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HomeMy WebLinkAboutWater Board - Minutes - 08/16/1996WATER BOARD MINUTES August 16, 1996 3:00 - 5:20 p.m. Light and Power Training Room 700 Wood Street CITY COUNCIL/WATER BOARD LIAISON Charles Wanner WATER BOARD PRESIDENT Paul Clopper - Phone: W 221-5556 H 226-3377 STAFF LIAISON Molly Nortier - Phone W 221-6681 H 493-2522 MEMBERS PRESENT Paul Clopper, President; John Bartholow, Vice President, Tom Sanders, Robert Ward, Howard Goldman, David Lauer, Ray Herrmann, Tom Brown STAFF Mike Smith, Wendy Williams, Gale McGaha Miller, Dennis Bode, Ben Alexander, Keith Elmund, Curt Miller, Owen Randall, Kevin Gertig, Kelley Gonzales, Molly Nortier GUESTS John Bigham, Northern Colorado Water Conservancy District (NCWCD) George Reed, Storm Drainage Board Bob Chapmann and Steve Guttenplan, CH2MHill MEMBERS ABSENT Terry Podmore, Alison Adams, Dave Frick President Paul Clopper opened the meeting. The following items were discussed: MINUTES Ray Herrmann moved that the minutes of July 19, 1996 be approved as distributed. David Lauer seconded the motion. The Board unanimously approved the motion. Water Board Minutes August 16, 1996 Page 2 NORTHERN COLORADO WATER CONSERVANCY DISTRICT UPDATE John Bigham reported that the rainfall for the Upper Colorado River, where water is brought from the west side, is still at 111%, "so we are still above average over there." The South Platte is at 121%. In each situation in each of the basins, "we are in good shape," he emphasized. Horsetooth Reservoir is still at 88.3% of active capacity; it's down about 8.8 ft. Carter is at 49% of active capacity; it's down about 54 ft. "In both cases they are almost where they should be in a normal situation," he said. "It's amazing how we have come out this year," he said. Granby is still at 99.5% of being full. There continues to be about 300 cfs flowing into it, "and we are bringing about 307 feet across in the Adams Tunnel." He went on to say that the pump plant reconstruction is on schedule. They anticipate starting it up the first of September; there will probably be testing the week of August 19th. If everything tests well, beginning the first week of September, they will run steady for a few weeks based on the amount of water that can be brought through the tunnel, and the demand on the Big Thompson River. "If there is not too much demand, they should be able to run the pump for a solid two weeks. Then they will shut down for 2-4 weeks and replace the balance of breakers and some of the control mechanisms., etc. The demand is not very high, he said; "we are delivering about 200 cfs out of Horsetooth and 420 out of Carter. "We are looking at a pretty good fall season," he summarized. Paul Clopper noticed in the District minutes that there was some discussion about a so called Gateway Park, which is something that may be considered in turning the old filter plant in Poudre Canyon into some kind of community park for the City. It seems to Mr. Clopper that the concern of the District is, if general improvements are made in the Canyon in connection with the establishment of a park, it might impact the potential construction of a dam on the Poudre. "If Grey Mountain or any of those projects are built in the future, the park could be in the flood plain of the reservoir," Mr. Bigham responded. "There was some discussion about some property at the edge of the mouth of the Canyon that the City of Greeley holds where the District's feeder canal dumps into the Poudre River and goes underneath and comes out on the other side of the River. "So it could be something related to a flood plain issue from a higher reservoir as well as inundation from a lower reservoir," Mr. Clopper commented. "Yes, that could be inundated by a reservoir, depending on the site," Mr. Bigham replied. PRESENTATION ON REVISED WATER TREATMENT FACILITIES MASTER PLAN Note: This presentation was videotaped and is available for viewing by calling Water Utilities at 221-6681. Water Board Minutes August 16, 1996 Page 3 Mike Smith prefaced the presentation by saying that some of the members of the Water Board who have been here for awhile will remember listening to a previous presentation on the Water Treatment Master Plan. The Water Planning Committee reviewed the plan, and following considerable discussion by Board members, they both concluded that the initial plan was very costly and that the Utility needed to come up with some better options. "We ended up getting some proposals from other consultants and we eventually selected CH2MHill," he said. The intent was to come up with a plan that was more affordable and with more efficient facilities. Today CH2MHILL will present their findings and recommendations. This is an introductory, informational presentation; no action will be taken at this time. He said that the process will be the same as it was previously. After this meeting staff will arrange meetings with the Water Planning Committee and possibly the Engineering Committee to study some of the details. Steve Guttenplan, with CH2MHILL, introduced Bob Chapmann who gave the presentation. He is a Senior Project Manager with the Company and is the senior consultant on the Water Master Plan. He is also C112MIML's Water/Business Technology Director worldwide. ORIENTATION Existing Facilities Process diagrams of the existing facilities were displayed on easels, as well as an aerial view of the treatment facility. The two sources of supply are Horsetooth Reservoir and the Poudre River. Each has a control facility to regulate the flow of water in the treatment plant. The treatment plant includes a number of parallel treatment trains. He went on to explain the steps in the treatment process. The basic processes in each treatment train is the same. The fundamental process is the addition of chemicals; the primary chemical is alum. It is added to the water primarily to coagulate particles in the water. After the chemicals are added, there is some kind of sedimentation device provided. They vary depending on the time the construction of the plant was completed and what technology was available at that time. Most of the contaminants are separated in those solids, which must then be processed as well. Not all of the particles are captured and some of them pass on to the next process which, is filtration. These are granular filters that consist of gravel, sand and coal; they filter out most of the remaining particles. The filters must be backwashed periodically. This creates a washwater stream that could be several million gallons a day. That needs to be processed and recovered. The washwater is directed to the washwater lagoons. Finally, the water passes into the treated water reservoirs. Chlorine is added just before the water goes into the reservoirs to provide final disinfection. The reservoirs serve as the primary detention facilities for obtaining the necessary chlorine contact time. They also provide flow equalization. It is Water Board Minutes August 16, 1996 Page 4 desirable to operate the reservoirs with a uniform flow as much as possible, and size them for maximum day demand. Revised Master Plan Intent The intent is a less capital intensive plan that will provide a continuous supply of quality water at a reasonable cost. Master Plan Review Process (a) Maximize value of the original master plan A lot of good work was done previously, and CH2M1-ULL wanted to utilize all that they could. (b) Additional bench and pilot testing This provided considerable new information. Staff did the testing on Horsetooth Reservoir and the Poudre River. (c) Strategic planning * all recommendations tied to water utility's mission and adopted council policies * commitment to maximize and optimize existing facilities * commitment to continuous improvement Key Assumptions (1) Retain the original 20-year planning period through the year 2015. (2) Revised Master Plan is based on an assumption that there will be no major new industrial or wholesale customers. There is a certain allowance for the growth of municipal and industrial water use. (3) Assumes a 20% net usage increase over the 20-year planning period: 37% increase in service area population and 17% per capita reduction through conservation. (4) The existing facilities can be optimized. Variables In looking ahead 20 years, there will be variables. There are two approaches you can use: you can make some very conservative or "worst case assumptions" about what is going to happen with these variables in the future, or you can take the approach where you can take the variables into account. By doing that, you can usually come up with better long term answers at more affordable costs, so that is the approach C112MIML is using. The key variables are: (1) Raw water quality - e.g. what's going to happen to the quality of the water in Horsetooth Reservoir in the next 20 years? (2) Customer expectations - Are they going to change over that period? Water Board Minutes August 16, 1996 Page 5 (3) Regulatory requirements - Recently the President signed into law a new Safe Drinking Water Act. This basically provides the outline for new regulations for the next several years. (4) Testingresults esults - Considerable testing has been done, and there are recommendations to do a lot more testing. This information can be extremely valuable. IDENTIFIED PROBLEMS Water Supply: Delivery Dependability This could relate to the adequacy of the City's water resources. It could relate to the reliability of various facilities. A good example has to do with the reliability of the Poudre pipe line. Quality Versus Water Rights Issues A picture of the Poudre River was shown during a spring storm event; a lot of water was flowing down the Canyon. The City has rights to that water, but it's also a time when there is considerable turbidity in that water, which presents real treatment challenges. Inadequate Capacity for Future Growth Mr. Chapmann referred to a graph showing the planning period through the year 2015 versus the projected maximum day capacity of the treatment plant in million gallons per day. This range of anticipated maximum water demand is consistent with the 20% increase in maximum day demand which was discussed previously. A range is shown because, in any given year, depending on the weather that particular year, you may have some days when demand may be higher or lower. The fundamental goal is to have the capacity of your treatment facilities be above the maximum day demand, so you meet that demand. A near term improvement was identified on the graph to complete filters 21-23 to satisfy that maximum day demand. Later on there will be other improvements. One major improvement was shown which was based on "worst case assumptions." In reality what would happen is, as the increase in demand is tracked, and complete testing of how much can be expected out of the existing plant is accomplished, a series of step increases in capacity of the treatment facilities will occur. That's the value of a strategic planning approach. Manganese in Distribution System Manganese in the distribution system is one of the challenges the Utility must face. The Utility is currently flushing the system in the spring. Difficulties of Sustaining Existing WTF Capacity/Quality (1) Seasonal raw water quality variation - Seasonal variation occurs both in the Poudre and Horsetooth. Water Board Minutes August 16, 1996 Page 6 (2) Recycle flows - This refers primarily to the washwater from the filters. Included in the new regulations, the federal government is saying that within four years municipalities will be charged with the responsibility of developing better ways to treat recycle flows. (3) Emerging regulations (4) Age and condition of facilities - What are the maintenance costs to maintain the existing facilities? Health Issues Potential Exposure to Cryptosporidium and Viruses - It has been recognized that Cryptosporidium is present in most of the surface water supplies across the country. It really came to the nation's attention about 3 years ago when Milwaukee was hit with a combination of circumstances where they had unusually high concentrations of Crypto in the raw water supply, and their treatment plant couldn't meet the challenge of that. More than 300,000 people became ill, many were hospitalized, and almost 120 people died. Crypto is serious and must be dealt with. Fortunately, considerable research has been done, and it's primarily a matter of choosing the best technology for a particular application. Potential Future Chronic Health Issues - There is also the long term potential of chronic health issues associated with disinfection of water. When chlorine is added to water, it creates a chlorinated organic byproduct which may have adverse health consequences for long-term exposures at low concentrations. Much of the recent regulation work has related to acute problems with pathogens vs. the chronic health problems that might come from byproducts associated with the use of chlorine for disinfection. Ensuring Sufficient Contact Time in Treated Water Reservoirs for Disinfection - It takes a combination of concentration of chlorine and sufficient contact time in the reservoir to kill the pathogens; providing that contact time is important. Future Solids HandlinpJDisposal Needs - There is the issue of what to do with the solids that are generated primarily in the sedimentation process. A picture of a solids lagoon showed the way that the solids are currently dried and concentrated. That process seems to be working quite well and it's economical. However, there are some concerns about whether there will be enough capacity for future demands, and the potential concern for associated groundwater contamination. Reliability of Electrical and Telemetry Systems - "What happens when the lights go out?" At home it's not a serious problem, but it's quite different when you are responsible for running a water system. A reliable electrical system to keep the facilities in operation is absolutely vital. Telemetry systems are for instrumentation control systems that allow operators to monitor various points in the system. 40 Water Board Minutes August 16, 1996 Page 7 Limitations of Chemical Systems - This was the last problem on which they focused. Chemical systems are the heart of the treatment plant because control of the chemicals is what makes these processes perform. If chemical systems aren't as safe as they should be, there may a need for some new systems. Bob Chapmann summarized that those were the problems that were identified that might prevent the Utility from achieving its mission. He then moved into the recommendations. RECOMMENDATIONS There are two types of recommendations, fixed and variable, imbedded in the plan: 1) Fixed recommendations are those identified with the primary problems they address. (In the presentation material these are listed in gold.) 2) Variable recommendations are those that are conditional in that they respond to variables as they are defined. (In the presentation material conditional recommendations are listed in white and are in italics in this text.) Conditional Recommendation: - Filter Example Investigate and upgrade filters 1-20, as appropriate, based on: * process performance - optimization * media performance - particle counters * media condition - physical exam * support gravel condition - physical exam * underdrain condition - physical inspection * Cost Range - $1.8 to $5.1 million * Highest cost included in budget Dependability of Water Supply Delivery Second pressure dissipation valve at Horsetooth Emergency response planning Raw water studies/watershed protection New Poudre delivery system Raw water alkalinity/coagulation optimization facilities Investigate and rehabilitate existing Poudre delivery system, as appropriate Quality Versus Water Rights Issues Raw water studies/watershed protection Source water management/treatability studies Water Board Minutes August 16, 1996 Page 8 Inadequate Capacity for Future Growth Provide T5 and filters 24-29 Associated chemical and electrical systems Manganese in Distribution System Chlorine dioxide treatment facilities Pilot studies Investigate and modem distribution system operation, as appropriate Investigate and provide Horsetooth manganese control, as required Difficulties Sustaining Existing WTF Capacity/Quality Investigate and upgrade TI,T2,T3, and T4, as appropriate Conduct pilot testing Complete filters 21-23 Investigate and correct hydraulic constraints, as appropriate Renovate operations space Potential Exposure to Cryptosporidium and Viruses Investigate and upgrade filters 1-20, as appropriate Upgrade wash water pond and recycle facilities Conduct pilot testing Insufficient Contact Time in Treated Water Reservoirs for Disinfection Provide baffles and modify reservoir operations Future Solids Hand] in isposal Needs Alternative solids handlinng/disposal facilities Reliability of Electrical and Telemetry Systems Change electrical service to Light and Power to improve reliability Investigate and provide reliable standby power and telemetry systems, as required Limitations of Chemical Systems Chlorine scrubber Upgrade in connection with other improvements 40 Water Board Minutes August 16, 1996 Page 9 SUMMARY Plan Anticipate a 15% capital cost reduction Original: $52.7 to $70.6 million Revised: $43.9 to $60.1 million 10-year implementation versus 5-year implementation in original plan Mr. Chapmann emphasized the dynamic nature of this master planning approach and the value of going through the plan, do, check, act type of activity. M Check Begin implementation - There are some things that are at the "do" phase now, and are recommended for implementation in the near term. Continually review Variables and Conditional Recommendations There are some strong recommendations to do additional checking and testing to see how much more capacity we can get out of the existing facilities. Act Periodically refine master plan, as appropriate Projected Cost for Water Utility Improvements Mr. Chapmann referred to a graphic that showed the next 10 years versus the cumulative cost of the recommendations in millions of dollars. The original master plan recommended improvements be completed in the next 5 years, while the revised master plan spreads those improvements over a 10- year planning period, depending on the variables that were discussed. Also, the original master plan provided for a maximum day capacity of 85 mgd, while the revised plan provides for 93 mgd. DISCUSSION Mike Smith provided graphics on how this impacts water rates. The graphs showed 3 options; no master plan, the original master plan and the revised master plan. On the left side were existing monthly rates with the typical residential rate of $23.15. "You can see over the 10-year period how that changes with each option: the original master plan going up to $36.59 after 10 years; the revised to $32.85—that's the maximum amount --and the minimum improvement increases to $29.00," he said. "There is significant benefit to the customer with the revised master plan over the original," he stated. Robert Ward referred to a couple of key assumptions; one was the projected population growth and the other was the reduction in per capita use. "Did you do any sensitivity analyses on your numbers relative to these estimates?" he asked. He acknowledged the difficulty of doing a precise analysis. Mr. Water Board Minutes August 16, 1996 Page 10 Smith pointed out that the per capita numbers were generated by the Water Resources Division. "It's not a precise science," he stressed. "I realize that, but was there a range you looked at, i.e. various combinations of numbers, and would that have influenced the timing of some of these recommendations," Mr. Ward wondered. "I think that is somewhat addressed by demand," Mr. Smith replied. "We have some weather conditions that affect the demand but also some of the variability in the projections in the per capita consumption. The smallest fluctuations are in the use patterns versus the weather effects. Mr. Ward was thinking in terms of the per capita figure being changed by mandatory metering. "I assume that would work into that reduction." Mr. Smith said that staff was fairly conservative on that figure in that we might achieve even more of a reduction with the metering program. Tom Sanders pointed out that a key assumption was based on a 20-year planning period but the master plan is based on a 10-year implementation period. "Is the 20% usage increase over the 20-year period or 10-year period?" "The 20-year period," Mr. Smith replied. "In the last 20 years, I imagine we have doubled in usage," Dr. Sanders guessed. "Part of the problem is that our service area is not growing as fast as the City's," Mr. Smith responded. "We are going to see our growth rate taper off over the next 20-40 years whereas the District's will pick up," he added. He referred to the executive summary where it showed the City population going up a lot faster than the service area population. "Someday our service area may be a non -growth area." Mr. Sanders thinks two assumptions were implicit, but weren't stated. "It seems to me you made the assumption that all capital construction and development will be at the water treatment plant at Horsetooth and not at a new site, like at the mouth of the Poudre River which we were looking at 5 or 10 years ago. The second implicit assumption is that we aren't going to look at this with a regional perspective. He contends that those are two areas that might still change everything in the next 5-10 years. Mr. Smith acknowledged that those are good points. The other site alternative was addressed somewhat in earlier studies, and it was a pretty expensive option. "The concept was that we would like to have two plants in case one breaks down," Mr. Sanders recalled. "Actually, the plant is designed to run four different trains," Mr. Smith pointed out. A major catastrophic failure would have to occur for the entire plant to shut down. "Right now there is considerable flexibility, and there will be even more in the future," he assured. Mr. Smith stated that "we really need to be able to provide water to the plant from both Horsetooth and the Poudre River at full capacity." "As far as regionalization goes, we are counting on working with the District and Greeley on the Poudre pipeline," Mr. Smith continued. The City is working with the Tri-district to develop some plans, perhaps trading water with each other. "When you referred to the original master plan, were you referring to the Black & Veatch study that was done a couple of years ago?" Paul Clopper asked. "Yes," Mr. Smith replied. Mr. Clopper was interested in hearing the top three to five significant differences of the plan that is being discussed today. Mr. Smith said that Bob Chapmann has a handout showing those comparisons. "We can look at that in more detail at another meeting," he said. Water Board Minutes August 16, 1996 Page 11 "Is it not worthwhile to consider, as a part of the master plan, that we may be taking over some of the other service districts?" Ray Herrmann asked. "That's not an assumption we made, but it could be a possibility," Mr. Smith replied. Tom Brown asked Mr. Smith to show the rate impacts graph again. His main question was what percent of the total cost of the new master plan would be covered by Plant Investment Fees (PIFs). His second question was: "Is what we see in the yellow only what isn't covered by PIFs?" "What is in the yellow is the total impact on the ratepayers from the plant, assuming that we have that growth rate and enough PIFs are collected, and they are used for the project," Mr. Smith replied. "So the PIF collections have already been subtracted out before you calculate the increase in rates?" Mr. Brown asked. "Yes," Mr. Smith answered. "We have assumed we have collected those PIFs and those have been used." "If that doesn't happen, will it throw us off?" Mr. Brown continued. "Of course it would also stop the expansion need on that chart, because you wouldn't have to increase treatment capacity," Mr. Smith responded. He noted that not all the improvements are capacity related. "As a matter of fact, very few are." Mr. Chapmann explained that most of the improvements are related to improving the whole facility. Mr. Smith also pointed out that the pipeline is a lot of money, and is a reliability issue. "There is a capacity component, but that's not the majority of it." Mr. Smith went on to explain that the types of increases in the yellow are 4-5 years of 6% increases. He displayed a chart that showed that. Mr. Herrmann asked if the green chart represents inflation. "Yes, and normal improvements, operating costs, labor costs, chemicals, etc.," Mr. Smith replied. Mr. Smith then showed a chart with the percentage increases. "Does the green assume a population increase?" Mr. Brown asked. "That option is not a reality; in other words, it's not a real option," Mr. Smith said. Dave Lauer went back to the issue that Tom Sanders brought up; the 10-year vs. the 20-year scenario. "Does this assume that these projected cost increases will accommodate what is necessary between the years 2006 and 2015?" he asked. Mr. Chapmann said what was shown on that graph was a worst case scenario. "It is more likely, rather than having that big step increase about 10 years out, there will be incremental increases in capacity. This cash flow will actually last past the 10-year period. There are some considerations about what is the most economically sized treatment plant, he said. "If I'm reading that right, the budget that is presented actually is going to get us to 94 mgd; that's costed out," Mr. Herrmann reiterated. "In other words, we'll be at 94 mgd, which is well above any demand that we are showing even within range. Any costs beyond 2004 are costs not included in the improvements that are in this plan; is that correct?" "I think what Mr. Chapmann is telling you is this is the worst case scenario," Mr. Smith began. "In reality, many of those projects may be moved to a later date based on our plan, do, check that occurs every year. Your point is well taken, Mr. Lauer." Mr. Clopper suggested that the Board identity elements of the recommended improvements that primarily relate to questions of capacity, reliability and quality, as the Water Planning Committee did Water Board Minutes August 16, 1996 Page 12 with the Black & Veatch plan. "That really helped the Board's understanding of the discussion. If there is any way of doing that again, I would recommend it." Mr. Smith said that staff also thinks that approach is helpful. "It simplifies some very complex information," he said. Ray Herrmann was curious about the cost of chlorine dioxide treatment. He assumed that it is easy to add, and it only kicks in during the summer when you experience manganese problems. "It is not something that is used continuously," Mr. Chapmann said. "It is about half the cost of ozone or other alternatives." Tom Sanders asked if the Utility has had much experience with chlorine dioxide. "It's been used predominately over the last 10 years," Mr. Chapmann replied. "It has been used in many places around the country, Texas in particular. One of its main benefits is that it can be used as an oxidant without creating chlorine byproducts. Dave Lauer wanted to be sure of the location of the water treatment plant. "Is that the one at the end of Laporte Ave. near the Soldier Canyon Dam?" "Yes," Mr. Smith replied. "You are talking about eventually adding another train to that plant?" "We are in the process of purchasing a piece of property from Colorado State University. After several years of pursuing this, CSU has finally said that they don't need it." John Bartholow asked for an explanation of the graph about drought year supply. "Are you saying that in a drought year the supply would be reduced from 13 million gallons per day to 11-1/2 MGDT' Mr. Bode said the blue band was the range between 35,000 and 40,000 acre feet that was used for the estimated supply that would be available for a 1-in-50 type drought. The bottom of the band would be the minimum. Mr. Smith said staff had considerable discussion about that graphic." "The drought year supply obviously will change," he said. "That's as of 1995?" Mr. Bartholow asked. "Right," Mr. Smith replied. "It depends on what happens in the future." Mr. Bartholow thinks it might be a good idea to show that. Robert Ward observed that it shows there is a problem but it doesn't reflect back that there's a solution. Mr. Lauer asked about the recommendation to switch electrical service at the plant to Light and Power. "Does Public Service not have the capacity to provide the improvements?" "Their system, frankly, is unreliable, whereas Light and Power is far more reliable," Mr. Smith responded. "Why weren't we served by L&P initially," Mr. Lauer asked. "Service has to be extended out there, and the cost of extending it has been a deterrent. City L&P stops short of Overland Trail, I believe," Mr. Smith explained. "L&P recently offered us a pretty good deal for extending the service," he added. Mr. Clopper thanked CH2MHill for an informative and interesting presentation. DISCUSSION - 1997 PROPOSED WATER & WASTEWATER UTILITY BUDGET Wendy Williams gave an overview of the 1997 proposed Water & Wastewater Utility budget. She began with a summary of the Water Fund. In the O&M category the Utility is looking at an increase of 5.89%, she said. "Our goal this year was to keep our O&M increases to 2%. If you subtract out Water Board Minutes August 16, 1996 Page 13 the impact of the use of chlorine dioxide we heard about in the CH2M1Ii11 presentation, and the impact of the Information Collection Rules, the O&M increase is 1.84%. The Payments and Transfers category refers to all the money that the Utility transfers to the General Fund, such as PILOT (payment in lieu of taxes), plus capital projects, and all the other expenses that are General Fund in nature. "That is where you see our largest increase; 29.81%." She explained that 67% of that increase is due to capital projects; 64% of that increase is directly related to the master plan. The Utility currently pays 5% of most operating revenue to the General Fund. There is discussion to increase this from 5% to 6%, because L&P currently pays 6%. That has not been approved yet. It will be taken up by the Council along with approval of the budget. The other fees are pretty much the standard increases that you would expect. The water assessments have gone up, but that is primarily related to Kodak shares that we purchased. There is a large increase in Art in Public Places. This program requires that 1% of all the budget for eligible appropriated capital projects be set aside for art projects. One new position is proposed in the combined Water & Wastewater Fund budgets, a laboratory technician. Comparing the 1997 budget to the 1996 budget, again the major increases are in capital projects, and personal services; bond interest and principal are going down slightly. Looking at the breakdown in percentages in the pie chart, again, the largest piece is for capital projects at 35%, then personal services at 16%, and bond interest and minor capital, both at 9%. Again 65% of that increase is related to the master plan. Next, Ms. Williams summarized the Wastewater Fund. O&M expenses increased by 1.65% which is less than the Utility's objective of 2%.There was a large increase in capital projects in the wastewater side as well. That is primarily related to the purchase of an anaerobic digester. "We currently have three," she said, and anticipates a need for additional solids handling capacity in 1997. Again, there are changes in PILOT and Art in Public Places. There is no increase in staffing. Comparing the 1997 and 1996 budget for wastewater, other than capital projects, there was not much of an increase. As Mike Smith pointed out, there will be no rate increase. Ms. Williams listed the capital projects for the Water Fund in response to a question. She emphasized that the significant part of the increase in the numbers that we have had in the last few years has been related to the master plan. She said that a 1 MGD treated water reservoir will be constructed in the northwest part of town to provide for population growth and pressure complaints. On the Wastewater side, more flow monitoring stations will be installed to help identify possible infiltration and capacity problems. There will be further improvements to the Mulberry Facility, and of course the anaerobic digester at the Drake Facility. Water Board Minutes August 16, 1996 Page 14 Howard Goldman reported that he thinks the Legislative and Finance Committee was pretty comfortable with the budget. "All we can do, basically, is to see if there are any changes in policy in the budget from year to year," he said. Tom Sanders brought up an issue related to the PILOT (Payment In Lieu of Taxes) program. "The Water Utility is already paying 5% and the Light and Power Utility is paying 6% back to the City," he said. The City general fund is looking for more revenues, Mike Smith stated "Why has it been 5% for so long? We hate to see that money being transferred to the general fund and taken out of water revenues," Dr. Sanders continued. David Lauer asked if there is any way to resist the change. "The Board can make any recommendation they want to the City Council," Mike Smith responded. Dr. Sanders said he would like to make a recommendation that they not raise the PILOT. "The primary reason they want to raise it is to get more money," Mr. Smith reiterated. Mr. Clopper noted that there needs to be a basic recommendation on the budget. "If anyone wants to make a recommendation with conditions regarding the increase in PILOT, that's fine, but we need to vote on approving the budget." Dr. Sanders moved that the Board recommend approval of the budget with the stipulation that the PILOT not be raised. Paul Clopper didn't think there was enough information on the PILOT yet to make a motion. Mike Smith explained that what staff would probably end up doing is drafting a letter for Mr. Clopper to send to the Mayor saying whatever the Board recommends. "Where I hear you headed is to recommend that Council adopt the budget as presented with the exception that the Board objects to the change in the PILOT from 5% to 6%. That would work," he added."That's my motion," Mr. Sanders said. Mr. Sanders said the Board would like more of an explanation and justification for why the City suddenly wants to make this change. I feel that it will have a major impact on the Utility. It's 1% more of all your operating budget, and that's how much?" he asked. "It's an additional $130,000 in water and $90,000 in wastewater," Mr. Smith replied. "You can buy a lot of water for $250,000," Mr. Sanders contends. Tom Brown asked where the current 5% goes. "It goes to the general fund," Mr. Smith replied. Mr. Brown asked what the logic is for taking 5% from water to the general fund. "It's labeled as a PILOT which stands for Payment in Lieu of Taxes," Mr. Smith explained. The theory behind it is if we were a private utility we would pay taxes, so the Utility pays a PILOT in lieu of paying taxes. "It seems to me that the issue here is that everybody who gets water in the City needs to pay the utility," Robert Ward began. "There is an interesting dynamic at work here; you open up a Pandora's box. Where, in the long run, does the Utility come out in all of this? If the Utility were privatized, what would they pay the City in taxes?" "The interesting fact is if the Utility were privatized, it would still be a governmental agency and probably wouldn't pay taxes," Mr. Smith responded. "That's what I was going to ask," Mr. Lauer said. "What is the point here? It seems to be a back -handed way of getting more revenue for the general fund," he asserted. "They seem to be saying if we weren't a public utility they would be charging us Water Board Minutes August 16, 1996 Page 15 taxes." "It's possible it could be a private utility controlled by the PUC, and there are a few of those around, but not very many," Mr. Smith said. "Is it not another way of making it look like residents of the City are paying fewer taxes than they are by hiding it in the water fees?" Mr. Lauer suggested. Dr. Sanders asked if anyone had seconded his motion. Mr. Clopper wanted to make sure everyone knew what the motion was. "We are not talking about the philosophy of PILOT here." Dr. Sanders reiterated that he would like to retain the 5% until there is a fundamental justification for changing it. Mr. Brown thinks we essentially are talking about the philosophy of PILOT. "Why is it even 5%?" he asserted. Mr. Sanders wondered if there should be a friendly amendment that questions the whole concept of PILOT in the first place. "That's what we're doing," Mr. Brown insisted. Mr. Clopper said it's an issue of precedence, and he would prefer not to open a Pandora's box. Howard Goldman pointed out that it could be that there was the need to not give the public utilities an unfair advantage over private entities. "In the beginning there was this idea that you would unfairly impede the market," he said. "It's a monopoly," Mr. Brown pointed out. "Does ELCO pay taxes to the City?" Mr. Sanders asked. "Part of the dynamics of PILOT is that it actually puts us at a competitive disadvantage because the districts don't pay that," Mr. Smith responded. "Our rates are going to be 5-6% higher no matter what," he stressed. "Isn't it correct that there are people in the City who don't get their water from us?" Mr. Brown inquired. "That's right," Mr. Smith replied. "Essentially, since they don't pay the PILOT, their total tax burden is lower than people who are receiving their utilities from the City," Mr. Brown continued. "Our money that goes to the general fund as a PILOT fee can be used for streets or something else, so we are subsidizing the non -Fort Collins water users," Mr. Sanders observed. John Bartholow pointed out that non -City water users pay an additional percentage. Ms. Williams clarified that these are outside city water users, which is different. "Then I was wrong," Mr. Bartholow admitted. "And the differential between rates paid by inside and outside City customers is going away," Mr. Smith added. Dr. Sanders proposed that the Board question the PILOT in general and the 1% increase specifically. Mr. Brown agreed. "It really makes no sense to be subsidizing City residents who don't receive their utilities from the City," he said. Mr. Smith said that the Budget Office will be preparing some justifications for the Council. "Once we have that, we will share it with the Board," Mr. Smith promised. "My sense is that this isn't the time or place, with this particular motion, to introduce that topic unless you feel differently," Mr. Clopper said. "There will be information from the City Manager's Budget Office going to the Council saying, 'Here's the recommendation and why."' It may be helpful for you to see the justification behind it," Mr. Smith responded. Mr. Sanders suggested that the Board not recommend the entire proposed budget until they find out about the justification for the 1% increase in PILOT. Mr. Smith suggested something in the middle. "It might be better to recommend the budget, but state the Board's concerns about the proposed change, and that the Board will make a further recommendation based on further information about the PILOT. Mr. Clopper stated that all these years when the PILOT was 5%, we didn't question it. "Now that there is a change of 1% and we question the whole thing." Mr. Sanders said he would Water Board Minutes August 16, 1996 Page 16 forget about questioning the whole thing, but he would like to make an issue of the 1% increase. "If we don't approve this budget, maybe someone will listen to us," he insisted. "It's $250,000, so it's not trivial!" Mr. Clopper reiterated that Mr. Sander's original motion states that the Board approve the proposed budget with the stipulation that they are opposed to the 1% increase in the PILOT fee. He advised that, in the letter forwarded to the Mayor, further information on the origin and justification of the PILOT be requested. Howard Goldman seconded the motion. Mr. Clopper suggested that he, with the help of staff, draft a letter to the mayor including the items the Board discussed. Mr. Brown wanted to clarify what the Board is recommending. "If we approve this motion, we are not actually approving the budget; we are approving a revised budget that doesn't recommend raising the PILOT from 5 to 6%, or are we not approving the budget at all?" "We are recommending that the budget is acceptable except the increase in the PILOT from 5% to 6%," Mr. Sanders stated. Mr. Lauer agreed with Mr. Sanders that nobody is going to pay any attention to this. He likes the idea of the Board saying, "you must do a better job of justifying this before you can expect us to recommend the budget." Mr. Smith said if you explain to the Council that you aren't recommending the budget because you don't like the 1% increase, the increase is the issue. "If that's the only issue, the Council is going to address that as they see fit. I don't see them focusing on it any more or less if you don't approve the whole budget," he stressed. Ultimately it will be up to the City Attorney. Mr. Smith thinks that the Board would be sending a strong message by saying that they recommend the budget but can not recommend changing the PILOT from 5% to 6%. "If the Board thinks that's enough of an attention getter, that's fine," Mr. Clopper remarked. "As long as we can state our concerns with a letter," Mr. Sanders added. Dr. Sanders called for the question. President Clopper asked the Board to vote on the motion that the Board recommend accepting the budget with the condition that the PILOT not be increased from 5% to 6%. Dr. Sanders wanted to make sure that the information concerning the PILOT be included in the letter to the Mayor. The vote was unanimous in favor of the motion. STAFF REPORTS Due to the lateness of the hour it was decided that the summaries included in the packets, of Treated Water Production and the Financial Status, would be sufficient. Update: Charter Review Item Dennis Bode reported that staff had a meeting with the Charter Review Committee on August 5th. The Committee had an opportunity to review the minutes on that subject from the July Water Board meeting. They were in agreement with the concepts that were raised in the discussion from that meeting, with some fairly minor changes. Mike Smith noted that they had questions about what it Water Board Minutes August 16, 1996 Page 17 means to "rent" water. There will be another meeting of the Committee on Monday evening when they will discuss the revised language. Update: 201 Study Gale McGaha Miller reported that the 201 study is on track. There was a water quality forum earlier in the week where the participants in the study met with staff from the EPA, the Colorado Water Quality Division and other experts in the field to try to get them to anticipate what they think might happen in terms of changes in water quality standards and practices to help us drive the planning process. "We generated some pretty interesting discussion on items such as watershed planning, and a newer broader view of total maximum daily load studies to see how much a receiving stream can handle in terms of discharges, and how to deal with that," she said. Near term changes in water quality standards may arise from studies of nutrient over enrichment in receiving streams. "It was a fairly general discussion. Nobody was willing to say, 'at this particular point in time, we are going to institute new water quality standards,' because they can't. Both EPA and the State are in the midst of pretty significant upheaval in terms of management and structuring. Nobody can tell us when we're going to have a new Clean Water Act, or anything like that," she stressed. But the forum gave us an idea of the kinds of trends that they are looking at. The State is very interested in and supportive of this regional planning effort. The consultants are nearly finished with the population projections and land use planning pieces of the project; they should be completed by the second week of September. "We will have a first draft memorandum of the water quality planning piece next week (the week beginning August 18th)," she said. They will have completed their evaluation of the existing treatment facilities by the end of September. "We are now looking at the first public involvement meeting in early November," she related. "Once we receive that input, then the consultants will proceed with the remainder of the project that includes: evaluation of collection facilities, management alternatives, treatment alternatives and ultimately the optimal alternative and recommendations," Ms. McGaha Miller concluded. Dave Lauer asked who has been doing the population projections. "The consultant has a demographer on staff who has been working on that, " Ms. McGaha Miller replied. "That person has been working with Larimer County planners and Fort Collins planners to incorporate those pieces. She reminded the Board of the City Structure map that was presented to the Board recently. "That's a tool the demographer is also using to be able to look at potential growth patterns in the area, and then to tie that back to specific wastewater service areas." Mr. Smith added that this is a very sensitive issue. "We wanted to make sure that we weren't out there with numbers without working with Larimer County." Mr. Lauer asked if they have come up with any numbers yet. "I'm meeting with the demographer on Monday," Ms. McGaha Miller answered. Water Board Minutes August 16, 1996 Page 18 COMMITTEE REPORTS Water Supply No report Conservation and Public Education No report Legislative and Finance Howard Goldman reported earlier on their meeting regarding the proposed budget. Engineering No report REGIONAL WATER SUPPLY STRATEGY No report REGIONAL WASTEWATER SERVICE ISSUES Ms. McGaha Miller covered this item with her report on the 201 study. OTHER BUSINESS Water Board Workshop Mike Smith reminded the Board of the workshop on Friday, September 20 beginning at 1:00 p.m. and ending at 9:00 p.m. at the Marriott Hotel. That will take the place of the regular Water Board meeting. By that time we will know the status of combining the Storm Drainage Board and the Water Board. If that occurs, we will be inviting the Storm Drainage Board members and staff. ADJOURNMENT Since there was no further business, the meeting was adjourned at 5:32 p.m. rn,t94 n � Water Board ecretary