Speaker 1: Thank you. Can anybody hear me okay? All right. So this is 2014 for this new supplemental budget of $10.3 billion. And just by way of background, you call that the budget for the wastewater treatment division is focused on capital projects, which is the basis of the projects. How much does it cost to promote projects? The 2019 rate proposal included a proposed direction for use of an incremental funding $143 million that would be used to avoid expenditure on new bond funds issuance in the year 2020. They would have been helped actually prove that reputation. It's quite a proven. In the meantime, the Piper Jaffray made recommendations to use that money in a different way. They had recommended that because noting that there are enough people to say about $21 billion, I think it recommended to use that money to actually purchase new bonds and to not use the money to.
Speaker 0: On Capitol. Okay. So I'll cut you off.
Speaker 1: Yeah. Yeah. So. So inside. The initial proposal can be used on unemployed $2 million and all the way you could get it back on $125,000. New $7.3 million Million. To avoid the expenditure on capital projects in future years 2018, 2019 and 2020. The expectation was that money was going to be used to avoid expenditures on capital budget. What would be what is now being proposed, however, is to actually to issue new bonds instead of. Instead of. In the amount of $1.3 million as a way to save basically about $21 million. That would come because, as you said, it's going to go instead of the issuance of. The proper use of capital funds must be more. Before joining the team expenditures in 2018 20. 2028. One thing to do is, is issue bonds a low interest rate and that interest rates meetings with the end result contained.
Speaker 0: About $1 billion. I'm looking for something between now and 23 to.
Speaker 1: So it's something that's the both business, the supplemental budget appropriation that we would. That saved us $41 million. High interest savings. Should we be getting out of the encampment wastewater treatment division and the.
Speaker 0: We're going to be need to help you the questions. He likes Rico. Okay.
Speaker 1: Good morning. My name is Rochelle and we play together and we serve as the special advisory.
Speaker 0: And I stay for the. What did.
Speaker 2: They say growing up so surprised.
Speaker 0: When the industry had. But with health industry analyzing.
Speaker 2: Their interest rates, it seem.
Speaker 1: Right now you do have the county wastewater treatment plant outstanding. Trace 5 to 5 and a half percent range. And so that is something where you're able to fund without the proposal.
Speaker 0: Plus we used to pay off those bonds.
Speaker 1: Instead he would end up issuing new. To find out of the program. They have an interest.
Speaker 0: In the neighborhood of 4% of. Exactly. Cash to be applied to 60,085. One of the things we were trying to. Currently 36. So there.
Speaker 1: Will be three productions that started in.
Speaker 3: 2006. Well, the rates are already.
Speaker 1: To be 2020. All these savings.
Speaker 0: And they're not just making. This thing started sometime in the 1920s to go on for about a dozen. And there's a chart of 41 apartments here.
Speaker 1: Yeah. You see it chart. I see the microphones are on the chart on page up. Page 41 of your materials does have a column that describes rate impact. And so you'll see that, that the rate impact ranges as low as two $0.02 and as high as $0.23 between now and 2032. That's against what were expected rates. So reduced against the rates that you've seen projected in the rate rate proposal for that came out in June of this year. So there are reductions in in not the not the absolute number, but in terms of what was expected, what was projected.
Speaker 4: To I'm sorry.
Speaker 2: Customer Biology Thank you, Mr. Chair. I'm looking at this chart. What it shows is the rate impact, which I believe would be the difference between our current rate, which I'm assuming is fixed, and a projection of what we think the rate will be into the future. Is that what that is?
Speaker 1: Yes. So you recall it during the discussion about the the the the rate the sewer rate for 2019 that we provided. You and I have numbers available, I believe, provided you the numbers as to what the proposed rates were expected rates were going to be over the next 10 to 15 years. These are the rate impact that just listed here is a reduced reduced against that amount against the sewer rates.
Speaker 2: Not not the interest rates.
Speaker 1: No. Sorry.
Speaker 2: These same words, I mean, two different things.
Speaker 1: I'm sorry.
Speaker 2: But this column is talking about the sewer rate.
Speaker 1: That's correct. So it's good.
Speaker 2: Point to me where the analysis is that we can I want to understand how we think we're going to save money, because I'm with Councilmember Lambert. It seems to me that rates are going up and it seems to me that we're projecting that when we bond in the future, it will remain a lower rate than the bonds we issued in the past. So how does that work?
Speaker 3: So the rates, I guess maybe two things on that front. Interest rates that have been getting the headlines that as far as interest rates going up, that has been primarily due to the Federal Reserve actions. And what they're doing is they're raising short term interest rates and that actually ends up helping you from the standpoint of paying off this debt. So it's something where, as Councilmember Dombrowski noted, this is a defeasance where you actually end up setting aside the funds and you end up paying off those bonds in three years. So 2022 is the final year. You would end up paying those off. So you would be investing those funds for the next three years. So that actually helps the cost of the DEFEASANCE. And one of the reasons why we ended up making the recommendation at this point is because the Federal Reserve has raised rates basically three times since the last since the March , June and September. And that ends up helping the investment rate that you would end up getting between now and 2022. The long term interest rates that you're talking about as far as those have not moved very much at all. And that's one where you would actually be borrowing for your new capital program at those long term interest rates and would be doing so within the next hour. Anticipation is that we'll be back to you in November with borrowing for we do the defeasance where we'd end up paying off your existing bonds at those higher interest rates . And we do that sometime in October. We would actually come back in November with locked in interest rates for long term borrowing. And those long term rates actually haven't moved very much at all. Those have been very, very, very stable. And so that's where you end up having that tradeoff, where the headlines certainly are interest rates are rising, but that is on the short term and that's where it actually it's kind of counterintuitive, but it actually helps the defeasance because in that transaction, you're an investor, right? And you want the rate to be as high as possible. So that actually helps you, right?
Speaker 2: I get it. So in the short term, our money is making more in the bank than it is paying off the debt. In the long term, we're going to be able to borrow at more fair and more favorable rates. And so in the entirety of that calculation means that we have $21 million more to spend on capital projects in the long term.
Speaker 3: That is exactly right.
Speaker 2: Are you feeling very confident about that? This is a bit of a state of events is going to continue this way.
Speaker 3: Well, there is there I think there is a reason. It says approximately 21 million right now. It certainly looks like it's going to be a substantial amount of money, but it will not be locked in until that the borrowing takes place in November. Okay.
Speaker 2: So but are you feeling confident?
Speaker 3: We're feeling fairly confident, yeah.
Speaker 2: Okay. Thank you, Mr. Chairman.
Speaker 4: Thank you. Customer reality and the prior plan had us just using these funds, the settlement funds, to pay cash for capital projects. Right, exactly. So but you're saying because the short term rates have gone up, it makes more sense to invest those dollars and then retire our high interest debt that's maturing here in the short term. And then. Issue. Cheaper, long term debt. Even through all that, it makes more sense than paying cash somehow.
Speaker 3: Yes. Yes. Because you have those higher and straight bonds still out. And if you didn't.
Speaker 4: Have those, then we should pay cash.
Speaker 3: Exactly. If you do not have those, then there would be no, I guess, opportunity to reduce your overall debt service.
Speaker 4: All right. Two other members have questions, council member calls. Would you like to put this before us for approval?
Speaker 2: Yes. Thank you, Mr. Chair. And I move post. Ordinance.
Speaker 4: Think you're Mike? We're working on.
Speaker 2: It.
Speaker 4: So they've got to join.
Speaker 2: Thank you, Mr. Chair. I'm a proposed ordinance number 2018 0424.
Speaker 4: All right, that's before us saying no further questions or debate the critical call the room.
Speaker 2: Thank you, Mr. Chair. Councilmember Balaji Councilmember Dunn. Councilmember Gossett. Councilmember Colwell. Councilmember Lambert. Councilmember McDermott. Councilmember of the Grove. Councilmember von Richter. Mr. Chair, hi, Mr. Chair of the Board of seven A's, no no's to excused.
Speaker 4: All right. We've given a do pass recommendation to that. Should we expedite that and can we do?
Speaker 1: Yeah, I should note that there actually has been a little bit of movement in interest rates in the last couple of days, and so that actually reduced the amount that we were expecting. There's going to be 20 million instead of 21 million. So it's about interest rate environment. And so it would make sense to expedite this.
Speaker 4: Can we expedite to this afternoon or do we.
Speaker 3: The better off you need.
Speaker 4: The better off to relieve the committee. Okay. And do we want to do that?
Speaker 1: In my communications with the agency, they have always expressed interest in moving it as quickly as possible. I should note that we had actually thought this was going to be acted on earlier. And so they urged me to encourage you to to move as rapidly as possible.
Speaker 4: Okay. So our counsel, Mr. Hoover, is suggesting that procedurally it might be better to let this sit in committee and then this afternoon move to relieve the committee and take action because of our agenda publication and things like that. And is there any problem from a bonding perspective with respect to notice?
Speaker 1: And there is.
Speaker 4: No. All right. You would.
Speaker 1: You would.
Speaker 4: All right. That's all right, Mike.
Speaker 3: Sorry, Mike Hoover, counsel for the council. There would not be a notice problem, but you would need to take testimony this afternoon if you chose to do that.
Speaker 4: All right. Well, now that I've called a vote, I have not announced the results. But where do we stand here? We want to leave it in committee.
Speaker 3: You you could just set it down for now and just move on to the next item. With gender, you can't actually report it out. We could suspend the rules. There's another way we could do it. If you want to. If you want to put this down for a minute, we could. Let me take a look at some things. We come back with the best way to get you where you need to be. So you could just you could just move that it hold its place on today's agenda in the committee and then move on to the next item.
Speaker 4: All right. Councilmember Caldwell's, does that meet with your approval? Would you make that motion.
Speaker 2: During the week to make a motion in Spain? Make do we need to make a motion to set it down?
Speaker 3: I think the chair could just say, you know, with you know, without objection.
Speaker 4: Unless there's objection, will lay this item here on the table. If subject to further action, the committee or the full council this afternoon, see what you've done. Thanks for being here and for helping us understand this. Mike, thank you very much for thank you for your work on it. All right. Now let's return to order. Here we have a consent agenda and councilmember calls. Would you be willing to put our consent agenda items five, six and seven before us?
AN ORDINANCE authorizing a supplemental appropriation of $143,000,000 from the water quality revenue bond fund; and amending the 2017-2018 Biennial Budget Ordinance, Ordinance 18409, Section 131, as amended.