Uh. So. Knock, knock. Uh, I’d like to call to order today’s special meeting of the King County Regional Water Quality Committee. It is August 5th, 2026.
Uh, today’s meeting is a special meeting because the King County Council is in recess, which means that we are not able to hold regular meetings, but we can hold the special meeting. Uh, thank you all for being here today. I know August is a tough time to pull together attendance, and I am very glad that we were able to do this today.
Um, as always, the committee accepts public comments in writing to a dedicated email address, which is committees. Its regular spelling committees at King County Gov. I know we received one email in public comment to the committee today. It was regarding battery electric storage systems and opposition to siting them in uh, in the Snoqualmie Valley area. I committed it’s been sent out to all members. I commit to your reading.
Uh, Clerk Wells, was there any other written comments that we received? Uh, no. Okay. Very good. Uh, with that, would you please call the roll? Yes, chair. Thank you very much. Deputy Mayor Hamilton, Council member Mauck. Present. Mayor Moore. Present. Mayor. Rossman here. Council member. Armia. Here. Council president. Stewart. Council president. Hollingsworth. Council member. Lynn. Here. Council. Thank you.
Council member. Soca. Commissioner. Clark. Here. Commissioner. Warren here. Commissioner. Hushing. General manager McClellan. Present. Council member. Dunn. Present. Councilmember. Lewis. Here.. And chair. Banducci. Here. And you do have a quorum. Thank you so much. Um. Moving on. Uh, there.
Our next item is to approve the minutes of our July 1st previous meeting as our motion to approve the minutes, which are on page four of the packet. So moved. Thank you, Council member Mark there before us. Any comments, questions or changes to the minutes? Hearing none. All those in favor, please signify by saying I. I any opposed? Please say nay. Meeting minutes are approved. All right. Uh, super brief chair’s report.
Just about the agenda ahead of us today. Uh, we have scheduled a briefing on the Washington Water Future Initiative. That is an initiative of the Department of Ecology and Governor Ferguson. Uh, we’re expected to have a briefing for, um, uh, Jennifer Hennessey of Doe on that issue.
Our second briefing is from consultant editor. I’m going to say this Chevron I hope I didn’t put your name to share his review of financial planning tools and infrastructure sustainability.
And then, of course, uh, the main purpose of the meeting, being a special meeting, is that we need to continue to walk through the regional waste system plan, update policy areas this month and this month we are discussing a combined system. The combined system. So, um, uh, if everything goes as planned, which I’ll just preview a little bit of a spoiler alert. So far, it’s not.
But if everything goes as planned, it’s going to be a very full meeting. And I may be a little bit, uh, aggressive with the time management. So thank you for that. And, uh, let’s start with our regular report, starting with our new report from Chair John McClellan. Welcome. Thank you. Chair. Uh, I will be as brief as possible as well.
Uh, you didn’t have any regular meeting in July and said we had our annual summer tour. The tour was arranged. Of course, by w TD, and that was to basically explore by foot some of the sights related to the mouth of the Duwamish Project.
We also had the opportunity to hear from staff and ask questions at the Georgetown Wet Weather Facility. In addition, there was some staff members from the Duwamish River Community Coalition which attended the meeting, and they shared their perspective from people who live and work alongside the Duwamish and were affected by stormwater and overflows in that area.
MoPac had a special meeting on the 26th to discuss the draft discharge permit for West Point Treatment Plant, which includes nutrient requirements. Following the meeting, we voted to submit a comment letter to ecology, which I signed. Uh, had a lot of help, uh, beyond help.
I think most of it was put together by our friends over at TD. Um, but these are issues where we are in lockstep on in terms of our concerns related to what ecology is, uh, wishing to do with some of these permit issues. Uh, and for today’s meeting, of course, we’re very, very interested in hearing Mr. Seeber speak.
My agency is one of the ones that brought him in to help us understand and analyze the financial tools. And with that, uh, that is my report chair. Thank you. Thank you. Chair McClellan. Any questions? I have a quick one.
Not to put you on the spot, but can you, uh, give us just the headline of what the letter on the discharge permit covered from IUPAC? Um, partly it was timing issues. You know, we always we always wish we had more time and even more so now with the incredible costs we’re facing. One of the things I talked to, um, Director Girl about in past weeks was our interest in trying to get ecology to consider adaptive management.
One of the challenges that we see, I think, across the board, being the regulated community with how ecology carries out its regulating work, is that there doesn’t seem to be adequate consideration for changing things as we go. If we’re not getting the outcomes, we hope for.
So if we can inject a philosophy, explicit philosophy of adaptive management into these permit conditions, that’s a win for us. And that’s a long term win. And it is perhaps a change of philosophy. But this might have maybe but the time to get it. So there you go. Thank you so much again. Um. All right. Seeing no other hands.
I’m going to move on to our regular report from the Wastewater Treatment Division. Uh, director, are you here and able to give you a report? I am, can you hear me? Okay. We can. Thank you. Please go ahead. Welcome. Thank you.
Uh, well, I’m going to cover a little bit of the same ground as, uh, the, uh, chairman, but I’ll add a little bit more, uh, as was mentioned, we’ll hear from Ed Sebring today. Um, we’ve been working with and, um, for over a year, helping him get the information he needs to review our long term financial model. Um, we’ve really appreciated his comments as insights, observations from a long career in this field.
Things like that. Policies and practices and a prudent approach to asset management. Um, we’ll just say I’m sure he’ll be open to responding to your questions, if any members also have questions for our staff, are happy to respond to those as well.
Uh, in the packet for this month’s meeting, you have an updated version of our sewer rate and capital work plan. I believe it’s pages 8 to 13. We keep that updated every month. I’m just going to pull a few highlights from that report. Um, we’re working on a calendar for the 2020.
Uh, for the last quarter of this year through the second quarter of next year, which would be the core of our rate engagement period for the 2027 and 2028 rate. We’ll be sharing a draft of that with new Parks Executive board a little bit later this month, and then start to get that out to others in the coming couple of months.
Um, we have more briefings from US tax rates and finance subcommittee scheduled in October on aspects of our model. Um, we are also working, continuing to work on, uh, one of the categories called, uh, Better Visibility and transparency into our capital project planning, especially for large projects.
Uh, two new PAC members have started to attend our project Oversight board meetings, and we really welcome their participation and insight in those meetings. Uh, we’re also working on a review of our regulatory obligations. We’ve been meeting with the Department of Ecology in June and July. There are more of those meetings to come, and there are multiple opportunity areas that we need to evaluate.
More to come on that, um, in the coming couple of months. But that is an active area of work. Also, continuing discussions with the Sound Cities Association, the City of Seattle, to follow up on last fall’s regional utility. Uh, summit.
And we’re currently discussing a potential event that would occur in December of this year. So stay tuned on that. Uh, chair McClellan also mentioned the nutrient permit. Um, we do have the public review draft out there.
This is a modification to our West Point needs permit and a re issuance of the Vachon and permit that would add conditions for nutrients. Um, those conditions include an annual nitrogen load value monitoring. Um, requirements, and then upgrade planning. Um, many of those are similar to what was in the original, uh, nutrient general permit. But there are some differences.
So, uh, we will be looking we are looking very carefully at all the different requirements in those, uh, permit modifications. The deadline for submittal of comments is this coming Monday at 10th, uh, for the West Point and then 28th largest for Vachon. Um, as was mentioned, we briefed me back on this. Meatpackers comment letter has already been submitted.
I’m sure we can provide a copy of that into the WTC records, so that you can see that directly. Um, we’re working on our our letter, as I mentioned this week, we’re also helping to inform a letter that our national trade association is is generating. Um, to send to the Department of Ecology as well. That’s Nashua.
That’s the organization that I’m I’m lucky enough to serve on the board. Um, Andrew Lee with the City of Seattle Public Utilities Department is also on that board. So not what we’ll be sending a comment letter as well.
We’ll keep you apprised on what we know about when ecology will issue the final permits. Um, uh, we don’t know when that will be. We’re kind of our crystal ball. Fuzzy crystal ball is sometime this fall. There will be a lot of comments for ecology to review, so we’ll keep folks apprised as we do more.
Uh, I mentioned not a moment ago, uh, this last July, I attended the Aqua Summer Utility Leadership Conference. Um, I have had an opportunity to present on nutrients, um, our insurance challenges, and one of the sessions, um, which was very helpful. There are many peer regions around our country that we are working to draw from.
Uh, for their experience working with nutrients, how they’ve navigated the challenge in those particular regions and water bodies, and working with either the local EPA region or that relevant state agency. Um, there’s a lot of material out there. Um, and there’s definitely things we can learn and put to work here. I’m confident. Um, NOC also released a communications toolkit.
Um, during that conference, and we’ll use that to help inform and supplement our own, uh, communication practices. Um, attending conferences like this helps us to stay connected with peer agencies where we can improve our practices here about innovation. And, um, and, uh, and learn from our peers and help inform our peers when, when we’ve got something to share. The summer tour was mentioned also by John.
We held that, uh, for pack members, we had one RWC member, a council member. Lynn was able to join as well, which we appreciate. Um, and, uh, I’m, I’m pleased that John mentioned we had a kind of a special thing here, uh, where we had members of the Community coalition, uh, speaking about, um, their
perspective on, uh, certainly the Duwamish River writ large. Uh, the opportunity with investments like the CSO project, not only for uncontrolled CSOs that were obligated to, to control, but also how all of our different investments, the river cleanup that we’re doing, um, affects, we hope positively.
We think positively for those who live and fish and work along, and lot of their comments help us, uh, remind us of the why behind this work. Um, the the fact that, uh, historically, um, our region has not done right by, uh, some of our water bodies and some of our local communities.
And so these investments do make a real difference for real people and real geographies there. Um, so appreciate them attending. Um, I would encourage our staff to share a couple of quick PowerPoint slides. And so if Olivia, you can do that, uh, here’s a picture from that tour.
Um, we did walk around the, um, mouth of Duwamish Project site. So if you’re familiar with Home Depot down in the Soto area, um, a couple of houses ago, I’ve spent lots of time and lots of money at that Home Depot down there. Um, so I’ve gotten to know that that area a little bit.
Um, that is not right where Home Depot is, but we actually have a, um, I think it’s a regulator station there. That’s right in the corner of that Home Depot parking lot. That was where we started the tour, and we walked down to the large area that we’re looking at. And this is a picture looking into that area where the group shot was, was taken.
And the other one for Georgetown. Uh, we’re looking to try to find other opportunities for folks to visit that Georgetown facility. And so if you have haven’t been there yet, would like to go let King County staffer know, and we’ll figure out a way for making that happen.
Um, the next slide I want to show you is related to our Coal Creek project. This is the project that won the Salmon Safe Award. You may remember I reported on that sometime ago. This is out in Bellevue. Um, very unique project. It’s the only wastewater project that we’re aware of that has ever been. Salmon safe certified.
And you can see here that we’re operating in very tight circumstances. This is Coal Creek Parkway. On the picture on the left there. That’s aerial photo. Coal Creek Parkway with the power lines going across us. And we have a very small, very highly intensive footprint, which is where those tunnel boring machine is.
That’s the launch pad, if you will, for that tunnel boring machine. Uh, we’ve been working since July 20th. Uh, this machine operates 24 over seven underground. Um, and it uses a technology called trench construction. So we are not digging in and disrupting the surface of this ravine. That is a salmon bearing stream down in that ravine.
And we’re able to install major portions of new pipeline away from sensitive features and community spaces, away from and minimize those noise and other impacts. Uh, while keeping that work going along safely. This project will add about two miles of new sewer pipe, and it will improve capacity for important part of our regional system and our geography.
Mostly benefiting the communities of Bellevue and Newcastle, and will be supporting decades of future growth. This is large pipe, 56 inch steel casing and a 36 inch inner pipe. It will carry 18 million gallons of wastewater every day. And one kind of interesting fun fact.
Currently, the longest trench tunnel in the United States, I’m told, is about 2500ft long. This project, upon its completion, will surpass that by a great deal. Um, so we will then have the longest project in the country using this technology. It’s pretty interesting. Um, it is like you’ve seen with other tunnel boring machines. You can steer this and go through.
It’s not just straight. It will allow you to curve that pipe and follow the direction of that ravine. And that’s what we need to do. So really great stuff. Um, really strong team. We appreciate the partnerships with Bellevue and New Castle.
We were out at Newcastle maybe a year ago talking to the city council. Um, so that we can complete this project on time and on budget. We know, um, those communities care a lot about making sure that these investments get done and that we do that in the most graceful way for those house communities. And with that, we can stop sharing and concluding my report. Thank you for the time.
Thank you, director. Uh, any questions for, uh, wastewater treatment? Director. Girl. Can I say two quick things? Just I when you talked about the utility summit rate summit follow up, did you say December? That that’s what you’re aiming for is December? That’s what we’re aiming for right now.
I won’t guarantee you today, but that is the target right now. Yeah. No, I wasn’t sure if you said this September or December. So just setting expectations, right? Uh, and then on the also timeline question, that’s a really cool project. That Coal Creek sewer upgrade project. Just so interesting.
Uh, and and congratulations on the salmon safe designation. That’s a really big deal. And, uh, I know it took a lot of work, and it does sort of make you have to do the project in very specific ways. And just having worked with much larger time machines, that’s an interesting little, little one.
Um, what is that? What is this? I mean, relatively speaking, right. Uh, you know, like train tunnels, right? Um, so, uh, what is the timeline for completing that project in, or is it on schedule? It is on schedule.
Um, we did have a few delays just with some of the early permitting work and the coordination with the cities, but we’re working hard to stay on schedule. Um, I think we’ve got another at least another year of construction after this, but I’ll verify for the team and get back to you. I’m asking for the hikers, uh, shutting down one of the most popular trails on the east side there.
So, uh, and if you can get it open for next summer, that would be so awesome. Well, we’ll see. I, uh, uh, we will have it better when it’s open at the end of the day, too. You may remember we briefed the committee on this before.
There’s also Ada improvements that are going on with this project, which is really going to benefit portion of our community that now can’t use some of those trails. And so we’ve really had a lot of really thoughtful design going into this project. Thank you. Good work. Thank you very much.
And uh, to both MoPac and we’d thank you so much for arranging the mouth of the Duwamish tour for the annual tour. I really had hoped to go, but as some of you know, I injured myself like just a few hours beforehand, and I’m not ambulatory at the moment, so no walking tours for me for a while.
But I really I know that those who went, uh, got a lot out of it and always do. So really appreciate the effort that goes into getting us out into the system. All right. Let’s move on into our agenda topics now.
Uh, I have been informed that our first presenter, Jennifer Hennessy, from, uh, State Department of Ecology, had a family, uh, I think emergency is a she. She had an urgent family issue. She had to go attend to. She, I think, intends to be here but is not here yet. So I want to ask, uh, if, Mr. Cebrian is ready to proceed.
I’m taking you out of order, and I don’t want to, uh, you know, throw you a curveball, but here it is. Yes, I’d be happy to. Very good. Okay, so let me just introduce, uh, this presentation was suggested to us by Commissioner Lloyd Warren on our committee and general manager McClellan from UPSC.
Uh, and I would love to ask Lloyd Warren, if you want to introduce the topic, please. First of all, I’d like to introduce Ed. Yeah. Please go ahead. Do your way. Many, many people have worked with Ed in this region. He’s been, uh, he’s a financial consultant and economist, primarily working in the utility area.
Uh, has worked with many, if not most of the contract agencies that are part of the the wastewater system. Uh, and his previously was a commissioner, uh, at Woodinville, uh, water and sewer and, uh, at one point in his career, sir served as chair of the rates and finance committee for MoPac.
So that is very familiar with, uh, WPD and, uh, the, the issues surrounding, uh, around financial issues. Um, and the latest, uh, job had served as economist for the Cascade Water Lands and, uh, the districts, uh, through voluntary contributions, raise money to bring it on board as a resource for everyone.
Uh, all the agencies, and to work with WPD on, uh, the issues first, concerning the long range, uh, rates and finance modeling, which I think he has a few comments to make. But recently we wanted to focus on is there a way of of coming up with some ideas on linking financial information to asset management or the status of our, uh, built systems, and coming up with some metrics that might make sense for everybody.
And so that’s, uh, kind of the, the, the genesis of this presentation. So unless somebody has some other questions about it and, and what he’s been doing for the last 30 years, uh, I’ll just turn it over to that. Well, welcome.
And thank you so much for, uh, for taking your time to be with us today and help educate us. These are issues that are preoccupying the committee. So this is very timely and helpful. Thank you and welcome. My pleasure. Thank you. I will share my screen. And hopefully that is visible. Yes. All right. Very good. Thank you.
And thanks, Lloyd for the introduction. And thank you all for your for your time. Um, been at this for about a year and a half now on behalf of the the districts that, uh, supported this venture. And it started out as a review of the financial planning tools, the financial model, uh, forecasting techniques.
ET cetera. And a review on the status of that, and then moved into trying to trying trying to define metrics that inform and can help guide the longer term financial sustainability of the system to match the efforts on the infrastructure side to deal with the physical sustainability of the system.
And so what I’m going to go through today is a briefing on that and some suggestions on tools that you can find useful as you’re evaluating social trends, trends and capital development, etc.. Uh, to help keep on track with the long term sustainability of the system.
And perhaps as a preface, uh, utility systems are somewhat different than a lot of the other, uh, examples that we might find in practice, because there is no option to simply stop operating one day. And so that idea of sustainability is is essential.
And it extends to all fronts financial, operational and and capital. Uh, so as we get into this, we really do tend to look long term. We tend to look at life cycles. And while immediate decisions regarding rates this year and next are important, um, they are best made in the context of where things are going longer term.
And this may be preaching to the choir, but it’s an important preface to moving into this. So looking at the analytical tools, uh, the the department has developed or acquired and developed a very robust and capable financial model.
Uh, it’s very impressive in its ability to, to address, uh, trend analysis, forecast costs into the future, manage the capital financing program. Uh, and, and also track and manage the the debt component, which is quite large for this utility.
Uh, given that despite that, uh, the information going in probably needs to continue to improve and evolve in the areas of asset management, ultimately, so much of this hinges on what it’s going to ultimately cost to replace major system components. And and over enough time, all system components and improved estimates of those replacement costs are really essential to be able to assess status and progress.
Uh, one thing I would note is the information being shared has tended to focus recently on a ten year period, which is an improvement over the past, perhaps in terms of length. But, uh, one solid recommendation would be to look longer term. And the model does that. It goes out, I believe, 30 or 40 years. I can’t recall it offhand, but, uh, see more of where the trends are going. And there’s many reasons for this.
You have to be able to see through the life cycles of assets that have to be replaced on the horizon. Uh, you also need to be able to see through the life of existing debt to see how the financial trends will progress over time. Uh, and then overlaying on that the ongoing need for replacement and improvement.
You can look at the, uh, trends in key financials like debt burden rates, etc., and make decisions. Now in the context of of those longer term trends and needs. Uh, an observation is the current financial metrics don’t necessarily link the financial and asset management elements.
Uh, but progress continues to be made on financial and funding capability. And I’m going to divert now to a couple of slides you’ve seen before that come from and are important to kind of set the framework for where things are at and then discuss where they could be going. Uh, the first looks at, uh, debt performance.
And historically, at the time, I chaired the rates and finance committee, for example, we had a major initiative to try to improve, uh, the, uh, the debt portfolio. By and by that, I mean reduced the debt burden relative to the total assets.
And you can see that over the past decade since that time, uh, there has been significant progress. There was a point in time, roughly a decade ago, that there was essentially as much debt and perhaps more debt than there were fixed assets in the system.
Uh, now we’re down in the 80% range, uh, which which means you’ve created some equity in the system, some value in the system that isn’t leveraged through debt. Uh, that also means that you don’t have as much debt burden. Uh, forcing your rates as you would if you had stayed at, you know, essentially debt financing, everything. There’s been a few reasons that was accomplished.
One is that, uh, the standard the policy standard for coverage was was changed roughly a decade ago. It was increased, uh, debt coverage is essentially a margin that you collect through rates in excess of what you need to repay debt, and it becomes a funding source for the capital program. So increasing that coverage factor has meant more reinvestment.
Uh, prior to the need to issue more debt. Uh, since then, there was also a focus on looking at depreciation expense. How fast are the assets declining in value and ensuring that reinvestment is incurring is occurring sufficiently to offset that. And that made further progress. Both of those are tools that can be used.
They can be used in tandem or individually, but ultimately what they’re after is the level of reinvestment that will allow the utility to sustain itself without always incurring debt to do so. Uh, another slide, uh, that’s been shared with you deals with asset management and the replacement strategy.
Um, you know, quite as the asset management program evolves and better estimates of costs and, uh, timing of of needs, you’ll be able to flesh out a more complete capital program for the R&R side or the reinvestment side of the puzzle. You also have the new project side, uh, that you’re well aware of, that that’s you’re facing in the future.
The things that are worth noting here, uh, in this slide, are trying to decide an adequate amount of ongoing reinvestment, uh, trying to protect that. So it’s actually being used for replacement, uh, as you’re looking at a major capital improvement program, it’s relatively easy to say, we’ll use the money for that.
We’ll worry about replacement later. And you create a backlog that ultimately can become untenable. Uh, and so the last point here, prioritizing asset are in our projects deals with that to make sure that the criticality is is part of the assessment.
And when you have repair and replacement projects that are high priority, that they stay on track even with other programmatic, uh, initiatives. So looking from the modeling and the information now, uh, some, some basic suggestions, and these were shared with Njpac several months ago as well. Uh, in more depth.
One is to extend the forecast period. And here the model does go out to 2060. Now, uh, that outstrips at the moment your debt portfolio, which means that you can see a full cycle of of paying off existing debt, as well as the implementation of new data for the new programs.
Another is is to begin to get comfortable with the idea that there is no single answer. You know, uh, my former boss, who’s now on your committee, used to say, the one thing I know about the forecast is it’s wrong. And that that will remain true.
Uh, so we have probabilities that we can apply or at least look at optimistic and pessimistic outcomes to bracket, uh, where we think things are going and ultimately to test specific cases and make sure that those tests include the need for reinvestment, because ultimately, if you’re not reinvesting there, you’ll be approaching a cliff. And that cliff will be when things start failing in use.
Uh, and you’ve lost the ability to manage those outcomes, and you’re simply in a reactive and very expensive reactive mode. And then finally, uh, look at some key metrics. And that’s where I want to spend some time with you today. So I’ll move on fairly quickly. Um, this is an example of the kind of the cone of uncertainty.
And if I were better at graphics, it would add the shaded area between the extremes that are shown here. Uh, these are actually some scenarios, uh, in the, uh, the rate and financial model, the, the thick blue one was the forecast a year ago at the time. I received a copy of the model. Uh, the others are variations on capital costs.
Uh, high cost, a very high cost or a low cost. And all of these are potential outcomes. And what we know now is where we’re at is, uh, at roughly something on the order of a $60 rate.
And where we’re going is something on the order of 130 to even as much as $200 rate. And that will evolve as these projects do. Uh, a lot of times people tend to think, well, there’s only the dark side. There’s there’s only higher possibilities of outcome. And there are a lot of pressures that cause costs to go up.
But there are also some factors that can reduce, uh, the rate forecast from that, uh, baseline forecast. And that could include things like assistance, whether it’s loan assistance or grant assistance. It could also include the things that may not seem as favorable, but delaying projects because it slows down the rate of expenditure on capital.
Another example would be if the asset management program determines that they’re the useful lives of assets are significantly longer at this point than the original estimates of useful lives, and that would delay the need for the replacement cycle. So it’s entirely possible to do better than the target.
But the probability is probably lean upwards in terms of outcomes being worse than the target. So moving on to the metrics themselves, there’s really two essential parts to how to assess.
Are we doing enough or are we doing the right amount or even are we doing too much when it comes to looking at sustaining financial sustainability and adequacy of reinvestment, one is to look at on an annual basis and how much cash are we generating for this purpose or capacity are we generating for this purpose of replacing assets? And for that you need to kind of isolate a bit from the improvement side, which also has its its needs and demands and schedule.
Uh, looking at annual performance, the depreciation expense that I mentioned earlier is one example of that. It is unfortunately a stale statistic. What’s something cost in, say, 1985? Uh, is not particularly relevant to what it’s going to cost to replace today. Uh, and you look at the entire system. That’s true.
Uh, so we need to take into account inflation. We need to take into account the environment in which the improvements would occur. Um, even things such as needing to maintain and continue operations while instituting major replacements, those all tend to increase costs. So somewhere we need to get to a very good cost estimate of what it’s going to cost to replace the system.
A first cut is to simply index the original cost using something like CPI. There’s there are construction cost indices that like the consumer price index, try to equate past investments or cost to current ones.
And on that basis, the system in place right now is roughly double to replace what it was originally, what it originally cost. So if you have $6 million of assets, it would cost you 12 to replace them. That does not take into account, though, some of those factors in that sub bullet one there regarding changes in the cost environment, the conditions in the field, uh, the need to continue operations around replacement activities,
etc.. So it tends to be low. And in the industry we call that reproduction cost. This estimate of simply indexing the prior, uh, expenditure and then replacement cost tries to go one step further to look at.
Now, what will it really cost as we undertake a project and the asset management program that’s in development should get you to better estimates on those numbers. So in the annual basis, what we want to see is are we matching that replacement based decline in asset value. Uh, and there are elements to that. It could be all cash funding. That’s, that’s equivalent to that.
It could also mean that we’re retiring debt and doing some cash funding and retiring debt. But in aggregate, if we’re not matching that replacement based level of depreciation, then we’re losing ground and the liability increases over time. And ultimately those costs will have much more profound, uh, rate shocks and impacts on rates.
The other element is more of a status check. And it will also change over time. But it’s not based on what you’re doing today. It’s based on where your system is at today.
And what we look for here is, is there a way to measure the remaining useful life in the system? And there is, uh, is there a way to measure whether our funding capacity is tracking with holding that line and not letting it decline? And as an example, if you look at the depreciated value of the assets in the books, now roughly for 60% of the useful life of the system has been consumed, meaning 30, it was a
little less than 40, but we’ll go with 40% remains. If that number is going down, it means you’re consuming more and more of the useful life of the assets and leaving a larger and larger liability when you need to be able to replace and extend those.
So what we came up with is a remaining life index that looks at that percentage of remaining, uh, system useful life. Um, and gives you the ability to track it over time to see whether you’re declining in value, holding your own, or increasing in value.
Uh, before I go on from this, it’s worth mentioning that another aspect of bringing these into play, once we find metrics that mean something to us and we can consistently apply, is thinking about generational equity, and that refers to ensuring that we’re not asking today’s customers to pay tomorrow’s customers costs, but also that we’re not kicking the can down the road and leaving a larger burden on future customers of
the system. So the two metrics that I’ll share briefly with you today, one we refer to as the annual reinvestment rate, it is simply how much? How much is being generated out of rates and used to either retire existing debt or invest directly in, uh, the system.
Uh, for capital projects and the annual reinvestment rate, that we’re looking for here is one consistent with replacement cost. And again, replacement cost isn’t just indexed original cost, but there’s some premium to that to reflect real world conditions at the time of replacement.
And the annual reinvestment rate is shown at the bottom in this simple table is about 72% right now, which means the amount that you’re funding is a about a quarter below the amount of asset you’re consuming. And that reflects both retiring debt again and some cash over time that goes up. Some, uh, and that’s good 100% means that you’re holding your own.
The system is not declining. It wouldn’t be unreasonable to set a target like that as a funding level long term, and then a strategy to get to that level. And what that would mean is, it won’t mean that you’re going to fund all the replacement projects, because a part of this metric, as it’s built, is recognizing that current
customers are paying off existing debt. But it does mean that you’re not losing ground and compounding with each life cycle. The amount of debt you have to issue to sustain the same level of service and facilities. The remaining life index looks at how much of the system remains in value. 38.
7% I’d mentioned 40% as a round number earlier, and over time, this gives you another measure as to whether you’re declining in useful life or increasing in useful life. Uh, again, the asset management program is critical because it’s going to tell you real useful lives, not just those used for accounting purposes. Remaining useful life.
And then finally, what it’s going to cost to replace the remaining life index, as you see it here, is projected to go up over time. And that’s the kind of trend you might like to sustain a system.
But this projection is heavily influenced by the high level of new capital projects entering during this decade. That’s forecast here. And since they’re all brand new, they make the system look younger. The average age is going down and the remaining life going up simply because you’re adding billions of dollars of new assets that are brand new and have reasonably long lives.
So it’s also important to see through that and develop this index and how you would apply it so that you’re really dealing with apples to apples and only dealing with the existing system going forward.
I didn’t have full facility of the model to try to do that for this example, but I do want to caution that it’s, uh, that upward trend is suggestive of improvement, but isn’t necessarily true. If you just looked at the existing core system. So in graphical form, these same two metrics, uh, the reinvestment rate, as you can see, doesn’t get up to 100% in this time frame, but it’s trending upwards.
And some policy objectives could be established to get it to that level where you’re sustaining a level of reinvestment, uh, consistent with the long term needs of the system. The remaining life index and the blue line. As noted there, it’s the swamping effects of the very large. And finally, not to keep beating this drum, but both metrics depend on a valid estimate of replacement cost.
Uh, what I did here to generate these was simply assume that if I took the original costs and indexed them to today’s cost, add another 25% as a provision for the types of cost impacts.
Uh, experienced in a replacement cycle that gets us closer to the mark, but it is still just a very rough estimate of slag. In fact, scientific wild guess. And we need to keep mining the asset management program to get better information. Kind of taking this to a real world example. And for this, just buying a house, you put out a mortgage on the house, you’re paying off that mortgage.
That makes it difficult to be funding other improvements or think about funding replacements. Over time, it goes up in value. Uh, it’s actually a really good analogy to the system. If you think about it. You’ve got structural aspects, mechanical aspects, hydraulics, electronics, electric, uh, etc.
where the analogy fails is the value of the house in the future isn’t necessarily tied to a depreciating value because it’s in an open market. And and so unless we can find people wanting to spend billions of dollars to own and operate wastewater treatment plants, the analogy doesn’t quite connect for us. But it does help illustrate different ways of approaching replacements.
And one is pay as you go. Uh, erratic cash flow. Because anytime something comes up, you got to come up with a way to pay for it. Uh, and no provisions for future large costs, including full replacement.
So when you need to replace the roof on the house, you better have that $50,000 laying around or go borrow again, uh, to fund that improvement on down in scale to replacing kitchen appliances and the like. Another approach is fun depreciation. This is comparable to kind of the perspective that’s being used in the modeling now. And that is an annual provision for replacement based on original cost.
It’s better than pay as you go. It does provide some funding given the scale of debt though. Most of that provision is actually just being used to retire debt and not very much of it’s available as cash for projects.
You can find the replacement as reproduction costs, which is kind of index cost of construction, and you can fund it at a higher level, which is a more robust estimate of what it would cost to build new. Uh, it’s interesting in our region that a lot of the school districts have kind of gone to building new schools on the same property as the old school, as opposed to renovating schools.
And part of it is that one they can keep operational during that time. And two, it’s it’s greenfield construction again, and it doesn’t necessarily have the same obstacles that, uh, operating within a given building footprint would have, would pose for them. So ability to fund replacement. Looking at those three examples, uh, or or four examples, pay as you go.
You never generate funds towards future replacements. The depreciation funding barely moves the needle. Uh, in part again, because on the front end it’s largely repaying debt and not generating a lot of cash reproduction. Depreciation in this example gets you about 20% replacement depreciation. About a third.
What that means is if if this were a single asset at the end of it, you had to replace it the second time around, you’d still be debt financing, two thirds of it. But that’s better than the first time around where your debt financing, 100% of it.
So it’s important in this context to recognize none of these are a panacea, but the more progress you can make towards an adequate level of replacement funding, the smoother the financial future is going to be. And so back. I’m almost done here, I promise.
Back to, uh, some of the standards here are you do have to continue essential service regardless of what’s happening and replacement run to failure can be a bad strategy when it’s a critical asset that you’re running to. Failure. Um, ultimately, everything needs to be replaced. The numerous aging facilities suggest that there’s an immediate and ongoing need, and I suspect the asset management programs identifying through criticality and condition. A lot of high priority, uh, reinvestment needs.
It is easy at times to avoid this problem and defer addressing it. And that does magnify it exponentially. So, you know, conceptually, it’s simplistically, you know, stop digging the hole and start climbing out a critical objective. As you look at, uh, sustaining and reinvesting.
So specific recommendations and annual performance measure like the IRR that that I briefly showed you, ideally you’d make that at least one and perhaps even then have a like a secondary standard that some level of that has to be cash, even if you’re paying off a lot of debt, there’s some level of cash being funded.
And then a system status measure like the remaining life index and kind of target a balance point where you’re holding your own in the system and, uh, maintaining adequate, useful life that the replacement side of the equation remains manageable. Along with that, have financial steps to get to your targets as you establish them.
And if if things vary, how to get back to them. Uh, I used term repair here, evaluate trends in these metrics without the new CIP, and with it, so that you can be sure that you’re seeing apples to apples, but also the full trend of the utility.
And then finally coordinate system planning and financial planning to ensure that the information needed is made available, is developed and made available, and that the financial strategy can support the needs coming out of the asset management program. Some simple conclusions. Financial sustainability is as important as system sustainability. Otherwise you don’t get the system sustainability. Uh, the financial metrics can help you understand trends and status.
Uh, the large upcoming CIP, uh, creates a risk because it can divert from that reinvestment objective. And it’s important to establish a commitment and a program to sustain the existing assets at the same time that you’re spending money on new ones. Increased reinvestment will sustain those assets.
And striking a balance with new needs shouldn’t undermine that R&R side of the program. And the first step is going to be define some metrics and objectives. The second step is going to be to let that evolve and refine, perhaps even change the metrics over time as you get a better sense of what they mean.
But ultimately, the goal here would be, all right, am I funding at 100% of replacement? Yes. Okay. That’s a good first step. And if it’s not, then how do we get to that. And the same with this with the, uh sustainability index of how much we’re maintaining life is there. And are we consuming that faster than we’re reinvesting in it.
And those are both very valuable pieces of information that can help you make the tough decisions in the, uh, on the broader program and financial structure. I’ll stop there. Thank you very much. I’ll be glad to answer any questions now or subsequently. So I’ll I’ll turn this back over and stop sharing if I can.
Thank you very, very much. Uh, that was that was really, uh, helpful educational information, uh, especially for those of us who are not, you know, uh, experts in this utilities field. Many of us are just, you know, sort of generic general policymakers and so super helpful. Uh, we have your slides, I believe. Yeah, yeah.
Very good. That’ll it bear a little bit of sitting in and thinking through it and what the applications could be for the kind of recommendations this committee makes. Any questions, colleagues questions on this very informative presentation. Let me set up my screen correctly. Mayor Rossman, go ahead. Thank you so much. This was really helpful.
And as the chair just said, uh, not being an expert in asset management, I loved how you expressed all of this so well for us. Electeds. Uh, the part that I am still struggling with a bit is, of course, we had, uh, some months back. And I’m sure you’ve seen this figure.
We’ve had presentations about the regulatory expenditures, which you, in your conclusions talk about as the CIP. Right. The CSOs and, uh, and those are a big chunk of our rate right there, uh, when they’re shown.
So I’m interested in understanding, um, more just at a, at a high level, this concept of asset management, apart from that piece of our rate structure, is there anything more you could say to me about where I could, um, find additional background or otherwise look into that? I appreciate how you’ve laid it out.
Um, but it’s still not entirely clear to me how to see the overall health of our existing system through this veil. That is the regulatory piece. Um, yeah. Great. Great question. I don’t know that there’s a Bible there. There is one document that American Waterworks Association puts out that talks about water, utility capital financing. It mentions asset management but doesn’t necessarily integrate it.
Um, most of what I’ve seen are actually practical applications in system as opposed to kind of textbooks to point to on on the outside. I think the key is that each system has to somehow strike its own balance and find its own path forward.
And the asset management program itself does a lot of that, because it Goes through a lot of prioritization and scheduling activities to try to, uh, get a handle around sustaining the system infrastructure. Uh, the the critical part is to make sure that the financial, uh, planning is coordinated with that.
So I know that I, I didn’t answer the question that I can’t cite you a, a document, but I think it is going to be evolutionary. And the first step is gain understanding of where things are at. The second step is where do we want them to go. And the third step is how we get there. Okay. Thank you.
That is where I was trying to figure out is how much there is between us and gaining an understanding of the health of our current system. Right. So. Okay. Thank you. Uh, I’d like to call on Commissioner Clark, and then after that, I want to give an opportunity to say a few words, and then we’re going to have to move on.
Unfortunately, we could do this all day, and we’ve got a couple other things. So, uh, Commissioner Clark, you next. Yep. Maybe a comment. Uh, Mayor Ross question a lot of the investments that have been made historically have been based on manufacturers definitions of how long an asset lasts.
So they’ll say a pipeline is good for 30 years. And so people made the assumption that that pipeline was good for 30 years and started trying to sort out some way of doing replacement based on that 30 year life.
What asset management really is, is how well can you understand the condition of every one of your assets? How well can you determine the risk of failure of every one of those assets, and the risk of what the consequences of that failure are, even though, uh, you know, running an asset to failure doesn’t make sense for some assets, you can take a higher risk of failure than you can and others.
For some with some infrastructure if it fails. Okay. So it takes you a week to fix it for some assets. It takes you six months, a year or two years to to fix it. And that’s a significant problem to deal with.
And, and finally trying to figure out a crossover point where what you’re trying to make a decision on is it does it make more sense to continue to repair an asset or to replace the asset because it has significant differences in costs? And so you if you know the condition of your asset, you know the risks of your asset, you have to make a
determination. Is it better to keep repairing an asset if it fails every five years? Or are you at that point where full replacement is necessary? So there’s just and that’s what I think.
If Cameron uh, is I’m sure still on that’s the decision points that they’re going through as they try to determine that. And then you have to make a decision. Once you know that, how fast are you going to invest in them? And that’s the R&R funds that that editor was referring to. How much do you repair, how much do you replace, and how fast do you do that.
And you have to have that separate from all those regulatory investments you’re making, and that if you avoid doing that at some point, you it’s like a hockey stick. Uh, if you think of a hockey stick, you just go straight and all of a sudden it bends and goes straight up.
If you start, if you don’t invest and don’t do the repair and replacement, you’ll get to a point where you have overall system failure and you can’t catch it fast enough to be able to repair and replace. And so that’s the fundamental principles behind trying to do the right things related to asset management. Super helpful.
Um, I just say run to failure is a new term to me, but it’s, uh, very understandable because it’s how I manage my personal automobile. Uh, but we’ve got backups, right? I have a husband, and he has a car, and I’ve got an Orca card. So anyway, to your point, yeah, there’s there’s analogies. All right.
Uh, I would like to call on, uh, wastewater treatment division CFO Caitlin Hall, who would like to if she would like to share a few things about how wastewater treatment division thinks about this kind of, asset management. Please go ahead. Thank you. Chair. And that was a really great, great segue.
Commissioner Clark, we agree with you and are in fact, working on a lot of the points that you mentioned. Um, I don’t want to go point for point today. I know that we have limited time, but I think Ed’s review was very thorough. This is a really good discussion.
I do just want to remind folks that a lot of this is up for review. We are looking at options in the RW p update. Uh, and the recent topic area we had around asset R&R in particular, if you’ve got that memo handy and we’re happy to share it out again.
If you start on page 21, it starts to describe our current funding approach. Uh, some of the challenges, uh, why perhaps that spending has not kept up and why it’s not about funding alone. It’s about prioritization of that portfolio. Some of the regulatory pressures we have and some of the options we have moving forward to make sure that that funding that cash is really protected.
We’re prioritizing in a way that is the most protective of the system. And also trying to really define what the appropriate level of asset R and R spending is. We are highly aware of the backlog.
We’ve tried to be transparent about it and the work that we’re doing to address it through the RW, through our asset Management steering committee and otherwise. Um, there are a few kind of technical points that I would like to offer to address in writing for the sake of time. In terms of some of the metrics we do and don’t do, and ones that we’d be very happy to add.
Um, talk a little bit about our current spending, but overall, I just would like to reassure folks that we are aware of the challenge at hand, and we are investing quite a bit of effort in it, and look forward to collaborating more in the future. Thank you.
Thank you. And as I said earlier, I think this is a it’s a fruitful topic for discussion. Uh, and we unfortunately don’t have the time today to engage in dialogue with wastewater treatment division about, uh, how they do, uh, asset management metrics and, uh, trajectories, etc..
But I think with all this food for thought, we will try, uh, take away and Jenny, please take a note to try to, uh, let’s think after this meeting about when would be a, an appropriate and productive time to bring back that sort of discussion, maybe it as we’re leading up to the biennial budget and the update to the next sip, I don’t know,
there might be other opportunities as well. All right. Uh, well, again, uh, Mr. Seaborn, thank you so much for spending your time with us today and sharing your research and expertise. Thank you to Commissioner Clark and Chair McClellan for bringing this to our attention so that we could engage in it as well.
It was very, very educational. As I said, thank you. Okay. Now we’ll move back to the last, um, the last agenda item, uh, which was item seven. Uh, and so today we have also invited a guest from the Washington State Department of Ecology, Washington Water Future Initiative.
Jennifer Hennessy is with us today. Uh, I was asked by, uh, ecology Director six killer to serve on an elected advisory group for this statewide discussion. But it’s much larger than, uh, than local jurisdictions and elected officials. Um, and we’re there.
They’re taking a look statewide, uh, among a vast, uh, sweep of stakeholders and interested parties to talk about the the great water challenges facing our state. Um, I’m sure you all know that water supplies across the state are under stress. And, uh, we are in the fourth year of a declared drought, uh, due to low snowpack.
And Governor Ferguson, uh, has asked ecology to host these statewide conversations to think through problem statements. What a resilient water future could look like. Uh, and to start to generate solutions that we could deploy for our growing water challenges. And this issue intersects with our work in several interesting ways. As I like to say, we are the regional Water quality committee, not the regional waste water quality committee.
So, of course, water as a the quality of water as a whole is our concern. But um, but also there are really important implications for, uh, reclaimed water or recycled water and for the ways in which the climate change that is impacting our water supply is also going to impact water quality.
So, uh, I invited Jennifer to talk to us today about this initiative because I think it would be of interest to all the members. And I really appreciate you taking the time to be here with us and to help educate our committee. So, uh, Jennifer, if you’re with us, please go ahead.
Um, we’ve got about 20 minutes for this discussion and we’re a little behind, so we’ll do the best we can, but just really appreciate your time to be here and help to tell us about what’s going on and how we can engage with it. Absolutely. Thank you, Chair Baldacci, really appreciate the opportunity to come and talk to the committee today.
And, um, and I’ll be sharing a presentation, um, and hopefully help you guys stay on time, but also just want to, um, appreciate the adjustment in the timing for me to present this afternoon. So appreciate that as well. Um, so I’ll just go ahead and pull up my slides and share my screen. Um, and let me get reorganized here.
Okay. Um, so again, my name is Jennifer Hennessy. I serve as special assistant to our director at Department of Ecology and in the lead for our implementation of Washington’s Water Future Initiative.
And today, as Chair Balducci mentioned, um, I’ve been invited to talk more about the initiative, but also about the the drivers that have led us to this initiative and really is about the integrated water challenges that are in front of our state and communities around our state. Um, both on the water quality side, uh, as well as the water supply side. And, um, it increasingly on the, the, the wintertime flooding side of the equation as well.
So there’s just this intersecting set of issues that are at play, um, that we see opportunity for, um, for new and different ways of approaching solutions. Oh, sorry, I went too fast.
So, um, I probably don’t need to tell any of you that, um, you know how and when water is arriving in Washington state is changing. Um, for those of you who’ve lived in the state for a while, you know that our snowpack is declining. And this last year was a great example of that. We did declare drought for a fourth year in a row, because in April we had less than 50% of the normal, uh, what we normally expect.
Um, and we are seeing warmer winters with more of our precipitation arriving as rain as these extreme rain events, with more and more heavy precipitation, atmospheric rivers that are causing bigger and bigger floods, uh, in the winter time.
So we have more of that water arriving in the wintertime when we don’t know what to do with it. Um, harming people’s public property, public safety, um, and scouring our, our river systems. And then, uh, because we have a warmer climate, um, the snow that we do accumulate is melting off quicker in the spring and early summer.
And that really leaves us with this, uh, event that we’re having right now, which is drier vegetation, a longer time frame for an increased wildfire risk. And, um, I just, you know, the last couple of days have been really hard for many communities around our state with the wildfires that have been hitting our, our state.
But it’s been, you know, for the last month and a half, we’ve been having wildfire season. Um, and then that leaves us with less of that water in the summertime when we need it for for people, for farms and for fish.
And that leaves our streams with lower flows, higher temperatures and increased prevalence of harmful algal bloom outbreaks as well. So this is the picture that, um, increasingly will be our new normal in Washington. These are the changing types of conditions that we need to, um, adapt to and prepare for. And I did mention drought.
Um, we actually have declared drought seven out of the last ten years. Um, in some or all of our parts of our state, many of them due to low snowpack. Um, but that’s not the only time that we’ve, um, we’ve declared drought in 2021 with the heat dome.
We lost almost all of our snowpack in the space of a week due to extreme high temperatures. So there’s a variety of of changing climate trends that are leaving us with less water when we need it most.
And our infrastructure and our ecosystems were designed for the precipitation and temperature patterns of the past. And that is no longer a predictor of what we will experience in the future. So this really gives us an opportunity to talk more about what are those integrated water solutions that are going to be right for different parts of our state.
And the University of Washington Climate Impacts Group has given us a wealth of data and information to help us understand what the future might hold. And just in the next 25 years or so, we expect to be in snowpack drought more often than not.
So about 70% of the time we will be facing, um, a low snowpack years. This is a look at statewide projections around flooding. And I mentioned that more of our water is arriving in the winter time. Um, I think for people on the west side of the state, that seems like that’s normal.
But, um, really, we are, projected to see an increase in, um, in the amount of rain that we get in the wintertime. And with those higher temperatures in the winter, less of that will be locked up in snow, and more of it will be running off into our rivers. And, um, and potentially causing flooding and bigger flooding.
Um, and these projections show that by the end of the century, we expect to see up to about a 25% increase in that two year peak runoff. Um, so in many of the watersheds around the state. This is a projection around snowpack for the Duwamish green watershed. And in here we’re looking at both a low emission scenario and a high emission scenario.
Recognizing that models are just that. They’re just projections. They’re not predictions. Um, there is a range, but regardless of the emission scenario that, um, will be ours in the future to inherit, um, our future in water in Washington will be one with us now.
So this is showing the change in April 1st snowpack, and the loss in acre feet of water. Um, that is equivalent. So over time, we expect to have less and less of that snow available to us to melt off slowly and help support our streams. Um, and, and use for people and communities.
This is layered on top of a whole host of other pressures that, um, that you all are well aware of and grappling with every day. And some of them were mentioned by the previous presenter, state and local requirements, water quality challenges meeting the needs of housing and population and economic growth, and balancing that too with the need to restore and protect our ecosystems.
So we know that these are challenges, that climate change is just exacerbating and, um, providing an opportunity. Hopefully we think, uh, for looking at these with a fresh perspective towards the future and how we sustain the things that we care about, um, with new ideas about solutions.
And we know that many parts of our state have already begun to look at and implement different types of solutions. Um, folks, we’re talking about water reuse. We know King County has been a leader in, um, advancing the water reuse through bright water. Um, and conservation and efficiency will remain important tools.
But we know that there are additional things we’ll need to look at on the water supply side as well. Uh, finding new ways of storing that excess water that we have in the wintertime in ways that can help protect communities and ecosystems, while allowing that water to be available for the future.
And thinking what really broadly about other solutions that that might not be on this slide. Right. There’s there’s new and innovative ways of thinking about these challenges. And we hope that we have the the fortunate thing is that we have time on our side.
Um, unlike the Southwest and California, where the Colorado River basin is really, um, running out of time and out of water, we know that, um, we have we have the time to put in place the kinds of solutions. But but the time is now to start those conversations.
As was mentioned before, the types of water infrastructure that communities around the state might be interested in. It takes time and money to put those in place. And so we want to be talking now about what are the types of solutions that are right for different parts of the state. Um, and, and how do we move forward? So that really brings us to Washington’s water future.
And, and the governor’s announcement in May, um, and charge to ecology was to lead the set of conversations really starting with listening to and learning from communities around the state and really grounding ourselves in what are those, uh, greatest water challenges that different communities are facing. We know, just like the solutions, the challenges vary.
Um, and so wanting to better understand what folks are dealing with and what do they need for their future, uh, and really beginning to start talking about those integrated solutions, um, especially ones that can help solve more than one problem solving for water supply while solving for water quality challenges.
Um, so really beginning that set of conversations. Over this summer, we are doing a wide range of outreach, and I’ll talk about some of the ways that we’ve been doing that outreach already. Um, and then we’re developing a tool to share some of the information about the climate projections that University of Washington Climate Impact Group have developed for us.
We, um, are working with a facilitation team that’s producing meeting summaries from each of our events, and they’ll be compiling a report that, um, synthesizes the key themes and findings across that, um, this fall. And we’ll hope to also release our online tool this fall as well.
The next steps that we take will really be determined by what we hear from folks. What’s ripe and ready. Um, and we know that this is a complex set of challenges. So that will undoubtedly be more conversations to be had. Um, as we take those next steps.
Just in terms of the types of outreach we’re hosting eight regional roundtables around the state. Those are in-person convening with a diverse group of stakeholders and interested folks. Um, we’ve held, I think, about six of them, or no, five of them so far. We have three more to go, including the one in central Puget Sound.
Um, we’ve held seven interest group and tribal input, um, sessions, including one today for environmental groups and environmental justice groups. We’ve held two public virtual input sessions.
And then we’ve also been heading around the state and learning from existing collaboratives that are working on integrated water plans, like the Acoma Basin, uh, the Walla Walla, Dungeness and others. So we’re trying to gather input from them and what they, um, are learning and where their existing challenges remain.
So just to note that there is an online survey that’s available to the public through the end of the month and ask some of those key questions that, uh, Chair Baldacci set up about. What’s your vision for a water resilient future? What are some of the key challenges that you’re seeing on the ground? What are the barriers and what solutions are you interested in? Um, so it’s a really quick survey that folks can take.
Um, and it is an additional way for us to get input. We also have two more interest based, uh, virtual convening, uh, the water utilities and local governments. One is next week, next Thursday, and we have a tribal input session coming the week after that.
Uh, you can sign up for email updates on our website. Uh, and you can find out more there as well. Um, and we’ll be posting, like I said, those meeting summaries as they come available throughout this process. And so with that, I’ll, I’ll close and see what questions folks have.
Um, and again, really appreciate you giving you the time and space today to share about the initiative. Well, again, thank you so much for coming in for sharing with the group. I wanted to introduce folks. The listening sessions have been really interesting.
I’ve been able to attend a couple of them, uh, and I know others have attended some of the others, and just hearing all the different thoughts and ideas and interests about what are the problems, what are the solution statements, what are the barriers to solutions? It’s been very, very, uh, very eye opening statewide water policy. Uh, any comments or questions from members of the committee? Um, Council Member Moore, please go ahead.
I just wanted to say thank you so much. This is great information. I’m so glad the governor is doing this. It’s so important to what we do. And and thank you. Thank you. Yeah, it’s, uh, it’s definitely an important topic and a difficult one.
And then the governor and, uh, the department taking it up is, uh, is a very worthwhile and important effort. And they deserve our support. All right. Okay. Well, thank you again so much. And thank you for, uh, for your flexibility to be here and present during our committee meeting with, with, uh, your family obligations.
We appreciate your, uh, your pulling it off, and we’ll see you in a future meeting. Thank you. Jennifer. Sounds great. Thanks so much. Take care. All right. Now, this brings us to our last big substantive item, which is the item nine, the regional Wastewater Services plan update.
This is the sixth set of policy issues to come before the committee today. As we look at the combined system, uh, just as a reminder, I know you’re probably all aware WPD has prepared the usual memo and PowerPoint regarding this topic.
Uh, they’ll do a presentation today, and members will have the rest of the month to provide comments on this set of policy questions. So let us dive in. I will call on Darren Green to walk us through it. Welcome, Darren. Thank you, Madam Chair, and good afternoon. Members of the Committee. Let me share my screen quickly. Okay. I can see my screen. Great. Okay.
Uh, Darren Griffey, government relations with King County. Uh, I’m joined by a colleague, fan O’Connor. And, uh, and Janice Johnson. Um, today we are talking with you about the combined system topic of the RW. As I like to do for all these RWC presentations and briefings, this slide shows where we are in the process.
Last month in July, we briefed you on affordability metrics and rate relief approaches. Today we’re talking about the combined system. And next month in September, we’re going to be talking with you about treatment levels and treatment capacity. The two policy questions we are addressing today are shown on this slide.
Uh, first, how should we best upgrade the combined system to address regulatory requirements, regional water quality and West Point operations. And the second, how should combined system costs be recovered? I will address this cost recovery question very briefly today.
Um, if time allows, but the substance of this will be addressed and covered in the November briefing to you where we’ll be talking with this committee about a range of alternative rate structures. You’re meeting. Packet contains, like the chair said, the full policy memo and the full uh, this the full presentation given time.
Today we’re going to provide you a truncated version of this presentation. Uh, so I just want to let you know that we’re not going to be covering all the slides in the presentation, uh, meeting packet, we’re going to give you a shortened version of that. So before I pass things off to fan, um, I need to set some context around the RW.
It’s policy work on the combined system and the CSO consent decree. Uh, the the rw, SP is our regional wastewater systems, general sewer plan. Um, and this plan must be submitted to and approved by the Washington State Department of Ecology.
This means that what is in the plan must meet or exceed our regulatory and legal obligations. In short, we can’t submit an unapproved plan to the Department of Ecology. So the policy options that fan is going to walk us through today regarding the combined system, meet or exceed our CSO obligations.
Separate from this, our WSP process, there is an effort that is well underway with ETD and our regulators that is exploring options to balance regulatory requirements with options to address financial sustainability and affordability, like the bullet point on the. My last bullet point on this slide indicates. So I just want to be very clear at the outset what the RW is doing.
And then this separate track, uh, about regulatory options with uh, with our regulators, um, and with that said, with that context, said ban, are you available and ready to walk us through some a little a brief background again, not all the slides, some of the slides. And then we will see options. Thank you Darren.
So just to keep us grounded this is the category that’s looking at our combined sewer management. Which means it includes our combined sewer overflow control program. So this map is reminding us of the 38 outfalls that the county is responsible for controlling to the state standard. And 82 outfalls also exist within the city of Seattle. Those fall under Seattle CSO control program.
So when we’re talking about the future of the county’s combined sewer management activities, it’s with that focus on the 38 outfalls that the county has responsibility for controlling each of our agencies are subject to consent, decree requirements and permanent requirements, and we work closely together. Next slide, Darren.
We have made a lot of progress over the decades that we’ve been managing our combined sewer overflow control projects. Over $1 billion has been invested since the early 90s. We are currently at 21 controlled outfalls as of our latest annual report, and we have brought the volume of untreated discharges down for $2.
3 billion in our baseline 1979, um, down to a ten year average of 1 billion gallons. We’re continuing on that trajectory towards control. We see here on this map. We have a lot of activities in this space. This is a large area of, uh, of activity for the county and for WTT. Next slide. That’s reflected in our portfolio, um, activities in our rate path.
So right now our regulatory portfolio includes $6.5 billion for 2026 to 2046. And, uh, here. Oh, I think I think Darren, were you going to speak to this? I just kept going. No, please go ahead. Okay.
Um, so so we have reflected all of our consent decree and and permit requirements in that sewer rate projection. We continue to do so. So this is an area of substantial commitment and and regulatory requirement for our regulatory portfolios. So when we’re presenting these policy options we’re really thinking first about this policy question.
How are we going to continue and best upgrade the combined system to continue to address these regulatory requirements. Our regional water quality objectives and West Point operations. We have three policy options that we present here. And I’ll go into a bit more detail, uh, to present different potential futures for the for the combined system management policy.
Option number one is focusing on continuing to complete all of our consent decree and permit requirements on the schedules that we have following current code using green stormwater infrastructure. When it’s cost effective policy. Option two expands on that with proactive opportunities to invest in peak flow management to reduce flows that are coming into the system that are not wastewater based flows, and potentially to redirect some combined flows.
Um, away from the West treatment plant to see what could go to other, uh, other regional treatment plants. Policy option number three takes that challenge further and imagines a future where there are no untreated CSO discharges, which would be achieved through meeting those required CSO control projects and and going further on the
next slide, we have a bit more about policy. Option number one, which is really focusing on these regulatory requirements. And in the next 11 years in particular. So continuing to meet these requirements and maintain CSO control in our system. Now we’re all aware of the challenges that comes with the stacking investments.
But this is consistent with what’s currently in our projection. On the next slide, policy option number two depicts some of that additional activity that we could do to further remove non wastewater flows in the combined system or redirect flows away from West Point, with the objective being to further improve water quality and also have some capacity
benefits at West Point, which could help us meet potential future regulatory requirements. And then on the next slide, we confirm that the objectives, the outcomes that we’re really looking for in policy, option number three, look down. There we go.
Uh, policy option number three would take that water quality benefit even further by ensuring that there would be no untreated discharges of combined sewer. Storm water flows from those 38 King County CSO outfalls. This would be characterized with a substantially higher cost. It would exceed regulatory requirements. Um and and would also likewise have greater water quality benefits. And with that, I think I’m passing it back to you, Darren.
Yeah. And I will add on this on this option three, just going back to this, uh, window here. So as I mentioned at the outset, all of these meet or exceed are our, uh, CSO consent decree, legal and regulatory obligations and requirements. Option one meets it. Option two goes somewhat past it.
Option three goes significantly past it, and option three, uh, is really a bookend. Uh, scenario, um, that we’re putting out to, to consider in the context of the WSP update process.
And, and um, it really is kind of, uh, we’re going to be we are asked and will be asked in the WSP process, uh, that, you know, uh, one CSO outflow every year under the CSO consent decree is one too many. And so option three is really, uh, addressing, uh, that perspective. Um, and as Phan said, the cost to achieve that, we’re going to be significantly high, uh, potentially prohibitively high.
Um, and so, uh, but it’s a range of options. Remember, we were in the ideation build, the buffet of options stage in the planning process. This is a far out bookend to eliminate completely all CSO discharges. But there is a group of folks out there that that suggest that one CSO on average per year is is one too many.
Um, and so we’re going to look at that. What, what that entails in the, in the WSP process. And. Madam chair, I don’t know if you want to take hands now or I’ve got a little bit to do and then I’ll be done and then we could open it up to questions. Up to you.
Let me check in with, uh, Commissioner. Uh, clerk first. Uh, can you hold off on the question, or is it, uh. No, I can hold I can hold off until, uh, until Darren sun. Okay, thanks. Director McClellan. You too. Can you wait? Okay. I’m taking that as a yes. Please. Keep going.
Darren I will. All right, so the second part of this policy analysis, again, completely in your policy memo, um, how should combined system costs be recovered? Um, I want to point out that currently WPD has has a uniform sewer rate, and we have had a uniform sewer rate, uh, since the founding of King
County Metro. Now, when the combined system was designed into the regional system back in 191961, and under that uniform sewer rate, the combined system costs are shared by all, all the local sewer agencies. Um, in November, like I mentioned, we are going to be bringing Caitlin and her team.
We’re going to be bringing, uh, a policy analysis to this committee on alternative rate structures. Uh, and that will include analysis of a CSO surcharge as well as an inny or inflow and infiltration surcharge, as well as a volume based rate, um, amongst other things, like the low income rate, uh, classification we talked with you about last month.
So, um, most of this kind of answering this question about, uh, combined system costs are going to be addressed in that November policy analysis. Um, uh, for that work. And so, um, there’s more information on the slide. Uh, and in the memo on this, but I am going to stop there. And, uh, open it up for questions.
And, uh, stop sharing my screen. If I could find that. Okay. Thank you so much, Darren. Uh, let’s start with Commissioner Clark. Uh, Darren, uh, one things that one of the things would be helpful for me.
There’s always somebody that doesn’t want any CSOs that we’ll never get away from a core group of people that want to prevent any of those. But when I start looking at the trade offs between those options and the volume reductions, I’m not really sure other than the regulatory impacts, I’m not really sure what I’m gaining from an environmental perspective.
I don’t really it would be helpful because I’m sure you guys have looked at what the consequence of a billion gallons of CSOs into the receiving waters, uh, what the what the impact is, or 150 million gallons, if you if you’re able to do that by I think it was 20, 37 or whatever it was having that information as part of the discussion,
particularly when we start trading it off with what you have a dollar here or you have a dollar at nutrients. And I know the regulators don’t like to hear that, but a dollar in nutrients or I have a dollar in non-point source. And we’re looking at doubling our rates every 5 to 6 years.
It would be really helpful to understand the environmental consequences of these choices, not just the regulatory consequences. So I would find it helpful if when we looked at the options, I could see what gain I’m getting, even though I know I’m subjected to the consent decree, subjected to the regulatory issues.
Really, what are we gaining from a environmental perspective? And I’m out of touch now, and I don’t spend as much time on as I used to, but it used to be that looking at non-point source scared me a lot more than the CSOs did for the what we were introducing into Puget Sound.
So I just think that would be that would be helpful to me to to be able to understand that. So for what it’s worth. Um, maybe, maybe I’ll try to respond to that. Madam Chair. That’s okay. You could you could support me a little bit on this. Uh, the concept of building in some water quality metrics to these options we’ve heard.
And I think that’s doable in the in the step two body of work, when we put costs on these and figure out, hey, what are the trade offs and what are the benefits. So absolutely, we’ve heard that. And I, I believe we’re planning on doing that. I don’t want to speak misspeak here, but I believe we are. Okay.
Um, and and the final point I want to say on, on this option two and Fain can speak a little bit more about this. It might be as it might be even more. I would I would venture to say about what Phan said about redirecting flows away from West Point to free up the ability to do something.
There, uh, with future, I might, might overshadow the water quality, benefit from further reduce CSO beyond one per year. But I’ll let Faye on. Add to that. Yeah, it’ll take that step to development of these policy options to characterize what we’re representing as the different activities that would be taking place.
But we would certainly want to characterize what the why is behind each of those. Okay. Uh, John, please go ahead. So if we’re considering policy option three, which is kind of extreme, uh, especially in light of, uh, Commissioner Clark’s comments, uh, in terms of really, what’s the value, uh, how are we looking at system separation? Uh, and
again, you know, a lot of this is relying on, since it’s a combined system in Seattle that’s contributing to this. What is the cost of treating stormwater at a wastewater treatment plant? And what is the, uh, lost opportunity of the volume that that stormwater takes up where you could be
treating wastewater? Um, and I think we’ve talked about these things very superficially before, but I think the analysis of those kind of questions is going to be important in the policy discussion in this particular issue.
Because, you know, again, if we’re looking at this policy option three zero discharge, why aren’t we looking at at system separation, which, you know, could be viewed as more practical. And I don’t know what the costs are because I don’t know if the analysis have been done on that. And I think it probably hasn’t yet.
Um, but also, I do not want to lose sight of the cost of treating stormwater to wastewater treatment plant. And again, we’ve asked those questions, uh, before and, and I understand we’re in the analysis stage. We’re not at the cost stage yet, but I just want to highlight those couple of points and, you know, stack those on top of Commissioner Clark’s comments. Thank you. Thank you. Uh, Councilmember Mauck.
Thank you. Chair, I, I just wanted to confirm, uh, option two, where part of the idea is to divert stormwater out of West Point. I wanted to make sure that the I and II component that we’re talking about for everywhere outside of Seattle, would also include Seattle, who has a significant
amount of separated conveyance so that that can be analyzed, you know, part and parcel. Yes. So policy option number two does explore removing the storm flows. Uh, in a, in a prioritized way, not all the way to what you represented in policy option number three.
But having a prioritized way to address non wastewater based flows coming into the system. That may be I and I that may be other system separation. That may be flow shedding from the West Point system. And I think it’s an important area for analysis.
And I want to make sure that previously Mister Grebe had suggested that, uh, Seattle did not have I and I, and I wanted to make sure that it, that it was included there separated system was included in the overall analysis.
Is that true? Did I misunderstand you? I believe I don’t I don’t think I would say that the separated system in Seattle is not part of the separated system of for I and II consideration, but but yeah, your note is taken. Um, Councilmember, more apologies if that was if I misconstrued that. But yeah, when we’re considering I and I and an I and I surcharge the entire separated system, including the portions in Seattle will be evaluated.
Thank you. I really appreciate it. And secondly, chair, I was wondering if there is you know, I have some questions about our obligations in the consent decree. And, uh, if you felt it was appropriate to discuss them in an executive session, I would have some questions. There.
Yes. Um, so we’re prepared to do that. Uh, I would like to just finish the questions that could be done outside of executive session. Before we do that. And, um, and then we’ll have a few minutes to, to switch over to the other zoom meeting. Thank you.
Um, I want to call on myself and just say this topic has been, uh, kind of like a step up in terms of how it raises some of the really big picture questions of the entire WSP.
For me, anyway, uh, compared to some of the topics we’ve been working on over the last several months, and it’s listening to this discussion here and having some discussions leading up to this meeting, I think it really does start to raise the question, what is that end state that we are hoping to achieve when it comes to water quality in our region? With this plan? And how do we structure the plan to best achieve that? So when it comes to the combined system,
I’m hearing and seeing a whole lot of, um, desire for understanding the benefits of what’s being proposed, not just as an analytical piece of stage two of the analysis, but as the ultimate goal.
Like why you do you do, uh, option one here because we have to by law, you do option two, possibly because we have two by law. Option three, like why? What is the what is the reason? Option three is on the table. When I’ve asked that question before, I heard before and I heard again today, stakeholders want it.
And it’s the first time I’ve really seen an option that I thought, I don’t know that we want to get people’s hopes up by proposing it, when it seems to me that it’s DOA.
Like, how could we possibly be talking about completely separating the combined system in Seattle? Who’s going to pay for that? On top of what we already can’t afford with the consent decree on top of what we have coming, which is order of magnitude bigger with the nutrient permit, and then we’re going to I hear that everybody’s kind of signaling.
Well, it’s unlikely because it’s probably impractical, but if it’s really impractical, why waste time and energy studying it? And why get people excited about it? So I think maybe turning this one around and thinking in terms of outcomes, not out, not the number of overflows, but the water quality impact.
Uh, what? So so I, I feel like I would like to see another round of what could we do with this one before giving the blessing to say yes, agree. These are the option. Please go study. Because I feel like maybe we don’t quite have this one yet. And that’s the first time I have felt this on a topic that you brought to us, which is, I think, a success of the program. Right.
You’re asking us for feedback and here it is. It has arrived. So, um, I’ll dare and give you an opportunity to say anything back that you choose to that. Or you can just take it on board. And then I would like to take up Councilmember Mark’s, uh, request for a brief executive session. I’ll just comment quickly.
Chair, that. Thank you for the feedback. Committee for the feedback. That’s what that’s what this is all about right now. That’s what we’re doing. We’re taking our QC and feedback on this. And we will take it to heart in terms of, um, the options that we move forward into a draft plan. Thank you.
Thank you. Okay. Um, with that, I did ask staff to send out before the meeting another link that you can use to go into an executive session, because I thought that this topic might lead us to questions that were best answered in executive session.
Um, and, uh, so the I’m going to now call us into executive session. The grounds are to discuss with legal counsel legal risks of a proposed action when public knowledge regarding the discussion is likely to result in adverse legal or financial consequence to the county, I’m going to say will be an executive session for approximately ten minutes until about by the time I get us out
of here, uh, for 55. And what I will ask is the committee to leave this zoom call and then, uh, and any county employees necessary for the discussion. Please leave the zoom call and enter the other link that you had for executive session.
And when the executive session is finished, we will come back into this zoom call. Uh, so there we go. We will be Committee will be in executive session for approximately ten minutes. While I was working
Um. Okay. Any final? Uh, the committee is back from executive session and will be back in regular session. Any final thoughts or comments on the WSP combined system topic? I’ll say it causes me to want to ask if we should consider including as a an option, or maybe a fundamental principle
of the plan. Something along the lines of adaptive management in our own planning process. Like why isn’t that part of the plan itself? That would be ambitious if we were to try to adapt that as a path forward.
And I say that only having a very modest understanding of what adaptive management is. But I’ve heard enough people say it and looked at it enough that it seems like that might be the path forward. So that’s my final comment for today. Well, uh, um, uh, Darren and company, we will submit a comment, uh, in writing, so you don’t have to interpret my verbal, you know, spewing here.
All right. Uh, that’ll be the end of this agenda item. And then there’s just one more, which is always the quick recap of our work program that we do at the end of each meeting. Um, so nothing much to say here.
The work plan is on track, and we’re not proposing any changes. But at our September meeting, we will be talking about treatment options and the vision for the Regional Water Services plan. And so hopefully that that might be a good opportunity to take up some of the big thoughts that were laid out here today. Anything else? For the good of the order, colleagues. All right.
Seeing none, I hope you all have a great rest of the summer. Uh, I hope the smoke goes away and we get to enjoy some outdoor times before we meet up again in September. This meeting is