get it, and they absolutely get the value of clean water.

So thank you for all you all are doing.

Thank you for letting me take the time.

Um Out of Woman Flicer, and I'm looking forward to the uh second presentation.

Thank you so much, Alderwoman.

Alderman Devotee.

Uh yes, I've got one comment and then a very brief question.

Uh, my comment is you and I have spent a fair amount of time together already this week.

Uh I would uh direct or inform members of the public who are watching this presentation that both you and Mr.

Gould appeared in front of the budget committee this week and uh both made a presentation looking forward at the 2627 budget, uh, but also answered questions for over an hour and a half of committee members.

Uh that presentation, of course, is uh was presented by STL TV and is on YouTube.

And for members of the public that would like additional information looking forward, my comment would check that out.

Uh very basic question.

Uh, you know that I like asking about terms of art.

Uh one item uh that you have mentioned a couple of times is the unit CCL.

For folks that are following the presentation or listening to you, please remind us, educate us what that unit means.

Sure.

It's it's a billing component, it's a billing term.

Um, and it's a common use of of uh uh a unit, but it's hundreds of cubic feet.

Uh, you know, a gallon uh is certainly known to many, but cubic feet are not.

Uh but you know, one cubic foot is approximately equal to 7.48 gallons.

A hundred cubic feet is about 748 gallons.

And we do charge uh for the usage component in CCF.

Thank you.

All right, thank you, Alderman.

Alderman uh Cox Antrie.

Thank you again for for coming to appear before us, and I'll echo my colleagues and understanding just the importance and significance of the conversation we're having today.

Um, I'll also open first with a comment, which is to highlight um one key thing that I heard you say, which is the risk that appears before the public if we are unable to meet the regulatory standards of producing clean water.

Uh, I think that is a challenge.

Um, just to underscore and and mention the the things that I know my colleagues um and I have seen from just the condition that our water treatment plan are in, but also how close to that risk we truly are if we don't make these kinds of critical investments.

So I know it's a challenge for you all to take the time to appear before us for this and for budget.

Uh, but I think the timing given the the crisis that we're in is actually beneficial for the public to first understand the conditions from this annual report and then to go into the conversation about the revenue sufficiency that I know we're about to.

So I just wanted to highlight that because I think it's really critical to understand from the annual report where we truly are.

Um, my question relates to um what you were discussing about the proportion of metered and unmetered users.

I know it's important for us to really understand that foundation before we go into this portion.

Um, could you clarify for me?

You mentioned metered, unmetered, and wholesale users, but the residential component, I think is really important for people to understand.

So, how many residents are paying flat rate versus metered?

And can you explain why um it's such a challenge, maybe to have residents convert to being metered users?

Sure.

No, so we have approximately 80,000 accounts uh that are uh residential flat rate.

And I say it that way because you cannot be on a flat rate if you are not a residential customer.

Um, but we do have the option of a residential customer to convert to a meter.

Um, and so just another point of context, we have uh a little over 12,000 metered accounts.

Um, you know, some of those are multimeter accounts, so they have uh, you know, multiple meters on one single account, and we have approximately 16,000 water meters that are out there measuring consumption uh within those uh 12,000 plus accounts.

Um, you know, the the concept of of converting from a flat rate to a meter for a residential customer uh is it's quite simple.

You know, we offer that to anyone who would like to do that.

Um, but we do have to have a place for us to install a water meter that uh is compliant with our connection regulations, and so that will look like uh, you know, an apparatus that sits on the water service line that's owned by the customer.

Um, typically in the tree lawn area, um, a water meter setter will be put onto that water service um and then a box installed around it so that we can install our meter in a protected location.

Um we purchase the meter, we install the meter, but we have to have somewhere to install it, and that resident then will then get uh converted over to a metered account.

Okay.

And the costs uh for the plumber to do the work uh to be ready to receive a meter is on the property owner or the president.

That was going to be my follow-up question.

Thank you.

All right, thank you.

Thank you for that time.

Um, and just answering questions on the annual report.

We'll move into the revenue sufficiency study now.

So please proceed.

All right, thank you.

And we should have our uh consultant that is in the Zoom uh waiting to jump.

Yes, we do have them on, and I've moved them over.

So if you all would please turn on your video feed.

Great.

Are you wanting to turn it over to them now?

I will turn it over to them.

I'll move the slides for them, and then uh, you know, uh need for me to chime in.

I can't great, wonderful.

And just make sure for those of you who are presenting virtually to say your name for the record and uh your role in this, and uh I'll let Director Patel move us forward.

Good evening, everyone.

Hope you can hear us.

Yes.

I'm Prabakumar from Black and Beach.

I'm a managing director, and I'm the project director on this engagement.

Wonderful.

Please proceed.

Alberta Morales with Black and Beach.

I am the project uh manager for the revenue sufficiency study.

Great.

So what we are here today is to discuss the water division revenue sufficiency study findings.

Uh, this is a very collaborative effort between Black and Wage and the Water Division.

Um, so what we are going to do is to briefly talk about the objectives and the approach, and then we'll walk through the study findings.

Alberto and I, we are going to tag team.

I just want to make sure that you're not hearing any echo and you can hear us clearly.

We hear a little bit of echo from you, but it's not all we can hear Alberto a little bit more clearly.

Okay.

So, in terms of the study objectives.

Um, what we really did was to perform an independent and objective financial analysis.

So, what I mean by that is we gathered the data from the city, we requested the data, we gathered the data, we did our own independent review of the information.

And when I say review of the information and using the information in an independent manner in doing the modeling, doing the financial analysis.

And how we did the financial analysis really conforms to industry best practice methodology.

So, what I mean by that is the American Waterworks Association, AWA has clear guidelines on how to do a water financial planning uh and rate study.

So we conform, we align with the best practices in terms of methodology, but we also take into consideration the unique circumstances and situations of the utility.

So it's not agnostic to that.

So it's using the guidelines, but really adapting it to the utility needs and obligations.

And then we did really a data-driven analysis.

So this is a study where we gather different types of information and we'll talk about it as we go along from operations and maintenance costs to the capital program cost and all of that, and financial policies.

Um, the debt service, the water division has, we gather all of that information, and then we do a data-driven analysis.

And when we do the analysis, when we develop the financial plan, there are some key principles that we abide by.

And when we talk about a financial plan, the financial plan is really governed by certain very fundamental principles.

The first principle is that the plan we develop should help the water enterprise fund to be self-sufficient, and which means it should cover 100% of the operations and maintenance costs.

It should support 100% of the operations and maintenance costs that's there in the budget.

It should support the planned capital improvement program, and we'll talk more about that.

And the funding that is necessary for the planned capital improvement program.

It should then provide for some level of operations and maintenance reserve.

And what we are aiming for in the study is very, very modest, really almost like a bare minimum industry best practice operations and maintenance reserve.

And we'll explain why we are really aiming only for a bare minimum and not something very sophisticated at this point in time.

Then the next parameter that the financial plan should really meet is the debt service coverage, because the water division goes to the bond market, and so when then it goes to the bond market, then it there are coverage debt service coverage ratios that it has to meet.

And so when then it goes to the bond market, then it there are coverage debt service coverage ratios that it has to meet.

We can explain what a debt service coverage ratio is as we go along.

And then it has to support what we call a rate stabilization reserve.

This is a bit of a new concept for the water division.

We'll talk more about it and why we are recommending a rate stabilization reserve.

Um and that's an important uh financial planning principle when we are talking about a self-sufficient enterprise fund.

And ultimately, we are doing all of these things so that the utility can have a long-term stability.

As you all have discussed all this while uh just before us, the utility is for the community, and so it needs to be financially self-sufficient, but it also needs to be financially have a long resiliency and stability over the long period of time.

So this really sets a pathway for getting there in terms of financial stability.

So we take all of these principles into consideration when we did the study, and ultimately what we have developed and we are presenting to you today is a balanced and pragmatic financial plan.

And those two words are really key.

Balanced because it takes all of these obligations into consideration, but we also take into consideration customer impact.

So it's not like we ignore that.

So that's an important aspect.

So that then determines how far how fast can you go?

Can you do everything that you want to do all in one go, or do we really have to face it?

So that's where the balance programming comes into play.

And also the pragmatic financial plan.

So that's where when we talk about reserves, we talk, we do introduce it's not like just business as usual.

We are trying to bring in some industry best practice into the planning process, like the rate stabilization reserve, but at the same time, we recognize we can run too fast.

We have to be pragmatic about what's the impact, overall impact, and we have to keep that in mind.

So keeping all of these principles, we've developed, we feel a balanced and pragmatic plan, and we can talk more about it and answer any questions you all may have.

Next slide, please.

So when we did the study, the overall, I'm not going to go into every step of this, but this is just to give you a visual illustration of the diligence that goes into developing a financial plan.

The first step in the process was to gather the data and project the revenues, revenues under existing rates.

So, what is the water division's existing rates?

And if there's no other changes to the rates, what is the water division likely to generate in terms of revenues over the next five years?

So that's what projecting revenues means.

The next step in the process is the revenue requirement.

So, what's the money that you need?

What is the money that the utility needs?

So that has two components.

One is really looking looking at the operations and maintenance budget, having conversations with the division staff, and also looking at what the uh market conditions are, what's the escalation, and then projecting the revenue, the operations and maintenance expenditures.

And my colleague will talk more about that, and then also develop working with the division staff and talking discussing the capital program.

What is the what are the assets, what are the facilities, what what need rehabilitation, what needs upgrade.

So we had all of that conversation.

We got a list of projects, and then the cost associated with those projects, and then we discussed how was the what kind of a funding mechanism can we use to do those projects and the timing of those projects, and we develop what is called a capital financing plan.

So the capital financing plan then tells us are we going to cash finance, are we going to do debt?

If you're going to do the debt, what's the level of debt service?

So we bring all that together, the revenues and the revenue requirements.

We bring it all together and then develop what we call a six-year cash flow analysis.

So the cash flow analysis really gives a projection of revenues, the projection of every component of the expenditure.

It then looks at how much reserve we need to have, and then it really tells us.

So, what does the cash flow tell us?

It tells us the gap.

And that's the gap that we then have to come and now have a mechanism to have an increase and fill that gap.

And it's not that we just do it one time and then say, okay, here is what it is.

We evaluate it, then we look at some scenarios and see how best we can optimize in what we are coming in front of the council to ask for an increase.

And also looking at what does the what does it do in terms of a bill impact?

So, this is the overall process we did to use for the study.

Next slide, please.

So now we are going to discuss the study findings, and my colleague is going to kind of walk us through, and then I can come back and chime in as well.

Alvaro.

Thank you, Barbara.

Um, I'm going to talk before we go into the financial plan.

I wanted to talk about the cost drivers.

So there are four primary cost drivers.

So sorry, I'm just getting some echo.

Yeah, I would um if you're not speaking and you're just just mute yourself.

Thank you.

Now we're not hearing from you, Alberto.

Okay.

Can you hear me now?

Yes.

Oh, perfect.

Sorry about that.

That's okay.

All righty.

So I wanted to talk about the key cost drivers that went into the financial plan for the six year period.

They were primarily four cost drivers that really kind of drove the need for the for the increases.

I'll start off with the first one, which is the significant capital program.

As Niraj might have mentioned, you know, some of the capital needs that are going to be needed over the next six years, which is the span of our financial plan, but also over maybe the next 10, 15 years of just improvements to the water system.

But for the financial analysis, we looked at the six years.

And in those six years, we identified that there was about 442 million dollars worth of CIP to be executed over the next um six years.

So that is one of the key drivers.

Then the next key driver is just a consistent increase in OM costs, right?

As as we know, um, just in even in the periods that we're living, you know, um operating costs have increased for um for a variety of reasons.

Um that and that includes just you know, that includes your labor, that includes your chemicals, that includes your electricity, and all of the things that are pretty common to a regular household are very common to a utility as well.

So any increases in in typical household items also impact utilities.

So understanding that there's going to be increase associated with the operating costs, um, we incorporate that as well.

So our our anticipated increase as as a whole revenue requirements was about 3.2% for for operating expenses.

Then the next item is establishing an ONM reserve.

Um the ONM reserve, and I'll briefly touch on it.

Um probably she'll go a little bit more into detail, but the uh the establishment of the ONM reserve is really intended to give you uh a little bit of a buffer in case there is unexpected emergencies or or you know there is uh a decrease in sales, for example, that will require additional revenue that you cannot necessarily go ahead and increase the rates right away.

That gives you a little bit of that of that leeway.

Then there is the development of the R and R reserve, which is uh race stabilization reserve.

That is really more of a long-term picture, right?

So you what you're doing there is you're developing a way to minimize your volatility in a longer term um phase because there is more uh revenue or more money in those funds to allow for for stability and revenue impacts um in the rate impacts in the future.

So we'll move on to the next slide.

Um I just you know, I will briefly over the next couple of slides.

I will kind of talk about the operation and maintenance costs, um, the capital costs and a little bit more of the revenues.

But so our first topic here is the operating and maintenance cost.

Um as a utility, there's uh several different cost elements associated with you know operating the utility.

As you could kind of see, um the the operating costs based off of our projections of 2027 will increase it will start at 77.6 million and increase to 90.8 million dollars.

And um the the obviously the the largest cost in operating costs is salaries and wages and other services.

Um so this is this is what we did in projecting the operating costs is we looked at historical costs, we looked at some indices and try to determine what would be an appropriate increase in cost associated with the utility over the next six years.

So maybe one thing to point here.

So you have me so maybe one thing to point here is that when we are doing the cost increase, it's not like you're just applying one one percentage.

We actually look at what's the potential escalation for salaries and wages.

So we discussed with the city staff team to say what is the uh anticipated increase in annual salaries and wages.

We apply a factor for that.

For example, the purchase power and chemicals, we have industry uh indices, that's what we talk about because industry tracks how these costs are increasing.

So we have those indices and specifically for the St.

Louis kind of region, and then that's what we use to apply the escalation for power and chemicals, and similarly for materials and materials and supplies.

So here there's a lot of diligence and a lot of granularity that goes into how we apply, and so it's not just one escalation factor, different cost categories that are presented here have different escalation factors, and that's how we then project the 77.6 million, it it goes up all the way to 90.8 million over the next six years.

Okay.

Um next slide.

So the the other component to the financial plan is your capital improvement program.

And again, you know, this was probably discussed um previously and in more detail in terms of for the capital projects and and what are the needs moving forward.

But uh on a numerical um basis, what they this is what the CIP represents over the next six years, and the type of project that would be associated.

So from in terms of types of projects, we got uh pumping facilities, we got transmission distribution, these are typically your pipelines.

Uh, we got our water treatment um improvements, we got storage improvements, we got hydrance meters, and then some just general um uh projects that you know are support supporting facilities that really support the uh the operation of the water system.

Um, as you can see, the two largest drivers over the next six years is transmission and distribution and water treatment plan.

Um there was a survey done across across the country, and typically those are the two largest um cost items for most water utilities.

They represent pipelines and water treatment, and and is pretty consistent with what you're seeing um uh as St.

Louis uh water division.

So uh just wanted to give you guys a perspective in terms of what is being seen, what is out there, um, and what is what is the utility gonna um execute over the next six years.

So to just add to that here, um, if you can just go to the previous, just can you go to the previous slide, please?

Yeah, just to stay on this for a moment.

So this is the this is the projected over the next six years.

So it doesn't mean beyond 2032, the pattern, this pattern will always be the case where the treatment plans will have the higher level of cost than the transmission distribution.

These treatment plan upgrades, based on what we have worked with the city, we understand are very critical.

These upgrades are very critical now, and they need to be done in the next six years.

So the next six years in St.

Louis water, the treatment plans are taking more on the more of the proportion of the capital cost.

But after 2032, when the treatment plant upgrades are done, then what will happen?

That cost will come down, but then the utility has to then focus more on the transmission and distribution, the orange that you see in this chart.

So then the question is okay, are they not focusing on transmission distribution now?

No, they are, but you can't focus on everything all at one time because you this is this in itself is a heavy lift with 440 million dollars, right?

So it's not that the transmission distribution doesn't require rehabilitation, they also need they honestly need probably at a higher level than what we are showing here, but you can do everything everything at one time.

So this is one example of a balancing act that the water division is doing.

They are first focusing on the treatment upgrades more because they need to get done now for the quality of the water and everything, and then when that phase of intense pressure comes to comes slows down, then the transmission distribution will get a higher focus, and then that that will get more of the proportion of the dollars.

So the the new reality for the water division is that we are still looking at roughly somewhere in the range of 70 to 80 million dollars of consistent expenditure in the foreseeable future, because the system has a lot of aging infrastructure, which has to be maintained, and it's a very, very high value asset, right?

So this level of annual expenditure is what any utility of your size actually faces with, and that's what we are seeing here as well.

But the pattern may not be exactly the same, but the magnitude of expenditure per year is likely to be the case in the foreseeable future.

Next slide, please.

All righty, so um, I think you're either frozen or muted.

I am muted.

Okay, yeah, your your picture is very small for me, so I can't always tell.

Thankfully, Spencer's on it.

Thank you.

All right.

Um so to execute the 442 million dollar um CIP over the next six years.

We had to develop a funding strategy, a strategy of of how are we going to finance these projects.

Um, we looked at, we looked at several sources, right?

We looked at um revenue bonds, we looked at state revolving funds, we looked at cash um through some of our you know, previous scenarios, we also looked at like WIFIA, for example.

Um, and just try to determine what was the best funding strategy for uh for the utility.

And what was determined was that we it was going to be a combination.

It was going to be a combination of revenue bonds and state revolving um funds, as well as cash.

So what you'll see in the in the pie chart there is that the majority of the money would be revenue bonds.

Um so these are bonds that are um issued by financial institutions and we are repaid over a given certain amount of time.

So typically 20 years, 30 years, depending on the type of bonds that are issued.

The the next um selected finance capital financing would be say revolving funds, uh state revolving fund loans.

There is two types there's the revenue back bonds and the loans, but uh essentially we consider these to be uh the same.

So we'll we'll just refer to them as the say revolving fund um loans.

Um those those represent the next about you know 33% or so, and then we have cash financing.

So when can I cash financing is is an important element to understand here because when we're um talking about cash financing, this is money that we are taking in from rates, right?

So whenever we're increasing rates, we're using some of that rate money to pay our operating costs, but we're also using some of that money to pay capital financing, right?

Using it for capital financing to pay some of our our projects.

So there is a combination of some debt, which will be paid over a longer term time frame, 20, 30 years, and then there is the cash financing, which is immediate, right?

So that is money that's coming in through rates and charges.

Um, sorry about that, I got muted accidentally.

Um, so so the next item is existing and proposed debt.

Um, as a as a water utility right now, they they currently have very little um uh debt financing.

It's almost most of the projects that are currently um financed and executed are cash-based.

So that means that money that's coming in again from rates is being used to to finance the projects.

But understanding the magnitude of the CIP and understanding the need that they will need over the next six years and plus um debt financing was gonna be the the bigger component of um of the financing strategy.

So understanding that this is a projecting of what debt uh service payments will look like over the next six years.

So this is the annual payment, this is an annual amount that you would pay in any of one of these given years.

So we'll obviously start off at about 2.4 in fiscal year 2027, moving up to about 23 million um in 2032.

This is basically the the payments associated with the uh revenue bonds and the state uh revolving fund notes.

So as you can see, this is a significant ramp up, right?

So if you're thinking about revenues, this is not it's not like the utility has the revenues already to pay this level.

So that is why, in many ways, this is one of the key drivers, as Alberto mentioned as to why a rate increase is needed, because that's the magnitude of capital program.

The point is that the utility can no longer defer this capital program and these need to get done.

And one of the balancing act is if you have to do cash financing, as Alberto said, then that'll be immediate pressure on the rate.

By doing debt financing and balancing it with a little bit of cash financing, but more of debt financing.

Yes, you have to pay the debt, but then at least it gives time over the period of next six years for the utility to build that financial capacity to repay that debt rather than putting immediate big pressure on on the customers.

So that's what you're seeing here.

It starts gradually at 2.4 million, then pretty much doubles and then keeps on almost doubling, and it gets to the point of about 23.2 million by the time you come to fiscal year 2032.

Next slide, please.

Okay, I want to talk a little bit about the revenue projections.

So I mean the the previous slides we talked about the revenue requirements.

So what is what is our needs, you know, um from an operating from a capital standpoint, and also from a debt uh standpoint.

Uh so what I kind of want to talk about now, it's a little bit of the revenues.

Where are our revenues coming from currently and where will they end up once once we kind of do this whole um comparison of revenues to revenue requirements?

So from a revenue standpoint, um there is three primary sources of revenue.

There is user charge revenues, which uh represents basically excuse me.

I don't I I I don't want to interrupt you.

Um, if you're having a conversation in the gallery uh to keep it to a minimum or have it in the hallway just so everyone can hear and I'm noticing some traction.

So thank you.

Please continue.

Okay, no problem.

So uh as I was saying, there's three main sources of revenues.

One is our user uh charge revenues, which really consists of our retail flat or our non-meter customers, then we have our retail meter charge customers.

Um we we move on to number two, which is our wholesale user charge revenues.

These are our wholesale customers that we currently that that the utility currently provides water to.

And then the last item is our miscellaneous uh water fund revenue.

So these typically represent smaller revenue sources.

Um, you know, I think the most common one that people probably understand is interest income, right?

So as we have money, that money generates money, and that helps offset some of their the revenue requirement needs.

So these are the three primary sources of revenue.

When we're doing a financial um planning study, typically what we're doing is we're incorporating number two and number three, but our main focus is number one, it's always the user charge uh revenue source.

Um next slide, please.

So, what this represents is the projective revenue for the next six years under existing rates.

So it's important to understand that this is under existing rates.

So this is without the 40% increase, um, six percent, six percent, five percent, five percent.

This is what the utility would generate in revenue if there was no increases, right?

So line number one is your retail rates, and if you look, they're they're pretty much flat line because um based on historical um uh trend, we notice that the the utility is basically not increasing in rates.

So the the revenue that is generated from your retail customers is pretty much stagnant, right?

And and that's kind of what you're gonna see in the 71.1.

Then we're gonna add the wholesale um element to it.

But there is another element that we also need to incorporate when we're projecting uh water sales, and that is bad debt expense.

So typically, um obviously you're you're gonna bill your customers, but there is an anticipation that not every customer will will pay, right?

That there will be some delinquencies in some of those payments.

So we incorporate the element that we understand that there's not going to be a full payment for all the full charges.

So that is incorporated.

And you know, when when COVID came around, and it wasn't just this utility, but many utilities across the nation, you know, there was a moratorium in terms of um shutoffs, which didn't give the utility the ability to to turn people off from from using water.

So what happened is that we we as a as in the country and the in the nation, we basically saw bad debt increase for a lot of utilities.

Um now that kind of moratoriums have kind of gone away.

So it's given the uh the utilities and ability to have a little bit more control.

So we anticipate that you know, while the bad data is still there, it we should start decreasing in a couple of years in about fiscal year 2029 and forward.

Um, so uh that is the last element of that's incorporated in the water sales.

So again, you know, we're we end up at about 74 million roughly in in water sales.

Then we add the other revenue sources.

So this is the other miscellaneous revenues, the interest income, um, operating from non-operating revenues.

Um so that brings us up to uh a total revenue about 76 to about 70 million dollars over over the six-year period.

Um next slide.

Yeah, perfect.

So uh on the next slide, uh I will pass it over to Prabha.

Sure.

So we kind of explained this a little bit, but we wanted to show you again in a summary.

So in summary, what we are saying is we look at all the revenue sources, and that tells us what could your revenues be if you don't do anything with your existing rates, what your revenues will continue to be over the next six years, which is what Alberta showed in the previous slide.

And that is what we call cash in, right?

It's on a cash in basis.

So that is why we even account for delinquency, because what you bill is not all, you're not gonna collect 100%.

That's not realistic.

So that's a cash in.

And then we'll talk about the rate stabilization fund zone because right now you don't have a rate stabilization uh reserve.

So we'll talk about that, how we are showing it in the financial plan.

So the cash and is a 70, 77 to 78 million that we are projecting year after year over the next six years.

So then what are the what are the cash out?

You have to meet your 100% of your ONM requirements, so that is one cost.

The second cost is a debt service associated with that 440 million dollar six years of CIP program that Alberto just talked about.

He also showed in the pie chart a small amount of cash financing of that 440 million, and then what we are trying to do in the study, in addition to those three cost drivers, we are also saying that the utility of of the size of St.

Louis water should at least have a 90 days of operating reserve.

Now, best financially positioned utilities in the country, they even go up to 120 days, 160 days of operating reserve, but it's difficult for us, as you will see in the financial plan to get there right away.

So what we are saying is in this five-year period, let's aim for at least achieving 90 days of operating reserve, and and then also some level of rate stabilization reserve, which will help that that rate stabilized rate stabilization reserve is on top of the operating reserve.

So we'll talk about that as well when we actually show you the numbers.

So those are all things that we are saying are the requirements, which is basically cash out in a sense.

So then we look at when you put the cash in, the money that's coming in and the expenditure obligations that we have, including the reserves, then we look at what's the funding gap.

If there is no funding gap whatsoever, then of course you don't need a rate increase.

But if there is a funding gap, that's when we need a series of annual revenue adjustments.

So as you can see, the key thing here is we don't take, we don't do this analysis with just one year in mind.

That's why we take a six-year look because when you do a six-year look, then you have the ability to do a little bit of balancing across all these parameters, and then once the revenue meets the revenue requirements, then what you're really left with will be modest levels of operating reserve balance and a rate stabilization reserve balance, both of which are critical, and we'll talk about it when we actually show you the numbers.

Next slide, please.

So now what we are going to do is really talk about the financial plan.

So what we are seeing when we did this analysis of looking at the revenues coming in under existing rates, which is about 77 to 78 million, and then when we look at the operating the total revenue requirements, we found that there is a gap.

So we're going to take the fiscal year 2027 column and we are going to walk you through that so that it's just clear what we have really done.

What we are finding is in fiscal 27, you need a significant boost in increase, which is a 40% increase in revenue.

And the reason, and when you do that, then the total revenue that you would that you we are projecting will be 99.4 million.

Remember, without under existing rates, Alberta showed something like 76 million.

So the question then is why do you need 99 million?

Why do you need that?

And that's what we're going to really talk about.

And so, including the other revenues, it becomes 102 million.

So the 76 million in total becomes 102 million.

Why do you need that 102 million?

Now let's look at line items four through eight.

What are the expenditures that we need to meet?

77.6 million is just operations and maintenance expenditures, right?

And if you don't have any rate increase, we are saying you're only in total going to bring 76 million.

So the revenues that you will bring under existing rates is not even going to be fully sufficient to meet your operations and maintenance expenditure.

So that's not a great place to be in, but that's what we are projecting if there are no rate adjustments.

So that is one expenditure in line item four.

And then you have to pay the gross receipt tax.

That's a requirement in St.

Louis Water Division.

So when you add just those two line items, you are already at 83 million already.

And remember again, keep this in mind as we go through line item, line item, your revenue under existing rate is only projected to be 76 million, and just line four and five already makes it 83 million.

Then you have really debt service, and that's about 2.4 million, and then there's also routine annual improvements that the water system needs to do because things keep breaking and those keep the utility needs to fix those things, and those routine annual improvements are about 2 million dollars, and then we are doing a very modest level of cash financing of capital program.

Again, this some of these projects have already started, right?

So the capital program is about 4.5 million, and at this point, we don't have any money to even create anything like a rate stabilization reserve.

That's why you're seeing a zero there.

So we are not even trying to create a rate stabilization reserve at this point.

When we add up lines four through line nine, the total revenue requirements is 92.6 million dollars.

Okay, and so as you can see, a 76 million dollar existing revenue stream is not going to cut it when your expenditure projected expenditures are 92.6 million.

And in addition, it will leave the utility with at least a 9.5 million dollar balance.

And you may wonder why do you need that 9.5 million dollar balance?

And we'll talk about it when we talk about in the next slide.

Okay.

So then what happens when you look at fiscal year 2028?

Okay, that's the scenario in 2027.

Then what will happen if that 40% is approved?

So this is a key word.

If the 40% increase is approved, then what do you what will happen in 2028?

In 2028, we are still seeing that you need another 6% increase.

And that's because remember in the chart that Alberta showed that debt is beginning to increase, right?

A $2.4 million debt.

Look at line six.

A $2.4 million debts becomes $4.8 million.

A $7.6 million dollar ONM in line four becomes 80 million dollars, right?

And the, and therefore, because your OM expenditure is increasing in line four, your debt service is increasing in line six, even though the routine app capital annual improvements, we are just keeping it at the same level.

In fact, we are even reducing the cash financing a little bit in line eight.

We need the money to meet all these additional costs.

So then what we are saying, if you are able to have a 6% increase in 2028, what it will do, it will help the utility first of all meet all of the expenditures in line four through eight.

But in addition, this time, it will also give you a little bit of money to start a rate stabilization reserve to put a small amount of money, 2.4 million dollars into the rate stabilization reserve.

And then remember the previous year, we have a balance of 9.5 million in line 12, and that the previous end of your balance becomes the beginning balance in 28.

So we still have the 9.5, and therefore at the end of the year, we are projecting the utility will have a total of 19.7 million dollars.

Okay.

And so that is this the same pattern keeps on repeating in 29 and 30.

And what you're finding in 29 and 30, look at the again, the OM is gradually increasing from 80 million to 82 million to 85 million in 29 and 30.

But look at your debt service.

Your debt service is going at a much higher clip.

So from 4.8 million, it went to 9.4.

From 9.4, it's going to 13.8 because of this massive 440 million dollars of CIP that you're trying to accomplish over the next six years.

So because the debt service is rising much faster, our rate increases have to be there to accommodate that increase in OM cost, increase in debt service.

And then we are also gradually beginning to increase the cash financing.

So if you are wondering why you're trying to increase the cash financing, because a utility cannot be heavily leveraged.

If you keep on borrowing debt, then you're actually paying a lot more cost for your capital projects, right?

Because of the interest payment that you have to pay.

And therefore, you balance it with the best the best industry practice is to balance it with at least some modest levels of cash financing.

So that's why in 29 and in 30, you are beginning to show some modest levels of cash financing of the CIP.

And the 6% increase, if you stay on this practice of 6% increase in 29 and 30, it also helps you build a little bit of more revenue in the rate stabilization reserve.

So that year we'll be able to put another 9.7 into the rate stabilization reserve.

In 30, we'll be able to put another 7 million in rate stabilization reserve.

And so by the time you come to 2030, you're building a very healthy end-of-year balance.

But then what happens?

Look at in 2031, what happens?

In 2031, your OM cost is going up to 88 million, and in line six, your debt service is now going another 5 million.

It's going from 13.8 to 18 million.

And you cannot keep on increasing the debt, right?

At some point, you have to do more cash financing so that you're not borrowing way too much.

And so there now, what we are able to do, we are saying we have to bump up the cash financing to about 18.3 million.

And then how do we do this then?

So what we are doing for all of these expenditures in line four through line eight, it's not like we are just significantly increasing the rate, we are only proposing a rate increase increase of 5% because remember how we gradually build the rate stabilization reserve in 28, 29, and 30.

The money that we built in the rate stabilization reserve, that 19 million that we have built over the three years, now we can draw down from it.

Okay, so we build it over 28, 29, 30, but we are drawing down from the rate stabilization reserve.

We are drawing 5.8 million dollars from the rate stabilization reserve so that you can keep the rate increase at 5%.

If we did not build the rate stabilization reserve at all, then in 2031, the level of increase you need will be more than 5%.

So this is the way we are balancing.

We are trying to build it up in 208, 29, 30 and then draw from the rate stabilization reserve very heavily.

We are drawing 5.8 million in 2031, and we are also drawing 7.6 million in 2032.

Because you can see the debt in 2032, the debt service alone goes from 18 million to 23.2 million.

So this is the balancing act that we are trying to do.

So we will show you in the next slide what does it mean in terms of really the fund balances.

Next slide, please.

So if you look at this, when we if we if we conform to this financial plan that is being proposed here, then what will you have after meeting all the obligations?

What the utility will have, it will have about if you look at 28, if you let's start in 27.

If you look at 27, what will happen is that there is really no, we are starting with a zero operating reserve.

That's the fundamental problem we have.

So when we ask for the data, we typically would expect some level of operating reserve balance.

Here, the the response was really there is no operating reserve balance, right?

So we are starting with a zero balance, and so and and then we are actually uh now finally depositing about 9.5 million dollars into the operating reserve.

Okay, so that is how we are beginning to build now a NSTEC.

We are building 9.5 million.

And so, and then if you look at the the next year of what happens to the operating reserve balance, then we are slowly building it up, the operating reserve balance to 10.2.

So you can see here, then we are we are depositing another 10.2 here.

So now the operating balance goes from a 9.5 million to 19.7.

In the next slide, we are going to show you what does it mean in terms of days.

So remember we talked about building 90 days of operating reserve.

That's what we are trying to do, but we couldn't get to the 90 days even in 27.

In 27, we will show you that we are actually less than 90 days, but we are able to get to the 90 days of operating reserve in 28, 29, 30, 31, and 32.

And that 90 days translates to 19 million, 20 million, 21 million.

It's 90 days of operations and maintenance expenditure.

Because every year your operations and maintenance expenditure goes up gradually.

Remember, Alberto said it grows up by about on an average of 3.2%.

Then the nine, then the reserve also has to go up because you have to keep it at that 90 days of operations and maintenance expenditure.

So the reserve goes from 19.7 million to 22.3 million by the end of 2032.

So the question then in your mind might be why do you need that operations and maintenance reserve, right?

A utility of your size with the community that it has to serve.

If there is an emergency, a catastrophic emergency, such as a massive flooding left, right?

And because of it, there are some operational issues and the plants have have issues and the pipes have issues, or you have real, real bad winters that you really have some pipe collapse that has to be immediately repaired and replaced, and therefore you have some disruption.

So you could have these natural weather-related events, or imagine what we went through three years ago.

The pandemic came completely unannounced.

And utilities that had an operating reserve survived it better.

The utilities that did not have an operating reserve, they really struggled because suddenly revenues in some cases dropped.

The businesses were no longer consuming water, so the business water consumption decreased, and customers had affordability problems.

So enforcement was stopped, so delinquency increased, then all of those things happened, you still have to run the utility, right?

The utility has just a 24-7, 365-day operation.

And therefore, you need that operating reserve.

And that's why utilities, at least what we are proposing as a best practice to at least have a 90 days of OM expenditures so that if ever there's a pandemic or something, you are not struggling.

You have something to rely on.

Okay.

And again, to reiterate, best high highly fiscally strong utilities even have about 160 days of ONM expenses in their reserve and they maintain it that way.

Okay.

So that's the operating reserve.

Now in the next slide, let's look at the rate stabilization reserve.

So remember, in year one, in 27, we don't have any money.

Even with the 40% increase, we don't have any money to put into the rate stabilization reserve.

We are using the money just to develop the operating reserve first.

Then in 28 and 29 and 30, if we have the series of additional rate increases that we propose, then we will be able to gradually build the rate stabilization.

You can see each year in 28, we can put 2.4 million, 29, we can put 9.7, in 30, we can put 7 million.

By the time you come to 2030, we would have built about 19.8 million dollars in the rate stabilization reserve.

Then from that, in 31 and 32, we are actually withdrawing about 12 million dollars.

And so by the time you come to 2032, we will have about 7 million dollars in the rate stabilization reserve.

So if you are wondering why are you building and then withdrawing, we are building it up so that in 31 and 32, when the debt service, remember the debt service chart, Alberta showed the debt service was significant, right?

Going up to 23 million.

When the debt service spikes up so much, you don't have to spike your rates again like we had to do in 27.

We are able to balance it, we build the rate stabilization gradually, and then we withdraw from while it does look painful that year after year we are asking for an additional rate increase.

What this really helps the customer base is that it gives them the transparency that the utility is going to build this reserves, and the utility has significant costs coming down the bike in 31 and 32.

At that time, the utility doesn't have to come back and say, give me a 20% or a 30% rate increase.

The utility is carefully planning and building for that eventuality.

And so when 3132 comes, yes, your expenditures are going up, but you're not hitting the customers with big double digit rate increases.

So that even the customers can plan their budget because they know what is coming down the pipe.

Okay.

So that is the balancing act, and we are trying to do it as pragmatically as possible, taking into consideration the affordability and the impact it can put on customers.

And the whole goal is we don't want St.

Louis Water Division to be in the situation that we are in 27, where we are coming in front of you and asking for a 40% increase, right?

We don't want to put you in that situation in the future.

So our hope is that with this pragmatic planning, it can be maintained at a single digit of increase and having these good practices of reserve.

And so the rate stabilization reserve, the primary role of that reserve is not to spend money for emergencies or catastrophes.

That is done by the operating reserve.

The rate stabilization reserve is to really help the utility build it up carefully and then withdraw from it.

So that let's say one year, for whatever reason, suddenly there's a little bit of a higher delinquency, then you don't have to panic.

You can draw from the rate stabilization reserve because we will still leave the rate stabilization reserve with about $7 million by the time of 2032.

So if there is some contingency like that, you can draw from it.

Let's say there is also another, let's say during the this is all a projection, correct?

Let's say there's some reason, and then there's a request or something to say, hey, can we have a better affordability program?

Now, when you have a better affordability program, what does that mean?

Then some group of customers are going to pay less than what it actually costs to serve them.

Then how do you then manage that revenue reduction?

Suddenly you can go change if you're if you're balancing this with all these rate increases, then maybe drawing a little more from the rate, you can balance that revenue reduction a little more from the rate stabilization reserve.

So the reserve plays a very vital role for long-term resiliency, the financial strength of the utility.

So that's the vital role it plays and helps in mitigating the level of rate increases, as Alberto pointed out right in the beginning.

Next slide, please.

Thank you.

We're getting uh pretty late into the evening.

And I can't.

So you can see in this chart with the projected operations and maintenance reserve that we are projecting.

Thank you.

We're getting pretty late into the evening, and we do uh recognize that there are some some time crunches, both um from you your end and our and our end.

How many more slides are there to go into?

Uh there is there's probably about two more, two or three more slides.

There's a lot of slides on the page.

Yeah, so so it is that okay.

Uh I know we have some some members of the committee that need to leave, so I want to make sure we can get to questions.

So if you could just make sure we get the information in the next two slides, and then we'll move to committee questions that we still have time for public comment as well.

Sure.

Yeah, we'll wrap up these two slides pretty quick here.

Uh so the the two slides there were left.

One was the key performance metrics.

Um, and as probably had mentioned, you know, the there were goals that we were trying to reach, right?

When we were developing the O and M reserve and the debt service coverage ratios.

So one of them was the O and M reserve, which was about the 90 day target of operating expenses.

Um, as probably mentioned, you know, the first year we only got to 45, and thereafter we would hit the 90.

Um, the next uh performance metric or key metric that we were trying to hit is the debt coverage, uh just service coverage ratio.

And the typical um, depending on the type of loan or type of bond that is issued, you know, there's different requirements set by different financial institutions, but our our best um best practice was to hit at least 1.5 times uh the the ratio.

So that's kind of what you're seeing from 2027 to 2032.

We save well above the the one point um 1.5 uh debt service uh coverage ratio metric.

Um and we'll move on to the next slide.

So what does that all mean?

You know, all the financial plan, all that all the projections.

What does it mean to somebody that's you know paying their bill?

So this is a bill impact, right?

So our currently customer is, you know, we took a tip an average typical customer that has about five rooms, um, two toilets, um, two bath or showers, um, and then there's sprinkling charge, there's line insurance charge, which are uh are in addition.

So we typically we we got this average bill, and and the typical uh customer will pay about 42.65 cents currently with the increases their their first year.

If we were to do the 40% increase, their bill will go from 4265 to 5917 and and continue to increase until it's 2032 of 77.27 cents.

So this is the impact that a customer would um feel and experience um for your typical residential customer.

That is uh non-meter customer.

Um I think uh this is just a trend.

Just wanted to with this one, we just wanted to demonstrate that while everybody understands CPI, the consumer price index, the the consumer price index for just all items usually runs below the consumer price index for utilities.

Utilities cost for utilities are typically tend to be a lot, they tend to be higher than cost for all your other normal stuff that everybody truly understands when they say CPI or inflation.

So we just wanted to demonstrate that they typically run higher for a utility as opposed to other items.

Um, and just wrapping it up, um, looking ahead, you know.

Um obviously when we do these studies, we would just want to make sure that the utilities have sufficient money to operate as as a utility.

So I'll wrap it up there just so we could have time for questions.

Thank you so much.

I really appreciate uh the presentation and how how thoroughly you walked us through that.

Uh Alderwin Clark Hubbard said we could skip her uh for now.

So I'll move to Alderman Devotee.

Uh thank you, Vice Chair, and I'll be very quick.

I went mindful of the public's time.

Um I know in the past, director, you have mentioned that we have certain immediate needs, whether it is dealing with whether it is dealing with a a certain number of uh uh ancient water mains or dealing with two pumps that need replacement decades ago.

Um how does those immediate needs fit into this nomenclature when my understanding is that the division will run out of money toward the end of June.

Uh and it's been pointed out we have a reserve of zero.

So how does that fit into where we stand not even talking about rates?

Yeah.

So you know, the buckets mentioned with uh the rate sufficiency study, um, you know, certainly address immediate solvency, um, you know, and then address the the reserve funds and then address the capital needs.

The ability to go after the amount of funding to do the main replacements and the pump replacements is built into that.

Um, but as you mentioned, we have to build capacity with rates.

And so uh, you know, as that takes time um to have issuance of debt to do those projects, um, you know, we'll we'll be building at the same time, but uh the study actually does take a look at the Rams funding as another piece, um, you know, immediate cash available to you know, do emergency repairs because we have zero dollars in reserves.

You you anticipated my next question, which is how does RAM's funding affect the the findings of the rate study, which we've just learned about.

In other words, is there an anticipation that there will be a minimum amount received from any allocation to get us to what to to what we just heard?

Sure.

So, you know, we looked at multiple scenarios of potential funding.

Um, and you know, what you see in the study is uh a funding level of 60 million dollars.

So we wanted to aim high.

We wanted to start with the highest number that we thought was you know potentially going to come to the water division um in conversations that had had been had, you know, either last session or the or you know, initially.

Um, and so that did build that in.

And what that does is it supports uh, you know, debt service payments um to leverage, you know, the the ability of interest being earned on Rams against the low subsidized interest rates for the SRF funding.

And and so what is the effect on rates should the amount of allocation from Rams not amount to 60 million dollars?

Sure.

So annually we were looking at somewhere in the order of you know four to six million dollars being drawn from the Rams fund.

And so what it looks like is at some point um, you know, that money runs out.

It earned interest along the way, but it runs out.

And so then that becomes cash financing.

And so the level that we looked at in the study, if it you know, were to go down would have us accessing cash financing sooner, not within the study time frame though, you know.

Um, so you know, we were anticipating uh an amount of 60, you know, that would run us well past 2040, um, you know, to be able to support that debt service.

Um, you know, if that number were cut in half, then we would still be beyond the six year time frame that this study looked at.

Thank you, Director.

Thanks.

Thank you, Alderman Coxantry.

Thank you, Madam Vice Chair, and thank you, Madam Vice Chair, and thank you uh for that thorough presentation.

Um I'll echo Alderman Devotee is I want to be respectful of the public's time, but I do have a number of questions.

Um my first question, and just to reiterate a bit of what we heard, I understand we're talking about you know, funding for significant projects that we all need to do, the operations, and then ultimately, you know, stabilizing the reserve funding that we know the water department needs.

And so I'll frame my questions in that way.

Speaking first about the significant capital projects, if I'm understanding the presentation correctly, part of the reason that we need to do um the level of drastic rate increase that we need to do is because the infrastructure that the water department has is in desperate need of repair.

And so you all are prioritizing these significant capital projects being done in advance of maybe some of the other projects that we know need to be done, like water main breaks, hydrants, things of that nature, so that we can make sure we have the quality of water that we need.

Is that correct in terms of the prioritization that was presented?

Yeah.

So the the, you know, the idea or concept of you know, spending money and renewing the asset base versus being reactionary, correct?

Okay, thank you.

Um, and then understanding, and I think you know, one of the components that the public is really interested in is that impact to the average ratepayer in terms of the way we're increasing the rates.

And I understand um between 2026 and 2028, there is that initial 40% increase to stabilize, as you all phrased it, the rate stabilization reserve so that we can bring the rate increases down over time.

Is that part of that framing and making and the reason why we have to increase rates so drastically in the first few years?

Yeah, the front loading is on purpose and it serves multiple purposes.

It is to build a reserve backup, it is to, you know, maintain coverage ratios, but it is also to support uh the start of the capital program.

Um, you know, it it does all of that.

Um, and then in the end of the period, you see that you know, we are just above the 1.5 debt service coverage ratio.

We are at the 90-day own uh, you know, level, and we've done all the capital work.

And so, you know, we're never exceeding 90 days, and again, there are utilities that seek to do more: 120 days, 160, 180 days of own and reserve.

Um, and we're not, you know, we're we're doing the minimum there to maintain 90 days of operating reserve.

Uh, a lot of it is to support the future CIP and the issuances required uh, you know, of debt to support that.

Okay.

And and could you or or maybe the consultant team explain why the 40% was selected?

Was there any discussion about maybe spreading that increase out over time in the immediate few years to lower that rate?

So it's less drastic.

Why did why did we select that?

Sure.

Uh, you know, I can I can address that.

Um, you know, the the amount is based on the capital improvement program that we have built, the 700 plus million dollars worth of need um and the imminent risk of failing of the water system.

Um, you know, we think that the amount that we've laid out in the plan that we've laid out, the issuances that we've laid out is, you know, aggressive but achievable.

Um, and we think that the risk in not being aggressive is failure of the water system.

Uh, you saw those headline articles.

I don't want to have to say that, you know, this is not a drill.

I don't want to have to say that, you know, uh the plant is on fire and we do not have water for the citizens of St.

Louis.

Yeah.

I also want to chime in just for a second.

This came up in the budget meeting, but because we are an enterprise fund, when we are facing this fiscal cliff, we talked to the city about the options to transfer money out of the reserve to the water division.

That is not possible.

So if we get to zero, there is no mechanism for a life raft.

And so when we talk about OM and why we need to push to do it, it is because the longer or the lower the rate we have, the longer amount of time we're in this situation that we're in.

And so that was something that we talked about early on to try to potentially address some of these issues.

We've looked at every possible way to address this.

And unfortunately, that 40% is what we're going to need to hit that bare minimum threshold.

Sorry.

Yeah.

You know, Spencer makes a good point that over the years we've done a lot of cutting.

Um we've deferred a lot of action.

We've put band-aids on everything we can put band-aids on, and the emergencies are starting to get a little worse.

And so uh it is, you know, what we feel is the minimum necessary increase to support the work that we need to do to keep the water system uh you know reliable for uh providing service to the citizens.

Okay, thank you both for for those comments.

Um, one more follow-up question, uh, Vice Chair.

Um, and this is sort of related to to Alderman Devotee's line of questioning, um, understanding, you know, the the potential support from from RIMS, which I know is an ongoing conversation and its utilization for the debt service component.

So you all mentioned two um, you know, pathways, the the bond issuances, and then also applying for the SRF state financing.

Um is there a particular, you know, level of preference between method of the over the other in terms of the timing of the capital projects versus just the general projects and how that may be impactful if you all choose to go one route versus the other.

Yeah.

So the state revolving fund, you know, is certainly a debt instrument, but it is one that is, you know, supplied with federal funding and has, you know, very uh laid out set of rules in the Safe Drinking Water Act to get federal funding for water infrastructure to water systems.

Um because of that mandate, um, you know, the the funds can have subsidy components, uh, that is a benefit for us.

Because of that mandate, um, you know, it is less stringent than you know, the open bond market.

And so when we're looking at revenue bonds, you know, we certainly have to meet these criteria, but you know, as that SRF program uh, you know, goes, the debt service coverage ratio is slightly lower.

Um, the underwriting is, you know, not as strict because you know, it is not a for-profit market.

Um, it is to serve water systems in maintaining Safe Drinking Water Act compliance.

Um, and so, you know, it is federal funds.

Uh, you know, we are well positioned to receive some grant portion in that uh route, but it is not you know an unlimited fund.

And so it is not gonna be enough to supply our CIP.

And so that's why we have to do a blend.

Um, it is a good concept too to do a blend and and get you know some traditional revenue bonds, um, some SRF bonds uh and do some cash financing.

Okay, thank you.

Thanks.

Thank you so much.

Those are all really great questions.

Um I just want to get to a few things before we have the public speak.

Uh, one is that I know you know, this is the proposal, this is the information that you're putting out.

Uh, I do expect to see um, you know, folks weighing in about, well, if it's this amount of RAMs and you have, you know, turn certain dials and you know, it may affect how much people could pay up front for the first few years if there's more money going out in cash um from that direction.

So I know that that's just you know, one way to use Rams funds is to use either the interest or smaller amounts over a longer period of time, but it's not the only way.

So I think that is an important part.

This is sort of one look at how that money could be used and that 60 million um, yes.

Um so that is something that I think is important.

Um, you know, one of the things that is happening next is the cost of service study.

And that is something that comes up all the time with people who are looking at you know the cost of they're looking, they're likely a metered customer and they're thinking about you know why are why they're paying a certain rate that they are, and then should larger companies, uh larger users be using paying more uh and and how all of that works out.

Um can you just preview that a little bit for us and why this study came first uh and what we should expect to hear from that study any information?

Sure.

So the the cost of service study is on our plate.

Um, you know, it is more expensive, it takes longer to go through, um, but it is not used to set your rates and your revenue uh sufficient to maintain your operations.

Uh the cash situation we're in, the reserve fund drawing down, um, and the fact that rate sufficiency studies are done more frequently to make sure that your rates are set adequately, um, you know, necessitated us to go after that first.

Um, you know, it took four or five months to do this study.

Um, and it does actually address the immediate need, which is, you know, we are going to run out of funding and we are going to have to make tough decisions on you know which leaks and breaks to fix and repair and which ones uh you know to leave B because you know, maybe it's a public impact, maybe it's not so much of a uh uh health or safety impact.

Uh, but again, you know, these are decisions we don't want to be talking about.

And so first and foremost, we needed to do a sufficiency study to set the rates um appropriate to be able to get started on the CIP to be able to build a reserve back up when we do a cost of service study.

And you know, we do think that we would have budget to do that study if we were to get an increase.

Um, you know, it may come up with a recommendation to reset rates again.

And, you know, at that point, uh, you know, the the proposal that we would put out there, um, the amounts that we would put out there um, you know, may get overhauled entirely.

And, you know, one thing is for sure, it probably wouldn't deviate from the revenue requirements of that study because we wouldn't have a different CIP, a different set of KPIs that we're trying to hit, uh, but it may rebalance the rates, um, you know, introduce new uh rates within our our rate structure, uh, you know, a data center rate.

Um, certainly it may, you know, have some insight into how to address the affordability rate differently than we envision right now.

Uh, and it may rebalance, you know, the tiers that we have for the declining block structure, uh, you know, for the metered customers, uh, andor the way we component bill the flat rate customers, the unmetered customers.

So it is a very important study for us to do.

It is long overdue.

Uh, you know, we just have a priority right now with the crisis that we're in fiscally to continue operating, and the rate sufficiency study is the way to address that first.

Okay.

And Blacken Beach did the 2020 run rate sufficiency study?

Correct.

And at that time, I think it was around 4%, 4.5% that was recommended.

Um, and then later, of course, there was an emergency increase at much higher rate.

Um, but going from a four and a half percent recommendation to this much larger recommendation just a few short layers later, is it because the capital improvement plan wasn't laid out and you were just looking at operating expenses at the time?

I know you weren't the director then, but obviously, you know, in looking back at all of those studies over the number of years, this feels like it's a hugely after another uh previous huge leap when in 2021, just you know, five short years ago, a much smaller increase was recommended by the same consultants who put this together.

So that just doesn't completely jive for me.

So I was hoping to get some more information.

Sure.

Just to provide some context there.

I think it was multiple 4% increases uh recommended for a $90 million, uh I'll call it a tranche of a CIP.

Okay.

Uh it was known that that wasn't going to be comprehensive.

Um there was a more comprehensive CIP that that you know lived internally at the water division.

Um, but also I will say that that study was published on five years of historical data prior to COVID.

Um, you know, the inflationary pressures that we saw, the extreme volatility in supply chains, including treatment chemicals that caused, you know, one of our bigger expenses in treatment chemicals to triple, you know, from five million to 15 million.

And then the ongoing impacts of the emergencies, you know, as labor got more expensive because of inflation, you know, as goods and and materials uh, you know, including the treatment chemicals got more expensive, all of that stacked uh, you know, to show an increase that was much larger than the recommended.

I I can't remember exactly, but I believe it was maybe two or three years of uh 4% increases and then resulted ultimately in 2023 for two, 20% increases.

And again, all of that was reactionary based on, you know, uh maintaining uh, you know, solvency and doing some amount of CIP.

I think what you're seeing now is just the result of many years of planning that has gotten us to this point where we have a much clearer picture of the risks and the need and a real path forward uh and and you know what we feel is a responsibility to act today.

Thank you.

I think that's just an important picture to paint, you know, when people are looking at the information that's available, what they're looking at and understanding talking about it publicly is such an important part of that.

Thank you.

Uh at this point, we will move into public comment.

We do have a sign-up sheet over there.

We'll go in order of sign-in.

Is anyone not signed up?

Please make sure to sign up on the form.

Uh to make sure, and then we'll go in order of who has signed up.

Um so the way our public comment works is we do allow public comments, uh, three minutes.

It's not a back and forth situation in which someone speaking from the public is able to ask questions, um, but they are directing their comments to us.

Uh, and I just ask that everyone be respectful of the three-minute timeline.

Uh, we do have several people here today uh and want to make sure that we are thinking about about that.

As I said at the very beginning of this meeting, this is not the only time for public comment on the rates.

Um, every time we've talked about the rates, every time the water division has come in front of us, there has been an opportunity for public comment.

Uh, and there's also you know, um ability to share information with this um committee as well as the full board of alderman via email or in any other means of communication um that are also um getting to us.

So uh please do be respectful.

I don't want to use the gapble, but I will.

Uh so a three minute timeline, please.

Um, Madam Clerk, if you could start with our first speaker.

Thank you.

The first speaker is John Kaufman.

Wonderful.

Thank you, John.

I'll have you raise your right hand.

Do you swear to tell the truth, the whole truth and nothing but the truth?

I do.

Thank you.

Please proceed.

Three minutes.

Uh John Kaufman, I'm here today on behalf of Consumers Council of Missouri.

I want to thank the committee for its commitment to a transparent rate review process.

And uh we are uh now we're in possession of the rate sufficiency study.

We're glad we're digging into it now.

We have hired um our own independent consultant uh who is a nationwide rate making uh expert and uh who has done a lot of water cases, a lot of MSD cases.

He actually is uh based here in St.

Louis, so I think it's the best of both worlds.

His name is Mike Gorman, and uh we need uh probably uh you know at least 60 days to kind of look into a kind of look at the assumptions and the methodologies and uh make a recommendation.

So we we hope that we'll have an opportunity to maybe make a presentation of our our our own suggestion as to this issue.

And I'll tell you what uh what we won't be saying, we won't be recommending no rate increase.

We we definitely understand that there's some necessary improvements that need to be made, but we may not recommend uh that you get it exactly the way Black and Beach is recommending it.

We know that they've done a lot of good work here, uh, but there are there are different perspectives and different ways that you can package this together.

And so we hope that our contribution will be seen as something that gives you some other uh some options and some other ways to to look at at the uh the process.

You might want to look at the at the type of bonds you're getting and the way that uh that it's structured.

Another thing that we won't be doing is we're not gonna be getting into kind of the class allocation metered stuff.

We understand that that that hasn't been done.

We do appreciate the commitment that a class cost of service study will be done here in the next year or two.

Uh and you know, it hasn't been done since 1958.

And so we're really excited to dig into that when we get to that and make sure that that there aren't subsidies between big you know big customers and so forth.

And and we have a concern about a lot of entities in our community that are getting free water, and uh I think there might be some ways to kind of equalize that.

And of course, the meter situation is a thing that we may have a contribution.

Another issue that we uh will hopefully uh contribute to, and that is the the idea of an assistance program, some income-based program, the ARPA program that's going on now.

We're we're working well with the city, and I know that but that that's gonna go away.

That's a temporary thing.

We would like to build in some program that does help our neediest customers.

And uh we're we're committed to finding a program that isn't as complicated maybe as the one we presented in the future that might have easier administration.

Uh, but we we hope to be sharing that with you with community members and with the water division and having a collaborative process with so uh we're again we're asking questions about the study, we're digging into that, and uh we're we're thankful that the the current uh leadership in the water division is uh been so good to work with, and we hope that that'll be a good process.

Um look forward to talking to you more.

Thank you, Mr.

Kaufman, and thank you for all of the work you've done to um protect consumers in Missouri in general, and then also in in this case as well.

I think that your input has been very helpful.

So thank you very much.

That's our goal.

Thank you.

Thank you.

Madam Clerk, next.

It looks like Claude.

Uh, we'll go in order of the list just to keep us on on track.

Are you waving your time, sir?

I'd like to go ahead.

Okay, well, we'll go for whoever's next after you, sir.

And then when you we'll just say that you've waived your time.

Okay.

If you would like to come up here and then we'll we'll do uh I'll swear you in.

And then uh Madam Clerk is keeping track of the time for us.

If you could raise your right hand.

Do you swear to tell the truth, the whole truth and nothing but the truth?

Absolutely.

Thank you, sir.

Please say your name for the record and please proceed.

It's Claude Breckwold, and um I'm a homeowner in Ben Park, and um I'm kind of horrified with um what I'm hearing here tonight.

So of course the entire um water system is cast iron pipes.

Our gas lines were all cast iron pipes.

I'm very disappointed that the water company and Spire didn't get together to um the the lines almost run side by side, and so instead of just patching the water line, which we've not discovered that's what's been happening.

We're in a state of emergency from what I see, because cast iron has a lifespan and and St.

Louis's cast iron pipes.

Mine just collapsed in my house.

I've got um cast iron um sewer pipes that were totally collapsed in my basement, but that's a typical thing.

So I've called several um plumbers.

Cast iron is with the chlorine in the in the pipes, and and just the the the nature of cast iron, it's not meant to carry chlorine fluoride.

I don't know what that does to pipes, but chlorine is definitely not a good situation, right?

So um please keep your comments directed at the committee.

So so anyway, I just feel um the whole infrastructure needs to be rebuilt just like what Spire just did.

And um I know Spire is still not finished with the whole project.

It should be um uh like uh uh cooperation between the two um the Spire and the water company to keep costs down for both entities.

We're we're just really at a at a at a break point with cast iron.

So we're seeing breaks.

I saw a break on Hampton, didn't get fixed for months and months, just pouring water out on Hampton, you know.

So you know it's it's a bad situation, and um I am kind of a little jittery about um the the situation because I know a lot about plumbing and and infrastructure, and I just can't believe it was band aided so long.

I'm not blaming the the the current uh guy of the division, but it obviously was like um not dealt with properly.

Thank you, sir.

So that's all I want to say.

I appreciate your comments.

Good luck.

Thank you.

We'll need a thank you.

Um Madam Clerk, next speaker.

Cheryl Glass.

Wonderful.

Please approach.

Unfortunately I forgot the chance.

Oh no.

So I held it.

Ums glass, if you could please raise your right hand.

Do you swear to tell the truth the whole truth and nothing but the truth?

Absolutely.

Please make sure you speak into the mic, otherwise we won't hear you on the stream and we'll miss your wonderful comments.

And as a reminder, you do have three minutes to speak.

I know you want more time.

Um, but so please just email on us anything we go over.

But before I begin and take my three minutes, I would like one of you to please read into the record the email that I sent you last Friday.

Um everyone has it available to them with just the public doesn't have it available.

That's we'll we'll make that please please proceed, Miss Ms.

Glass.

Three minutes.

Thank you.

All right.

Thank you.

I don't know how to project.

I've never done this before.

Uh we're not projecting the public comment, Ms.

Glass.

We've communicated that earlier today.

If you could please speak for three minutes into the record, I would appreciate your time.

Thank you, ma'am.

Here's what I'm gonna do.

All of this is taking up your time.

So if you could just speak your comment.

Connected.

I had to listen to people yammering on with sorry, I didn't mean to say that.

I apologize.

So give me a second, I'm gonna pull up that email and I'll read it into the record.

It wasn't my plan.

I was all set to go in another direction, so please bear with me.

I sent this um email last Friday.

Um I sent it to the mayor and every member of this committee.

I'm not well.

Take your time.

We'll let you read the whole email.

Good day, Alder Woman Schweitzer.

As always, I am grateful for your support and will forward all of the information that needs to be entered into the public record.

Sorry.

It's okay.

I hope the clerk is prepared for a deluge.

I will also submit my plan comments and we'll try to invent links throughout to make future reference more manageable.

I was up on my working on that.

That said, well, I appreciate the brief opportunity I've been given.

I find it completely unacceptable that I am the one who needs to explain the connection between the water division's broken billing structure and our outrageous MSD bills.

I already explained it.

You were in that meeting, Alderman Woman Cox, Hantwe, were you not?

Yes, ma'am.

Did we here just hear a bunch of lies?

I presented all of the information.

What you saw on there about people paying more, this and that.

That all came from my presentation.

I gave Director Patel the information he needed to approach this the right way.

And he chose not to take it.

So I'm here and I'm gonna blow it all up.

I find it completely unacceptable that I am the one who needs to explain this connection.

Then to be told that there's a tight schedule and I can't be allocated time.

Well, they rambled on for an hour and a half and enter my comments and explain it and enter my comments on the rate proposal is beyond disappointing.

Myth core time than a tag.

I'll let you finish reading your email, ma'am.

Well, I understand it's tight schedules.

There will likely never be a more important issue before this committee.

This is a core pocketbook issue.

City residents are being robbed by not one but two utilities because of a rate structure that intentionally created a dark hole where costs that can't be directly attributed to a special or commercial metered user are dumped and billed off to unmetered users.

Given the amount of time I have doted devoted to researching this topic, and the fact that Director Patel seemingly still doesn't understand the connection.

I consider myself the city's foremost expert on this topic.

I argue there is no more pressing issue.

This committee needs to take on in this one, and time must be allocated to fully address it in this important comment session.

If not today, at another time, because the public needs to hear what I have to say.

Most residents can not take time off work to be here.

So I am their proxy and wanted the time to explain this mess in a public recorded forum so unmetered residents can watch it at a time that meets their schedule, so they will have all of the information needed to understand how badly they are being ripped off.

Excuse me, my computer just did something wonky.

I have the email pulled up here.

Um what do you think?

I just it just my computer.

I've been having trouble with it ever since I've been in here.

I guess my connection isn't very good.

Sure.

Here's the bottom line.

I'll go from memory.

Okay.

Well, well, well, we just do need to be cognizant of time.

So we've hit the three-minute mark, so please proceed.

But here's the deal.

Please be respectful.

Our water division, black and feach seized control of our water division in 1958.

That is when this broken rate structure was created.

Like I said, it protects the meant financial interests of commercial and large users.

They have seemingly contributed absolutely nothing to maintain our infrastructure.

I'd like to understand how much capital investment funds have been collected from places like Anheuser Bush.

How much of our water capacity is Anheuser Busch using to make profit while our infrastructure was left to rot beneath us?

I think it's fair that we know these answers.

I sat in a meeting with Director Patel, the meeting that we had.

I did not know at that time that MSD is one of the water division's largest customers.

And that was not revealed to me.

That is a blatant conflict of interest.

Then the scheme worked so well with the water division.

Black and Veach ran it again over at MSD.

The similarities between the two proposals are striking.

I have the script.

I've even already written an amateur legal argument.

In my opinion, what needs to happen is that Black and Veach needs to be kicked the hell out of our water division.

And we need to, they're trying to tell us that doing all of this will save us from being taken over by a private provider.

A private company has been running our water division for almost 70 years, and they've developed an intentional scheme not to install meters.

You can't convince me that no meet money could ever be found.

So when MSD switched, right?

When they did the 1993 study for MSD.

One of the proposed solutions, MSD went from flat rate to usage base.

One of the proposed solutions was to install meters at a cost of 40 to 50 million dollars.

They didn't chose not to do that.

Because then the whole thing would blow up.

If we're on meters, they can't keep pushing the cost onto us.

Has this black hole ever been audited?

Is Keith Fairchild here?

He's been working on this issue for a long time.

He's been trying to get an audit, and it still hasn't happened.

When was the last time we had a real deep dive audit into this water division?

Thank you for your your comments, Ms.

Glass.

I have a lot more.

Ella, my Uber driver's here.

Ellen, come down and speak for three minutes about your problem.

If anybody would like to sign in for public comment, it is still open.

I'm out of it.

Thank you, Ms.

Glass.

I appreciate it.

Stolen our money.

Infrastructure right beneath our feet and have the nerve to come out here with this sales pitch that shows us our rotten ass pipes.

What toxins are being put into our houses.

It's absolutely disgusting.

And we are not the ones who created the problem, and we shouldn't be expected to pay for it.

We're already in a doom loop of debt with MSD, and now they're trying to do it to us again over here.

Thank you.

Madam Clerk, is there anyone else signed up?

Anyone online?

We just sat here and had lies fed to our face for an hour and a half.

And I'm not supposed to be mad.

Thank you to all members of the public who came to speak today.

Um, and thank you, Ms.

Glass, for your testimony.

You certainly provided a lot of information over the months that we've been speaking, and I hope that um we've been able to move forward on many of the things that you're concerned about, uh, especially regarding the cost of service study coming up.

I think one of the um hat tip to to you for um the the discussion to make sure that that's important.

I certainly have learned a lot from our conversation.

So thank you for being here, and I appreciate how uh emotionally draining this topic is for so many people.

So uh thank you very much for all of that for for moving on with the next piece.

We'll be moving.

Thank you.

We'll be moving to acknowledgement of any written testimony.

Any written testimony, Madam Clerk.

We have not.

Thank you.

Um, any announcements from members of the committee?

Okay, no announcements.

Excuse members.

I will excuse Alderman Browning for necessary absence and Alderman Boyd for necessary absence.

And with that, I will entertain a motion to adjourn.

So moved.

Thank you.

It's been moved by the alderman from the eighth, seconded by the alderman from the tenth.

All in favor, signify by saying aye.

Aye.

Aye.

Any opposed?

Hearing none, we are adjourned.

Thank you.