I have 530. So let's go ahead and start this Board of Directors meeting of the San Lorenzo Valley Water District for May 20th, 2021. Holly, would you please call the roll? President May Hood. Here. Vice President Henry. Here. Director Ackman. Here. Director Fultz. Director Smalley. Here. Okay. Are there any additions or deletions to the closed session agenda? That has none. This, do we have any public members? Because this is the time for oral communications regarding items in the closed session. I see we have one attendee. Yes. Linda Scott, would you want to make a comment? Are you there? If you'd like to make an oral communication, this is your chance. Or if you accidentally signed on too early and you really want to be here for the regular meeting, which starts at 630. Ah, turn at 630. Yeah, that's all right. People do this all the time. That's what I thought probably happened. Okay, no problem. So I guess now we adjourn to closed session. And begin that. Let's go ahead and reconvene the meeting to open session. All right, so this is the board of directors of the San Lorenzo Valley Water District for May 20, 2021. So we're convening the open session. We do have a report of actions or at least a report out of closed session, which will be presented by the district council, Gina Nichols, and was adopted unanimously by the board. Okay, thank you, Chair Mayhood. The board voted, as you said, unanimously to make a statement out of closed session about the lawsuit that was recently filed by the county of Santa Cruz against the district. The public may be aware that the county has sued the district regarding a roadway failure that occurred on Bear Creek Road in January of 2020. The district strongly believes it is not at fault and has submitted a claim to the county for damages to its pipeline. In the meantime, the district's risk management provider, SDRMA, has appointed lawyers to defend the district against the county's lawsuit. Litigation strategy is confidential and privileged. Nonetheless, the district will try to release any public information about the lawsuit when it becomes available. Thank you, Gina. We can now reconvene to open session. Holly, would you like to take the roll call, please? President Mayhood. Here. Vice President Henry. Saw her. Hold on here. There we go. Okay. Director Ackman. Here. Director Fulse. Here. Director Smalley. Here. Any additions or deletions to the agenda tonight? Yes, Chair Mayhood. I have a request to make a couple of changes to the agenda. I would like to move item 11B, the fire recovery search arch, to right after 10A, new business, the draft budget. And I would like to remove items 10D and E, the vegetation fire management plan, and the panorama augmentation item. That's items 10D and E. I'd like to remove from the agenda. Any objections from members of the board? If not, we'll proceed on those people. We now have that point in the meeting where we have a chance for oral communications from members of the public. On any subject that's within the purview of the district but is not on the agenda tonight. Do we have any such communications? You do raise your hand and I see that Rick Moran does have one. Go ahead, Rick. Yes. Hi, I'm Rick Moran from Ben Lohman. I'd like to comment about our water meters. Ever since I served on a submarine, I've had a keen awareness about water conservation. Submarines are often associated with the submarine shower which is a wet washcloth and deodorant. While living here, I've experienced quite a few droughts. My wife and I have replaced a front lawn with flagstone, chosen to use cactus and succulents for landscaping, grown and promoted the use of iris as drought tolerant flowers and even adapted to dry farming in our vegetable garden. Recently, because California Drive had its water main updated, all 36 homes have been converted to the badger meter. Despite its name, it does not measure badgers but electronically measures household water use. With this badger meter, you can connect to an app on your computer or phone. Once you do that, you've got a great tool for helping conserve water. You can use the app as a way to see by using graphs how much water a specific app activity will use. For example, if you do a load of laundry at 9 a.m., the app will show you the number of gallons used at that particular time. It also gives you an alert for leaks. There are presently over 2,000 badger meters online already and we're phasing them in at about 500 meters a year. You can request one at no extra charge. They also come with a lightweight, easy to remove cover. If you've tried to remove the old cement cover, you'll appreciate that upgrade. I just wanted to express my appreciation for these new meters and to encourage others to use them as we all try to conserve water. Thank you for your attention. Thank you, Rick, and isn't it a pity it doesn't count badgers? I'd like to see them while. Actually, this brings to mind a question that I have from a member of the public who has a large property and a large garden that she waters for her and orchard. And she also has tenants and she wondered whether it was possible that she said she would be willing to pay part of the cost of having one of those installed because she thought it would help her monitor this. And I guess I would like to ask Rich whether, Rick, excuse me, whether this is something that we could consider that if there were particular repairs that actually really wanted one of these that we can somehow incentivize that by allowing them to pay for part of it. Right now we're trying to discourage customers calling in because we're trying to do specific books and sequencing. But I would recommend, we do do case by case when there's some unique circumstances. I would ask her Gail to have her either email myself or Stephanie for that request and we can evaluate it and go from there. I think she was more just talking about whether there would be a general project, but we could just make as a general. And it depends on where she lives. She may be in an area that we're in and it may be real easy to do. Have her give us email either Stephanie or myself and we'll review it. All right, thank you. Are there any other non-badger related comments from the public? Seeing none and hearing none, we'll go on to new business. The first item is the draft of the fiscal year 2021 to 2023 biennial budget. And I will ask the director of finance to present this item to the board for starters. Thank you. Good evening, everyone. So from the prior board meeting, we started to see some of the operating revenue and expenses and now we've gotten into where we do have more of a full rollup of the budget. So we're able to kind of take a look at the entire process. We are doing the biennial budget. So that is new to this year's budget process. Additionally, this budget has a lot going on. The district recently did the large $15 million loan. We also have a lot of the different FEMA projects going on. Fire recovery surcharge is for right now built into this. And so that's where we can kind of go over some of these key points. Additionally, if people want to see a little bit more of the detail behind some of these numbers at the budget and finance committees, we are looking at more of the departmental line-by-line data. It is a little bit overwhelming to have something like that on a full board meeting. But people are able to go back and pull up the prior budget and finance committee meetings to see that detail. This fiscal year, we're projecting approximately 675,000 units of water to end the year at. For next year's budget, we're projecting a decrease of roughly 2%. So taking it down to about 663,000. And then the following fiscal year, another 2% bringing it down to 650,000. Depending on how the drought stages go during the summer of this year, some of these projections may need to get changed. It may end up needing to be tweaked at the mid-year review when we kind of look at these again. Currently, we only have, there's another slated rate increase in November of this year. And so that is factored into this budget, but there are not any rate increases factored in beyond that. This does have the fire recovery surcharge in the budget for 5 million over a five-year period. This first fiscal year, fiscal year 21-22 is factoring in 11 months of that surcharge. And then some high-level things on the expense side, this budget does include one new hire for a special project manager, as well as three promotions for current staff. The first year also has an additional $100,000 in there for a new rate study. And so that's something that we like to call out because those are typically only happening once every five years or so. There's 40,000 in there for a going digital campaign. And then each year that we bring on more and more badger meters, the badger meters do having this technology, like Rick Moran was talking about does come at a cost. It's about 89 cents per month per meter. And so each year we'll slowly see the operating expense for those to slowly increase. Very good to point out, this does include a pay down of the district's CalPERS pension liability. It's factoring in a $200,000 pay down in fiscal year 21-22 and $100,000 pay down in fiscal year 22-23. And so when we look at those numbers, part of that higher increase that we're seeing in the salaries and benefits section is the district paying down a chunk of our unfunded pension liability. Quick background on that, CalPERS charges roughly 7% interest on your unfunded liability. The district is making a higher interest revenue these next couple of years since we have that $15 million loan sitting in an interest-bearing bank account. And so we're trying to utilize those funds to go towards paying off something like this that's incurring us a higher interest rate. Additionally, the OPEB, we typically do a pay as we go. The district did set up a trust fund for that. And this year we have an additional $26,000 in the budget to fund that trust fund. It's essentially a matching program that we're starting off with.  It's broken down by the different funding sources. And so fiscal year 21-22 is projecting to have about $20.8 million in expenditures and fiscal year 22-23 is at about 13.3. That first line item, $15 million loan, those are the projects that are not related to FEMA but are being funded by this $15 million loan. The $14.5 million loan that we secured a couple of years ago, that's funding all of those projects. The next line is the $15 million slash FEMA. So these are projects that are being paid for by the $15 million loan, but they are also FEMA related projects, which means we'll end up getting 75% reimbursement on those approximately from FEMA as those projects complete. Excuse me, Stephanie. Right now we're not actually seeing the lines that you're talking about. Did you mean to share the budget? I'm not able to share. So unless we wanted to have CCTV pull up, I'm going down the agenda memo. Sorry, I didn't realize that. Yeah, so all it says is the agenda memo right now. So... You can share the screen. I can share the screen. Okay, let's see if this and everything just went dark on me. Can you guys see anything? We see the screen. We see the spring, but spring screen right now. There we go. So this... Okay. Sorry about that. Thank you. Okay. Sorry, so here's the different funding sources that I was going over. The FEMA ones are gonna be projects that are gonna be the 75% reimbursement from FEMA eventually, and then in excess of $15 million loan, that's what the projects are projected to be. I believe they're, you know, it's about 16 points something, and then projects that did not have any other sort of additional funding sources come out of the district's reserves. And so that kind of brings us over to kind of the flow of the statement of revenues, expenses, and change in reserves. So over here is where we think the current fiscal year is going to end up, and it's showing us having an ending balance of about $4 million in reserves. And then the fiscal year 21-22 proposed budget starts to go and take all of the operating revenues, expenses, it takes into account the capital improvements. What it does here for the grant and FEMA funded amounts is this is when we think the cash is actually gonna be coming through. So FEMA, if it's a large project, you don't get the reimbursement until the project is fully complete, submitted, they process it, then they send you the money. So this is kind of helping to show what the cash flows are gonna kind of look like for the district. And it is showing that the ending reserve balance will be around six million. And then rolling into the following fiscal year, similar process, it's taking all of the operating revenues and expenditures. And then the capital improvement and expense spending down here is where it gets a little bit interesting because we actually have more money coming in than the capital projects we have going out. And that's all being driven by the projections of when we're expecting to be getting those FEMA cash flows coming back to us. And so this has the district ending fiscal year 22-23 with a $10 million reserve balance. And then down here, it breaks out what the different reserves are for the district. So the district, a couple of years ago, set up a new reserve fund policy with target levels of where we wanted the reserve funds to be. Usually it's been kind of a building up to that point. So the reserves haven't been fully funded at the target level. This is where we will be funding at the full target level. So the district's reserves when fully funded is about $7.8 million. And then what's happening is we actually have a surplus of money. And a lot of that's coming from the fact that we have these FEMA reimbursements coming in. We have the $15 million loan financing some of these projects. And so this is kind of gonna be very important, but a bigger discussion that we wanna have with the board and the district manager for the best ways to utilize this future money. Conversations starting now is excellent. The actual actions won't come until we actually see these FEMA funds coming in. So depending on the timing of it, it may not actually be happening in fiscal year 22, 23, it may be happening the year after that. Similarly to kind of what we saw before, these are just the high level summaries showing some of the different categories in what is making up the different balances. And then the revenue goes into, breaks out the operating, the non-operating and non-operating revenue, operating expenses, it's getting pulled out. You could see it based on the different categories of the expenditures. And then this is the slide where we're kind of going over the debt coverage forecast. So this is important to look at because when you have things like long-term capital financing where you're also getting that, the influx of FEMA reimbursements, you're getting cash, but at the end of the day, we still have certain debt coverage ratios that we have to be abiding by for our debt covenants with some of our loans. And that's looking at more so what your net income is. And so it's not gonna be really factoring in the capital contribution piece. Now this, it's probably not a full reality, but it is kind of helping to depict what the potential could be if the district were to choose not to do rate increases or some different things. So this gray column is showing some of the assumptions. So it's showing water usage going down a little bit in the future years. It is not factoring in any additional rate increases. It does however, have the fire recovery surcharge in there. We have property taxes going up by about 3%, which is pretty common and expected. And then operating expenses we have going up by what the run rates been for the last few years. And so as you can see the operating, if you're not doing any sort of rate increase, operating expenses tend to at least go up by inflationary purposes. So it's expected that you would see your total income going on a downward trajectory. And then I show what the projected debt service coverage ratios would be going five years out. Our current debt covenants do require us to have a 1.25 coverage ratio. And realistically, we've kind of talked about how we wanna be in that two range, two, two and a half to make sure that we're healthy to be able to continue to secure some of these larger financings. We won't go into too much detail on these ones, but these are the listing of all the capital projects. So if people have questions on individual projects, we will be able to talk about those. It shows what the project type is, what the funding sources are. And then this table down here is similar to the one we looked at above where it's breaking down the different projects. And then additionally, it goes into the description detail for all of those as well. So this kind of is the big picture rounding out what the budget is looking like. The next steps will be for us to have, you know, hopefully a good conversation around any questions or changes that the board or the district manager are looking to make in here. We'll take those different changes in and then at the second meeting in June, we'd be putting together the full package, which is that larger, you know, 80, 90 page document. So this is kind of the meeting where we really wanna try and nail things down, any loose ends, get any major changes accounted for so that we can start to roll up the entire budget package. Is that all of you? Is that the, you're finished on your presentation? All right. Let me just remind the board that what the recommendation here from the staff is to discuss this preliminary budget and especially discuss in detail any areas that need further changes. And what I would just say is that this is, the hope is that this is the board meeting where everybody talks about any substantive changes so that after this meeting, Stephanie and her staff can go back and prepare the final budget which will be brought back to us in June and that that would not be subject to, you know, anything but the most minor changes based on comments from the board. So with that said, let me go to director Henry who is the chair of the budget and finance committee to see if she has anything that she would like to add. I really don't have anything to add. I think Stephanie has done a great job here giving us a lot of information that we need. And of course I've been able to look at this a few times. I did ask about increases to the budget, to expenses, that kind of thing. And she had some very good answers for what is happening for 21-22. And 22-23 looks like a 4% increase in costs but it's more for this 21-22 year. So if you have questions about that, Stephanie definitely has the answers. I would just add as the other board member on this committee that I really appreciate that Stephanie and her staff have gone the extra mile to produce our first two year budget. I realize that that takes a lot of work and I appreciate that you're doing that. And with that I will go ahead and start with Director Ackerman to see if she has any questions. So just a couple of things. First question, Stephanie, are the drought projections driving the decline in consumption numbers? And if not, what are the other considerations for the reason that the projected consumption numbers are going down? Part of it's a combo. Even in the rate study, it does show that water agencies should be expecting continued water conservation, especially in California. And so when we had the major drought year, we got down to about 336,000 units. Then when we had that really wet year, we hit 690 this year's projecting at 675, but those other years in between were more around that 650, 660 range. And so we're projecting it to gradually go down at least a little bit, especially given the lack of rainfall, even without the district putting out its drought messaging. I think people already are kind of projecting that they're gonna need to not use as much water this year. I would project that we would flatline out around that $650,000 number. So if we were to be doing three, four, five year budget, I wouldn't really be thinking we'd be going 2% in perpetuity. I think we're probably gonna end up leveling out kind of around that 640 to 660, depending on the year. Thank you. And my only other question is related to that. I guess I'm just wondering, and maybe this was all discussed prior to my joining the board and I'm not aware of the discussion. So forgive me if that's the case, but in terms of the businesses and households that were lost in the fire and the impact that that had on our rate collection, is that factored into these numbers as well or has that been an issue? It is factored in. We do have a lot of people that are connecting right away and starting rebuilding. So if it would have continued on shortly after the fires, it was about $100,000 or so revenue loss per year. And so this is factoring in a slow rebuild of those customers coming back onto our system. Thank you. Okay. Director Fultz. Yes, thank you. Excuse me. I had a few comments and questions. I'll be sort of intermingled. I'm just going through my notes here. I noticed in the last drought, the water sales was actually more of a step function. Stephanie, not a smooth decline. So are we expecting that this time or are we expecting the smooth decline? I guess maybe Rick could answer that. I mean, we built in just a gradual 2%. When we did have the last drought, you are correct. It was a very steep decline, but based on our conversations, the district's only looking for voluntary outdoor conservation at this point. Obviously if we continue on and we need to kind of have that more strict, we may be experiencing more than that 2%. Well, I think this goes to my confusion, maybe last meeting about what the goal really was. So if we're looking for another 10 to 20% drop from current consumption, then we probably need to be looking at a step function and revenue reduction. But if we're looking at a 10 to 20% from the peak in 2014, you know, we're kind of already there. So I'm not really sure what the specific goal here is and how that impacts the development of the budget. So Rick, do you want to touch on kind of what your expectations are? This first year, we are looking at more of a voluntary 10 to 20% of outdoor. The second year, it may be different and we will be evaluating the second year of this budget. You know, we return back to close to normal rainfall. Obviously it won't be an issue, but we can continue with an aggressive type drought we will be coming back and readjusting at the end of this first year. There's no doubt. It kind of sounds more like a step function in the revenue unless you're expecting to get a lot of the savings water conservation through continued reduction in an accounted for water, which has been trending upwards over the last few years. That's correct. We do have an aggressive plan to reduce the unaccounted for water. We actually just finished up with a contract team in to do our system. We found a considerable amount of underground leaks. We have replaced the six Lompeco tanks plus taken two other Redwood tanks offline and replaced the probation tank, which was a considerable amount of a lost water. So we're kind of coming at it in two different directions. Obviously I'd rather see the water go through our customer meters and we do need the revenue. But I think we can reduce by 5% of our unaccounted for water just within this first year. We'll be looking good, but the drought continues if we have the same type of rainfall pattern going into the next year's water year and we'll be reevaluating for the second year of this budget. Yeah, I just think we're still giving some next messages. Bob, did you have other questions? Am I the only one where he looks kind of stuck? He's frozen. Okay, well, while Bob is frozen, we'll go ahead with Mark Smalley and we'll come back to Bob. Okay. I'm glad to see the capital improvement plan that's factored into this and in particular across the two-year period. I see that next year's capital improvements are particularly construction heavy with minimal purchases at a total of almost 21 million. Rick, how does that compare to previous years? Is it significantly more than in the past? Oh, I think it's definitely significantly more. I think Stephanie would probably have numbers to go with that, but it's definitely significantly more. And if that's the case, do you have sufficient staff to be following through on this then? Well, as part of this budget, as far as the engineering staff, I feel that we have sufficient staff and a lot of this will be outsourced to contract labor for design and obviously most of the construction will be. There's one or two projects in this capital that we're proposing to have the district be the general contractor because we feel we can save several hundred thousand dollars by being our own general contractor. And it's two of the tank replacement projects and we met just this morning on how we were going to facilitate making those projects happen. I do have in this budget another position which will help department heads in a lot of these objectives. I helped push a lot of this over the finish line. So I think we have the right amount of staff and if there was an issue, obviously a lot of this is going to be outsourced. Okay, that's my only comment and question. Thank you. They'll be busy. There's no doubt about it. But you've peed in on this special projects manager providing some assistance given this significant additional work which we're seeing on the capital. And this position, the special project manager, he's definitely, you take the engineering department, I hope to engage with the special project manager and the district engineer on bringing in- He's our chief. Yeah. For me? Thank you, Jamie. I'm sorry, this person to engage with the engineering manager to bring the website, to bring the engineering section up and get all these projects up on the website. That's something that the engineering manager just doesn't have time to do. The same with the operations manager to work with those different department heads to bring a lot of the information that's behind the scenes that we're not getting out there that's really important. Okay, I'll leave it there. Thank you. Stephanie, I just have a simple question. I know we're not talking about the panorama fire management plan tonight, but are there any items in the budget that are related to that? Carly, I'm just pulling up the detail to your budget. I believe you had some stuff in there. There's, we allocated about $50,000 for both fiscal years coming up for the implementation of the work. And presumably that is, obviously, that's not the whole thing, but that is in addition to whatever grants or whatever that you're in. Exactly, right, right. Okay, thank you. Let's see if Bob is back in a position to have finished asking his questions. Yes, hopefully you can hear me now. I'm in a little bit of a mystery, neat broadband situation, so my apologies to- That's all right. We're just glad everybody's here given the wind that there's been in some parts of the valley. Yeah, well, there were just a couple more things here. On that person you're referring to, Rick, is that a full-time position and is that targeted for more than one year? I mean, do you see that as an ongoing thing? You know, when we talked a while back, I was thinking at a minimum two years, but I think it would need to be evaluated. If it goes as planned, I believe that there will be results that the district will see that it is a valuable position as needed because I'll also bring her into the outreach and the work with Parley on lowering our consultants in outreach. You know, I have several projects that I would like her to work on that I think could really pay off. And I think that the district and board would see that this position is really needed and it would continue after the two years. But it's a discussion I think we should have. Rick, can I just ask where's that discussion? Is there a particular committee that will address kind of helping or where you'll present your ideas for it? I think all of them. We will, I will present that. And I'll probably have it in memo form with the budget for adoption. I was asking whether it would go through the budget committee or the admin committee before it kind of hit the full board. It could. I mean, we're running out of time. Yeah. I could bring it to all committees because this position will work with all committees. All right. I understand though. Okay. Yeah, no problem with that. All right. Bob, did you have other questions that you would like to ask? A couple of comments and maybe suggestions for some clarity on the final version. We tend to use the word reserve and I think in a manner that's a little bit confusing. So there's reserves that I look at as being reserves set aside and not touched and are intended for disasters. Then there's operating margin and there's debt financing. And we tend to sweep all of those together into the same pot. And I think what that does is it kind of skews your view of what we really have as actual reserves. The $15 million loan is already fully designated. So any notion that it's reserves, I mean, it's going to earn interest obviously, but it's not really a reserve. And then that money as debt financing is really not what you should be doing for funding your reserves. And because it's been designated for other projects unless we were to withdraw those projects, that money is going to go away. And so it makes it I think a little bit harder to follow the money. In addition, in the capital projects, Stephanie, for the next version, I think it would be great to include the current capital projects just as we include the current budget numbers for operating revenue and operating expense. I think that would give a lot of clarity around where the operating margin or where the debt financing is going in the current year as well. I miss that.  And it would just be nice to have it all in one place. I think including the multi-year budgets as we talked about before is a great thing, something I know we've all advocated for a while. I also think it's great that you included the pro-forma numbers for an additional three years out. Though I am concerned about our continued rapid increase in operating expenses at a level that is about three times inflation. So we're not increasing just on inflationary pressures. We're going up substantially faster than that. And that has implications for your rate increase requests that I'm sure will be coming very soon in addition to the fire search yards that we're going to talk about next. Are there any other questions or comments from the board before I go out to the public? Lois, you're muted Lois. Bob will faint over this. I agree with Bob about reserves. To me, reserves are something that are set aside for emergencies. And it almost seems like that our reserves are not necessarily set aside for emergencies. They're there and we can spend them when we decide to instead of waiting until an issue came up where we had to. So I get maybe the district's reserves are just different. Different than a credit union's reserves would be. And we just had reserves we put in every year and they grew and they grew and they grew. But our reserves, it looks like they're gonna grow but they haven't necessarily grown as time goes by. I guess I would like to add on to that. It seems to me that there's, we've sort of conflated two separate things. One is reserves for emergencies as Lois suggested. And then reserves that I guess I would call restricted reserves that they're money that's sitting around but they are committed to certain purposes and they should not be confused with money that we have available to deal with emergencies. So Stephanie, can you suggest a way to sort of delineate this so that it's clear in the way we present the budget? Yeah, so I mean the monies that we're showing here, it is broken out in the different categories for what is restricted and what is not. And then the operating reserve, we don't have specific bank accounts to where we do a journal entry every single month based off of what happened and it goes up or down. The way that it works now is once the restricted reserves have their balance, any surplus from the operating reserve flows into the capital reserve. And so that's kind of how it looks at now and I'm trying to get down. Is my screen still up? Yes it is. So if we look at, excuse me while I scroll, when we look at the cash, so essentially this operating balance is kind of that, here's the different restricted and maybe we start calling them by the actual category, showing them what they are because all of these other monies we are not considering part of our, free cash fund, reserve fund. Yes, I agree. We could probably figure out a way to fine tune some of that but right now we're sitting here at this 3.6 number. This is the number that we're projecting this year to end at being the 4 million that we see kind of right here. It gets tricky between this and the audit because you're gonna have things where the audit is gonna sit there and say, here's what your ending reserves are but they're taking an absolute view of it, as if we were to end at 6.30 doing business, we would owe $500,000 to this, this and this where for a budgetary purpose we're only earmarking a certain amount of that money to go towards those different things. So we can try to work on a way to better define it to help make it a little bit more clear, maybe on our quarterly cash flow projections to kind of show how these buckets roll up. Okay, well, Stephanie, I defer to you and Lois and Bob because you're more expert at this than I am, so. I'll work on helping to fine tune this maybe for this budget report but then also for future financial reports. Do we have any more comments from the board before I go out to the public? Let's see, I don't see any hands up. So let's go out to the public attendees, we have 15 and if anybody would like to comment on this issue, please raise your hand. Don't see any comments. Oh, sorry, Mark Lee. Hi, good evening. This is Mark Lee from Ben Lohman. Can you hear me? Yes, we can. This is directed towards Stephanie is just off the napkin a thumbnail sketch. What are the shortfalls in terms of the budget and the current account that you have forecasted for this year? Are we having matching budgets or are we overextended or are we under extended? For this year's budget, the estimated actuals are actually coming in pretty close to the actual budget. The change came from in the capital planning, obviously, we did not have something like the fire in the forecast for that. But as far as total revenues and expenses, those were coming in relatively close to on budget. I think we had total revenues in the budget of 12.7 and we're projecting them to come in at 12.7. Overall total expenditures were expected to come in at for operating expenses, 8.4. The estimated actuals are 8.5 now a little bit more and a lot of that is directly related to the CZU fires, the overtime and the additional pumping costs. So as far as year over year operating wise, it's coming in very close to budget. Okay, so my second part is there's some discussion about an additional fee being charged that hasn't been discussed yet. It's not on the agenda, I don't think yet, but I'd like to see how that is being discussed in terms of the budget and what the financial implications are. And the budget does have, we will be talking in more detail on the fire recovery surcharge, but I think it's okay to talk about it now because it is in this budget. I put the plan is a $5 million over the next five years. I have 11 months worth in the first year, 21-22, and then a full million in fiscal year 22-23 factored into this budget. So if when we get to the next item, if it looks like that is not moving forward, then obviously I would be needing to revise the budgets and pull that amount out or modify the dollar amount. Thank you. Are there any other comments or questions from members of the public? Seeing none, hearing none, I think just go back to the board for one more round. It's kind of speak now or forever, hold your peace because we're going to the next round will be the final version. So go ahead, Bob. Thank you. I've got a short statement here. As I expressed earlier, there are some things in this budget, including our long-awaited digital initiative, paying down some pension liabilities and more infrastructure that are really good. And of course, the innovation in moving the mold of your budgets with the additional three years pro forma was really good as well. So Stephanie, I know you did a lot of work on it. Thank you very much. Unfortunately, there are many things that are not so good in this budget. They keep us on the hamster wheel, including the addition of another head count. And once again, the increase in operating expenses eating up almost 100% of the operating revenue increase, not counting the money that is targeted, I will discuss later, specifically at CZU fire recovery. This continues our fiscal status quo unsustainability, especially in light of the number of capital obligations that face our district, not the least of which is 10 million in unfunded tank maintenance, which if deferred much longer is going to significantly increase due to the need for tank repair. This budget unfortunately still is not addressing the long-term obligations we build up. It's a status quo budget. And by status quo, I mean the following. Since 1997, our operating revenues have increased by a bit under 5% a year compounded. Our operating revenues have increased between 5% and 6% per year compounded. Inflation during this time, average 2% a year compounded. During that time, we've made very little progress toward addressing our capital obligations, promises, unfunded liabilities, et cetera. We've actually grown them. And only about 20% of the revenue collected since 1997, including the rate increases that have gone on since then, have gone to operating margin, which can be applied to capital obligations. About 80% of that money has gone to operating expenses. This is unsustainable. In addition, until we have a clear picture of all of our capital obligations, it's hard for this board to understand the trade-offs involved between pensions, infrastructure, deferred maintenance, promise projects that haven't been completed, deferred infrastructure, and actual reserves, reserves for emergencies. Therefore, we're looking forward if the board continues its current strategy to avoid addressing these obligations. Our community can look forward to 5% to 6% rate increases forever, doubling everyone's water bill every 12 to 15 years. In fact, if the pro forma budgets for debt coverage assume a 6% increase in operating expenses for three years beyond this budget. So that means the rate increases will have to reflect that. And regrettably, with the current split of money between operating and capital, 12 to 15 years from now, we'll be facing even larger capital obligations. In other words, we're not closing the gap yet. And I'm afraid this is not a great legacy to leave our children and grandchildren who will have to pick up the tab for our decisions today. Thank you. Would anybody like to respond to that? I'll make this point many times. And each time he has not finished by making suggestions on how the operating budget can be reduced. Now, the thing I noticed was that well before the election, when I was just attending meetings as a member of the public, was that when we considered during the COVID time, whether we should negotiate with the classified employees about their 3% increase due to the MOU, he voted for this. Now, we know that the salaries are the largest component. They're the largest, you know, they're the lion's share of what drives all of our increases in the operating budget. I remember that meeting because I was shocked because Bob was such a budget hawk that he did not take advantage of that time when many other companies were furloughing people or putting raises in sort of a bands until the economy improved. But instead he voted for this 3%. The only person that didn't or actually he voted for it but he raised the issue was Director Swan. So I remember being shocked by that and thinking that why did he do that? And the only answer I could come up with is that he didn't win the bad guy before an upcoming election. And so what I'm asking for is consistency in his views and concrete suggestions rather than constantly coming up with these sort of canned things about how we're on the wrong track to come up with concrete suggestions to the staff and to our district manager of how we can change the trajectory that he thinks is so damaging. With that, I will go to the next item on the budget. I think I deserve an opportunity to respond to that. Director Fultz. Yes, just to correct the record, I actually voted against last year's budget because of this for the same reasons. So the consistency is definitely there. No, you voted for the salary increase which is the major driver. I voted against the budget and that was the vote that we were taking. We'll have to go back and look at the record if you wish but I'm happy to do that. In addition, it is not the board's job to direct operations. I think many people on the board have made this point that our job is to set policy. The way that the board would do this is the board would give staff a target for the budget increase, be it 2% inflation, 4% double inflation, what have you. And from that policy, the staff would be obligated to come up with an operating plan that would meet that objective. At this point in time, the board has not made that policy decision. I'm happy to have that put on the agenda so that the board can discuss what that operating expense policy decision should be and perhaps that's something we do for next year since clearly we're way beyond that this year. And I would be happy for you to join me in that because right now, 6% increase in operating expenses means you're not getting ahead of the capital obligation curve. It's very simple. So what we have to do as a board is set that policy. We don't go in and say, do this, do this, do this, do this at an operating level. That's not our job. And you've made that point in the past yourself. I agree. And when Rick Rogers suggested that we bring in someone to do a study about levels of staffing to address your concerns, you did not follow up on that. So we can talk about this later in time, but that is just not accurate at all. That is not accurate at all. Give Jamie a chance to speak. So I wanna respond a little bit to the idea that where we are as a district is somehow out of line with what other water districts are experiencing here in California and really anywhere, right? And fundamentally, the problem is that we base our water assumptions on how much water we believe people are going to buy and consume over the course of a year, right? So when we go through drought considerations, which California has seen more and more of over the last couple of decades, it becomes more and more difficult to meet our budget projections, right? We're constantly behind the curve because people aren't using as much water and there's a couple of reasons for that, right? We've done a really good job as a state of trying to get people to use less water to install drought conservation plumbing in their homes. We've done a good job as a district of trying to encourage that and that's great, but what does that mean? That means each year we're selling less water and the basic formula on which we base our budget means that each year we're taking in less water. So we're constantly behind the curve as agencies and that's part of the reason that we are also behind the curve in funding our capital expenditures, which is not out of line with any other water district anywhere in the state or the country. That's why the American Society of Engineers gives the water infrastructure in the United States a D plus because we're not doing enough to replace rapidly our water infrastructure. And so we're seeing this constant increase in the capital needs because we're not taking in enough revenue to replace our water infrastructure while also keeping up with our operating costs because we're selling a less and less water year over year, right? So I appreciate, Bob, you're raising the right point, but I mean, I think that the issues that are driving that are far more nuanced than you are allowing discussion for frankly in the way that you're laying them out here. I mean, we can have a discussion on any number of axes around this. I'm perfectly happy with that. And certainly this is an issue that is endemic throughout the United States. I've never said that we are in some way different or somehow doing things differently. What I'm saying is that as a country, as a district, as a community, if we stay on this hamster wheel we're on, we know where it's going. We are not gonna reduce our capital expenses. Our rates are gonna go up five to 6% every year because of the operating expense increases. And at the end of the day, 15 years from now, our community will be in the same or probably worse because of the increased capital obligations we have. It's unsustainable unless there's some fountain of money that's gonna magically appear and maybe the infrastructure program that's being debated in Washington. We're on our own. We have to figure this out. And we're either gonna do it through setting new policies around operating expense increases to shift money from operating the capital or we're gonna stay in the path we're on basically. Okay, I think we sort of reached an impasse on this and I would like to proceed to the next item on the agenda, which is the fire recovery surcharge. Rick? Yes, I didn't think we were gonna end that quick. Any second. At the regular board meeting on January 21st, 2021, the board directed staff to hire a rate consultant to prepare a rate study and to develop and present a fire recovery surcharge for board review and approval. Staff retained NBS to analyze and make recommendations regarding the surcharge. In your packet, attachment A is the final draft technical memorandum prepared by NBS, which presents technical analysis and recommendations for proposed surcharge. The CZU complex lightning fire, the wildfire, caused extensive damage to district facilities. The district is working with FEMA to recover approximately 75% of the eligible project costs or the district will be responsible for the remaining 25%. Attachment B in your packet is the copy of the district's project list submitted to FEMA. The district's total estimate project costs are over $20 million based on standard engineering estimation methods. This means the district is expecting to incur a net cost of approximately $5 million after anticipated the 75% FEMA reimbursement. And that's anticipated. There's no guarantee we will get 75% reimbursement. It'll be necessary for the district to cover the entire project costs upfront out of pocket prior to any FEMA reimbursement. The district has taken on long-term debt to help finance these costs. Insurance proceeds will be deducted from the FEMA reimbursement amounts. In past natural disasters, the district has adopted a surcharge tied directly to the event and typically with a set amount and or sunset date. As recommended at the board review, the analysis proposed amounts and time frames set forth in the technical memorandum for the CZU wildfire recovery. The district's actual final net cost to the wildfire recovery and repairs could be more or less than the estimated 5 million. The district contends the track its costs against the revenues generated by the surcharge. The surcharge is proposed would end automatically upon the collection of the estimated 5 million, which will occur in approximately five years after the implementation. If the district's actual costs are lower than expected, the board could reduce or terminate the surcharge earlier without conducting another Prop 218 process. Water service rate increases must comply with Prop 218, in particular with the California constitution. And with that, I'm going to ask the district's council to explain the Prop 218 process and then come back for questions. Okay, thanks, Rick. The short version of what's going on here with the Proposition 218 process is that while a charge like this can be structured a number of different ways, here it's been proposed to be added to the monthly water bill for customers. And therefore it's best characterized for legal purposes as a water service charge, which is subject to this particular part of Prop 218, which requires notices of the proposed rate increase to be sent to all customers, by which I mean all customers who pay bills and all parcels receiving water service. And then in that notice has the date and time and location of a hearing at which the board will consider the surcharge. Customers have an opportunity to submit a protest, one per parcel. And if the number of protests is more than 50% of the parcels of the district, then the rate cannot go forward. If they're less than 50%, then the board can vote to adopt the surcharge as proposed. And it is a 45 day notice period before the hearing can be conducted. So that means that if the board approves the draft Proposition 218 notice language that's in the packet tonight, the district will then have to finalize those, have them printed, finalize the lists to which those notices will be sent and get them sent out. And then there's a 45 day period before the board can conduct the hearing to decide whether to implement the charge or not. And for that reason, I believe we've proposed a hearing date of, and I apologize, I'm just trying to scroll down now, I think it's early August, August 5th, Thursday, August 5th at 6.30 p.m. And via Zoom, because we're still in this COVID remote meeting world, so Zoom meeting rather than an in-person meeting. And I'm happy to answer any questions about the Proposition 218 process. Director Ackerman, you wanna start questioning if you have any questions? No questions. Director Ackerman. Chair Mayho, if I could just add, I think we have the consultant on this news as well. I didn't realize that, I forgot, you're right, please. So I'll just, Greg Klumpner's with NBS, it's the company that did, it's the firm that did the district's last rate study. And he came online to help prepare the technical backup that's required under Proposition 218 for this kind of a charge. And that's the memo, or that's the technical memo that you see as an attachment to the board memo in the packet. And I believe he was just here to answer questions if there are any about the technical analysis. Would he like to say anything upfront or just answer questions? Hi, this is Greg Klumpner. I'm happy to answer questions. I think the analysis is pretty straightforward. You know, the couple of tables that are in the memo, I think that the math works out pretty simply. So, you know, it is a charge based on system capacity or potential demand of a system based on meter size. And really, it's pretty simple and pretty straightforward, but I'd be happy to answer any questions. I agree, it was pretty straightforward. Jamie, just let me check in with you again if you had any questions. If not, I'll just go on to Director Volts. Yeah, not at this time. I'd like to hear what the rest of the directors in the public have to say. You know, we'll cycle back around. Okay. Director Volts. Yeah, I don't know if this is a question for Gina or Greg or perhaps Rick or Stephanie, but when I was going through the budget, it wasn't exactly clear to me how this money was being sequestered in a way that guaranteed that it would be used only for either out of pocket cash expenses that FEMA didn't reimburse or payment of a loan that is reducing the loan amount by 5 million. Now, the 15 million loan we took out, obviously we can't do a prepayment on. I don't know if we can do a partial one even, but it seems to me that in order for us to move forward with this, we need to make sure that there's language in what we're proposing that absolutely guarantees and make sure that the supporting budget documents show that flow, that at the end of all of this movement of money, we've either reduced our loan amount by 5 million or we've paid cash out of pocket 5 million. Right now, that money is sort of flows into the budget and it kind of just becomes part of the operating revenues. And when you look at the breakdown of the capital expenses, it's one of the reasons why I wanted to talk about actual reserves versus how we call reserves and separate those, it wasn't real clear how this money was flowing through. And I'm very concerned that this money be absolutely sequestered just for CCU fire recovery, not for any other purpose. Yeah, Stephanie, I think we've already sort of discussed this issue and I think you have some ideas how we can make sure that it is only used for this purpose. So maybe if you kind of explain what those are, that'd be great. But that language needs to go into whatever it is that we- Okay, well, I understand and let's Stephanie explain what she thinks is the best way and then maybe we can come up with language for it. So in general, the five million came about from, we know the FEMA direct projects estimate is 20 million, they only pay roughly 75%. So basic math, that's at least five million. There's some expenditures that FEMA doesn't cover, there's some expenditures that insurance isn't gonna cover. And so we have monies that have been expended so far the hard part becomes is we don't know what the exact FEMA portion is gonna be until we get to the end of these projects. These are estimates for right now. So essentially, some of these projects that we have spanning over a one two year period, we're gonna be needing to either pay out of pocket or it's gonna be paid for upfront by the loan. And then we're gonna go through a year, year and a half of incurring these expenses, it finally finishes. I submit everything to FEMA, we then eventually get an amount back from them. And so at that point, I'll know what the true cost to the district was. So on a basic ongoing basis, it's not gonna be an easy number to have the exact inflow and outflow of. We're gonna need these monies to be sitting in our operating cash account to be able to keep up with funding these projects in advance. And so it's kind of gonna be, I don't wanna say necessarily a tangled web, we'll be able to sit here and clearly state how much money we're spending on CZU projects, but it's gonna be a long reconciliation process before we end up knowing the exact amount that it's all gonna be shaking out to kind of be for what the district is paying out of pocket. I understand that Stephanie, and I'll get back to you, Bob, but I guess I'm just trying, I'm trying to kind of agree with you is that why can't this money be put in a separate account so that it can only be used for things related to CZU and yes, the values it will go up and down depending on how we are reimbursed by FEMA. But I think Bob is fully justified in wanting this particular money to be held in a, not just Bob, but our ratepayers are justified in wanting it to be held in a particular account, a restricted account that can only be used for this purpose and what's to prevent us from doing that. So may I make a suggestion? So the $15 million loan, the reason I advocated for that amount was to make sure we had ample money to cover the FEMA expenses, right? And so my belief here is that we should use that loan money for the FEMA. We should put this $5 million in a separate account and it should only be reconciled at the end or some very late stage after we have really clear picture of what's going on. Other than that, it should not be touched whatsoever. And the reason I voted again was that the process was not part of it.  And if it doesn't respond to you, you can come back. So I mean, we would be able to put this money in an account and have it flow specifically only for CZU related expenses that $15 million loan only had about nine million related to CZU. It is specific projects. So there still is a chunk of money that the district is gonna be having to pay upfront that this money is gonna help to finance on that front end. And then as we get money back on the back end, Bob brought up the fact that we financed a $20 million loan. We can choose to keep that money sitting in a bank account and have the portion of it go each year towards the debt. That is an option. If we want it, I mean, that's what we would essentially need to do to keep it 100% earmark. And Stephanie, part of my understanding in this was based, I think, on statements that you and Rick had made earlier, which is that the FEMA reimbursements would start flowing at some point in time. That is, it isn't that we would spend all 20 million and then get the first dollar of FEMA money back. But as we are spending things and completing things, FEMA money would start flowing in and that the peak cash flow requirement was probably gonna be somewhere in the order of, I think it was 10 to 12 million somewhere in there.  But I didn't think that was the way that it was working. We should start to see some of the money flow through. We've already submitted our category A and B work for different staff. And so, I mean, we will start to see it. So correct, I mean, we should be able to float ourselves. We may hit the pinch points to where some of the money needs to come out of there. And then once we get the reimbursement back, the difference only gets charged to this special account. But then either way, on a long-term basis, we're gonna have a balance sitting in there because we have long-term financing of roughly nine million of it. So, there's a portion that will remain in there. And so, if we want it to keep going perpetually to it then each year a portion of it, it can just slowly be drawn upon as we make loan payments. Let me see if any of the other board members would like to pipe in about this, Lois. Well, I don't have any questions about the 218 process because I've been through that a few times. But when it comes to FEMA, they can really take their time when they get back to paying you back. That can be an issue. And I've experienced that. So they can be very slow. But I also had a question about this fixed monthly buyer surcharge by meter size. How many, who and what have a four inch meter? That'd be $161 a month added to their bill. What is that? Who has a meter like that? The schools or the larger, any of the very large water users? Well, like schools or? Yes, the school. The schools are gonna be the main one or some of the other large ones are gonna be things like Vista del Lago where it's a larger meter serving a bunch of smaller individual parcels. But it's the large meters are typically the schools. Okay. So the three inch and four inch usually are the schools. Well, in the mobile home parks in the camp, so the two inch knowing that there's a considerable, but yes, there are the schools in that as well. The $161 a month wouldn't be every person in the mobile home park, right? No. It'd just be the park itself. The one, yeah, per meter. So that's not such a big deal. Then I looked at that amount and thought, wow, it's a lot of money. Okay. I don't have any other questions or comments. Director Smalley, did you have anything that you wanted to add or questions? Yes. Stephanie, to address the concern that Bob and Gail are bringing up, can't we do a separate budget reconciliation budget reconciliation with cash in cash out for CZU aspects? And I don't know how that gets rolled back up into the budget, but if it's separate from it, we can at least see income that's coming in from this surcharge fee that we're considering. And then whatever costs we're assigning to that fund that Rick feels are CZU related fire damage, tracking it on that and then a portion of the funds or a portion of the expenses from that construction aspect are funded from this account. And the portion is from FEMA, but it's not cash in from FEMA yet, but that's where we're expecting that to come from when it does come in, just so that we can see some level of accounting on this. Yeah, so I mean, the majority of these projects are the CZU capital projects. So I mean, we have dollars coming in and we have what the CZU expected expenditures are gonna be and we can assume a 75% FEMA reimbursement rate and keep a running record of something like that going. The tricky part is the cash coming in from FEMA, but I mean, even in this budget, we do have some of that. So I mean, it's not something that's totally difficult to do. I guess what I'm saying is I'm not gonna be able to provide an official final reconciliation until we get that actual money from FEMA to know what it should out to be. I fully understand that. I think we are less concerned at this point about that than tracking the money that we're trying to recover from our ratepayers for this fire surcharge fee and being able to appropriately account for that because if we approve this, we know when that's coming in. Yeah, I mean, I agree that I personally want to see this tracked pretty specifically. I've heard different ways about how people wanna have it done. So from a logistics standpoint, that's where I really will be looking for how the district manager and the board want to see it as we start to fully reconcile it. We can break down a slide in the budget to specifically look at this. That's not an issue at all either, but I agree that reconciliation is key. Okay, all right. So you've heard comments from us. You can bring that back to us at a subsequent board meeting then. Well, can I just suggest and see if other people might accept this addition to the recommendation that is already provided by the staff that we just simply add and establish restricted account for these funds that could be used only to pay for CCU repairs. Yeah, go ahead, Jamie. Before we take a motion or a vote on that, I had one question about doing that and if we could hear from staff. Is there any, so the money that's coming in via the surcharge, obviously, we will collect it gradually over the next five years. Is there any downside to having this color? I mean, like, does this limit in some way your ability to be nimble and flexible? I will say I tend to agree with director Smolley and Foltz about having some sort of a clearly, identified viable fund for this, but I'd just like to hear whether there's something that we would be costing you in terms of your flexibility if we did it. From my standpoint, no, and I strongly agree with, I think all of you, that this money used to be spent on CCU by related charges. And I think it's important that, and if we don't do it tonight as part of moving forward, and that's kind of what the finance manager spoke earlier on the budget presentation, we have a lot to talk about moving ahead with this budget on how we do reserves and so forth. But I agree with the board that, this money needs to go into the CCU fire and Bob is correct. We've had rate increases in the past that we've sold on capital improvements and I've sold those capital improvements. We've never done those improvements until now, frankly, until this board and the previous board. So I strongly agree with that with those principles. I just wanna add quickly that if the board wants to see something like that, I'd suggest having a proposal brought back at a subsequent meeting for exactly how to do it because I'm hesitant on the legal side to put that language in the fly onto the motion and become bound to it without flushing it out a little more. Does it need to be in this motion? I mean, does it need to be part of tonight's action, Gina, and how we account for this money?  It does legally, it does not need to be part of this motion. The board can require particular accounting or require that the district put this money in particular funds or to account for it certain ways without it being part of this motion to move forward with the 218 clause. So I guess maybe I'm a little confused then relative to what is being sent to the owners of the district customers. What language is it then and wouldn't this need to be appended to that in order to make it crystal clear to them that this is what the money is going for? The district can put a statement to that effect in the 218 notice. It does not have to. There is no 218 requirement to add that. And if we're going to do it, we need to do it very carefully and make sure that it matches exactly what the district does in fact intend to do. And that's some of my concern with kind of writing the language on the fly. I mean, this to me is a commitment written in blood, right? This isn't something that we want to be very general and vague about in our 218 language. And then, you know, say, because boards change, things change, but the ratepayers don't. I guess I'm less concerned, Gina, about, I understand your desire to be very careful about how we word this in the Prop 218 notice. But I think that what Bob and Mark and I are trying to get is at least a sense of the board, not exactly how you're going to word this, but that this is specifically tied and we're not going to approve this, you know, the go ahead on the Prop 218 until it is clear that we've tied it this way. And so, am I, that's how I feel about it. I don't want to try to speak for Mark or Bob. Well, and that's why I see, I thought we were going to vote on some specific language that would be going to the, you know, to the customers around the Prop 218. And that's why this, in my view, this needed to include it, but because in the past there have been, I mean, this is something that is a recurring theme in a lot of areas where people think they're voting on something and then something happens because the language wasn't very specific. And so the money could be used in other ways, loopholes. We can't have any of those. So is there any urgency on this? In my opinion. If we ask you to bring it back to the next board meeting, revising the recommendation to include the language that you are worried about, Gina? Well, I don't want to cause this to get kicked down the road. So I guess where I sit, as long as it's clear, you know, what the board is requesting and Stephanie and Rick are comfortable with it and know what it means, then we could put it, you know, it could be included in the motion and then we could put a statement to that effect in the 218 notice. But I do think that it's worth some discussion to make sure that that language is what the district can and will actually do, because otherwise we could be creating a problem for us. Mark, did you have something you wanted to say? Yes. When does this 218 notice need to go out? Well, it has to go out at least 45 days before the hearing. So if we're talking about a hearing on August 5th or so, that's honor about June, I don't know, 25th, maybe? Right, and then it takes a couple of weeks to get the notices printed and so forth. Right, okay. So if we approve the recommendation that's provided to us tonight with the stipulation that at the next board meeting we have this language, does that still allow the district to move ahead? With this to then hit that tentative August, whatever August 5th public hearing? It's becoming a little bit tight because 45 days back from August 5th, that's like June 10th or something. So that would be weak to get the notices absolutely correct. So yes, you do want it now. Okay, all right. Amy, did you have something you wanted to add? Yeah, so I think, first of all, I think that if we delay, the cost is that right now we are projecting for 11 months of the fire recovery surcharge in the next budget and any delay that pushes us beyond the projected implementation date, and of course all of this public process has to unfold before we could vote and implement it, then that means potentially we're pushing out the date at which we start to bring in those revenues and so that there's a material budget impact, right? But beyond that, I think, I'm just wondering if I really appreciate the concern that the board members were showing about wanting to be very careful about communicating to the public how this money is collected and spent and reserved for these costs and expenses. And I think what I'm hearing staff and our legal counsel say is that we can go forward now with the Prop 218 process to start the public outreach process so that people become aware that we're considering a fire surcharge. And then we can come back at a subsequent meeting and be very specific in our direction that should we choose to go forward with the implementation of a fire surcharge, we the board are gonna give a real specific direction about how we want those funds to be reserved and identified in those reserves. Gina, is that kind of a fair framework for what you're talking about? Yes, that's a fair summary, thank you. Well, we've already done the proceed of Prop 218 vote a few months ago. So that's been out there percolating. This is in fact the time that we need to be very specific in our language. I appreciate the need to move forward on it. Again, one of the reasons that I advocated so strongly for 15 million instead of five was to make sure that we have a team around things like this to make sure that we work. So I am not prepared to vote what is in the board packet right now. Gail, your amendment certainly makes it better, but I'm hearing that Gina is very concerned about the fact that we may be buying ourselves in. I'm not sure I understand that, but we can have a special meeting next week if we need to. I really don't wanna do that. And I guess I'm gonna push back on this, Gina, and that I understand your concern, but I think everybody understands that what we're doing here is simply directing the staff. So if we're not trying to word this exactly now, we're just trying to express our intent. And what I said was simple. It's clear what we're trying to do. And we leave it to the staff, which includes you and Stephanie to figure out the exact way to do it. And I just don't want us to put this whole thing off or spend more board time on this to try to get the wording exactly right when we can make the boards in 10th gear tonight. Bob. Unfortunately, these things, devil's in the details. So will the board be voting on what is going to be sent out to our customers? I'm not sure that we actually ever read or approve the exact thing that is sent out to our customers. We depend on our staff to do that sort of work. And I'm not even really sure that we should be micromanaging in that way. We should express our wishes and trust our staff to carry out the intent of what we're saying. We're not lawyers and to expect us to on the fly, be able to do that is unrealistic. But I don't think it's unrealistic for us to be able to in plain language express what we want. Yeah. Lois. Things have gone five ways before after the intent is expressed. So I agree with what you said about trusting our staff to do what we want. I trust our staff and they will take care of this and they can put the wording in the 218 process. We don't have to do the exact wording. And as I'm listening to this, I think, okay, am I just naive that I trust our staff? Maybe I am, I don't know. But it just, I agree it's micromanaging the staff and we need to move ahead with this. And the letters that go out should say that where the money's going. It just seems simple to me, but maybe I'm simple minded. I don't know. Well, I guess I'd like to ask Rick to weigh in here if he wants to. There is a graph, proposition 218 notice, attachment C in your packet. There is information there. You know, I definitely staff would like to move forward with this. And, you know, if there's some tweaking that we could do the 218 notice, I don't know if it's necessary. When you read the notice, it states what it's for. Well, we seem to be, it's sort of a, we need to move one way or the other on this. So I think the best thing to do is to just, I'll go ahead and make my revised recommendation and we can just vote on it. And if people don't wanna proceed that way, they can vote no and we'll, then I guess we'll just have to come back to the next board meeting and deal with it then. That seems like the only way out of this unless somebody has a, Mark, go ahead. Gail, I think we still need to go out to the public. Yeah, I agree. But I just wanted to ask, I just felt like we were just kind of agree, you know, in limbo here without making any kind of decision. So I was trying to get us to the point where we at least had an idea of what we were asking the public about. I see, okay, okay. So I'll just read what I was suggesting and then we'll go out to the public and we'll come back to the board for further discussion. So this is that we are making a motion that we accept the NBS technical memorandum and direct staff to proceed with conducting a Proposition 218 process, including scheduling a public hearing and mailing Proposition 280 notices as required by law and establish a restricted account for these funds that can be used only to pay for CZU repairs. Okay, and then we can tweak that a little bit if you want, but that's kind of the general idea. And with that, can I go out and get responses from our public members? I see we have 15 and Beth Thomas has a comment. Go ahead, Beth. Hi, thank you. I'd be interested, Gail, President Mahood, in Gina Nichols' response to what you just read and whether she's the one who initially had some concerns about adjusting the wording before approving it. And it would be important, I think, to hear from her about what you just read. Okay, when we go back to the board, we'll ask her that immediately. Great. Anyone else from the public would like to make a comment or ask a question? Mark Lee, please.  Can you hear me? Yes, we can. Yeah, I'm amazed that the board is actually moving ahead with this without public discussion. We don't even know, 90% of the people are not even aware of the fire recovery surcharge and what the implications are monthly. You're putting something out, we have no study on the screen here showing what the average rate increases are gonna be. Nothing here displayed in the public discussion. That's number one. I'm absolutely appalled. I can't believe you're moving forward with this without further public discussion. Two, there's been no discussion on the loan amount, the term and the interest rate. I'd like to have those questions answered. I'd also like to look at why are we locked into a five-year period? Why not an eight-year period of payoff or a 10-year period to reduce the actual financial impact on a lot of the lower income and seniors in this community, which make up 20% of your rate payers, by the way. Three, Proposition 18 allows for public input during the voting period. Do you have provisions for allowing rate payers to witness the counting of the ballots? That's addressed to Gina. And so a lot of these, this information is still very cloudy. This is as clear as mud, and I cannot believe that you're moving forward with this without answering some basic questions. I'm looking at a screen here with item 11B with a title of fire recovery surcharge. There's no data here. I don't see it. There's no information here that I can review. Mr. Lee, I guess... So I'd like to have those questions answered. The agenda's on... Otherwise, there will be a large protest. I can tell you right now. Thank you for your comment. I would just simply say... I like my answers. I am answering if you would allow me to answer. Thank you. One, this issue has been brought before the board before and was thoroughly discussed at a meeting... I don't know, a month or so ago. You don't know? Yes, it was. The other issue is that all of the information about what this might cost different users is available on as part of the agenda packet. And just to answer your question, for the typical user, it will be on the order of just under $10 a month. The reason for five years is that that's kind of the amount of time that it's gonna take to finish off all of the projects more or less. The issue of the loan is something that is totally unrelated and was discussed at length at previous meetings. So I suggest that you go back to those agendas and those minutes to find out about that loan. The loan was at a very favorable rate at about 2%. And that's the reason that we took it out was to give us enough money to make the repairs. And so I'll just leave it with that. Jamie? I still have not finished the other question to our legal counsel. I will go to her in a minute. Jamie? Sure, I just wanted to respond. I appreciate his concern about wanting to participate in the public discussion of this. And what we're doing tonight is actually just starting the public outreach process. If we vote in favor of this, we're not voting to implement the surcharge tonight. What we're voting for is to tell staff that they can begin the process of going out and doing the public outreach to do exactly what you're concerned about, which is get your feedback about what this is and to talk to you about what it is that it would mean for your bill specifically. So you'll have more opportunities between now and August to weigh in on this. And I really appreciate your concern about that because this is not the end of that process. That's correct. Gina, did you wanna respond to what Mark was saying? Well, I guess all I can say is that the district does have policies and procedures about the Prop 218 process that follow the law. They follow the terms, the actual language of Prop 218 and the omnibus Proposition 218 Implementation Act. And they contain some additional detail about the balloting process. I don't remember all of the specifics of that, but I can assure anyone who's interested that the district will follow the law related to Prop 218 and conducting the process and tabulating the ballots.  Did you wanna address Mr. Lee's questions? Not specifically, but they're related. So I'll wait. All right, that's fine. Did we have any other questions from members of the public? Cynthia. Yes, recently I went on the website to access the agenda items so I could read all these details. And I had to register in order to get to the agenda. That had never happened before and I was wondering whether it was something new on the website and I hope the other people in the public who are concerned about getting information are following in the post and the press banner and whatever other means of information they have. The friends of SLV Water, we try to put information on the website so people can access it more easily, but we do need to have those links to the SLV Water District website and make it easy for people to find that information. Thank you. A little puzzled about what problems you're having because I had no trouble getting linked in to. I just went there as well and I didn't ask anyone. Maybe you're having a problem with Adobe opening the PDS or something forcing you to register, but there's no problem with the information on the website as far as I know. Yes, I just wanted to let you know that it was the first time it ever happened to me and at the time I was wondering whether it was something new but I talked to other people and no one else had a problem with it. I don't think it's a problem. I think something odd happened probably with your attempt to open a PDF. Normally, we don't go back for second questions, but Beth, if you've got a second one, that's quick, go ahead. Hi, thank you. I actually was just going to remind you that I had asked what Gina Nichols' consideration of your language that you were proposing was and how it would cover the conversation tonight. Okay, Gina, would you like to answer her? I can do that. I wonder, Chairman Hood, if it might make sense to close out public comment and then I can respond. Yeah, I think that would make sense, yeah. Just to answer, and there might be other questions to you. Okay, if you don't mind, Beth, Alayna Lang. I just wanted to chime in on that whole logging in thing. When it was first posted, it did require a login and then I went back later and there wasn't a login required. And then additionally, I just wanted to say I am a little bit concerned about this surcharge hitting our schools. I think they've already had a really tough year this last year with COVID and putting a further burden on them that's higher than everyone else that definitely brings up concern for me. So that's all. Thank you. Okay. Any other comments from attendees? Hearing none and seeing none. Gina, why don't you go ahead and answer Beth's question? I don't mean to be difficult, but Chairman Hood, I appreciate your sort of deciding to pose the question to me just because some legal questions are a little difficult to answer on the fly in a public setting. No, no, no, no, I fully understand. Yeah, and I certainly can comment on the motion that you proposed. And I have two comments. One is that you had framed it as to be used only to pay for CZU repairs. And I would suggest like we broader language, repairs and recovery because there are CZU fire costs that aren't, you know, one could argue or not necessarily repairs. I mean, they could include, you know, handing out water or other things. Then the other comment is that I just, I was hoping that Rick and or Stephanie could weigh in on, you know, restricted account that can be used only to pay for CZU repairs because, you know, I'm not a finance person and I don't know what that language translates to in terms of their operations. So I guess I'm looking for a little bit of certainty that the staff, especially the finance staff can actually do that before the district commits itself to it as part of the process. And I guess I'll put in a third too. So can be used only to pay. So that means that funds going out have to be for CZU, say repair or recovery, but what about fund, you know, funding coming in? So this money will get used up very quickly if FEMA reimbursements don't get applied to the account.  And so I just wanna make sure that the folks who do manage the account can comply with the language that you're proposing. Yeah, the reason I didn't wanna say anything about, I wanted to be silent on the issue of whether FEMA reimbursements could go in just because I thought that gave more flexibility to the staff to do whatever is the most logical thing. But let's hear from Stephanie and Rick about this. I can at least talk on the having a restricted account. So there's nothing, I mean, it can be a actual bank account we can open. It can be a general ledger account that we open that we label as being restricted. So, you know, we can deal with that aspect internally. The proposed draft 218 notice does state that the surcharge could be terminated early, you know, if the wildfire net costs are less than the five million. So to me, that means I am going to be actively tracking and reconciling this. And while, yes, I understand Gail's point on trying to remain silent on the FEMA monies coming back in.  This is the net cost to the district. And that, I mean, and that's a relatively easy thing for us to display on an ongoing basis. Okay, well, that's good news. I mean, I have faith in you figuring out how to do this. Bob, did you wanna make a comment? Yes, several I think. You know, this isn't an issue of trust the staff. This is an issue of our community trusting their board and the policies that the board sets. In the last two big rate increases that we had, and by the way, proportionally, this rate increase will affect the residential customers at a far, far greater rate than it will affect the schools just because of the size of their bill. When you look at the press releases that went out around those rate increases, none of them mentioned that operating expenses were going to skyrocket. In the case of the first rate increase, it was on the order of about 20% on the second one over a two year period, it was about 35%. So I can't think of anything more important that the board should have oversight on than a rate increase and the budgets, of course. Money is our primary job. So I'm very uncomfortable with the notion of moving forward though your language, I get that it's trying to get there. I would probably be more comfortable if the budget that we just reviewed had been crystal clear in how that money was being addressed. So I know Stephanie was trying to work on it, but it wasn't crystal clear. And I'm concerned about that in terms of how all this gets implemented. Because once this is approved, and I think, let's be honest, I think everybody is in general agreement that the community, I mean, there's no one else, the community is going to have to fund the fire recovery. It's simply a question of over what period of time and how much the repair costs are actually gonna come in. And at the end of the day, to get back to where we were, status quo ante before the fire. So that's my concern. It's just a little bit unclear right now and previous history has been, we as a board have not done a great job. We'll try to do better. Go ahead, Jamie. Well, I think that we're conflating a couple of issues because the question of whether the operating budget is going to increase is not the same question as whether we need the fire recovery surcharge to cover the 25% that we're obligated to in order to restore and recover our infrastructure from the fire, right? So I appreciate Bob's concerns about the operating budget but focusing on the fire recovery surcharge, I guess I would pose the question to Bob. He's concerned about the language. I think he, and maybe I'm not understanding his concern but I think he's concerned that in the language we send to our customers, we're being very clear that this money is going to be specifically identified only for costs associated with, and Gina has provided some nuance around being careful around that language, recovering from the fire. And maybe if I'm understanding what he's going for, he wants some kind of language in there that says that we're going to isolate this funding in some specific way to ensure that it can only be used for those purposes. And if we could include language to that effect in the notice that goes out to the public and in the public outreach materials, Bob, would that address the concern that you're raising? Well, just to rewind a little bit, the issue was the last two rating increases was sold by the board on capital improvements. What we didn't say in this press releases is that most of the money went to operating expenses.  Ordered for a repeat, I would like the board to be able to look at what that language is before it goes out because that is an oversight for us. As long as we have that, we can move forward tonight, I believe, but it has to come back or I can't support it because I don't know what that language is gonna be. The proposed language is in the agenda. So if there's, is there like a specific, they did questions with answers. So are you guys looking for like an additional question with an additional answer to be a little bit more clear on that this is gonna be tracked closely? And if you start getting too cumbersome in the notices about accounts and how we're doing things, I think you'll confuse our customers and I wonder what are we talking about? There'll be more outreach as part of this process, but I don't wanna, I don't wanna really confuse our folks with a bunch of accounting. And I agree with Bob, don't get me wrong. I agree with you, Bob, that it's important that this money is spent on CZU and our customers know that, but I don't wanna get too bogged down in details to them. I agree. Mark. Yes. We've heard from Stephanie, we've heard from Rick. Gina has a pint on this also. I'd like to move forward with the motion that President Mayhood has read. How do we, how can I make that motion at this point? Just make an amendment. Make the motion. Okay. I don't have your, I don't have the language that you're using. If you'd like, I'll read it. Please. Okay. That we direct the staff to accept the NBS technical memorandum and direct staff to proceed with conducting a proposition 218 process, including scheduling a hearing and mailing proposition 218 notices as required by law and establish a restricted account for those funds that can be used only to pay for CZU repairs and recovery. Thank you. I'd like to make that motion. Okay. I will second it. Okay. I make an amendment. Any further discussion? I propose an amendment. What would you like to propose? And that the language that staff develops come back to the board for review and approval at the next meeting. I would not second that amendment only because it would cause a delay in our ability to proceed with the public outreach process if we require the staff to come back to us with specific language. And because I think that the overreach of... Okay, Jamie. Jamie, let me just do this by Robert's rules of order. Sorry, I thought because I seconded it. No, no, the way this works is that Mark can accept that as a friendly amendment. If he doesn't, then the amendment itself is proposed as Bob does. And somebody must second that emotion. That emotion, I said. Got it. I see. Get silly here. Second that motion. And if there's no second, or if there is a second, we vote on it. If there's no second, then we just go back to the original motion. So I'm not making an amendment. Okay. Thank you for that clarification, Bill. I'd like to stand with the motion as originally read. Okay. Thank you. So Bob has proposed an amendment. Is there a second for the amendment? Hearing none, we will now vote on the motion as proposed by Director Smalley. Holly, would you please take the vote? President Mayhood, Vice President Henry. Yes. Director Ackman. Yes. Director Fouls. No. Director Smalley. Yes. Motion passes. On to the next item of new business, which is the utility billing policy. Yes. Thank you, Chair. The district's finance manager will present this item to the board. Hello. Staff was directed to try and figure out a way to no longer do the tags and turnoffs and figure out a more amicable way to work with our customers. This went to the admin committee and one of the things that we discussed is in order to prevent turnoffs from occurring, it really becomes an issue with the fact that we allow tenants on accounts because at a certain point, the owners need to be aware if a tenant is in arrears. At the end of the day, owners are ultimately responsible for the bill. And essentially, if you have tenants that know that they're not paying the bill, that they don't actually have to pay the bill, it's gonna, it will likely create quite a bit of confusion. So since a lot of this does have some pretty big decisions to make, we're looking for direction from the board before we turn around and write a full proposal. So section one is talking about how eliminating turnoffs, the rationale that the board's express is that it waters a basic human necessity and we wanna figure out other ways to collect the past due balances. SB998 is a major bill that you have to jump through a lot of hoops to turn off someone's water for non-payment. This would essentially eliminate if the district is not doing turnoffs for non-payment, it essentially makes SB998 null for our district. It is projected to have some financial savings since there was, you know, there is increased costs to implement this policy. The con is if this is not implemented with the removal of tenants being able to have accounts in section two, there's gonna be a lot of additional procedures needed to let the owners know that they're in arrears and then that likely is gonna offset some of the savings that we mentioned above. The preferred alternative that the district has been moving towards is putting past due balances on the property tax rule. The pros is that this is an effective means of collection and would result in accounts not going past essentially 12 months in arrear. It would be very difficult to implement across the board if we continue with an owner-tenant relationship. So evaluating the elimination of options to have tenants on accounts, the district used to have only owner accounts. There are other water agencies that do allow only owners on accounts. We did start to allow tenants. It has, you know, the complications for the turnoffs. And then it would technically simplify the billing process. We wouldn't have so many cut-ins and cut-outs for every time a tenant comes in and out. We do have a lot of confusion around that with owners and tenants sometimes. We have approximately 850 owner-tenant accounts currently. And we actually are seeing more and more owners starting to take over their own accounts because at the end of the day, they're responsible for the water bill. So they would rather have the bill be in their name and be in the know a little bit more for what's going on. And another pro is the likelihood of collection. It should be beneficial for the district. Right now, if a tenant goes or a owner that has now left the property goes to collection, they retain about 40% of any amounts that are collected. So that will additionally help us in the bad debt savings. In my view, a con to this would be, you know, owners, there are some owners that are gonna prefer to have tenants with their own accounts. So this would create, you know, likely some rental agreement modifications or them working with the tenant a little bit more to be able to get these types of bills paid. The district would still continue to allow for long-term payment arrangements and continue with the $10 late fee to give people incentive to continue to pay their water bill on time. So essentially numbers one through three in the memo hinge significantly on if the district is looking to remove tenants from having their own accounts and switch back to being an owner only operation. It would be relatively easy for us to facilitate for a district of our size.  A lot of the different types of policies are not a one size fits all model, similar to how SB998 is a very difficult thing for small agencies to implement versus the large. So given the task for trying to figure out a way of eliminating turn offs and perpetuity, this was the most clear path that the district was able to come up with that would fit our individual agency. And so we're looking to get some feedback from the board and the community on moving forward with this process. So just let me clarify that we're not actually voting on anything tonight other than directing the staff to develop more formal proposals based on these items. And they would then come back for real vote later. So, Bob, would you like to start the discussion? Sure, since we discussed it in the admin committee. Yeah. You know, when SB998 first came down, my assessment of it was that this was just way too big for our district to handle. And so, you know, thankfully, Stephanie's really worked very hard, I think, in coming up with what I think outlines the conclusion of the admin committee, which is that we need to move away from this. When you layer that with the fact that we're not turning people's water off. I mean, come on, one way or the other, people are still gonna have water. So it almost becomes sort of a kabuki theater of doing these turn on and turn offs. And we're not really doing anything in terms of helping, you know, people make sure they stay in water. And then finally, just keep things simple. We're way too small to have complicated and one size fits all for LA, you know, water districts applied to us. I had a number of owners reach out to me when this first came about a year ago or so. And most of them said that they were gonna be switching their tenants over to where they owned the bills. So Stephanie, I'm not surprised to see that trend happening. I think the consensus of the committee was this was definitely worth the board's review and hopefully moving forward with these kinds of recommendations. Point I was still on the admin board and I would just second everything that Bob said. I thought the staff has thought this through very carefully. So I'm in favor of all these changes. Lois, would you like to make any comments? I would. I realized that when tenants don't pay and even though the owners knew it would come back to them, you get very angry people, the owners. So I think just having billing owners is a good idea. And as far as putting the past due on the property tax, it's pretty simple procedure. I've been involved in that and it works. And the only time it really that I found that it doesn't work is if it's a huge amount and it's been a number of years that they haven't paid. And then the county may balk at that. But basically the county teeters, which that means that even though they haven't received the money from the property owner, they'll still pay the district because eventually the county will get that money plus interest. So they just go ahead, they call it teetering to pay the district. And I think it's the best and only way to go. Thank you, Lois. Mark, did you have anything you wanted to add? I was going to ask before Stephanie and Bob commented about the feedback that they're already getting from owners. One of my questions was, so what's the likely pushback? But I'm hearing owners are already saying, we're changing our rental agreements. I'm in favor of going to the switching to owner only accounts as Stephanie is proposing. So that's it. Okay, how about you, Jamie? I am with Director Henry, what she said. Okay, great. Well, unless we have any more comments from the board, I'll go out and see if there's any comments from the public. Alina Lang. I know it's just a few accounts, but have we thought any further of trying to address those people that are on the rate assistance program that would be kicked off when they're the owner of the property, when their income is considered for that? So that is one of the things where it's gonna be an intricate policy rewrite. And so we did discuss that. And what we're gonna do is, as long as they're able to show proof that they are part of the care program at that address, we will still allow enrollment in the program. And then obviously we're hoping that, since the owner is getting the bill with the discount, that discount is being passed on to the tenant that is living at the property. Does that answer your question, Alina? Yes, it does. Thank you. Yeah, I was really pleased that the staff bought that through. I mean, it's not a lot of people, but it's a few people that it really might matter to. So I was glad that they bought it through. Elaine. Hi, yes, Felton, Elaine Fresco. I'm just curious. It seems like if people don't pay their own bills, they're not as concerned with saving water and how you thought through that issue. I would consider that a true statement. If the owner isn't communicating to the tenant, hopefully the owner is taking proactive steps in installing low-flow toilets, high-efficiency clothes washers, different stuff like that.  It's Santa Cruz County or the city of Santa Cruz has water allotments for houses now. So I'm assuming at a certain point, if you go above that, the owner may be requiring you to pay that additional penalty on top of it. So I'm hoping that, I'm envisioning owners still having the tenants pay the bill. So that's still gonna give them the incentive. It's just that the district is not gonna facilitate the benefit of us providing the owner-tenant billing relationship. Okay. Does that answer your question, Elaine? Well, I guess, no, yeah. Not really, but I don't think anyone can answer. Yeah, you're right. It does in some ways put a little bit more pressure on the owners to figure out ways to pass those incentives along. Okay, I don't see any more comments from the public. Are there any more comments or questions from the board? If not, I would just suggest that the motion be that direct staff to develop formal proposals based on items one through three to be voted on by the board at a future meeting.  I don't know, Bob. I'll let you make that call to share the chair. Well, I guess I'd like to ask Stephanie if she thought that that would be helpful, because we certainly wanted to be helpful in the development of this process. Wouldn't mind having some extra eyes on the policy. So I'm not opposed to it going to admin. Then that way, when it does come to the board, we hopefully can have a well thought out and hopefully adopted policy. Great, well, let's do it then, Gail. I think that would be a worthwhile thing. All right, so then I would revise that to be direct staff to develop formal proposals based on items one through three to be considered by the admin committee and ultimately voted on by the board at a future meeting. Is that okay? Can I have somebody move that? Oh, move. Okay, second. I'll second that. All right. Holly, do you need for me to repeat that or are we okay to take a vote? I haven't recorded, so I can go ahead and...  President Mayhood. Yes. Vice President Henry. Yes. Director Ackman. Yes. Director Fultz. Yes. Director Smalley. Yes. Okay, so we have the last issue that sort of related to budgetary issues, which is past due bills. So, Rick, what would you like to do? Stephanie will present this to the board. Okay. But it's the night. Certain aspects of the past due policy were temporary suspended in April of 2020 due to COVID-19. In July of 2020, we had a board meeting to reinstate some of those to avoid continually having to come back to the board for each of the different piece mail. Where we're proposing that the board reinstate the past due process and the utility billing policy, the district will continue to follow, obviously all state mandates. There is still a moratorium on doing water shutoffs for non-payment. You know, obviously the policy that we just talked about is kind of moving us in that direction as well. We're also gonna be implementing the, we're also looking to implement the property tax rule for this year in order to still be conscious of the impacts from the COVID-19 pandemic. We're going to, for this first property tax rule, collecting for balances that were owed prior to 1231 2019. So this is kind of getting those extremely long-term past due accounts that the district has had on the books to start to clean those up. And so essentially we're just kind of looking to get some of these officially, well, the whole thing reinstated so that the district can move forward essentially with collection policies and still following any state guidelines. Again, Bob, you wanna start as the chair of the admin committee? Sure. I mean, I think this is a, I think this is definitely worthwhile to do, particularly getting going with the collecting past due balances. And as Stephanie said, it was important to us that we be a little more flexible with the amounts owed once the COVID-19 pandemic started. So I think the background here is very self-explanatory. The committee was in favor of moving this forward to the board for its review and consideration. So Lois, did you have anything to add? Actually, I do. And I don't wanna sound hard-nosed here. And I realize people have problems, but I've been dealing with people paying their bills for so many years. And some people just never pay. But it's a way of life. I mean, eventually they pay after they run up $10 late fees and they get further and further in the hole. It's kind of a catch-22 because if we start hitting them with late fees, they don't start paying. They're just further and further in the hole. But at the same time, we have to give them a shove to pay. And like I said, it's a way of life for some people. Doesn't mean they're dishonest or trying to cheat. It's just they don't know how to deal with money. So in a way, I hate to do this, but on the other hand, I think we have to. Did you have anything you wanted to say? No, I don't have any questions on this. I think we should move forward ahead with it. Great, me too. Jamie. I agree, we should move forward. All right, so let's now go out to members of the public. Does anybody have any comment or question that they would like to tell us about this issue? Seeing none, hearing none, we'll just come back to the board. And basically what we're doing is the motion from the staff is to reinstate the past due process and the utility. Bob had his hand up. Oh, sorry, I'm sorry, I didn't see you, Bob. Go ahead. Well, I was just going to make the motion. So if you don't want me to do that. I was just going to read it and then, but go ahead. Yeah, well, I move that the board reinstate the past due process and utility building policy and continue to follow any related executive orders by the state. Okay. I'll second that. Holly, would you please go ahead and take the vote? President Mayhood. Yes. Vice President Henry. Yes. Director Ackman. Yes. Director Falls. Yeah. Director Smalley. Yes. Motion passes. And we come to our last item of new business, which is the emergency intertie with Big Basin Water. Yes, thank you. On May 10th, 2021, Jim Moore, who is the owner of the Big Basin Water Company, made a verbal request for the installation of an emergency potable water interconnection between the two systems. A Big Basin Water experienced a considerable amount of damage as a result of the 2020 CZU Lightning Fire damaging several of the company's water sources that damaged its surface water treatment plant and a considerable amount of other components to his water system. On April 9th, Big Basin received a compliance order from the State Water Resources Control Board requiring Big Basin to have a second water source or permanent interconnection to a nearby water system, and that being the only nearby water system being the San Lorenzo Valley Water District. And also the second requirement, or one of the other requirements was that the State Water Board, a contingency plan that describes on how Big Basin Water was secured the temporary water source in the event of his failure of his only one operating well. This request is for an emergency intertie and will be considered an emergency only and not considered a permanent meter connection and will be subject to contractual limitations. All costs for the installation of the intertie, including materials, engineering, labor, pumping, temporary power, will be the responsibility of Big Basin Water. I made it clear to Mr. Moore that the district will not pay for this work on a reimbursement schedule that he would have to be required to install all of this under Big Basin Water and then pay for ongoing meter charges. I'm asking the board to approve that the district can supply a emergency interconnection and inform staff to put together an agreement and bring back to the board for approval. And with that, I'll take questions. As we often do, Rick, me and Gina get together to discuss the agenda before the meeting and we kind of agreed to a slight change in the recommendation that made it more clear that we're not paying for any of this. And that is that, so that the recommendation has been changed to direct staff to prepare an emergency intertie agreement with Big Basin Water Company for board review and approval and to proceed with giving advice regarding procurement activities needed for design and construction of the intertie for the owner of Big Basin Water. The previous statement of the, made it sound like we were paying and we were gonna go ahead and start buying things. And I just wanted to, when I questioned Rick, it was clear that that isn't what was meant. So I just wanted to state that upfront so that we could maybe forego some concerns or questions on that issue. But starting with that, go ahead, Lois. I do have some concerns. It bothers me that Big Basin has totally ignored the state water board. Have not, they have not complied with any of the orders from the state water board. And okay, I'm hearing that they will have to pay for the intertie. But how are we guaranteed that if there's an emergency and we send them water and don't get me wrong, I'm for being good to your neighbor, I believe in that. But they need to pay for that water. And what's the guarantee? And now, SLV was so good to Long Pico. They loaned us money, but they wanted a guarantee that they would get paid back. Well, Long Pico got property tax money so the county could say, well, they don't pay you, we'll pay you from their property tax. So I want to help out Big Basin. But anybody who will ignore state requirements months and months and do nothing and then think they're gonna sell that place need a reality check, they could go into receivership which we got threatened with in Long Pico and we were paying our bills and we were following state requirements but we didn't have a manager. So I just see this as a possible issue. I think about how much the water costs. And if they need that emergency, they have an emergency, they don't have the water. Somebody's gonna have to pay for that. And that's my concern. It isn't that I don't wanna help them, I do. But I have a little trust issue since they didn't follow state requirements and I have no knowledge of them not paying their bills. Don't get me wrong and don't get me wrong. I wanna help them out because certainly Long Pico was helped but they've gotta step up and show that they're gonna take care of all these state policies and guarantee if we send them water and through an emergency that that water is going to be paid for. Thank you, Lois. I have a feeling that you've just expressed what a lot of the directors are concerned about and you've lived through this directly. And I'll just add to your concerns is the problem I see is that once you turn water on, it's really gonna be hard to turn it off because you'll be pitched as the bad ogre. So Rick, if you can sort of lay some of our fears, that would be great. And I've had this discussion with Lois and subsequently I've had this discussion with council because of this concern that Lois raised. And the agreement can be structured just about any way that the district wants including requiring deposits up front before we start the flow of water. I don't have any reasons to think that Big Basin wouldn't pay their bill. And Lois is right, once we turn the water on and if the worst case scenario was to happen and we're not gonna let those folks run out of water, obviously they've been through a considerable tragedy through the fire. But it is a concern and we can try to stay on top of it and through the agreement, either do a deposit or we can bill them quite frequently, two week intervals, whatever, and have some payment arrangements in the agreement. And I do believe council, she had some other thoughts on how we could strengthen the agreement to make sure that the district was paid for water sold. I don't know how far, Gina, you wanna- So you can just add it all, our way to put the agreement together. I prefer to wait until we put the agreement together and simply get the comments here that we'll use to make sure we're covering the things the board comes about. No, that makes total sense. And we're really hopeful, there's a lot of people working behind the scenes with Jim Moore to either get his improvements done or to change of ownership or whatever. I'm hoping that there will be some type of smooth transition either to a private company or he'll reach out to San Lorenzo Valley for discussion. And hopefully we don't go down that road. That would be unfortunate and it would be messy. Director Smalley, would you like to comment? Yes, I have a number of questions. So we received a phone call or verbal request for Jim Moore on May 10th. Do we have anything in writing from him yet? We do not. Are we going to get anything in writing before we begin work? We can do that. I think that that's appropriate at a minimum, a one-page letter requesting us to begin the process rather than just a verbal request. How long do you anticipate Rick that it would take them to construct everything that was listed for this emergency enter tie, which I think included some type of a treatment system also? Well, we don't need, you know, our systems potable water passes all state standards, obviously he does not need a treatment system, but what he will need is he will need some type of temporary or subgenie power and he will need a pump because there's a significant elevation difference between a big basin water and San Lorenzo Valley water. He'll have to pump into his system. And many, many years ago, when I first started back in the 70s, there was an enter tie at that location. It was very small. It had a power pole and it had a pump underground, but that's been moved 25, 30, maybe up to 40 years ago. He's been removed. But this is something that we would be supplying on the order of 0.35 to 0.62 million gallons per day, which is what I was seeing is there required capacities necessary? No, we would not, that may be their requirement, but what all we would be supplying is approximately, we would limit this interconnection at 50 gallons per minute. We're running the numbers right now. What's available, another great byproduct of our master plan that we just completed has those hydrants and has the mains in that area. We know what type of water availability we have. We feel comfortable as supplying roughly a maximum of 50 gallons per minute. Okay. I have to work out that math to see how that compares to what they were using on a gallon per day because the state was setting a requirement for them. Right. That they had to have available. Okay. So we're gonna cap the amount that we're gonna be able to send him in this, in this agreement that we would be drafting. Okay. And as to how long it would take him to construct this, it sounds like this could be something fairly simple then within a month or two. That's the best part. My thoughts, you know, I did request engineering data from him and design work to see how this would tie into our water system. Obviously it has to be protected with a state approved cross connection control device. So we have no backside finish. Right. He may have some CalTrans or County encroachment permit requirements to be able to park something on the side of the highway there. Okay. All right. Lois has addressed the cost for water. What about any of our district internal staff costs to get to the point of being able to flow water? There'll be a few hours of both the district engineer and the director of operations. We can definitely go that into the agreement. I think we should in order to be fair to our ratepayers some fees in order for us to execute and maintain this agreement with them. Okay. I'm looking at my questions. That's all I have. Okay. Thank you. All right. Jamie. I agree with Director Smolley that there should be some language in there that includes any staff time that we have to administer the intertie and any other subsequent frankly arrangements that we should always be looking at staff time when we're entering into these contracts. Just so that I'm clear, what we're doing here tonight is we're telling you that you now have the authority to go out and negotiate or structure a contract that I'm assuming the big basin water would also be a signatory on that would outline the responsibilities of this agreement is that and so you'll bring that to us. Yeah. Improving the concept of installing an emergency intertie and directing staff to move forward with appropriate agreement. Right. So you'll bring back to us the finalized agreement once the language is drafted and agreed to with big basin and then we'll That's correct. Great. Okay. Do you have any questions? Let's see. I'm having a hard time finding Bob Volts. He's dropped off. Yeah. Okay. Well, then waiting for Bob, let's go out and see if any of our public attendees have anything that they'd like to say. Larry Ford, go ahead. Thank you. This is Larry Ford Felton. What I haven't heard any discussion about is what constitutes an actual emergency. It's my understanding that they don't have an emergency right now and it would only be if they're well failed. But I wonder what other kinds of circumstances as an emergency and that should certainly be included in any agreement. Thank you. We agree and then speaking with council, we were going to look at, you know, other emergency agreements we have. You know, we do have emergency intertide agreements and that would be built into this agreement. This is not a permanent installation. This is strictly a temporary emergency and it's interruptible if for some reason that we have issues due to drought or our own mechanical issues in our water system, this water would be interruptible. Comments by the public? To members of the board, I have to say, Rick, I was really happy that you just added that last thing about it could be interruptible if there were issues related to the drought because I'm really worried, you know, when I start carrying 50 gallons per minute, whether that starts to be an issue for us if we have a really, really dry year. But let's see if Bob is back with us. Hmm, I don't seem to see him. Does anybody else see him? Yeah, Gail, I'm back by telephone. Okay, thank you Bob for the effort. Yeah, the broadband here is not good. Yeah, I mean, you know, I have an enormous amount of empathy for the more family here and the challenges that they're facing. I don't know that we can't even, you know, come close to grasping what they've been through and what kind of road they have ahead of them. And, you know, I'm sure that the state water board has all this, you know, in hand. I did the numbers, it looks like that's gonna be roughly about 4% of our total production per year, assuming that, you know, it went for an entire year and it sounds like if it's emergency only, it's probably not gonna even be that much. So hopefully, you know, the leak program that we have to eliminate some leaks might give us some flexibility there as well. Rick, I did have a question. Is this an above ground or below ground intertide that's being contemplated and how big a pipe would that be?  First off, he was supposed to have his engineer. He says he has an engineer to design that engineer and I gave direction for him to contact the director of operations so they could kind of lay out the configuration. I'm thinking, Bob, that something like this is probably gonna be trailer mounted, you know, an emergency rain for rent type thing that it'll. Right. Okay. That's fine. The generator will be trailer mounted. And most likely it'll be, you know, probably a four inch. I doubt it'd be any larger. It'll be a four inch. Turn it. Yeah, especially at the 50 gallons per minute. So yeah, I mean, I'm definitely in favor of though, I think Mark's suggestion of, you know, let's get some things in writing. Let's just do business, right? Just normal business, you know, they sign a credit risk and, you know, get things in writing that they want to proceed because as soon as we start spending money on attorneys, you know, that's money out of our pocket and out of our ratepayers pocket too. So, you know, I'd like to make sure that all of that cost is recovered in some fashion as we go forward. But we definitely need to help our neighbors and we really need to help those that have been just devastated by this fire. And certainly the big basin water company falls into that category. And you know, I think he's lost over like 200 connections. There's not a lot of connections still up there. And this water is going to be at our retail rate and it's not going to be cheap water compared to, like he's supposed to do. So there's incentive for him to get his system back up and running. Yeah, absolutely. No, this is really the right thing. I mean, it falls in line with what we did with the water filling station. You know, we need to help our neighbors. Thanks, Gail. I'm trying to get back online now. No, I'm glad you're there. Jamie, go ahead. I just want to confirm or ask, I guess, we proceed with like the fire recovery surcharge in the billing relationship. One assumes that all things being equal, this metered connection would also have to pay any, you know, additional future fees that may be recoverable. Is that a fair assessment? There'll be no connection fee. I just want to be, it'll be a temporary set. It's not a permanent set. So there'll be no connection fee charge. It'll just be, you know, the volume of water purchased. Did that answer your question, Jamie? It did. Thank you. Good clarity. I just want to, I think that this is a really good conversation to table for when you have negotiated the terms of the contract, because maybe all my questions will be resolved through the process of that negotiation. Okay. Are there any other members of the board that want to comment on this before we, go ahead and make a motion. Okay. If not, is there anybody that wants to make a motion or would you like me to reread what I had as a revised motion? Yes, please, Gail. I make one suggestion. Yeah. But I'd advise, how about consult, consult? Okay. And to proceed with consulting regarding, is that what you want? That's right. Okay. All right. So let me read it again.  We are making a motion to direct staff to prepare an emergency intertie agreement with Big Basin Water Company for board review and approval. And to proceed with consulting regarding procurement activities needed for design and construction of the intertie with the owner of Big Basin Water. Is that okay? Thank you for making the change. Okay. No problem. And Holly, did you catch that? Or you have the record so you can go through it. So would anybody like to make that motion? I would. Okay. I'll second that. All right. I'll make the motion and then you can say. Somebody already made the motion. I made it. And Holly, would you like to take the roll call that please? President Mayhood. Yes. Vice President Henry. Yes. Director Ackman. Yes. Director Fultz. Yes. And Director Smalley. Yes. Motion passes. Move on to the one remaining item of the finished business which is exploration of possible consolidation. Would you like to start that discussion? Thank you, Chair Mayhood. Exploration of possible consolidation of the two district's San Lorenzo Valley and Scott's Valley water. In your packet you have a lengthy memo.  I'm just going to start with a little background. At the February 4th, 2021 SLD Board of Directors meeting the district manager and district council presented an agenda item to the board regarding the possibility of consolidating with Scott's Valley water district. The staff report suggested there may be substantial benefits if the two agencies would be consolidated. At the March 4th meeting, board meeting, the staff outlined a recommendation to take the initial steps needed to explore whether or not to initiate a consolidation between the two districts. It was not recommending to approve a consolidation only to initiate a public process to start engaging with the public gathering information needed to make a decision. By motion of the board, the San Lorenzo Valley district manager was directed to meet with Scott's Valley district manager and prepare a brief summary of pros and cons, benefits and risks to include a rudimentary budget analysis. The report was to be presented at the first meeting in May, 2021. It was delayed due to the fact that we were down one board member and we wanted to ensure we had a full board to continue discussion. Developing benefits and risks pros and cons was not easy. And a much higher level of analysis is required for reaching conclusions. You know, at this time, there was more benefits than risks were identified in this report. Basically, I'm asking the board to review this memo and to refer this item, to continue to explore consolidation, refer this item to the admin committee, have the admin committee develop a public process, developing a, moving forward and developing an RFP for a feasibility study and then return back to the full board with an outline moving forward. And with that, most of this is in your packet was the actual analysis that was done. Finance manager put together a high level SLB district consolidation expense analysis for your review. I know there's any questions, I'll be happy to answer. And I'll turn it back to the board for discussion. Thank you, Ridd. I would just like to say that we've already discussed a potential consolidation twice. And we've heard and received considerable public input. So rather than revisit the merits of the idea of consolidation writ large, I hope we can focus based on the report that Rick provided us on the proposal that we have before us from the staff, which is to direct the admin committee to develop a draft RFP for a feasibility study for consolidation of the San Lorenzo Valley Water District and Scotts Valley Water District for board consideration and approval by August 2020. And with that, I'll ask Mark to go ahead and your next in line to start a discussion. Okay, all right. Rick, a well-written memo. More than the two pages that I was thinking, but a very good memo summarizing the aspects of this. And I do have to admit, if I count the numbers of what you've identified for benefits versus risk, yes, there are by numbers more benefits than risks. However, if one of the risks so significantly outweighs benefits, I don't think we can count by numbers, which I agree. And after looking at the risks in here, the one for the Santa Marta Rita groundwater agency to me is now becoming the most significant. And it's only been in the last two months that I've come to this understanding and it's been at the last two meetings that I've attended as a director for the Santa Marta Rita groundwater agency. And what's going to be likely happening over the next number of years for that. You've outlined in here the percentages that currently Scott's Valley is paying and what our district is paying for the administrative costs for this agency. However, that doesn't reflect what various districts are gonna have to end up paying for whatever mitigation aspects or project management actions required in order to get the basin to recover. I don't think you can quantify that.  And we have the diversity of water sources. I think they're much more heavily impacted by what's gonna have to happen to recover the water. I have the concern that if we were to merge our rate payers are gonna be taking an undue burden to fund mitigation actions that is being necessary for the water that Scott's Valley has been pumping out of the ground. And we're gonna be paying to some degree or a significant degree for helping that part of this larger basin recover. So that is the essence of what I'm seeing here as the big elephant in this memo that's sticking out for me. So that's my take on it at this point. Thank you. Jamie. Thank you. And thank you, Director Smully for su