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2023-10-17 Special MeetingEDMONDS CITY COUNCIL SPECIAL MEETING MINUTES APPROVED MINUTES October 17, 2023 ELECTED OFFICIALS PRESENT Mike Nelson, Mayor Neil Tibbott, Council President Vivian Olson, Councilmember Will Chen, Councilmember Diane Buckshnis, Councilmember Susan Paine, Councilmember Dave Teitzel, Councilmember Jenna Nand, Councilmember 1. CALL TO ORDER STAFF PRESENT Oscar Antillon, Public Works Director Rob English, City Engineer Mike De Lilla, Senior Utilities Engineer Jeff Taraday, City Attorney Scott Passey, City Clerk Jerrie Bevington, Camera Operator The special Edmonds City Council meeting was called to order at 6 p.m. by Mayor Nelson in the Council Chambers, 250 5t' Avenue North, Edmonds, and virtually. 2. ROLL CALL City Clerk Scott Passey called the roll. All elected officials were present. 3. COUNCIL BUSINESS 1. UTILITY RATE STUDY AND ADOPTION OF A UTILITY RATE ORDINANCE Public Works Director Oscar Antillon introduced Chris Gonzalez, Principal, FCS Group. Mr. Antillon advised the utility rate study has been discussed with individual and small groups of councilmembers over the last few weeks. The City's Water/Sewer Manager, Brett Gehrke has relayed all the utilities in the region are interested in ensuring utilities maintain the health of the community and are safe and resilient. The goal of the utility rate study is to ensure the utilities are self-supporting and have adequate resources to operate and invest in capital needs. [Due to technical difficulties, Mr. Gonzalez's PowerPoint was not displayed in Council Chambers. The PowerPoint was provided in the council packet.] Mr. Gonzalez reviewed: • Why Are We Doing This? o City utilities are enterprise funds that need to be self-sufficient ■ Revenues need to cover costs in the long run o City utilities have substantial infrastructure replacement needs ■ 30 — 40% of City's mains have exceeded standard useful life estimates Edmonds City Council Approved Minutes October 17, 2023 Page 1 ■ Delaying needs increases operating costs and risk of failure - Main breaks - Inflow and infiltration (accelerates need for sewer treatment plant expansions) o Goal is to recover an equitable share of costs from existing/future customers ■ Delays can lead to "snowballing" needs that have adverse rate impacts ■ Debt can be used to spread costs of large projects over time - Rates should support ongoing capital projects (e.g. main replacement program) - Term of debt is limited to the expected useful life of the facilities being funded Overview of Financial Plan o Defines "cost -based rates" as rates based on aggregate obligations ■ Operating costs ■ Capital project expenditures ■ Debt service payments ■ Other financial needs o Establishes a multi -year financial plan beyond the current budget cycle o Key Elements of Financial Plan: ■ Defining revenues and expenses ■ Developing capital funding strategy ■ Establishing fiscal policy "framework" Fiscal Policies o City does not have formal policies ■ Recommendation: Draft policies for Council consideration/adoption next year o Financial plans assume each utility maintains a combined operating/capital balance equal to at least 180 days of operating expenses ■ Policy recommended by bond rating agencies - Falling short of this standard could lead to higher interest costs/reserve requirements ■ Helps mitigate cash -flow issues during construction season Key Drivers of Water Rate Increases o Recent inflation (higher than long-term averages) o Increased operating costs ■ Water purchases from Alderwood WWD (8% annual increases projected from Everett) o Capital needs Capital Costs by Year (2023- 2032) Capital Funding Strategy (2023 — 20321 $100 $s o Total: $U.5M c $6.0 $4.0 $2 0 $0.0 N N N N N N N N N N u Yost & 3eaview Resenroirs ($9.6M) ■ Main Replacements ($44.9M) Expected to increase annual debt service by $803,000 Key Drivers of Stormwater Rate Increases o Recent inflation (higher than long-term averages) ■ Less funding available for main replacement program and other needs o Capital needs ■ Need to generate $2.5M in local matching funds for large stormwater projects - Staff proposes setting aside matching funds from existing balances and issuing bonds to fund other capital projects Edmonds City Council Approved Minutes October 17, 2023 Page 2 Capital Costs by Year (2023 - 2032) $10-0 Total: $,37.3M $8 0 o_ $6 0 $4.0 $2.0 $0.0 ".T N� N N N N N N N (7 th th N N N N N N N N N N ■ Main Replacements ($22-9M) * Other Projects ($14.4M) Capital Funding Strategy (2023 - 2032) Expected to increase annual debt service by $218,000 Key Drivers of Sewer Rate Increases o Recent inflation (higher than long-term averages) ■ Less funding available for main replacement program and other needs o Capital needs Capital Costs by Year (2023 - 2032) $0 $35.5 0 Total: $127.2M $30 0 c $25 0 °_ $20.0 $15.0 $10.0 $5-0 $0.0 Capital Funding Strategy (2023 - 2032) Expected to increase annual debt service by $3.6M Lnnw'odWectsrEdmondsWcls 282M Proie 1,4 5aoM F Edmonds share is � 50% ■ Other City Sewer Projects ($7 2M) ■ Main Replacements ($33 9M) • Bimonthly Single -Family Bill @ 14 ccf Mountlake Terrace 5153.49 $55.92 $158.62 $368.03 Woodinville [1] $146.16 1$34.671 $166.42 $347.25 Lake Stevens $99.08 $42.83 $198.00 $339.91 Bothell $99.70 1-$37.521 $202.22 1 $339.44 Monroe $101.06 © $184.30 $323.80 Bainbridge Island $65.28 -� S210.40 _ $313.35 Shoreline [2] $133.77J s1o7_d0 11 $295.99 Edmonds (Updated) $118.19 $50.89$286.33 Edmonds (Existing) $108.48 -= r$46.90 I , $261.49 Bremerton $67.52 $43.00 $149.92 $260.44 Mukilteo $74.74 $134.96 $259.37 Alderwood WWD [3] $64.06 ®_ S156.94 11 $243.09 Lynnwood $77.28 $132.35�J $241.32 u Water Rate o Stormwater Rate u Sewer Rate [1] Woodinville Water District's sewer rate includes King County's wastewater treatment rate ($104.22 bimonthly) [2] Shoreline sewer rate assuming Edmonds wastewater treatment. [3] Stormwater bill shown for Alderwood WWD assumes Snohomish County's stormwater rate ($132.54 per year) applies. • Cost Impacts to Low -Income Households o Affordability assessment based on industry metrics Edmonds City Council Approved Minutes October 17, 2023 Page 3 City of Edmonds 1.2% 6.3 5.0% Affordability Threshold 4.5% 8.0 10.0% o City offers low-income discount program ■ Established by City Ordinance No. 3629; currently published on City website - Human Services is aware and helps advertise program to eligible customers ■ Customers can qualify for a rate reduction based on income levels - 30% rate reduction if disposable income is 50 - 60% of County MHI - 50% rate reduction if disposable income is < 50% of County MHI ■ 95 - 100 customers participate in program on average Recommendations o Adopt proposed rate increases for 2024 - 2026 ■ Water: 9.0% per year ■ Stormwater: 8.5% per year ■ Sewer: 10.0 -10.5% per year Water Bill $108.48 $118.19 $128.95 $140.52 $153.08 $166.94 $180.21 Stormwater Bill 46.90 50.89 55.21 59.90 65.00 66.62 68.29 Sewer Bill 106.11 117.25 129.56 142.52 156.77 172.45 189.69 Total Bill $261.49 $286.33 $313.72 $342.94 $374.85 $406.01 $438.19 Change from Prior Year +$24.84 +$27.39 +$29.22 +$31.91 +$31.16 +$32.18 Percent Change from Prior Year +9.5% +9.6% +9.3% +9.3% +8.3% +7.9% o Monitor financial status regularly, considering adjustments as needed ■ Revisit 2027 - 2029 rate increases sometime around 2026 Councilmember Olson expressed appreciation for the slide that compares Edmonds' existing and updated bimonthly single family bill @ 14 ccf with other communities (packet page 18). She recalled Mr. Gonzalez stating during the presentation that the Cost Impacts To Low -Income Households and Affordability Assessment Based on Industry Metrics (packet page 19) were based on the existing rate; she asked if the affordability assessment was done on the updated rate. Mr. Gonzalez answered he did not think the increase would be enough to exceed the industry metrics. Councilmember Olson asked if he could provide that information to council in the coming week. Mr. De Lila said that information was provided in the spreadsheet of questions generated from meetings with councilmembers; he recalled the affordability ratio next year increased to 5.5% and to 6.3% in the third year which is still below the affordability threshold of 10%. He offered to resend the information. Councilmember Teitzel referred to packet page 16, Key Drivers of Stormwater Rate Increase where the pie chart indicates $8.7M is from grants/ARPA. He asked how much of the $8.7M is ARPA and how much is grants. Mr. De Lilla answered $155,000 is ARPA and the remainder is grants. Councilmember Teitzel referred to packet page 19, Cost Impacts to Low -Income Households, expressing surprise that only 95-100 customers participate in the City's low-income discount program, anticipating there were more residents that qualified. He asked how the program was advertised. Mr. De Lilla answered it is on the City's website; in talking with utility billing staff, many people who apply do not qualify. The City's Human Services Program Manager Mindy Woods provides that information to everyone she comes into contact with. A mailer has not been done lately. Utility billing staff to do not recommend an insert due to the additional cost; a separate mailer would cost $6-10,000 to send it to all households in the City. Councilmember Teitzel asked if there was a way to print an announcement on the bill. Mr. De Lilla answered there is not enough space on the bill; there are only two lines of very fine print available. Edmonds City Council Approved Minutes October 17, 2023 Page 4 Councilmember Teitzel was hopeful newer and more creative ways could be identified to notify people who may qualify. Mr. De Lilla anticipated a postcard mailer would be the most cost efficient and effective. Mr. Gonzales provided the following in response to Councilmember Olson's earlier question about cost impacts to low-income households and affordability assessment based on industry metrics for the updated rates: Average Water/Sewer Bill as % of Median Household Income MHI Hours at Minimum Wage Affordability Ratio @ 20tn Income Percentile AR2o City of Edmonds(existing) 1.2% 6.3 5.0% City of Edmonds 2026 1.4% 7.5 6.7% City of Edmonds 2029 1.7% 9.1 8.7% Affordability Threshold 4.5% 8.0 10.0% Mr. Gonzalez noted the affordability ratios are set via industry experts and will increase at some point as costs continue to increase. He noted minimum wage is not representative of what a lot of Edmonds residents earn based on typical income levels. Councilmember Nand observed the City's website states the water/sewer program is closed as of September 2, 2023. There is a QR code that links to Snohomish County's low income household water assistance program (LIHWAP) which states the program is unfunded because federal grant funds ran out. To stay in accordance with Ordinance 3629 that mandates the City provide a reduction of 30-50% for people who are low income, she asked whether that program would need to be funded via City resources. She recalled in her discussion with Mr. Antillon, he indicated that could be funded via the enterprise fund versus an allocation by council. Mr. De Lilla advised Snohomish County's LIHWAP is a different program. Councilmember Nand reiterated the City's website states the City's program is closed. Mr. De Lilla recalled the packet of information sent to council contained a link. He asked Councilmember Nand to send him a link to the webpage she was referring to, assuring that the City's low-income discount program is active. Councilmember Nand relayed the top of the website states in red, the water/sewer system program is closed as of September 2, 2023. She wanted to see how easy it would be for a ratepayer to access these programs. Mr. De Lilla advised there is a link to the low-income utility discount program via senior services on the City's website; the majority of people using the discount program are seniors. Councilmember Nand expressed interest in a paper advertisement and application for people with disabilities or who lack internet access to apply for the program. She asked if a budget allocation would be required to fund that. Mr. De Lilla answered he would need to check, he could see that as a possibility. He relayed the estimate for a mailer was $4,00046,000 or a little more depending on the type of mailer. There could be a budget amendment to include funds for that. Mr. Antillon advised staff will follow up on both those items, to ensure information is readily available and easy to find on the website, and if the program is not funded, work with council to ensure there are funds available. Mr. De Lilla assured the discount program is funded, he confirmed that with utility billing prior to the meeting. Councilmember Nand relayed when accessing human services from the City's website, then selecting utility, water, sewer assistance and then selecting water/sewer assistance is where it states the water/sewer assistance program is closed as of September 2, 2023. Mr. De Lilla offered to confer with utility billing department. Councilmember Nand asked if notification of the assistance program and how to apply could be sent to rate payers in concurrence with the rate increase. Mr. De Lilla suggested sending out a mailer with the rate increases and how to apply for water/sewer assistance. Edmonds City Council Approved Minutes October 17, 2023 Page 5 Councilmember Buckshnis asked if the 180 day reserve calculation was embedded in the rates. Mr. De Lilla answered it was. Councilmember Buckshnis observed the City does not have a policy and asked why 180 days was used versus 90 like most other industries. Mr. De Lilla answered during the construction season, $1-2 million/month can be spent on projects; if the reserve was only 90 days, that amount may be exceeded if $1-2 million/month was spent 3-4 months in a row. He assumed that was why bonding agencies recommend 180 days. Councilmember Buckshnis commented it has never been embedded in the past such as in 2019. Mr. De Lilla answered it was included in all the previous rate studies including 2019, 2016, and 2013. It is all about making sure the City gets the best rates for their bonds and make them as marketable as possible. Councilmember Buckshnis hoped the council adopted a policy next year. Councilmember Buckshnis said she could not reconcile anything with the CIP other than the Yost and Seaview reservoirs. She observed there are water main replacement of $44.9 million and the total cost is only $25.8 million. Mr. De Lilla responded the horizon for the CIP is 6 years, the rate analysis covers 10 years. The CIP also has a total for 2030 to 2044; the rate analysis should include 2030, 2031 and 2032. Councilmember Buckshnis said she included that and still did not come up with the same numbers. It would be nice to have a reconciliation on the numbers. She agreed the City has aging infrastructure, but citizens want clarity. Mr. De Lilla referred to the detailed model for all three utilities, one page shows the CIP/CFP based on the data available when the models were generated; those were the numbers that were used. Councilmember Buckshnis asked if it would balance to those numbers. Mr. De Lilla responded it should balance to the numbers in the models. The model was built before the finalized CIP, all the changes and increases were added, but the majority is based on a hybrid of last year's CIP and this year's CIP. The utility rate process began in January. Mr. Gonzalez added projections/estimates on main replacements were pulled from last year's study. This rate study went back to the base estimate in the system plan instead of adjusting for assumed inflation, actual inflation for 2016-2022 was used in making projections. He commented on being mindful of assumptions and not just carrying over data from the last study. Councilmember Buckshnis wanted to be mindful of transparency for citizens before approving the rates. She noted stormwater shows main replacement of $22.9M and she came up with $12.M and projects of 14.4M which does not reconcile. Councilmember Buckshnis expressed concern with Lynnwood I I% and $28.2M imbedded in the utility rates and wanted more information on that. The 11% will be a large plant and she feared it was paying for Lynnwood's growth. Mr. De Lilla answered staff is in discussions with Lynwood about possibly adjusting that number; there is currently an ILA 11% so the City is stuck with that rate at this time. Both Edmonds and Lynnwood understand the number most likely needs to be revised. He anticipated a long discussion to determine how to reassess that number. The good news is both Lynnwood and Edmonds realize it needs to be done, but it will be a large process and considering the project is starting soon, there needs to be adequate cash to fund it. Another issue is that project is very early in the planning and design cycle and there are usually a lot of assumptions made early on when the number of unknown unknowns are high and the odds of the cost of the project creeping higher are more likely than if there was a 100% design. He did not want to undersell the cost and then have to play catch up and some parties not pay their fair share. In summary, it is a project with a long process, over 10 years, and what happens at the beginning falls within that 11% and the City should be able to recoup and lower rates as needed although it will not be reduced as low as 5%. Mr. Antillon said he understood Councilmember Buckshnis' concern, it is something staff is working on. The existing agreement with Lynnwood for 11 % has to be honored, but it will be updated based on growth both cities have experienced and obviously Lynnwood has experienced more growth than Edmonds. The same is true with the agreements currently in place for the Edmonds WWTP; the share is currently approximately 50150, but that will also need to be updated. Councilmember Buckshnis commented Mr. Antillon answered her next question regarding the Edmonds WWTP, relaying she had heard Mountlake Edmonds City Council Approved Minutes October 17, 2023 Page 6 Terrace is taking more capacity. She relayed if councilmembers are not comfortable with the amounts, in the past the council has not agreed to the full recommended percentage increase. Councilmember Chen relayed his understanding the increase is needed to fund capital projects, account for inflation, etc. With regard to assistance available to low income households, he noted some of the low income households are non-English speaking and asked if the postcard would be in multiple languages. Mr. Antillon advised that is required. Councilmember Paine thanked staff for collecting and sending information to councilmembers as well as spending time with councilmembers in small groups. She recalled in the small group meeting she participated it, it was pointed out no new water rights have been created over the past 20 years and that the cost of infrastructure replacement has not been keeping up with the City's 1% replacement policy. It is important to remember the importance of keeping water coming in and sewer going out. She recalled pictures of the reservoirs that were provided two years ago showing the holes in the reservoirs which have since been repaired. She appreciated that staff will be doing comprehensive outreach to the community. 2. PRESENTATION OF AMENDMENT WITH CONSOR NORTH AMERICA, INC FOR YOST AND SEAVIEW RESERVOIR REPAIRS AND UPGRADES PROJECT [Due to technical difficulties, the PowerPoint was not displayed in Council Chambers. The PowerPoint was included in the council packet.] Senior Utilities Engineer Mike De Lilla explained this amendment with Consor North America, Inc. will to take design for the Yost and Seaview reservoir rehabilitation from 30% design to fully completed design that hopefully will be done by the end of 2024. He reviewed: • Structural Deficiencies - Yost Reservoir o Roof loads per code exceed capacity by 300% o Wall flexural capacity exceeded by 14% o No roof to wall connection o Foundation insufficient to provide fixity on wall base for seismic loading • Non -Structural Deficiencies - Yost Reservoir o Joint sealants failing, reservoir leakage in exceedance of allowable per AWWA D110 o No flexibility on pipes connected to reservoir 0 18-inch gate valve reaching the end of service life o Tuberculation on reservoir piping o Corroded silt stop o Ponding against reservoir perimeter Structural Deficiencies — Seaview Reservoir o Roof loads per code exceed capacity by 200% o Wall flexural capacity exceeded by 48% in seismic condition o No roof to wall connection o Foundation insufficient to provide fixity on wall base for seismic loading Non -Structural Deficiencies — Seaview Reservoir o No flexibility on pipes connected to reservoir o Tuberculation on reservoir piping o No silt stop on drain outlet o Trees within 50 feet of reservoir o Hatch hardware corroding o Vault ladder not per code o Minor cracking allowing infiltration Structural Rehabilitation Improvements Edmonds City Council Approved Minutes October 17, 2023 Page 7 o Fiberglass Reinforced Polymers (FRP) ■ Unidirectional reinforcement ■ Applied to reservoir walls and roof • Structural Rehabilitation Improvements o Roof to Wall Bracket ■ Allows for movement for thermal expansion while preventing lateral movement between roof and wall Amendment o Acknowledges merger of Consulting firms ■ MurraySmith and Consor North America o Scope of Work ■ Complete Final Design on both reservoirs o Amendment Fee ■ $422,634 (Includes $40,000 Management Reserve) ■ $675,575 total design cost for both reservoirs o Schedule ■ 2025 1 st reservoir ■ 2026 2nd reservoir COUNCILMEMBER PAINE MOVED, SECONDED BY APPROVE AMENDMENT 1 TO PROFESSIONAL SERVICES AGREEMENT REGARDING THE YOST AND SEAVIEW RESERVOIRS UPGRADES AND REPAIRS AND ACKNOWLEDGING THE CONSULTANT NAME CHANGE DUE TO CONSOLIDATION. MOTION CARRIED UNANIMOUSLY. 4. ADJOURN With no further business, the Council meeting was adjourned at 6:55 p.m. SCOTT PASSEY, C CLERK Edmonds City Council Approved Minutes October 17, 2023 Page 8