[0:03] Good afternoon. Welcome to this meeting in City Georgetown City Council. Call us to order, and we're going to start with our employee recognitions.

[0:12] And who's going to lead us off here? Mary Lee.

[0:20] Remember push, put the mic on. Thank you. So good afternoon, mayor and council. Today I have the honor of recognizing the extraordinary dedication of our employees for their years of service with the city. These individuals are the ones

[0:36] Once keeping our city services running smoothly and ensuring our community receives excellent customer service.

[0:42] Thank you for your passion, your hard work, and your unwavering commitment.

[0:46] Today we are celebrating February milestones.

[0:53] All right, this month there's one employee celebrating five years of service.

[0:59] Ernest, can you come on down?

[1:14] That's okay, we're warming up.

[1:16] We're going to gather around, this is our only five year celebration person celebrating.

[1:21] Let me just,

[1:28] it's allergy season.

[1:36] Yeah, Ernest, if you would stay there and get the photo,

[1:38] representing all five years of service.

[1:54] Thank you and congratulations again.

[1:59] Well, this is exciting.

[2:00] There are five employees celebrating 10 years of service.

[2:04] So I'm gonna call you down here.

[2:05] You're gonna get your plaque and then you're gonna stay

[2:07] for the group photo.

[2:09] So, first on deck is Aaron St. Pierre from Finance.

[2:23] I've been too many things.

[2:24] Change my slide.

[2:25] Look at that.

[2:27] There we go. These are all our candidates. Leslie Laffing, Finance, come on down.

[2:37] Lee Wallace, Finance, Woo-hoo!

[2:45] Cynthia Economos is not here today, but representing City Secretary

[2:51] and Rocky Menchaka, permitting in inspections.

[3:03] You're probably going to have to get closer for that photo.

[3:28] Thank you all.

[3:29] We

[3:34] have one employee celebrating 15 years of service.

[3:39] So, Tate, you could see how this is done.

[3:41] Tate Sugamura for Finance or Fleet as we like to call it.

[4:16] Thank you.

[4:17] And congratulations.

[4:23] I would now like to call Assistant Fire Chief Craig Cranky.

[4:30] We're going to recognize Lance Jordy for 25 years of service.

[4:35] Well,

[4:43] unfortunately, Lance is not here today, but that is kind of what Lance is all about.

[4:49] He is not one for being in the spotlight.

[4:52] He came to work every day, did a great job, a great attitude, but he didn't want anybody

[4:57] to recognize him for anything.

[5:01] His attitude was phenomenal.

[5:04] He would help our members out if they were struggling at home, or if they were struggling

[5:09] with just life in general, he's the top person that had sit down and talk to him, he was

[5:15] great with finances, he offered, hey, if you want me to go over ways you can invest money

[5:22] and stuff, I'm not going to tell you how to do it, I'll just explain it to you, he did

[5:25] it for me and I owe him a lot for what he taught me and allowed me to do. Good enough to

[5:31] where tomorrow is his last day.

[5:34] He's retiring.

[5:36] So Lance's last shift was on Saturday.

[5:40] He worked at station 4 at the airport.

[5:42] His official last day is tomorrow, 11.

[5:45] So we wish him the best on his retirement.

[5:49] He is actually taking over the family business.

[5:51] Him and his father run a plumbing company

[5:53] and his father wants to retire.

[5:55] So Lance is taking that over.

[5:57] So that

[6:03] is super impressive.

[6:04] So thank you everybody for showing up to celebrate our 5 or 10 or 15 and our 25 years of service.

[6:10] We really appreciate it.

[6:33] All right.

[6:33] Thank you very much.

[6:35] And now we're going to move to item B, Cameron.

[6:56] Hey, good afternoon, Mayor and Council.

[6:58] I appreciate you guys making time to talk about economic development.

[7:00] Can you guess you're okay?

[7:02] Okay.

[7:04] So I thought it would be a good time to do an annual kind of economic update.

[7:08] And there's been a lot of really great things happening in Georgetown, not even just in the

[7:11] the last 12 months, but really over the last five years.

[7:14] So we're gonna hit on some of the main things

[7:16] like our approach to economic development,

[7:19] incentive tools and our philosophy behind

[7:21] how we use those tools.

[7:23] I think the exciting part will be the

[7:24] economic development activity and project update.

[7:27] So kind of talking about what's happened recently

[7:28] here in Georgetown, what the impact is.

[7:30] And then also looking forward at our opportunities

[7:33] and the focus that we'll have in the years to come.

[7:35] And we'll have some time for Q and A at the end too.

[7:37] So if you have questions, you're more than welcome

[7:38] to jump in while I'm going through this,

[7:40] but we can also have time for Q&A at the end, too.

[7:44] So really Georgetown, it's probably no surprise to anyone

[7:47] in this room.

[7:47] We've had just a tremendous amount of population growth

[7:51] from 2010 to 2025.

[7:54] And you've seen that go from about 123% in growth.

[7:58] That's just a historic amount of growth.

[8:00] I think that would bring a lot of opportunities and challenges

[8:02] to any community across the nation.

[8:04] But I think this is really given Georgetown an opportunity

[8:06] to make ourselves even better than we were before.

[8:09] And not wholesale change, but really make us the best version

[8:12] of ourselves that we can be and that's kind of what we do is we work proactively to harness those

[8:16] opportunities and help shape the growth occurring. We can't necessarily stop all growth or limit it,

[8:21] but we can work to make sure that growth that's coming is quality growth that's going to be a

[8:25] net positive add to our community. And one of the strategic ways we do this is we worked through

[8:31] a strategic plan for economic development. So this was adopted in early 2024 and there's three kind

[8:36] of goal areas for economic development. The first is business development that's kind of what you

[8:41] think of when you think of recruiting businesses and growing the ones that are already here,

[8:45] but with that comes talent development of making sure that we're developing the local workforce

[8:49] and our future workforce with our partners at GISD to fill those jobs and also quality

[8:54] place-making to make sure that Georgetown's a unique place to live and keeping that community

[8:59] culture that we have here thriving. And a big part of that strategic plan that was adopted

[9:05] is a target industry study. So that looks at not only is what's a good fit for Georgetown

[9:09] from their perspective but what's a good fit for us from our community perspective as well.

[9:13] So it has to be a match and when we look at the type of opportunities that exist for Georgetown

[9:18] and what's a good fit for those communities. Three main areas emerged which is advanced manufacturing

[9:24] and when you think of that you can kind of see things with Samsung suppliers, with semiconductors,

[9:29] EV vehicles and components so Tesla suppliers and other areas like that. Computer electronics

[9:34] manufacturing is a large one for us and we're going to dig into that a little bit more in this

[9:37] presentation, aerospace, patient, aviation, and clean energy technology as well.

[9:42] Professional services, again, is also a big thing with us being the county

[9:47] seat of Williamson County. There's a lot of professional services located in

[9:50] our community, especially in the downtown. And then healthcare and life sciences and

[9:53] emerging industry with biotech and research facilities, but also health care

[9:58] facilities as well in Georgetown.

[10:01] And one of the ways that we are trying to be

[10:03] proactive and work to be proactive is looking at several different

[10:07] the criteria when we look at a project.

[10:09] So we don't just look at, does this project

[10:10] want to be in Georgetown?

[10:11] When we look at, is this a project a good fit

[10:13] for our community?

[10:14] Are the wages competitive?

[10:15] Can someone support a family and have a career

[10:18] with these jobs?

[10:19] Do we have the infrastructure to support that?

[10:21] So it's great to get a $2 billion project,

[10:23] but if you have to spend $4 billion

[10:24] to build out the infrastructure,

[10:25] is that a good deal or not?

[10:28] Do we have career pathways that are being created

[10:31] for residents that are already here living here?

[10:33] People are moving here or students at Georgetown ISD.

[10:36] those are the kind of questions we ask ourselves, and then is it a benefit for the entire community?

[10:41] So we want to make sure that all these kind of criteria are looked at while you're evaluating a

[10:45] project with you. We also look at if this project is going to cause any unintended impacts to the

[10:52] community. So if there are, are there ways that we can minimize those when they're happening?

[10:58] We also look at kind of taking a growth pace for growth approach. So things like impact fees,

[11:02] making sure that current residents aren't necessarily paying the impact more traffic or more infrastructure

[11:08] being built to support that specific business. Those companies just help pay for their fair share

[11:12] and we also have things like electric utility policies for large customers so we want to make sure

[11:16] that we're safeguarding the existing customers when a new large user comes in to make sure that they're

[11:21] paying for 100% of their infrastructure needed to support that project. I think Georgetown's also

[11:25] done a really amazing job for long-term planning and that's something we'll touch on in a few other

[11:30] slides but when we look at where these companies are coming into Georgetown, the really inappropriate

[11:35] places that are not popping up next to neighborhoods or schools, they're coming into areas that

[11:39] are planned for business parks that have the infrastructure to support them in the road

[11:43] networks that are around them are really planned to handle that type of capacity.

[11:49] And I think this is a good example of that.

[11:50] This is the city's first real master planned business park with North Park 35 and then

[11:59] been the epicenter of a lot of the growth that's happened here in Georgetown in terms of advanced

[12:03] manufacturing. This happened well before my time, but I really feel fortunate to work in a community

[12:08] that put this type of effort into planning for infrastructure and just in lane use in this area.

[12:15] So you can see a lot of the major employers that we're going to see in a few slides are actually

[12:19] located in this business park.

[12:22] And I think this was recognized. So it's not just us saying that

[12:25] Georgetown's done a great job of planning. The American Planning Association actually awarded

[12:29] Georgetown community of the year distinction for the planning efforts that have happened in 2024. So

[12:34] we're very fortunate to have that representation, but we're also very fortunate to have the team

[12:38] all working together to make sure that Georgetown's growing and developing in a planned way.

[12:46] And this is just an example so you can see ZT systems in the back. That's one of our largest

[12:50] employers now in Georgetown and you can see more and more employers are coming into this area.

[12:54] These business parks don't just pop up overnight. It takes a lot of work to plan for the roadways,

[12:59] is the water, the wastewater, the natural gas that's come in.

[13:03] And I think this is just a great example of showing our citizens

[13:07] that when you have these large employers,

[13:10] you don't necessarily know what's happening

[13:11] behind those four gray walls.

[13:14] You can just see on the outside,

[13:16] they all look fairly similar and clean,

[13:17] but there's some really high-tech advanced manufacturing

[13:19] that's happening in these facilities here in Georgetown.

[13:22] That's creating a lot of opportunities for our residents as well.

[13:26] And I mentioned infrastructure,

[13:27] But again, this doesn't happen overnight, and Georgetown is in a great job of playing for water, wastewater, electricity, and even working with our partners like Atmos on natural gas.

[13:37] These are years-long processes that have put it in place to help position us to compete for these projects that we're seeing come in now.

[13:45] One thing I did want to touch on is water. So I know just being in central Texas water is a commodity that's very precious to our residents and our businesses as well.

[13:53] So we're seeing new technology being used.

[13:56] This is an example of a closed loop system,

[13:58] whether it's at a data center or an advanced

[14:00] manufacturing facility that's using it for cooling.

[14:02] I think this basically works where you top it off

[14:05] and it basically recirculates that water

[14:07] instead of being evaporated into the air.

[14:09] So it can operate very, very efficiently.

[14:13] And you're seeing more and more data centers

[14:14] actually use this technology to drastically reduce

[14:17] the amount of water that's being used

[14:18] at their facilities for cooling.

[14:20] Hey, Cameron, can I ask you about that?

[14:21] Yeah, sure.

[14:22] It's just since it's kind of a hot topic going around.

[14:26] Yeah, like what's an idea?

[14:27] Like the amount of water these types of day centers

[14:30] you're using equivalent to like residential.

[14:32] Yeah, yeah, so like just using,

[14:34] it all goes by the electricity,

[14:35] but let's say it's a 75 megawatt data center.

[14:38] I would say they use with this closed loop system,

[14:40] probably somewhere between seven to 15 homes

[14:42] is what we've seen from some of the projects we've looked at.

[14:45] If you looked at the size of land

[14:47] that those type of projects you go to,

[14:48] you're looking at several hundred homes

[14:50] or Tannums, it could be over 1,000 Tannums for that same size project.

[14:54] So make sure we're saying the right, so a 75 megawatt data center is the closed loop system is the equal.

[15:00] Local government, 15 houses worth of water, and you could put, you know, 100 acres worth of houses on that same site. That's, that's right based on what we've looked at. Yes. All right, just want to make sure we're looking at that right. Thanks. Also, we're currently developing some language regarding data center and some of our high electric users, and as well as could have been a potential high water users. Just to out clarify that steps were

[15:29] We're taking to be cognizant of that, to manage risk on the electric side, manage cost

[15:35] and making sure there's not cost burden outside of those customers and the same thing on

[15:41] the water side.

[15:42] So we're going to develop, just let's say we're talking about examples, just to help better

[15:46] understand how we're trying to mitigate the risk associated with these types of users.

[15:50] Yeah, thank you for adding that.

[15:53] So I did want to give a case study of that.

[15:55] So I know I mentioned theoretically there's companies doing this, but here's an actual company

[15:58] that has used a closed-loop system in their facility.

[16:01] So total-side solutions has come into Georgetown.

[16:04] They've quickly become one of our largest employers.

[16:07] And they actually do.

[16:08] A lot of work with it is, and they're testing some of the equipment that is being used

[16:11] in those facilities.

[16:13] And their closed-loop system has dramatically brought down the amount of wire that they would

[16:16] have used if they used more traditional kind of antiquated equipment.

[16:20] So there are also a key customer for Georgetown Electric, and the cost of the infrastructure that

[16:24] that was basically paid for for the facility

[16:26] was 100% borne by this company

[16:29] and was not passed on to users

[16:31] as David mentioned because of those policies.

[16:35] So I did wanna kind of connect this

[16:36] so I know when people see a big company

[16:38] coming into Georgetown,

[16:39] it's not just the people who are being hired

[16:41] by the facility that benefit.

[16:43] I think there's a real connection to our general fund

[16:45] that pays for critical city services like police, fire,

[16:49] the public library,

[16:50] parks and rec, streets and roadway infrastructure.

[16:53] If you're really going about your daily life in Georgetown,

[16:55] You're going to be touched by one of these things, most likely every single day of your life.

[16:59] And these projects really are net contributors where they generate more taxes than they basically take in certain city services.

[17:07] So this helps fund the city and helps us continue to grow and operate as a first class city into the future as we continue growing.

[17:16] And again, so kind of hitting on that, Georgetown has the lowest property tax rate and central taxes at the city level.

[17:21] And these type of projects are a big part of that.

[17:23] So being able to basically contribute more taxes than they take has helped us continue to have a very competitive tax rate.

[17:32] Again, so I mentioned those jobs that come with it.

[17:34] So there's 300 full-time positions plus at that facility that doesn't account for the spin-off effect.

[17:40] So when you do economic modeling and you see the type of companies that are supplying them or people going out to eat in the community at restaurants or shopping and stores,

[17:49] economic modeling show there's about 237 other jobs in our community they're

[17:53] supported by them being here. So it really has a cumulative effect where when

[17:57] we make an announcement it says 300 employees are coming or 500 employees

[18:01] there's really a bigger effect on our community that we see with these types of

[18:04] manufacturing projects. And I will mention in the lastly

[18:09] total site solutions, Pegatron, Compon, ZTE. These are all employers that have come

[18:14] in recently and they're all in the same industry and they're actually being

[18:17] great partners where I think people could think they're competing for the same jobs, but they're

[18:21] actually working together with Georgetown ISD, TSTC and ACC to help develop the pipeline of talent.

[18:28] So we're working to develop curriculum with all these groups, and we're going to work on some

[18:33] of the positions like a testing technician that all of these companies need to help open up these

[18:37] job opportunities for local residents. So you don't necessarily have to have manufacturing experience.

[18:42] If you can go into these programs within a matter of weeks, you can get the skills needed

[18:45] to go ahead and apply for these types of jobs.

[18:50] We're going to talk about some of our incentive tools

[18:51] and our philosophy behind these tools.

[18:54] So really, I think the great thing about Georgetown

[18:55] is we have the whole toolbox

[18:57] of economic development incentives.

[18:59] We don't have a prescriptive approach

[19:00] where if you do this, you necessarily are owed this.

[19:03] We look at each project on a case by case basis

[19:05] and see what's the most appropriate tool

[19:08] with the goal of always trying to get the best return

[19:10] for our residents and the public.

[19:13] So when we look at tax abatements that's lowering taxes

[19:16] taxes on the property tax side for a period of time up to 10 years.

[19:20] Taxary rates can be them paying those taxes and then coming back.

[19:23] Triple freeports, a tool that's used to help incentivize manufacturing in an area where

[19:28] if they export those goods within 175 days, they don't have to pay freeport taxes on those

[19:34] or inventory taxes.

[19:35] So that can help bring in more manufacturing companies to our area.

[19:39] Foreign trade zone, if you've been watching the news and seeing the news on tariffs, a big

[19:44] Part of foreign trade zones benefits now is delaying the payments of those tariffs.

[19:48] So not that they don't pay those, they still will pay the full tariff, but instead of paying

[19:53] those when the goods that they buy come into the warehouse and they start making a product,

[19:57] they would pay those tariffs after they sell that good to a customer and it leaves the warehouse.

[20:02] And then again, we have type A and type B economic development corporations.

[20:05] Type B is GTEC, so that's really a great tool for us to making sure that Georgetown has

[20:10] great road to infrastructure and has helped support a lot of our economic development projects.

[20:15] And type A is Jedko, which we use on our bringing in mostly manufacturing but also other types of jobs into Georgetown as well.

[20:24] And I did want to hit on the point that all performance programs are performance based.

[20:29] So all incentives are performance based.

[20:30] It's not just a, here's a reward for doing a good job.

[20:33] It's, will you need this incentives in order to move forward?

[20:36] You have to move forward and hit these key benchmarks.

[20:39] And when we look at that, we need to agree upon a minimum amount of full-time employees,

[20:43] a minimum amount of capital investment, hit a construction date, and also hit a finishing

[20:48] of the construction date as well.

[20:51] And then we put guardrails and protections in.

[20:52] So we always want to make sure that if a project doesn't perform, it doesn't receive funding.

[20:56] And there's even opportunities for cloud backs where if they say they're going to do something,

[21:00] they don't do it over a period of time that there's way to pull any money that has been paid back.

[21:04] We also do annual compliance reports with multiple checks in each year.

[21:09] So we're always checking in with these projects and seeing how they're doing

[21:11] to just make sure that they're performing and delivering their end of the bargain as well.

[21:16] And we look at economic development incentives as an investment done under non-unordination.

[21:21] So when we're talking about these projects, we always look at what's the net benefit,

[21:24] what's the rate of return, how long does it take us to actually earn our money back through that payback period.

[21:29] And we actually look at those incentives on a per-job basis as well.

[21:32] So we just want to see are these heading the metrics that we look at for those projects to make sure it's a good benefit for our community.

[21:40] And I think some people have asked why are incentives needed? Why are the government involved in doing this?

[21:45] Why do we have an economic development corporation? I think the answer is that economic development projects are highly competitive.

[21:50] There's a real benefit for our community to get these projects to come in and really every city across the nation realizes that.

[21:56] So these projects are being competed for not just on a state basis, but on a national and international level as well.

[22:01] We've had some really great international companies come into Georgetown in recent months and years and these projects have the opportunity to look across the nation and even in other countries like Mexico for these types of investments.

[22:14] We also look at using these incentives to overcome initial cost gaps such as infrastructure costs, which can make a site uncompetitive.

[22:21] So if we have a site that maybe has a sewer line that's 3,000 feet away, but otherwise they want to come to Georgetown that can potentially be an opportunity for us to work with them to overcome those initial costs to bring us into a competitive nature.

[22:33] And it can help shape a project was so they can make our project an even stronger fit for our community.

[22:42] So some of these projects have really had a huge impact. I said all of our projects have had a huge impact on our community and has helped us diversify the local tax base.

[22:49] I think Georgetown's done a really good job

[22:51] in not becoming overly reliant on one single employer.

[22:54] If you think of Detroit with Ford

[22:56] or another city that has one large employer,

[22:59] that can be dangerous if that employer

[23:00] grows out of business and people are out of work

[23:02] and people have to relocate.

[23:04] You're gonna see, I think over 13 projects have come in

[23:06] the last few years to Georgetown,

[23:08] which has helped spread out that level of risk

[23:10] and also diversified the local tax

[23:12] based in different industries as well.

[23:14] And it's increased the amount of jobs

[23:15] and career opportunities for existing residents,

[23:17] future students as well.

[23:20] It's also helped us fund key critical services and

[23:23] infrastructure. So I mentioned that earlier, but I just want to thank them again

[23:25] that these really do help us pay for a lot of the key city services that we

[23:29] provide. And we see another benefit just in a quality of life standpoint where

[23:34] daytime populations, one of the key things that restaurants and retailers look at

[23:38] so they want to make sure it's not just people there at nighttime going out to

[23:42] dinner is there going to be a lunch crowd or they're going to be people

[23:45] shopping at our business from nine to five. And having these employees here in Georgetown

[23:50] really helps move those metrics where we can get even higher quality retail and entertainment

[23:54] options in Georgetown.

[23:58] So now I think we're moving into the fun part. So I think this is

[24:00] what have we done in the last 12 months and the good news is that we actually had our best year

[24:05] on record. So I'm really happy to announce that we had $650 million of capital investment over 11

[24:10] 700 jobs and 573,000 square feet of space utilized.

[24:15] So that's over five or six HEBs worth of space

[24:18] filled up with really high quality jobs.

[24:21] These announcements included TSS,

[24:23] we looked at earlier.

[24:24] JF actually moved their R&D facilities here

[24:26] to Georgetown from California, which is great.

[24:29] The Blueprint Data Center's Project Announce,

[24:31] and then we had Pegatron enjoy us from Taiwan.

[24:33] So they're one of the premier manufacturing companies

[24:35] from Taiwan.

[24:36] They're one of the top five companies in Taiwan as well.

[24:39] and then TML and TML Risk pool announced their headquarters here in downtown

[24:43] Georgetown as well which will have a huge impact positively in our community.

[24:49] And just looking back up in the last few years, these are all the just the

[24:52] companies that have come to Georgetown. So it's pretty impressive when you look at

[24:56] what Georgetown's been able to do in the last four to five years. I think a lot of

[25:00] communities across the state would just be very, very happy with this level of

[25:04] investment. And Georgetown is consuming to see this. So I think we're going to have a

[25:11] Why have we, I said big focus, so when you look at this,

[25:14] you'll see a lot of companies in that advanced

[25:15] manufacturing sphere.

[25:17] And I think some people ask, well,

[25:19] why do you want that more than another type of industry?

[25:22] And really, there's a few different reasons.

[25:23] I think these projects are hired locally.

[25:26] So there's a lot of things that are happening

[25:28] across the economy where a lot of things are being

[25:33] optimized or AIs impacting them.

[25:36] Manufacturing is really hard to do that with,

[25:39] where a lot of the things that they're making

[25:40] or at such a detailed level that changes every three to four weeks where they're going

[25:43] to need high staff counts.

[25:45] So a lot of the companies that have come and have told us with their announcing 500 jobs

[25:48] it's going to stay at about 500 jobs even with automation.

[25:52] It also creates a lot of career pathways for people with zero or even minimal manufacturing

[25:56] experience to jump into that sector and really start making a great rewarding career kind

[26:03] of money and support their families.

[26:06] So we've had situations where people have worked at coffee shops and have been hired on

[26:09] and some of these local companies

[26:10] and now they're making $75,000, $85,000,

[26:13] whereas before they were making hourly wages.

[26:17] There are also a future profile guy mentioned

[26:19] and many of the projects also involve significant investment

[26:21] into machinery and equipment.

[26:23] So when we look at the tax impact of these projects,

[26:26] as opposed to, let's say, a warehouse.

[26:28] A warehouse has a lot of things on shelves

[26:30] that are shipped out and doesn't generate

[26:31] a lot of taxable value,

[26:33] but some of these machines are several million dollars each

[26:37] and we actually benefit from the property taxes

[26:39] that come from those machines and it helps make those projects a little more sticky

[26:42] where the company is less likely to pick up and move if they're installed there.

[26:48] So those 13 projects alone have a count of about 1.4 billion in capital investment,

[26:52] 5,000, 25 new full-time positions, and 3.2 million square feet of space utilized.

[26:58] So I think that's just a really great impact for Georgetown and working continue to see

[27:02] more and more of these types of companies coming thanks to the hard work and plenty that's been put in

[27:07] to our community, just looking at business park space.

[27:11] I know we've had some comments about,

[27:12] hey, I see an empty building, what's going on there.

[27:16] And I think we're seeing a lot of activity.

[27:17] I think pretty soon we'll see some of those vacancies filled.

[27:20] But I would say there's actually not that many vacancies.

[27:22] There's been about four million square feet of space

[27:25] that's been absorbed.

[27:27] And you can go down the list going from 600,000 square feet

[27:29] of space down to 41,000 square feet of space

[27:32] and see the types of companies that come in.

[27:34] and it's really not a lot of distribution.

[27:36] It's almost all manufacturing,

[27:38] which is really exciting to see.

[27:42] And again, so when we looked at our strategic plan

[27:45] and it recommended computer electronics and manufacturing,

[27:48] that was just after ZT systems came.

[27:50] So we were beginning to understand

[27:51] how we could work with our electric utility

[27:54] and our city to go after these projects.

[27:56] And we've seen three other types of these projects

[27:58] come into Georgetown in recent years.

[28:00] In addition to companies like Bear Manufacturing

[28:02] who are supporting those industries as well.

[28:04] And I think this has been a really big impact on us.

[28:06] So we've created new types of jobs for our residents.

[28:10] We've had homegrown companies that left Georgetown,

[28:12] like control panel's USA, who went to Austin,

[28:15] come back and benefit and the opportunities

[28:16] have been created here with this business workspace.

[28:19] We've had companies from all the way in Taiwan

[28:21] come to Georgetown to make investments here.

[28:25] And I think a big part of that is that

[28:26] we have a great relationship with Georgetown ISD.

[28:29] So the future ready complex has actually been

[28:30] a huge asset for us.

[28:32] A lot of our recruiting meetings that we have are actually held at the future ready complex

[28:36] to show these companies that were committed with Georgetown ISD to develop these talents

[28:40] of pipeline.

[28:42] And on your right, you can actually see that students are working on aerospace where they

[28:45] actually build a plane and fly it from Georgetown Executive Airport, but they also have a manufacturing

[28:50] program that just started this last year, where they're working with companies like Selling

[28:53] to actually donate equipment and learn on that cutting edge technology at the high school

[28:58] level, which is exciting.

[29:01] Fort Hood is also a huge asset for us as well so you can see just coming straight down into Georgetown.

[29:06] People can come to work here in about 35 or 40 minutes as opposed to going down to other parts of Austin.

[29:13] And that's helped our employers actually capture a large percentage of the soldiers who transitioned out of the military.

[29:18] And we're actually seeing about seven to 800 soldiers every single month retiring from the military looking for work and Georgetown's capturing a large portion of those people.

[29:30] I know we've talked a lot about manufacturing in some of those projects, but I also wanted

[29:34] to hit on the fact that supporting retail development is a big focus first as well.

[29:38] We put a lot of focus into that more recently.

[29:42] So things like Southwestern, announcing the 560 acres, I think that's going to be a very

[29:46] important project for our community that's going to bring in new types of high-quality,

[29:50] mixed-use development.

[29:52] We also have our first parking garage.

[29:53] I say our first because we're working on potentially a second garage in downtown.

[29:57] and we developed a retail attraction profile.

[30:00] I'll tool to share with developers and retailers. So we go to conferences and actually practically meet with a lot of the developers and retailers themselves to permit Georgetown and actually just return back from a trip doing that in California where we had a follow-up meeting today. So we're seeing good interest from those types of companies. And we're actually having ongoing experience discussion with experienced developers to do new developments in Georgetown as well. But we've had groups like Sprouts, lows, home goods, HEB and Texas Honey Ham.

[30:29] open up new stores here in Georgetown.

[30:31] And we're gonna continue to see more and more of that.

[30:34] And I think one good example that is blue bonnet plaza,

[30:36] just to kind of highlight what some of these projects look like

[30:38] where you have groups like Summer Moon,

[30:41] Bell the Talk, Shake Shack coming to Georgetown,

[30:43] which I think is a good indicator of what's coming.

[30:47] We're also seeing projects like the Junction.

[30:49] So it's a little bit more creative

[30:50] where there's gonna be a mixture of restaurants,

[30:52] pickleball courts, a performance stage,

[30:55] mixed in with flexible office space.

[30:56] And this is coming into an area

[30:58] where a lot of the manufacturing projects are actually

[31:00] located next door.

[31:01] So people can walk over from those facilities

[31:04] to come and grab a cup of coffee or grab a pizza next door

[31:07] and enjoy some of the facilities.

[31:10] Also our downtown is just continuing to thrive.

[31:13] So I think our downtown teams have an amazing job

[31:15] and really that benefits us in the economic development

[31:17] department as well, where when we're just kind of selling

[31:20] Georgetown and letting people know that it's a great community

[31:22] that can fit their company, they're able to envision themselves

[31:25] living here and enjoying Georgetown

[31:26] in our community and fitting in and our downtown is really the front doorstep to that so it's been

[31:31] a great asset for us. And I mentioned the Texas Municipal League. I think this is going to have a

[31:36] big impact on that too. So having the events that are associated with TML, having those workers here in

[31:41] Georgetown is going to further support a lot of those activities in our downtown. And then looking

[31:48] forward at the future, I think Georgetown's an a great job so nationally we've had some headwinds

[31:53] manufacturing, but Georgetown's really continuing to excel.

[31:58] I think some of our key sectors are manufacturing assembly, aerospace and defense, automotive parts, and electrical equipment.

[32:05] So a lot of things are still tied to data centers, but we're seeing more diversification into aerospace and defense as well.

[32:13] And we're seeing more growth with Samsung, so them actually having their announcement that they're going to be open at the end of this year has kind of led to a lot of the

[32:21] creating companies of re-engaging and we're going to see more growth coming from that hopefully

[32:25] at the end of this year.

[32:29] So our project pipeline continues to be about a 50-50 mix I would say

[32:32] of international and US-based companies but the good thing is that whether it's an international

[32:37] company or a company from another part of the United States they're still hiring almost I would say

[32:41] 95% of these jobs locally whether there will be a few management level positions that maybe come from

[32:47] another location but the vast vast majority of those positions are being hired here at the local

[32:52] level. And we've also seen a really good uptick and interest from Taiwanese companies, so we have

[32:57] a delegation actually coming to visit us later on this year from Taiwan. And part of that is that

[33:02] they've seen that Georgetown's worked really well with these two major companies, so they have

[33:05] an increase interest in us. Again, Samsung has led to more interest from South Korea and we're seeing

[33:11] an opportunity with Japan, with some of your connector companies as well.

[33:16] Again, kind of wrapping up,

[33:18] But Georgetown's continued rapid growth has led to more opportunities for high quality projects on with the retail and entertainment side.

[33:25] Just with the thousands of jobs that have come into Georgetown with these other projects, that's helped us demonstrate that there's sufficient demand for these type of projects.

[33:33] And we're currently engaged in other conversations with mixed use developers and developers of entertainment and opinions as well.

[33:41] With that we've got some time for Q&A, but I hope that kind of showed what we're working

[33:45] on and how the opportunities we have to.

[33:47] Thank you, Cameron.

[33:49] That's a lot of great information.

[33:51] Any questions, comments for Cameron?

[33:54] I think Amanda has a question.

[33:58] Are there any small niche grocery stores that are begging to come into Georgetown?

[34:05] And if so, why are you telling them they can't come?

[34:08] I think Georgetown will be a great location for any grocery store that needs to come here.

[34:14] No, I do have a comment.

[34:15] So thanks, Cameron, for the presentation.

[34:17] I actually was going to say I'm going to ask you a question, but I'm not baiting you for that particular retailer.

[34:24] But when we do hear people that do ask questions around, you know, we have several developable sites, I think, for retail right now.

[34:32] Would you say that we have more interest than we have sites currently available?

[34:38] Is that a fair question?

[34:39] I think about blue bonnet, McCoy, you know, potentially Southwestern, the future, but

[34:44] we're not there yet.

[34:45] I mean, are we seeing enough interest to actually fill those spaces?

[34:48] Because I think sometimes the community sees things like, you know, not develop out as fast

[34:52] as they would like them to.

[34:53] I mean, Wolf Lakes is another great example.

[34:56] So where do you see that sitting as far as getting some of those things developed out in

[35:00] in a way we want them to be developed out

[35:01] because I would also preface with,

[35:03] we don't just want anything,

[35:04] we want the right businesses to come to Georgetown

[35:07] that we want and that residents want.

[35:09] Yeah, I would say more recently,

[35:12] the vacancy rates in Austin have kind of shrunk,

[35:14] so there's just more demand for retail space.

[35:16] So even with online shopping,

[35:17] some of the things that have happened,

[35:19] there's still strong demand for restaurants and retail stores.

[35:21] So we're seeing more and more interest

[35:23] from groups like Endeavor that are doing Blibond and Plaza.

[35:26] I think we're gonna see more of those types

[35:27] of developments around Georgetown

[35:28] with high quality tenants and we're focusing on working with good developers that have good relationships with tenants as well.

[35:34] Because it's one thing for me to go and talk to those retailers and try to convince them and we can do that and we do do that.

[35:39] But it's really more of a that's like it's harder to get the returns on that.

[35:43] But when you're working with a developer that has those relationships and knows all the other brokers.

[35:48] We're able to see five or six or seven different companies come in with that development.

[35:52] And I think that's where we're going to see the most gains.

[35:54] but I think there's a lot of opportunity in Georgetown.

[35:56] I know some vacancies are still existing,

[35:59] but there's still a lot of demand.

[36:01] And I think we'll see those filled up soon.

[36:02] Okay, great.

[36:03] And I think that, you know, the other thing that I hear a lot

[36:05] and I always tell people is, you know,

[36:06] we don't determine, you know,

[36:08] who people choose to rent their property to,

[36:12] but I do think when we have more demand,

[36:13] then there are, you know, more choices out there.

[36:16] And when there are more choices,

[36:17] then maybe developers can be more selective

[36:19] about what's coming here,

[36:20] which you said that that's fair to.

[36:22] I agree.

[36:22] Yeah, on the private side, there's just more complications where when they get into lending and credit

[36:27] They need to see that that person going into has great credit and the financing behind them and sometimes there's

[36:31] complications or things going on or maybe one group only works with national tenants while we have more local tenants

[36:37] So it's really a matter of matching those people up and finding the right opportunities

[36:41] So I would say if there's anyone watching and they're a local company and they want to be in any of these developments

[36:45] They can reach out to us and we'll help try to match make and find the right opportunity for them. Great. Yeah

[36:49] I think that I was loved what you said about, you know, that these larger employers then help, you know,

[36:55] as get other better retailers in a higher quality of retailer because they want to know that there's

[36:59] places for people to come and eat and shop and do all those things. So, I think that was a great play on

[37:03] why are we only, you know, because some people do think that we're only focused on all of this large

[37:07] industrial, but we really are focused on other things as well. And the fact that that impacts who

[37:12] wants to come here to have a local food shop or restaurant or business or retailer.

[37:17] Yeah, it's kind of like building the foundation that will lead to those things.

[37:21] Yeah, well the last thing I want to say is you know as the chair of Jedko and you know

[37:24] I know that except for the fact that I know you really have to manage Sean a lot on G-Tech

[37:29] As the chair of G-Tech and Cameron and his team do a great job. Thank you for always bringing projects to us

[37:35] I think it's exciting that every meeting we tend to always have a project to look at and to make decisions about

[37:41] So thank you for all that you and your team do to make our lives easier. Appreciate it. Thanks. Thank you

[37:47] I have one comment first and importantly, as a former member of the Economic Development

[37:54] Board, I appreciate what you have done since you've come here and the energy level that

[38:00] I see with you and your team will play results down the road.

[38:06] And I just think it's a great thing that we're doing.

[38:09] Thank you.

[38:10] I appreciate it.

[38:12] Hey, Karen, on slide 31, you mentioned a 4.1 million roughly square foot of space talking about the industrial buildings.

[38:25] Is that that number, the 4.1 million, is that what we have class A today on the ground, or is that what you're saying that your record show has either at least or has traded hands as sold.

[38:38] At least our traded hand is sold, right?

[38:41] Do you know how much roughly we have on the ground?

[38:43] Not necessarily it's in title.

[38:44] I know there's some stuff that's in title that's yet to build.

[38:47] Or is it?

[38:48] I'm just doing the math in my head.

[38:49] There's some smaller spaces.

[38:51] So I would say the larger spaces have been taken.

[38:53] So anything that's 300,000 square feet or 400,

[38:55] a lot of that has a lot of activity on it.

[38:57] So it's either sold least or could be least soon.

[39:01] Some of the smaller spaces have been a little bit harder

[39:03] to move.

[39:03] So 40 to 50,000 square feet have been more challenging

[39:05] because we've had so many big companies come in but I will say these big companies have come and now it's time to get the suppliers that support those companies so I think this will be a good opportunity to transition to recruiting some of those groups to support.

[39:19] Yeah because it's just the number I know calling on businesses and Round Rock from my day job years ago there's so many small businesses you don't realize that are there that are actually pretty good size businesses that are support to Dell.

[39:33] that they do some niche function that you don't really know as a job really or something that a business would solely do.

[39:43] There's so many of them out there, you don't even realize, so you have to have a having,

[39:46] you will likely see some of those pop up for some of the larger companies here.

[39:49] They're going to need support folks, businesses here that would need that kind of space.

[39:54] When the reason I asked mine, this question was, I've been asked multiple times,

[39:58] like while we don't have just the industrial space, but near the airport, I think it's probably

[40:04] the most visible for most people, just the way the land, the terrain sits, I guess.

[40:08] Um, other folks ask, you know, is all that bacon? Looks like it's bacon. It's all built.

[40:14] No, I think my understanding is it's all pretty much leased whether they're actually occupied

[40:18] and operational yet. Uh, is, is a different story potentially, but my understanding is most

[40:24] of it is leased. Is that, is that a correct statement?

[40:26] Yeah, it's almost all of its lease.

[40:27] There's I think one small 70,000 sub lease situation,

[40:31] but everything else is taken.

[40:33] So the vast, I would say 95% of its lease debt are occupied.

[40:37] One of the companies mentioned throughout the presentation

[40:40] here are any of them fully operational.

[40:44] Because I know like selling, for example,

[40:47] they kind of had a staged onboarding,

[40:50] if you will, of ramping up the full production.

[40:53] Are most of those companies that we've seen recently

[40:55] are they kind of in that stage as well of ramping up getting to getting to where they're at capacity?

[41:00] Yeah I would say so I think most of the companies we work with they try to grow as quickly as

[41:04] possible and we grow with them on the infrastructure side too but I would say it's pretty common for

[41:09] like three to four to five years of like a ramp period for them to grow out and we're seeing that

[41:14] with most of the manufacturing groups too just as they hire more people and add more customers and

[41:18] more business. It's pretty specialized manufacturing type work that you can't just turn on the switch.

[41:24] Yeah, some of them have an existing contract which drives them to move quickly, but most of the time they have a contract, but they're bringing on more business and they're growing along the way.

[41:34] Well, the numbers are impressive on what your department's done.

[41:38] What's interesting, on my Council Facebook page, my posts have about 2,700 followers.

[41:45] the highest, most successful post I've made was announcing home goods and marshals was opening up and the spring had 150,000 views.

[41:58] So out of 2,700 followers, there was so much engagement and the algorithm pushed it up 150,000 views for home goods and marshals.

[42:07] Yeah, I think we get that and we were so mad when it doesn't I think most people most

[42:15] people aren't engaging in interacting with these companies we bring in every single day

[42:18] but you do with the home goods or another company so we respect that and that's why we

[42:22] do want to bring in more of those type of uses too so that'll also be a focus for us.

[42:26] Well no you're right I mean the average person ZT systems they're never going to while

[42:33] While they may end up buying something or using something that ZT systems is touched

[42:36] or is part of, they won't ever even know that.

[42:39] But home goods and marshals, they know they can feel it, they can touch it, they can see

[42:42] it.

[42:44] You know, and that's the one thing I think that, from an economic development standpoint,

[42:49] you mentioned it here, we've talked about it before, but just I think the one thing that

[42:52] Georgetown kind of is missing is more of that entertainment kind of concept.

[42:57] We have it with our square, is really the square really fits that in my mind.

[43:01] And I think the junction development is something that would kind of fit in that sector as well.

[43:06] I know of another development being considered that has some more pickleball type with restaurant

[43:12] and things on the other side of town, but I think, you know, there's been recently that what

[43:17] that pop stroke, advancing like a really cool concept that Cedar Park, Cedar Park said

[43:20] a great job of getting some of these projects for one reason or another and every market or every

[43:25] community is different and I'm happy for them to get those.

[43:28] I plan on going over there and checking out.

[43:29] I guess what is it the Nebraska furniture, martin shields never seen them never been to them, but people say it's a big deal, but I think just from the average citizen, those types of things are what they're hoping for, but that's not all that you do you're really trying to create more tax based more jobs.

[43:46] I think you've done a good job with that, trying to as we can fill in the gap for things we're missing as a community is something that I think you you're working on and continue to work on and I'm sure.

[43:56] Before long, we have the rooftops and the density that something like that will go some but Cameron, thank you for the presentation.

[44:03] Thank you.

[44:06] I just want to say thank you Cameron.

[44:08] You kind of soft sold it earlier that some of the work had begun before you got here.

[44:13] But my experience serving with Amanda on GTEC and Jedko is your team is first class and you are the example for all the cities around us and so we're proud to have you.

[44:25] Thank you.

[44:26] I'm glad to be on team George now.

[44:27] All

[44:30] right. Thanks, bud. Appreciate it. All right. Next up, Leah, you're going to lead this

[44:37] one for us on the cost recovery.

[44:42] Yes, sir. I get this adjusted.

[44:49] Thank you, Austin, for pulling

[44:50] that up. All right.

[44:55] So good afternoon, Mayor and council members. Lee Wallace, Chief Financial Officer,

[44:59] Sir, here-

[45:00] With you this afternoon, at the Water Advisory Board last week, I did accidentally introduce myself as Lee Water, and I've never seen Wes Wright laugh so hard in his life.

[45:11] This is a pretty good Freudian slip. Yeah, so I bring you information today that was pulled together in partnership with Chelsea Solomon, our Waters Utility Director. We also worked very closely with Matthew Garrett, our rate consultant from New Gen Strategies and Solutions, as well as Jennifer.

[45:29] for Ritter Douglas, our financial advisor from Specialized Public Finance.

[45:38] Okay, so we're here today to talk about financial policies, particularly for our water utility,

[45:47] how the compliance with those policies affect our bond ratings and our customer rates,

[45:53] propose to you an alternative policy, specifically for fixed cost recovery in the water base rate

[45:59] and first tier, and then get your feedback.

[46:02] We need to bring a fiscal policy like this to you this early in the planning cycle so that we can take your feedback and inform our rate modeling for the fiscal year 2027 budget process.

[46:19] So every year we review the fiscal and budgetary document policies with you and you adopt it with the budget.

[46:28] It's got budget policies, accounting policies, debt policies, there's a lot of things in here.

[46:35] The overall purpose of that document is to guide decision making on financial topics,

[46:40] including lots of policies specific to our large utilities with water and electric.

[46:46] And they are a tool for risk mitigation.

[46:53] But those policies also then have a direct impact on rates.

[46:57] So the strong policies demonstrate to our investor community that our city has long term financial stability in the utilities

[47:05] Helps us get a favorable bond rating, which in turn helps us get the most favorable interest rate that we can on the market

[47:12] for

[47:14] paying off the large infrastructure projects over time

[47:18] Those policies also require that the rates are set to satisfy

[47:22] by several financial metrics and ratios each year.

[47:27] So we're not just talking about meeting the immediate cash needs of the water utility,

[47:31] but also achieving coverage ratios and reserves.

[47:38] For the water utility, it's going to be difficult to maintain our existing fixed cost recovery

[47:44] policy in the near term while balancing rate affordability for customers.

[47:50] So, when we look at our preliminary model going into 2027 and on our five-year forecast horizon,

[48:02] fixed costs are projected to grow from around 64 million in 2025 to 138 million in 2030.

[48:13] So, fixed costs the big rocks in those buckets are going to be your annual principal and

[48:18] debt payments for infrastructure and then take or pay water supply contracts.

[48:25] Those are the big, big rocks in fixed costs.

[48:29] When I say preliminary, I just want to be really clear for you today as well as our media

[48:34] partners that may be watching today.

[48:36] We're still updating all the inputs to the model right now.

[48:40] And so while I am giving you a variety of numbers in the presentation today that will

[48:48] will illustrate conceptually what's going to happen, they're based off of numbers as of December,

[48:53] but we are constantly making updates this spring to bring you the real rates back.

[48:59] So I just want to be clear about that when I show the numbers today, my goal is to basically,

[49:06] when we bring the rates back in May, to be in the same ballpark as what is being illustrated today.

[49:11] So currently in that five-year forecast, because of these increasing fixed obligations for

[49:19] new supply of water and all the capital infrastructure from our master plan, our water rates are

[49:24] forecasted to increase 9% per year for five years.

[49:32] We have a policy inside the fiscal and budgetary policy documents specific to fixed costs recovery

[49:40] for the water utility. And today, that policy is that 65% of fixed costs will be recovered

[49:46] through the base rate charges, and 90% will be recovered through the base plus the first

[49:54] year. And so the table on the screen is an illustration of how our rate modeling achieves

[50:02] that. You can see with the green dots through the five-year forecast on the bottom that we

[50:07] We are meeting those policy requirements, and then we get real close to the edge by that

[50:14] fifth year in 2030.

[50:18] And again, this is illustrating what that would look like with a 9% per year increase

[50:24] on water rates.

[50:29] Excuse me.

[50:30] So this is another view of that same information, see how the colors are coming across good here.

[50:38] So we have, you can see in the gray bar along the bottom, all of the fixed costs for the water utility going up to the 100% mark.

[50:48] And then in kind of the beige color after that are the variable expenses and other financial targets for the water utility.

[50:56] And then the bars are showing you the revenue from the tiers and the red dotted lines are how today, under the current policy,

[51:05] we're achieving 65% recovered through the base rate, 90% through the base rate plus the first tier.

[51:13] And just like you saw on this slide before, you can see that it's stronger in the earlier years

[51:17] and it's much closer to the line when we get to 2030.

[51:24] Okay, so we want to propose a change to this policy.

[51:28] We want to relieve the pressure on rate affordability while we're supporting this large capital

[51:35] infrastructure plan, and this major operating impact from the new water supplies that we are

[51:42] currently trying to obtain. And while our rating agencies measure leverage and liquidity

[51:50] and debt coverage ratios, they also measure rate affordability in the rating criteria. So they

[51:57] look at the utility bill as a percent of median household income. Currently the Georgetown combined

[52:04] water and electric utility is at 1.9%, so we're right there in that one to two

[52:10] percent average range, but really close to being at the two or more, which would

[52:17] be a weak rating on that specific criteria. So how do we shift more costs to

[52:22] volumetric rates without compromising the financial stability of the utility?

[52:30] And when we shift costs to the volumetric rates, those are the users that are

[52:35] driving peak demand and our need for infrastructure.

[52:41] So if we made a change to this policy, then the base rates could be increased more gradually,

[52:47] and the volumetric rates could be increased at a more accelerated pace.

[52:53] And that's going to still get us to the total recovery that we need.

[52:58] It would reduce the total increases required to the average residential bill.

[53:03] And as we get further you'll see that it is going to provide staff and you as the council greater rate setting flexibility in the future.

[53:15] So we are proposing that we change the policy from 65% through the base rate to 50% through the base rate and 90% through the base rate and first year to 75%.

[53:29] Again, these are a comparison of our preliminary modeling, looking at years 2027 through 2030.

[53:39] So our baseline projections column would be under the current policy.

[53:44] As I've already mentioned, we'd be increasing rates 9% per year on the water minimum charge.

[53:51] If we were to move to this alternative, then the base rate would increase 4% per year.

[53:57] the volumetric rate would increase 14% per year.

[54:03] So that's where you can see that differential.

[54:05] And again, we still get to total overall revenue recovery

[54:08] that's needed for the utility.

[54:13] So let me show you what that looks like for our customers.

[54:16] So on this slide we've got over on the right,

[54:19] you can see graphically the change in the monthly water bill

[54:23] as of the forecasted year 2030.

[54:28] So residential customers using 12,000 gallons of water or less would see a reduction in their bills in 2030 as compared to baseline.

[54:37] So again, we're not saying water bills are decreasing, but they will increase at a slower rate.

[54:50] Here are some examples at different tiered usages.

[54:56] So, the first graph on the left is just the base rate, so you can see our current policy on the bottom and what that would look like in the year 2030 versus the proposal we're bringing today where we would shift the policy so that base rate in 2030 would be at $58.30 which is lower than the $70.

[55:20] Then we start to introduce consumption on top of the base rate, so on the right we have someone who's basically only using a very small amount of indoor water, 2000 gallons,

[55:32] and so under the current policy, their projected monthly bill in 2030 is $78.20.

[55:42] If we were to make this shift to the revised policy, it would be $67.80.

[55:47] sense. And I've just got some more examples of that walking through the tiers. So we've got a

[55:53] 6,000 gallon water user on the left here. You can still see that under the alternative that we're

[56:01] proposing their future rate is lower. Then what's currently proposed once we cross the 12,000 gallon mark

[56:10] over to the 15,000 gallon user, you'll see that that bill now starts to be larger in 2030.

[56:17] Again, because we are shifting from the base rate and accelerating tiered usage more quickly.

[56:28] And here's an example of a 35,000 gallon user and a 60,000 gallon user just to get our fourth and fifth tiers in there.

[56:41] So here's that same graph that you saw before but now showing what this would look like under the alternative that's being proposed.

[56:51] and that we are still able to meet that goal and it's just illustrating for you how it does that across the tiers.

[57:04] We still recover all the revenue that's necessary to satisfy this policy but also our fixed cost coverage ratio,

[57:11] our debt coverage ratio, our dayscash on hand, our reserves policies for the utilities.

[57:15] all of those would still be met.

[57:17] Excuse me, under this proposal.

[57:27] So that sounds really good.

[57:28] What are the risks?

[57:30] It wouldn't be fair to not also cover that with you.

[57:35] So when you shifting costs from the base rates to volumetric use,

[57:41] you're becoming increasingly reliant on that customer usage.

[57:44] If you have really severe drought conditions,

[57:47] or really higher than average rainfall conditions,

[57:50] either one can result in lower water consumption that could be a risk.

[57:55] However, we've discussed that at length with our rate consultant at New

[58:00] Gen. The city already has very, very strong reserve and days cash on hand policies.

[58:08] It's an existing strength that is noted in our current bond rating.

[58:12] We would be able to maintain those with this shift in policy.

[58:16] and so we basically have a buffer if we were to have one, you know, particularly difficult year,

[58:23] with not selling a lot of consumption. We have reserves. That's what those reserves are there for

[58:28] and we would pull together a plan where we would then make a correction, you know, for the following

[58:35] year or several years for the utility.

[58:40] Another important note is the current structure of our tier

[58:44] and where tiers and where those thresholds are for volume is predicated on the current

[58:51] policy at the 65% and 90.

[58:56] If we make this change to 50% and 75%, it's going to give you an opportunity.

[59:05] Basically we could adjust those tier ranges, so the thresholds as well as the differential

[59:12] in price between the tiers in the future.

[59:19] And, you know, we did discuss that length with our financial advisor, and this came up

[59:23] at the Water Advisory Board meeting that we do not believe that adjusting this policy

[59:27] would negatively affect our current rating.

[59:30] Again, it's very strong, and as I've already mentioned, the rating agencies also look at

[59:37] rate affordability as part of your overall criteria.

[59:41] So in conclusion, we do recommend moving to the 50% and 75% for fixed cost recovery through the rates.

[59:51] It improves our ability to adjust to these really sizable fixed costs that are coming.

[1:00:00] In the fund over our five-year forecast, we are balancing out maintaining strong financial metrics with rate affordability and intend to maintain our current excellent rating of double a-minus.

[1:00:20] So, I can take your feedback and questions today. I should mention, so we had two water advisory board meetings on this.

[1:00:31] one in February and then one last week in early March ultimately that board voted to

[1:00:37] recommend the change to you with a vote of four to one and there were two members absent.

[1:00:45] So I can take your feedback. Basically I'm looking forward to you support staff's recommendation

[1:00:50] or not because I then need to take that back with our rate consultant. We need to update the

[1:00:56] modeling based on that feedback, and then we are anticipating that we will bring the rates back to the water advisory board.

[1:01:03] I believe it's actually May 9th, not April 9th, and then we've got the May 26th Council workshop slated to bring those back.

[1:01:12] Thanks, Lee. Kevin had a question.

[1:01:15] Yeah, I think I said the water board just for the sake of the diocese here the modeling you have here

[1:01:20] Which once again, this is this is just policy. This is not rate setting. This is setting the policy to direct you guys on how to go set rates

[1:01:28] And then obviously rate setting will come back to this body in the future whenever those those are

[1:01:34] Reviewed but this is just policy to help you not asking you to say yes to a 4%

[1:01:39] Increased on the base rate today. I'm not guaranteeing that's exactly what's gonna come back

[1:01:44] What I'm saying is right now it's looking like it would be in the range of 9% and if we make this shift I can bring back something in the range of 4%.

[1:01:53] That's then offset in the volumetric rate.

[1:01:56] But that's I'm asking for your guidance because this policy is in a document that you adopt.

[1:02:02] I need your feedback now so I can work it into the rates and I would bring both the rates back for you to approve and the, you know, literally the policy document for you to approve.

[1:02:12] And then the this does not assume or this assumes our water CCN as it sets today as well from anything you put in here

[1:02:20] We're not we're not making any of your modeling. I know once again. This is policy any your modeling. We're not looking at

[1:02:25] Any changes to the CCN at this point because that's not a guarantee. That's correct. We're working on

[1:02:32] versions of modeling that but none of that is reflected here today. Okay, and

[1:02:37] And this model would only include reservation payments for one of the ground water deals,

[1:02:47] not the ground water for the entire CCN.

[1:02:51] Would that be a correct statement?

[1:02:55] Yes.

[1:02:59] It does, if I could just clarify, it does, it does assume debt portions of bringing basically

[1:03:09] we're planning and developing a pipeline from so it does include it's including one of the

[1:03:15] preserved groundwater deals for the CCN that we're retaining. It's not we're not loading in.

[1:03:23] Even though we're factoring in for this model the entire CCN, we aren't presuming that we're

[1:03:30] going to get the groundwater for the entire CCN as part of this model is that correct statement.

[1:03:35] Yes. Thank you. So let me I think this might be the same question as Kevin's but phrased a different way and I

[1:03:43] Sorry for you know, I'm trying to wrap my head around this

[1:03:46] So with this policy direction that you're looking for we said are we effectively setting the lower limit?

[1:03:53] Of the fixed cost recovery or are you or is that the percentage?

[1:03:58] It would basically be the lower limit. We couldn't go any lower than this. We could in any given year

[1:04:05] better than this, we could still, we could go back to 65% and 90% and we'd still be meeting

[1:04:13] these minimums of 50 and 75, but it's basically giving us more flexibility, where to set

[1:04:20] that from year to year, but not to go below it.

[1:04:24] That's what I thought.

[1:04:24] I just wanted to clarify that.

[1:04:25] Thank you.

[1:04:26] And then I also have a clarification question on that.

[1:04:28] So I think Kevin helped with that, that helps as well, but this is assuming that whatever

[1:04:33] We would come back with based on this direction that there would be rate increases in the next several years, and then at 2030 there would be, this would change into the lower, taking into the variable the lower percent, the lower rate users, is that because I'm seeing that 2030 number, when does the shift happen?

[1:04:54] The shifts would be starting in 2027.

[1:04:57] Okay, that's what I thought.

[1:04:58] The rate that you would adopt in 2027,

[1:05:00] would reflect moving towards this.

[1:05:03] Okay, so the change doesn't happen in 2030.

[1:05:06] It happens in 2027.

[1:05:07] We're just trying to illustrate over time,

[1:05:10] because if I show you just one year's change,

[1:05:13] it's not as much variance as when we show,

[1:05:16] like, the cumulative impact over the five years.

[1:05:20] Okay, thank you.

[1:05:21] So it would change immediately.

[1:05:22] and 27 not just have this shift in 2030, perfect.

[1:05:26] Correct, okay, thanks.

[1:05:27] I think it also be helpful to know that we're also

[1:05:29] from rate making cost of service standpoint.

[1:05:32] We're looking at, we showed you kind of a five year outlook.

[1:05:36] We're also looking longer term because we recognize

[1:05:38] that one of the things that we're currently negotiating

[1:05:44] is a water supply agreement that would bring additional water

[1:05:47] and have contract obligations for buying water,

[1:05:51] starting in roughly a 20-30 time frame.

[1:05:53] So if you want to go ahead.

[1:05:56] That's why things start to get tight or with yellow dots for a variety of them.

[1:06:03] So if you were to look at any metric in the forecast,

[1:06:05] they kind of look like this.

[1:06:06] It's like green, green, green, green, green, and then 20-30,

[1:06:09] ooh, it starts getting tougher because that is when we are currently projecting the significant

[1:06:16] can't cost a new water supply to start hitting and we're trying to anticipate that and make it as smooth as we possibly can versus a big cliff.

[1:06:29] And so what you'll see is you'll continue, we're looking at 27 and then outlook to 2030, but you'll continue to see us as we move along over the next several years, you'll see the impact of that assumptions.

[1:06:42] I mean, we believe we're close to negotiating an agreement, but you'll see that start to

[1:06:51] be programmed in in 2031, 2032, and modeling out.

[1:06:55] And that's why I think it's really important, and we've been on this track record of having

[1:07:01] a cost of service study rate-making on an annual basis.

[1:07:03] So that is a very much of best practice, and especially important for us, given the dynamic

[1:07:09] nature of our water utility.

[1:07:10] Hey Lee, this is the residential policy correct for our residential rates, right?

[1:07:17] Correct.

[1:07:17] When we have separate rates for multifamily commercial, is this also going to be the policy for

[1:07:24] the rate making for those as well, even those are different rates?

[1:07:30] Are we setting the rates for commercial and multifamily right now too?

[1:07:34] I mean, are we setting the policy for setting the rights for commercial and multifamily?

[1:07:39] So this is different numbers.

[1:07:43] This policy is geared towards residential, because that's where it's going to have the biggest

[1:07:49] impact, but we have similar targets for commercial.

[1:07:58] Okay.

[1:07:59] Yeah, I just wanted to see if we're going to apply the same logic to commercial slash multifamily

[1:08:04] family where we're going to have the fixed costs in the

[1:08:07] base rate and I got you.

[1:08:10] I mean, we'll probably be coming back to discuss more about

[1:08:12] other opportunities with with commercial rates.

[1:08:16] But it's this we're largely focused on residential here with

[1:08:20] this discussion today. Sorry, Ben, I didn't mean to interrupt.

[1:08:22] Go ahead, Ben. No, just also as a feedback because you asked for

[1:08:25] feedback is I do think I do like this in the fact that, you

[1:08:28] know, we have talked about and I think we've we've said over

[1:08:31] the last few months or last year and I know Kevin has

[1:08:34] brought the stuff numerous times, you know, to not put this on the lowest

[1:08:39] year rate payers, you know, the people that are using the least amount of water

[1:08:43] should not be, you know, the people that are charged at the same rate.

[1:08:46] Yeah, and that's part of why we're have some of these examples here to show or

[1:08:51] even if I go back, you know, to this one, I don't know if you all can see where my

[1:08:56] mouse moves, right? But that 12,000 gallon line is right here where we start

[1:09:00] going from below zero to over, I believe we provided some information in the supplemental slides

[1:09:08] that were also attached to the agenda that show you the percent of customers that are in this group

[1:09:15] here, right, is a significant, I forget the number off the top of my head, but it's pretty significant.

[1:09:21] Yeah, so I think that this achieves exactly what we've asked for you to look at, is there a possibility

[1:09:25] to allow the users that are not using as much water to not have to pay as much for that.

[1:09:31] So, I like this policy and I like the direction we're moving from a feedback standpoint.

[1:09:35] Right. So, 45% of bills exceed 7,000 gallons, which is kind of right there where that first red line is,

[1:09:47] and then we get to about 60% of customers at that 12,000 gallon mark.

[1:09:54] So that, I mean, it will have a substantially positive impact on most customers.

[1:10:04] I only want to comment for the group to be aware that at the Water Advisory Board meeting last week,

[1:10:11] this was a topic of long discussion, possibly the longest discussion we've had in quite a time.

[1:10:18] And the result was that recommendation with a four to one vote that we moved towards this policy.

[1:10:23] and Kevin, thanks for your input last week.

[1:10:26] It was very helpful.

[1:10:27] I think we're heading in a good direction.

[1:10:31] So I agree with the policy, the concept,

[1:10:34] but I do have some questions on slide six.

[1:10:39] There's a big change between 2029 and 2030.

[1:10:43] The fixed rate goes way up,

[1:10:45] and the variable rate goes down.

[1:10:48] I'm just surprised that the variable rate went down.

[1:10:51] Do you happen to know why or is that something

[1:10:53] and you can get back to me later on.

[1:10:55] Well, again, 2030 is when the water supply costs

[1:11:00] for new groundwater, that's when we're projecting

[1:11:02] for those to start.

[1:11:03] And so the cost per gallon will go down

[1:11:06] when we get the new groundwater.

[1:11:10] That's what it looks like to me, but I,

[1:11:12] and if you don't have the answer today,

[1:11:13] that's okay, I just noticed that

[1:11:15] and it's surprised me that the cost would go down.

[1:11:20] So the cost of groundwater is baked into that fixed cost,

[1:11:24] that fixed cost is a take or pay number.

[1:11:27] Okay.

[1:11:28] So, even if there is a volumetric,

[1:11:31] we are signing a contract based on a take or pay amount.

[1:11:35] So, it's going to be a set amount

[1:11:37] whether you take the volume or not.

[1:11:39] So, you won't have it in volumetric

[1:11:41] or you won't have it in the variable,

[1:11:43] it will become fixed at that point.

[1:11:45] So, that price goes up.

[1:11:47] How does that drive the volumetric down?

[1:11:50] The variable goes down

[1:11:52] because the more the more take or pay water you get, the less reservation you're paying because you're actually taking down that water.

[1:12:00] Okay. We've been paying reservation for five years since the reservation.

[1:12:04] Okay. And then to slide nine,

[1:12:10] the comment is that rating agencies measure and track affordability, percent of median household income, we need the same amount of revenue from this.

[1:12:23] So we're really not changing the average cost per person.

[1:12:28] We may be changing the cost of the median household.

[1:12:32] But I just wondered how that, because we're really not changing the average.

[1:12:37] So it's still going to be 1.9%.

[1:12:40] If you take the average and compare it to the median, the average cost to the median income,

[1:12:46] right?

[1:12:46] Does that mean it's something?

[1:12:49] I'm sorry.

[1:12:50] I'm not following your question.

[1:12:51] I'll follow up with you afterwards then, because I don't want to waste a lot of time, but I do have a question about that and then back to the mayor's question, is there ever do commercial or industrial ever paid less than residential per gallon of water under these changes?

[1:13:17] In other words, or residential supporting commercial and industrial?

[1:13:20] So currently your residential has tiered rates, and so those tiered rates, as you get to the higher tiers, are higher than the commercial tiered rates.

[1:13:33] Commercial though, however, is required to have a separate irrigation meter, and that's at a higher rate.

[1:13:38] So we keep the rates for commercial that is for business use at something comparable to residential in the lower tiers.

[1:13:48] But there is an opportunity to look at that as we go forward.

[1:13:52] I would like to look at that and make sure that the residents will not subsidizing the commercial and industrial.

[1:14:01] Okay, we can follow up with you on that.

[1:14:03] And again, I support the concept.

[1:14:05] I think it's the right concept and just wanted to ask that question.

[1:14:08] So thank you.

[1:14:13] Overall, I'm obviously supportive of the policy.

[1:14:16] policy. I think the slides you show the comparisons of water rates based on the old and the new illustrated there, we're putting more of the proportion of cost on the higher users and less on on the existing, there are the folks are using it just for primarily domestic use.

[1:14:37] I think one of our housing policies we have is to try to help people stay in their home and the cost of living is one of that one item of that.

[1:14:44] So lower income folks or folks who don't have much yard they shouldn't have to see as much of an impact as they're we're basically having to build the parking lot for Easter Sunday for our systems everybody can water as much as they want.

[1:15:00] To up to up to the restrictions, at least those who aren't aren't using that shouldn't have to see the big is much of an increase. Obviously they're certainly going to see an increase, but to try to shift some of that off. And I think that's what you've illustrated here with this policy would allow for that. It doesn't restrict us from going back and using setting rates the same way we already have been. And so I think it gives us more flexibility. And if it works, then I think it'd be a great thing for many. The one concern I had

[1:15:29] I don't think you highlighted well.

[1:15:31] What do we do on drought years?

[1:15:33] What we're telling people don't water.

[1:15:34] We're not selling as much water.

[1:15:35] What do we do on years where we actually get more rain

[1:15:38] than we expect and people aren't having to water?

[1:15:41] What does that do?

[1:15:42] Well, that's something we'll have to monitor, obviously.

[1:15:44] And if we have to adjust, we'll adjust at the time.

[1:15:47] But from a rating agency standpoint,

[1:15:50] Jennifer was at the Water Board meeting,

[1:15:51] and I asked her, I don't think she's here,

[1:15:55] what her thoughts were on this.

[1:15:56] She felt like the potential of a downgrade in rating wouldn't necessarily be because of this policy or setting rates in this this

[1:16:03] For a fashion it was it would be basically just from the sheer amount of debt. We would the amount of leverage we would have

[1:16:09] Would be probably our biggest risk from a downgrade standpoint. Not this policy or this type of rate setting. So

[1:16:16] Just some feedback I wanted to share, but overall I'm supportive

[1:16:19] Fickley

[1:16:22] Yeah, now that was Kevin kind of hit on the one thing I was gonna say is is you know

[1:16:27] So we wanted to do everything we can to avoid a downgrade on the rating just because we're

[1:16:33] about to do a lot of things that are dependent on rating.

[1:16:37] And so, you know, anything that is going to jeopardize that from the standpoint.

[1:16:43] And the other thing, too, I think we just need to be real transparent with the right pairs

[1:16:47] about is, you know, a lot of this is geared towards modifying behavior.

[1:16:54] and if it works, then it's going to somewhat have this effect of, okay, now we have to adjust rates back because it worked really, really well.

[1:17:07] And everyone stopped irrigating on July 15th.

[1:17:12] As Kevin said, even on days, years when we don't have drought conditions, even on years when we don't have heavy rain.

[1:17:18] And so the better it works, you know, it's going to have this impact where we're going to have to raise the fixed rate to cover the fixed cost because we have take or pay contracts.

[1:17:30] And that's just the reality of water and such taxes.

[1:17:33] We added that extra tier of over 50,000 right now.

[1:17:36] If you look at slide seven of the supplemental presentation presented, 0.8% of our customers exceed 50,000 gallons.

[1:17:42] So hopefully we'll look up in the future and we won't need that tier anymore because we don't have any customers in it.

[1:17:46] but as of right now we do, so we have a tier.

[1:17:49] Yeah, so yeah, I think great policy

[1:17:52] and let's implement it and see how it goes going forward.

[1:17:55] Great, thank you for your feedback.

[1:17:57] I'll take that consensus feedback

[1:17:58] as to move forward in this direction

[1:18:00] and we'll follow up with Councilmember Bellar

[1:18:03] on his questions.

[1:18:03] Thank you.

[1:18:04] Thank you.

[1:18:06] Hey, let's take five minutes before we roll into the audit.

[1:18:08] That's gonna be lengthy.

[1:18:15] All right, we're back, let's get rolling.

[1:18:22] Sorry.

[1:18:23] Good afternoon, Mayor and Councilmembers.

[1:18:25] Sir, before I start my presentation, I just want to say this document is a lot to put together.

[1:18:36] And I just wanted to say what a amazing team I have over there, my accounting department,

[1:18:43] they work so hard to put this together, and they gather data from all the departments across

[1:18:50] the city, so this really is a team work effort across all the departments and we thank all

[1:18:56] the departments for their responsiveness and my team, they do an amazing job and this

[1:19:02] is the earliest we have had a final draft prepared in my eight and a half years here.

[1:19:07] So thank you to my amazing team and thank you for letting me say that to them.

[1:19:13] Okay, let's talk about the annual comprehensive financial report and our annual audit.

[1:19:23] All right, so some background terms, aquifer or aquifer refers to the annual comprehensive

[1:19:29] financial report, which is prepared according to GAP, which are generally accepted accounting

[1:19:35] principles.

[1:19:36] These are the rules and standards by which all financial reporting is presented and prepared.

[1:19:42] This is not the same as the budgetary accounting that you all see in the fund schedules that are presented to you in the quarterly report.

[1:19:50] And you'll also hear the term gas being. This refers to the governmental accounting standards board. That is the oversight body for accounting standards for governmental entities.

[1:20:01] All

[1:20:06] right, our independent annual audit, this is required by state law and city charter.

[1:20:11] It is performed by an outside independent audit firm.

[1:20:15] The firm is selected by you and they perform, they conduct their audit in accordance with

[1:20:21] generally accepted auditing standards and government auditing standards.

[1:20:27] And their job is to provide assurance that our financial statements are materially free

[1:20:32] of misstatements. And they ensure that we're not only complying with federal and state laws,

[1:20:38] but also with our own internal policies and external requirements.

[1:20:45] All right, let's talk about

[1:20:46] the offer. There are six sections to the offer. The first is the introductory section. This starts

[1:20:53] with a transmittal letter, which tells you about what's going on across the city. It's a letter

[1:20:58] from management to y'all, telling you about all the projects going on and general information

[1:21:05] about the city. The next section is the Independent Audit Report. This is where the auditors

[1:21:10] give their opinion on whether or not our financial statements are free of material misstatement.

[1:21:19] Now, the offer is a very technical document and the next section, the MDNA as we call it,

[1:21:28] management, discussion, and analysis, that is geared for more non-accounting people.

[1:21:35] So if you're new to reading it, that's a great place to start.

[1:21:40] Not only do we do year over year comparison, but we also explain why those things, why those

[1:21:45] variances happened, that's a great place to start.

[1:21:49] The next section is the financial section.

[1:21:52] And in there you'll see two sets of financial statements.

[1:21:55] The first is government-wide, where the city as a whole is presented as a business type activity.

[1:22:01] And then we have the fund schedules, where each of the different types of funds are presented in their accounting treatment.

[1:22:11] So the governmental funds are presented in modified a cruel basis and the enterprise funds in full of cruel basis.

[1:22:18] Now, no financial statements are complete without the notes to the financials.

[1:22:22] They're an integral part, and you can think about the notes to the financials as the words

[1:22:26] or the story behind the numbers.

[1:22:28] So if there's more information we need to give you about the numbers, they'll be in

[1:22:32] the notes.

[1:22:33] They help make it more clear.

[1:22:36] The last section of the offer is the statistical section where we maintain 10 years of data that

[1:22:43] will help you see trends and analysis with all that information.

[1:22:47] All right. Let's talk about the statement of net position. If you're in business in the

[1:22:54] private sector, you'll see that you'll know this as a balance sheet, similar to a balance

[1:22:58] sheet.

[1:23:01] Sorry, coughing. Overall, we had an increase in assets of

[1:23:09] 428 million, 94 million

[1:23:13] of that was an increase in current and other assets.

[1:23:17] That was results increased cash from bond proceeds

[1:23:21] and receivables.

[1:23:23] And then we also had an increase in capital assets

[1:23:25] of $335 million.

[1:23:28] Of that $335 million, $216 million was the result

[1:23:32] of whip work in progress or projects

[1:23:34] that we have going on right now around the city.

[1:23:39] We also saw an increase in liabilities this year.

[1:23:43] And that was a result of an increase in OPEB, which is other post-employment benefits,

[1:23:49] net pension liability, our arbitrage liability, and the increase in debt due to bond

[1:23:56] issuance. All right. Now for the summary, the statement of activities, you can think of this as

[1:24:04] income statement. So this year the city had a change in net position or net income you may

[1:24:13] think of it that way as $253 million. So let's look at where the changes are, where the changes

[1:24:22] happen. In governmental revenue we saw an increase of sales tax of 4.6 percent. We did see an increase

[1:24:30] and property tax, and we did have significant interest income again this year.

[1:24:35] In the business type activities, we saw increases in charges for services due to water and

[1:24:42] sewer rate increases, customer growth, and electric's new very large load customers.

[1:24:48] In the governmental expenses, we had an increase year over year of $11 million due to new positions,

[1:24:54] Pay increases, the increase in capital projects spending for parks, roads and public safety and the business type activities had increased expenses due to customer growth, pay increases new positions and the water that service for capital projects.

[1:25:23] So here's some highlights, here's

[1:25:30] some highlights for 2025.

[1:25:35] That is highlighted and I don't know why because that's the wrong number.

[1:25:40] That's interesting.

[1:25:41] Okay, so property tax collections, we had property tax collections of 62.6 million,

[1:25:47] which was a 5.6 percent increase over the prior year, not three.

[1:25:52] We had sales tax collections of 52.8 million, which was another 4.5% over the prior year.

[1:26:01] We saw franchise tax collections increase to 9.7 million this year.

[1:26:09] That's an increase of 15%.

[1:26:11] We also saw investment income at 49 million, which isn't an increase over the prior year,

[1:26:18] but still continues to be significantly more than years prior.

[1:26:24] We did see an increase in our arbitrage liability this year of $4.5 million, which staff continues

[1:26:30] to monitor, and that was mostly in the water fund, and with all the water fund projects

[1:26:35] going on, we continued to monitor that situation.

[1:26:39] We also had a $9.4 million reimbursement from the Chisholm Trail Foundation for improvements

[1:26:46] to Gary Park. And this year accounting undertook a big project and we moved all of the utility

[1:26:57] fleet assets out of the fleet fund and into the enterprise funds

[1:27:03] onto their balance sheet so they could get the benefit of depreciation. Now fleet will still

[1:27:09] manage their acquisition maintenance and replacement of those vehicles. The vehicles will now live in

[1:27:15] their respective utility funds.

[1:27:17] And last highlight of the year, electric sales revenue increased 8 percent over a prior

[1:27:25] year due to organic growth, the very large CNI customer loads, water and sewer sales

[1:27:33] revenue increased 30 percent due to expanded irrigation schedule, organic growth, and rate

[1:27:42] increases to support the capital program and the new water supply and with

[1:27:48] that we are going to now have Adam McCain from our audit firm. We've

[1:27:54] rented welcome and produced comments.

[1:27:59] Thank you very much Christine.

[1:28:03] Appreciate the opportunity to be with Council today and present the results of our

[1:28:06] audit for the fiscal year ended September 30th 2025. Please feel free to stop

[1:28:12] me if you have any questions as we're going along. I don't mind being interrupted at

[1:28:14] all. So just speak up if you've got any questions. My name's Adam McCain. I am the engagement partner

[1:28:21] on your audit engagement and Brandon Trian will be here a little bit later if we're the council

[1:28:27] meeting if you guys have any questions that come up at that point. Just kind of walk you through,

[1:28:32] remind you kind of what the audit process looks like and critical touch on some of this. We do

[1:28:35] perform our audit under generally accepted audit standards, which is the same set of standards we

[1:28:40] would perform the audit under if we were to audit just any commercial business. Then we layer

[1:28:44] on top of that, generally except the governmental auditing standards, which essentially just has

[1:28:49] a few additional requirements associated with our independence and our works surrounding

[1:28:54] internal controls are really the biggest kind of differences there. And we issue our report

[1:28:59] under both of those standards. We also perform a single audit, an audit of the expenditures of

[1:29:04] federal awards that the city spends, so that is kind of a risk-based process. And for this year

[1:29:11] we did look, there are some continuing use of coronavirus recovery funds running through

[1:29:16] the city, and so that was the program that we looked at for this year. We also do some

[1:29:21] work on compliance. We don't issue an opinion on compliance, but we look to make sure that

[1:29:26] we don't see any types of non-compliance with rules, regulations, contracts, federal

[1:29:34] awards, things like that. It might have a material impact on the financial statements.

[1:29:39] It kind of reminds you what our timeline looks like.

[1:29:41] We really get started on our audit as soon as we wrap up the previous year, kind of keep

[1:29:46] in touch with management, make sure that we know about any significant contracts.

[1:29:50] We read the minutes, and then come what you'd started and start kind of the summertime working

[1:29:55] out our interim work, which includes kind of our understanding and testing of internal

[1:30:00] Financial reporting, and also internal controls over compliance. Then we come out after the

[1:30:07] city has closed the books in December and start working on the audit itself, really digging

[1:30:11] into the transactions, looking at support for what's recorded on the books so that we

[1:30:17] can spend most of January, February, helping management put together that big, big document that

[1:30:23] Christy was just talking about with you guys, and then come to present to you so that we can

[1:30:28] started just for next year.

[1:30:31] So I'll kind of run through our

[1:30:33] required communications and findings or a lack thereof here for the

[1:30:37] report. So first we are required to point out to you any significant changes to

[1:30:42] our planned out of strategy that may have occurred since we initially communicated

[1:30:45] with you guys. We have not had any significant changes for our strategy. Nothing

[1:30:50] came up that we didn't expect that causes have to change the focus of our

[1:30:54] audit. As far as our report goes we have issued an unmodified or clean

[1:30:58] opinion on the financial statements, highest level of assurance that we can give on set

[1:31:02] of financial statements. We also issued our report on internal control over financial reporting

[1:31:07] and compliance and other matters and had no findings to report to there and we did issue

[1:31:12] our single audit report to report on compliance and internal control required by the uniform

[1:31:17] guidance and are able to issue a clean on modified opinion there.

[1:31:23] So you can kind of look at this part as the report card here. We had no material

[1:31:32] We had no material weaknesses or significant deficiencies in internal control that we would report to you, and we don't have any independence matters that we would report to you if we had come up with any independence matters that would be communicating that to you now.

[1:31:47] As I said, no adjustments that we had to post really, it's not very many of our audits

[1:31:52] that we run through where that ends up being the case, so I want to commit management

[1:31:55] on their work to get ready for us, get the financials, get the books closed, so that

[1:32:02] we can really spend our time auditing and not have to go in and reconcile and clean up

[1:32:05] and figure out kind of what's going on. We've got a clear record so that we can really spend

[1:32:09] our time testing and focusing on the financial reporting itself.

[1:32:13] So

[1:32:15] we are required to communicate to you what we call our significant risks in the audit this and so we've got kind of three significant risks that we point out to you. There's significant risks in every audit that's part of the audit standards is that we identify significant risk.

[1:32:30] First when we point out point out as management override of controls this is pervasive in every audit has nothing to do with the city and almost every audit that you would look at this would be one of the significant risks.

[1:32:42] And so we kind of plan our audit surrounding that, assuming that that could be the case.

[1:32:46] We have no audit findings associated with our testing there.

[1:32:52] Improper revenue recognition is something identified by the standards is in most organizations,

[1:32:58] most entities, commercial, non-commercial, governmental, and non-profit.

[1:33:03] Revenue recognition is going to be a potential for our risk.

[1:33:06] And so we do kind of narrow down and identify risk of improper property tax revenue recognition as a risk.

[1:33:13] We have some specific procedures that we perform related that make sure we're comfortable with the way that revenue is getting recognized and we have no findings to report to you.

[1:33:22] We also identify kind of the risk of movement of expenses between budget categories.

[1:33:26] You know, it could be someone trying to manipulate the budget for compliance purposes, and so we identify that as a risk.

[1:33:34] We do perform procedure related to that and don't have any audit findings to present to you related to that risk as well.

[1:33:41] Some of the other areas where we spend time that I'll touch on just general expenditures related liabilities including payroll capital projects and general disbursements obviously as a government spending money is kind of one of the things that you do.

[1:33:52] And so we look to make sure that money is being spent consistent with the way the council has defined those created those budgets.

[1:34:01] Revenue and related receivables, including utility revenues, taxes, charges for services and grant revenues.

[1:34:07] Being sure those are getting recognized in the correct period, in the correct fund, so that they're getting credited appropriately, the fund balance that's appropriate as well.

[1:34:16] So, cash and investments looking to make sure that the custody of cash and investments

[1:34:20] exists as management has told us that it has.

[1:34:22] We confirm cash and investments with third parties and testing material, reconciling

[1:34:28] items.

[1:34:30] And then long-term debt can be a little bit sticky, making sure that the debt and any kind

[1:34:35] of deferred items associated with the debt is getting appropriately reported and amortized

[1:34:39] off as they should be.

[1:34:45] So, it's important to read the notes of financial statement,

[1:34:47] Chris, you kind of touched on that.

[1:34:50] And so, all the significant accounting policies are summarized

[1:34:53] in the financial statements.

[1:34:55] There are no new significant accounting policies adopted this year.

[1:34:58] They should be pretty consistent with what you've seen in the past.

[1:35:01] It's important to remember that the preparation of any financial statements

[1:35:04] does include these investments.

[1:35:06] And so, we do take a look at the estimates and make sure that we believe

[1:35:09] that the inputs to those methodologies used by management are appropriate

[1:35:12] and so they are materially presented in these financial statements.

[1:35:17] Some of the estimates that are included in your financials, the allowance for

[1:35:21] uncollectable receivables, compensated absences, pension, and other

[1:35:25] post-employment benefits, self-insurance liabilities, we don't need many of

[1:35:30] these as significant or subjective estimates, pension and OPEB.

[1:35:36] You know, you could consider that way but you, you know, there's third-party

[1:35:41] actually were involved, there's not a whole lot of say by management on how those estimates

[1:35:45] are going to be derived.

[1:35:50] Just to point out a couple of significant disclosures that are relevant to the financial

[1:35:54] statement presentation, the debt disclosures obviously, then there's disclosure of your

[1:36:01] regulatory asset position and the commitments and contingencies are significant footnotes.

[1:36:06] We're not aware of any significant or unusual transactions that we came across as we were

[1:36:10] For performing audit this year, we'd communicate those two if we did.

[1:36:15] We're not aware of any identified or suspected fraud, same thing.

[1:36:19] You'd be hearing about it before now if we'd run into anything.

[1:36:23] Did not encounter any significant difficulties in dealing with management.

[1:36:27] In fact, again, as I mentioned, I really appreciate all the hard work by counting and finance

[1:36:32] and everybody that kind of rolls up into that, getting all the information, getting everything

[1:36:35] ready for us so that we can really do a good job auditing and not have to chase things

[1:36:40] down and track down pieces of information that we may not be able to find.

[1:36:46] Did not have any discrements with management over any accounting issues or anything like that.

[1:36:50] If we did, we'd be required to communicate that too.

[1:36:55] Management does sign a rep letter, essentially telling us they provided us everything that we need for the audit and that everything that we've been given is true and accurate.

[1:37:03] As I mentioned, there's no significant new accounting policies this year.

[1:37:07] We're not aware that management did an opinion shopping going out and checking with other

[1:37:11] accountants on the way that they think should be treated.

[1:37:14] We don't have any other significant matter to find these to present to you.

[1:37:22] That'll be happy to answer any questions that you guys may have related to the audit.

[1:37:26] Thanks, sir.

[1:37:27] Any questions from?

[1:37:32] All right.

[1:37:33] Well, thank you very much.

[1:37:34] We appreciate the thoroughness.

[1:37:35] Thank you very much.

[1:37:38] Mayor, I wanted to call out one thing, of course, liposetistical data in the back.

[1:37:41] back. But Glenn was here earlier and I see him here anymore.

[1:37:47] Well, based on what the audit says the last 10 years, Glenn and his Department have done 682,908 inspections.

[1:37:57] The last 10 years, 682,908 inspections.

[1:38:03] Glenn did that himself.

[1:38:04] Glenn did all by himself is what it says.

[1:38:06] His department, I believe, but the residential permits last 10 years, 16,000.

[1:38:11] and what's interesting about the commercial permits,

[1:38:14] you look at commercial permits every year

[1:38:16] for the past 10 years besides 24 and 25,

[1:38:19] the highest, there was never a year over 100 commercial permits.

[1:38:23] 85 was the highest in 17, but then the last two years

[1:38:25] we've had almost 250 each year.

[1:38:28] So basically over the past 10 years,

[1:38:31] 47% of our commercial permits have been issued

[1:38:34] in the last two years.

[1:38:35] So the commercials fall on the rooftops,

[1:38:37] rooftops are here, the numbers are here,

[1:38:38] It feels like we're finally seeing, hitting the metrics for side selectors and the commercials

[1:38:43] falling behind it.

[1:38:46] Well, I just wanted to add in echoing thanks of our accounting team or finance team.

[1:38:53] And it is a broad team effort to be able to present the effort and go through the audit

[1:38:59] process and compliance associated with that.

[1:39:03] It's kind of interesting that pretty much every workshop item we had tonight was actually

[1:39:07] a very large team effort to be able to get us to this point and be able to have, just

[1:39:13] talking about the economic development wins, have the different achievements that we've

[1:39:17] been able to identify tonight.

[1:39:19] So I just wanted to personally say thank you to the finance team and congratulations on

[1:39:22] the clean audit.

[1:39:23] It's a big achievement.

[1:39:26] Yes, thank you very much.

[1:39:28] Appreciate you guys.

[1:39:30] All right.

[1:39:30] We are going to roll into executive session to discuss sections 551.071, 551.072, 551.087 and 551.074. Thank y'all.

Mar 10, 2026 Workshop

Agenda

Transcript