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BCC Minutes 11/28/2001 S (Utilities; Transportation; and Impact Fees)November 28, 2001 TRANSCRIPT OF THE SPECIAL MEETING OF THE BOARD OF COUNTY COMMISSIONERS Naples, Florida, November 28,2001 LET IT BE REMEMBERED, that the Board of County Commissioners, in and for the County of Collier, having conducted business herein, and Also acting as the Board of Zoning Appeals and as The governing board(s) of such special districts As have been created according to law and having conducted business herein, met on this date at 9:10 a.m. in SPECIAL SESSION in Building "F" of the Government Complex, Naples, Florida, with the following members present: CHAIRMAN: James D. Carter, Ph.D. Jim Coletta Donna Fiala Tom Henning Fred Coyle ALSO PRESENT: Thomas Olliff, County Manager Jim Mudd, Deputy County Manager David Weigel, County Attorney Marjorie Student, Assistant County Attorney Page 1 COLLIER COUNTY BOARD OF COUNTY COMMISSIONERS AGENDA November 28, 2001 9:00 a.m. NOTICE: ALL PERSONS WISHING TO SPEAK ON ANY AGENDA ITEM MUST REGISTER PRIOR TO SPEAKING. SPEAKERS MUST REGISTER WITH THE COUNTY MANAGER PRIOR TO THE PRESENTATION OF THE AGENDA ITEM TO BE ADDRESSED. COLLIER COUNTY ORDINANCE NO. 99-22 REQUIRES THAT ALL LOBBYISTS SHALL, BEFORE ENGAGING IN ANY LOBBYING ACTIVITIES (INCLUDING, BUT NOT LIMITED TO, ADDRESSING THE BOARD OF COUNTY COMMISSIONERS), REGISTER WITH THE CLERK TO THE BOARD AT THE BOARD MINUTES AND RECORDS DEPARTMENT. REQUESTS TO ADDRESS THE BOARD ON SUBJECTS WHICH ARE NOT ON THIS AGENDA MUST BE SUBMITTED IN WRITING WITH EXPLANATION TO THE COUNTY MANAGER AT LEAST 13 DAYS PRIOR TO THE DATE OF THE MEETING AND WILL BE HEARD UNDER "PUBLIC PETITIONS". ANY PERSON WHO DECIDES TO APPEAL A DECISION OF THIS BOARD WILL NEED A RECORD OF THE PROCEEDINGS PERTAINING THERETO, AND THEREFORE MAY NEED TO ENSURE THAT A VERBATIM RECORD OF THE PROCEEDINGS IS MADE, WHICH RECORD INCLUDES THE TESTIMONY AND EVIDENCE UPON WHICH THE APPEAL IS TO BE BASED. ALL REGISTERED PUBLIC SPEAKERS WILL BE LIMITED TO FIVE (5) MINUTES UNLESS PERMISSION FOR ADDITIONAL TIME IS GRANTED BY THE CHAIRMAN. IF YOU ARE A PERSON WITH A DISABILITY WHO 'NEEDS ANY ACCOMMODATION IN ORDER TO PARTICIPATE IN THIS PROCEEDING, YOU ARE ENTITLED, AT NO COST TO YOU, TO November 28, 2001 THE PROVISION OF CERTAIN ASSISTANCE. PLEASE CONTACT THE COLLIER COUNTY FACILITIES MANAGEMENT DEPARTMENT LOCATED AT 3301 EAST TAMIAMI TRAIL, NAPLES, FLORIDA, 34112, (941) .774-8380; ASSISTED LISTENING DEVICES FOR THE HEARING IMPAIRED ARE AVAILABLE IN THE COUNTY COMMISSIONERS' OFFICE. 1. PLEDGE OF ALLEGIANCE 2. AGENDA ITEMS A. Presentation of the Project 70070. B. Presentation of the Update, Project 73066. 2001 Collier County Water Master Plan Update, 2001 Collier County Wastewater Master Plan C. Review Proposed Reuse (Treated Wastewater) Rates. D. Review Proposed Water and Wastewater Rates. E. Review Proposed Water and Sewer Impact Fees. F. Budget Reconsideration. G. Impact Fee Analysis. H. PUD-Idea on Workforce Housing (Commissioner Fiala) I. Indigent Health Care Idea (Commissioner Fiala) J. K. Road System-Where to go from here (Commissioner Fiala) Legislative representation from Collier County to lobby Tallahassee (Commissioner Coletta) Public Information (Commissioner Carter) Regular Agenda vs. Consent Agenda (Commissioner Caner) Staff Direction (latitude to investigate all possibilities and bring back multiple suggestions vs. narrow focus) (Commissioner Carter) Interdepartmental Teams including Legal Representation (Commissioner Carter) 2 November 28, 2001 e P. Prioritizing Board Member's Requests (Commissioner Carter) PUBLIC COMMENTS ADJOURN INQUIRIES CONCERNING CHANGES TO THE BOARD'S AGENDA SHOULD BE MADE TO THE COUNTY MANAGER'S OFFICE AT 774- 8383. 3 November 28, 2001 November 28,2001 CHAIRMAN CARTER: Good morning, ladies and gentlemen. Welcome to a special meeting of the Board of County Commissioners. It's November 28th. It's about 9:10 in the morning. We are ready to begin the program, which is a special workshop on the master plan for water and sewer treatment plants. I am going to, first of all, say good morning to the commissioners again, which I haven't seen for less than 12 hours. It seems like that. People said, "Boy, we had a marathon meeting yesterday." John Manning is here, and he said that Lee County had a marathon meeting yesterday. It's not unusual for County Commissions or City Councils to have long meetings periodically because of the business that needs to be discussed. We never complain, and it's our pleasure to get the job done. Now, yesterday Commissioner Coletta, our vice-chair, and I chaired the meeting. I can tell you that I got two or three calls this morning wanting to know if I had resigned. Again, I want to announce this morning that Commissioner Coletta, who is the vice- chair, and I will be sharing meetings. We will be doing workshops. It's so that the vice-chair and the chair have an opportunity to split some of these duties of conducting the meetings. It also will affect the TDC -- not this year, but I'm recommending next year that whoever the vice-chair is have the opportunity to chair that organization. You've got to spread the duties out. So, folks, we're all together up here on this dais. We don't want to cause anybody to be upset out there, but, Commissioner, it's a pleasure to chair and share meetings with you. I don't know whether they expected you to move over here or-- COMMISSIONER COLETTA: No. CHAIRMAN CARTER: -- you needed to go down and sit in the audience. I don't know. At any rate let's get started. Mr. Mudd, you are -- Page 2 November 28, 2001 MR. MUDD: Sir, I think we need to do the pledge of allegiance. CHAIRMAN CARTER: I think that would be an excellent idea. Thank you. (The pledge of allegiance was recited in unison.) MR. OLLIFF: Mr. Chairman, before Mr. Mudd gets started with some of the agenda issues, I needed to pass along one message that's just priceless. The chairman of your Planning Commission, Miss Rautio, has called and left a message to make sure to remind us that the Planning Commission has this room for five o'clock this evening. CHAIRMAN CARTER: Tell Miss Rautio that she can have this room way before five o'clock this afternoon. COMMISSIONER FIALA: I love it. CHAIRMAN CARTER: I also have a picture of a cockaded woodpecker -- redheaded cockaded woodpecker that was passed around the dais this morning, so if anybody has never seen one of these beautiful birds-- COMMISSIONER COYLE: It's a flicker. CHAIRMAN CARTER: Then why does it say red cockaded woodpecker? COMMISSIONER COLETTA: It's not really -- that's what they call a common District III woodpecker as opposed to the more elite cockatoo woodpecker which lives in District V. CHAIRMAN CARTER: I see. I hope you get guys get your woodpeckers straightened out. All right. I better stop at that. Mr. Mudd. MR. MUDD: Commissioners, one change to the agenda just in the ordering sequence. We would like to change 2-C to 2-E and then 2-E to 2-C. CHAIRMAN CARTER: So E becomes C and C becomes E. Page 3 November 28, 2001 MR. MUDD: Yes, sir. CHAIRMAN CARTER: Thank you. COMMISSIONER HENNING: Motion to approve the agenda. COMMISSIONER FIALA: Second. CHAIRMAN CARTER: All in favor signify by saying aye. (Unanimous response.) CHAIRMAN CARTER: Opposed by the same sign. (No response.) CHAIRMAN CARTER: Motion carries. MR. MUDD: Commissioners, I'm Jim Mudd, deputy county manager. Today we bring you five items. We decided that it would be better to do this at one sitting when everybody had -- were pretty much refreshed instead of having it be the last thing at two o'clock in the morning, and that's kind of what we thought was going to happen yesterday if we would have put this on the agenda and kept it there. We tried to bring -- in this particular case, we're going to talk about the water master plan, the wastewater master plan, the implications for rates, the implications for impact fees, and we're also taking a look at reclaimed water, the plan for it, and the rates that correspond to that process. We didn't -- in the past this has come to the commissioners piecemeal. I asked some questions a year ago when I took over the public utility administrator's job. I said, "Last year you had a cut in rates for water." They said, "Yep." I said, "When you asked the commissioners to do that, did you tell the conunissioners that you had $160 million in debt that you were bonded for, and did you give them the debt service for the utility?" They said, "No." I said, "Well, that's an injustice." So they did a rate cut. It was minor. But what it did is it had an adverse impact upon the debt that was there. I said, "Great. Let me ask about reclaimed water issues." I said, "In '97 they made the decision to go to 13 cents on the thousand." Page 4 November 28, 2001 They said, "Yep." I said, "Well, what did the study say?" They said, "Well, it should be around 26 or above." I said, "Great. They approved the 13 cents." They said, "Yep." "Did anybody in that argument tell the commissioners that by making it 13 cents that the difference in what it's supposed to be is a subsidy that every sewer customer is now going to have to pay for that process?" They said, "Nope. We didn't tell the commissioners that." I said, "Well, the commissioners made a decision based on half the information." I said, "That's not right." I said, "We don't want to do that anymore. We want to make sure we give them the opportunity to make the best decisions they can with all the information in front of them." Today is one of those days that we're going to try to provide you with all the information, both on water, wastewater, and what the rate implications are in that whole process and give you a holistic view. Another thing that we've discovered this last year is we found out that people were people. Previous plans that were provided to us were based on average population figures, not during peak periods of time, and we've gone over this process this last year. When that became known and we started to go through previous products, we decided in public utilities that it was time to pull out all the stops, redo the master plans, and not do them in five-year increments with a piecemeal short-focused view, because we've got real problems in public utilities. If you want an adjective to describe the pubic utilities water and wastewater that we had a year ago -- and we probably still have a little bit today -- the word "exhausted" fits. We've about taken it as far as we can stretch it, and it's time to take a look at some major improvements as far as plants are concerned and different locations for plants. You're going to receive a briefing, and you've had some briefings already on the rural fringe in some areas out there that Page 5 November 28,2001 people are talking about clustering for future development. Well, we're going to talk about those today when you take a look at future plant sites and things like that to give you the big view in the process so you're just not looking at the urban area, but you're going to be looking at some decisions that you're going to make that are going to transpire here over the next six months. Again, this is an opportunity to us to provide you with all the information. The plans -- we asked our consultants to take a look at those plans and to look at it in a 20-year time frame in a buildout time frame for the county and then to give us 5-year digestible doses on what those should look like along with an execution matrix with those ingredients so that we can determine based on population projections, actual population, building permits where we can make decisions and tweak that along the way. Because a plan is only as good as it is today, and when it gets into execution it's a little bit different. You've got to be able to monitor that and make some smart changes along that path. We've tried to do that with our consultant. Without any further introduction, I would like to bring Tom Wides, the interim public utilities administrator, and he'll start that agenda for you. Thank you. MR. WIDES: Commissioners, good morning. Again, for the record, Tom Wides, interim public utilities administrator. To avoid or not to repeat too much of what Jim has just said, but it is key that we understand that we've really taken a comprehensive look all the way through from the population development all the way through the capital requirements and out through the back end which could be described as the impact fees, the rate studies themselves for water and sewer users But today, this morning, just to introduce the folks that we'll have with us this morning, our consultants include Greeley & Hansen, and they're being represented by Roger Howell and David Page 6 November 28, 2001 Hagan. From PRMG, which is Public Resources Management Group, our consultant is Rob Ori. And finally from CDM, Camp, Dresser & McKee, we have Diane Kemp and Marie Mahaugn (phonetic). Just to talk a little bit more about the study itself, again we've kept in mind in the process of this study various topics in terms of population growth. We've accommodated the needs imposed by the Department of Environmental Protection for the consent order. We've determined, as Jim noted, the location for the infrastructure that we feel we'll need out ahead as we look over that 5-, 10-, and 20- year environment. As you hear the presentation this morning, I think the key thing -- one of the key things to listen for is the impact of this infrastructure on our requirements for financing that infrastructure. It's really a balance of where that financing comes from and, gee, once you have the financing, how do we actually pay for that debt we incurred. We've stayed with the concept of growth pays for growth. Impact fees pay for the growth. There are some situations that we'll talk about this morning that require other uses of fees, but we'll stay with that concept. As we talk about the water and sewer impact fees, as you'll hear again this morning, our first impact fees were incorporated in 1978. Our last major update of impact fees was in 1998, almost 3-plus years ago. That data as you'll hear this morning in the past was based on 1990 census data. That was the best data that we had at the time. Now, as we move forward we're able to look at the very current time frame of the year 2000 census data, and as a result we're able to build a lot of our information based on that. The water and sewer impact fees -- excuse me. The water and sewer user fees are, in fact, based on the master -- directly off the master plans. The calculated needs for 0 & M and for capital costs that are really repair and maintenance type of costs, they come Page 7 November 28,2001 directly off of what we've developed there. Other than that what I would like to do at this point in time is turn this over to our consultants from Greeley & Hansen, and I believe David Hagan will be our first speaker. MR. MUDD: Commissioners, while he's coming to the podium -- again, Jim Mudd, deputy county manager -- Tom mentioned that the rates were based off the Master Plan. I will also tell you that the configuration for the rates for water and sewer were based on your guidance back in the March water workshop where you asked the staff to go back and invert the rates to talk -- to make sure that we get in a conservation mode and force that a little bit from the economics of the price for water or for sewer. So you'll see that this morning. MR. HAGAN: Thank you. I'm Dave Hagan with Greeley & Hansen. I'm going to talk about the wastewater plan, and then Roger will talk about the water plan, and then we'll have some summary remarks. First of all, though, I'm going to go over to the board and give away some of the ending on the wastewater plan before I get started here. Most of the presentation is a PowerPoint presentation, but we do have this board here. I assume the microphone works. This is a map of the water and sewer district as it might be at the end of a buildout situation. As part of the Master Plan what we've tried to do was to look out at what the buildout situation may be in the county and what kind of populations you'd have at that time, what kind of infrastructure needs you might have, and then designed a pathway to get there through the next 20 years. The plan is really a 20-year plan, but we have to look out beyond that knowing that there will be future needs. Your existing water and sewer district comes out to here, which is a few miles east of 1-75, and the green area shown on the map is where you now have sewer. You have two wastewater plants, one in Page 8 November 28,2001 the north and one in the south, that are currently under expansion. But also during the course of our study there was a parallel rural fringe study that identified areas out in the rural areas that may have needs for water and wastewater service. Then, also, the OrangeTree area is where you have a commitment already to serve the population out there and take over their plant by 2011. So that all went into the development of the Master Plan. When we look out into these areas, we see that these existing plants won't have enough capacity to serve the additional population that might come in from those areas because the plans right now are to expand these plants up to the physical limits of the properties. So we've identified three future plans that would serve the rural fringe area and even some areas within the existing water and sewer district that we need to take off of the service area for the existing plans. The blue line here represents what a future water and sewer district may look like. At this point I'll go over and talk using the PowerPoint presentation. The basis of development of the needs for the water and wastewater facilities is the population, your service population. The population projections are based upon -- that we've used are based on the Florida Bureau of Economic and Business Research (sic), BEBR, the 2000 census. As Tom said we had the advantage in this Master Plan to have recent census information that we could use for the study. It's also somewhat of a disadvantage in that we were starting the plan so early that that information became available in about June and hadn't really been disaggregated yet to the smaller pieces that we needed to look at, and we had to do that as part of the plan. We also used the county planning section estimates, buildout estimates, and recent certification of occupancy data as well to look at the population. And, of course, we looked at the historical wastewater flows at your plants. Page 9 November 28, 2001 Some historical information regarding the population, from 1990 to 2000 the population in Collier County grew by about 62 percent. Now, that's county-wide. But in your water and sewer district, which excludes the City of Naples and Marco Island, your increase was 91 percent. So your increase in the number of customers went up or almost doubled in the last ten years. COMMISSIONER HENNING: this? and I to follow you. CHAIRMAN CARTER: morning, I believe. one. Excuse me, Mr. Hagan. MR. HAGAN: Yes. COMMISSIONER HENNING: Do you have any handouts on This screen is real shaky, and it's hard for Commissioner Coyle It was in your handouts from this COMMISSIONER FIALA: It's right in there. CHAIRMAN CARTER: Oh, right in this package. COMMISSIONER FIALA: Yeah, that's it. CHAIRMAN CARTER: If we can go to-- COMMISSIONER HENNING: It looks like we have more than CHAIRMAN CARTER: Yes. You have two packages. The first one is the Master Plan update as one of your projects, I believe. COMMISSIONER HENNING: Thanks. MR. HAGAN: Unfortunately, a few of the slides may be a little different than the handout, and there's some additional slides as well. If you have a problem identifying where you're at, let me know, and I can let you know. Okay. So your population in the water/sewer district has almost doubled in the last ten years. The BEBR projections are done by the state for every county, and they do a medium, average, five-year floating, and high estimate. The high estimate is their most conservative, of course, and the average is essentially their lowest. Page 10 November 28,2001 The medium value is halfway in between the average and the high. And the five-year floating is a value that goes out five years at the high-growth rate but then parallels the average line to show some reduction in the growth over time. This identifies a range that has been proposed by BEBR for the county population. This is shown graphically here with the highest curve, of course, being the BEBR high population. This is for the entire county, not just the water and sewer district, but for the entire county. We also identified and looked at the buildout projections that the county planning section has done in 1994 and then updated in 1997. Their total buildout population, which excludes the rural areas, Immokalee, Everglades City -- so it's essentially within the water and sewer district, but it also includes the City of Naples and Marco Island. So we took those out and identified a total buildout within the water and sewer district of almost 394,000. Of course, that does not include areas within the rural fringe. When we look at the BEBR high population projections and the others compared to the buildout population -- that's the blue line that is shown here that's horizontal across the page -- that's the estimated buildout population without the City of Naples and Marco Island, 394,000. The thing that we noted here -- and this goes out to 2030 by the way. The thing that we noticed is that several of these curves wind up going above what the county is identifying as buildout population for the water and sewer district, and so we made adjustments for that as I'll identify in a moment. COMMISSIONER COYLE: Can I ask a question about this chart? MR. HAGAN: Sure. COMMISSIONER COYLE: It seems that between the years 1990 and the year 2000 all of the curves were exactly the same, and I Page 11 November 28, 2001 don't think that could possibly have been the case. MR. HAGAN: Well, these are projections, and these BEBR projections just came out this year. They used the 2000 census. So from 1990 to 2000 that's census information. COMMISSIONER COYLE: Okay. It would be helpful if we understood how far off our projects were in the past to be able to assess the kind of projections -- MR. HAGAN: I've got a slide that says that. COMMISSIONER COYLE: Okay. Good. Thank you. MR. HAGAN: Also, though, we had to add on the rural fringe population projections. The study on the rural fringe was ongoing during the course of our study, so we identified a high range and a low range of population that could be -- that could occur in the rural fringe area. It's anywhere from 54,000 to 109,000 depending on the densities finally arrived at in the rural fringe. When we -- if we use the total buildout that we identified earlier through the planning section, 394,000, and then we add the high estimate of the rural fringe and OrangeTree buildout of about 109,000, we wind up with a total buildout in the expanded water and sewer district, including the rural fringe, of about 504,000. We then looked at two approaches for growth because we have all of these curves that end up at different places. We looked at a conservative-growth approach and a moderate-growth approach. We used -- for the conservative growth we used the high BEBR projections and modified them as I'll talk about in a moment. We used the high-population projections for Areas A to D in the rural fringe. We also said that we would -- under this we would eventually serve homes that are now on septic tanks within the district. This, of course, is not additional population, but it's additional served population. Also, Golden Gate City would be served by the county. Page 12 November 28,2001 Golden Gate City now has their own wastewater plant that serves part of the area, but the rest is on septic tank. We also had a moderate-growth approach, and we used the average BEBR projections for that. We used the low projections for Areas A to D. We said that homes that were now on septic tanks would remain on septic tanks, and Golden Gate City would remain separate. COMMISSIONER HENNING: Question. Why do we want to service these people if they already have a service that provides for them? MR. HAGAN: Well, this is looking at a "what if" and what you may need to plan for. There are -- there are certain elements that are saying that all homes should be off of septic tanks on a state level, and there may be state legislation that would require that. COMMISSIONER HENNING: Is there state legislation that requires that? MR. HAGAN: Not presently, there is not. COMMISSIONER HENNING: So we're doing -- we're building this plan under assumption? MR. HAGAN: Well, it's not an assumption, but you certainly wouldn't build the facilities until you had to do that or there was some compelling reason to do it. But we wanted to make sure that you were at least identifying property that would be large enough to have a wastewater plant that would service those areas even if you don't build the facility. COMMISSIONER HENNING: But the plan includes assumptions or assumes that the state is going to tighten regulations to require people to be on water and sewer. MR. HAGAN: But the assumptions that we have that are in the conservative-growth approach, that doesn't occur until some years out, and even at that it's not right away. It's over a long period of Page 13 November 28, 2001 time that this would happen. MR. MUDD: Commissioner -- again, Jim Mudd, deputy county manager -- you're right. You plan for the worst, okay, and you hope for the best. And if you plan for the best and you get the worst -- then you have spills, and you have some other issues. So what we asked them to do was to do the whole gamut, run it across a series of scenarios that could come to pass. As you know, the Golden Gate City -- their council that they have meets every once in awhile, and we just had a meeting with Florida Government Utility, and there was some issues that were talked about at great length about the cost of the product that they get, the service that they get, and some of their odor issues. In this -- one of the scenarios sometime -- in the second five-year period of time from six through ten the county would go in and purchase that utility and start to service those constituents, those taxpayers. There's a scenario where that doesn't occur. As you know, only about a one-mile square area of that four- mile square area is really serviced by sewer. There are some issues with septic systems within the county. As our folks from Greeley & Hansen just mentioned, you have to have the land in order to have the septic system and the drain field and everything else. If your densities get too high and you have multiple septic systems in a short span, you have some -- you have some issues with drain fields and groundwater and things like that. We've had some of those occurrences in the past in the Golden Gate Estates area. COMMISSIONER HENNING: In the past. MR. MUDD: In the past. COMMISSIONER HENNING: Okay. Now, what I'm trying to get at is we're building this Master Plan under assumptions. When we get down there further, then we're going to get to the cost assumptions, and I think what I would like to see is -- for one thing, I Page 14 November 28,2001 know that the people in Golden Gate City do not want to get on sewer because they know what the impact fees or costs to go on there are. You know, it's a lot cheaper fixing an existing sewer drain field than it is to hook up on city water. My concern is the affordability for these people. And from what we've seen back in the 1980s in East Naples people were forced to hook up to city water and sewer. CHAIRMAN CARTER: But, Commissioner, in all due respect -- COMMISSIONER HENNING: CHAIRMAN CARTER: Okay. If I can finish, please. But I'm going to tell you, you're wandering into an area -- all he's trying to do is give you a plan. COMMISSIONER HENNING: And it forces some people out of their home. So that's my concern. MR. MUDD: Yes, sir. There is some talk in Tallahassee throughout the community about -- well, there has been several communities that have been directed by the state health department to come off of septic because they botched it very badly, and it has caused some hardship upon those communities. As Florida grows I think you'll see that the public health laws will get a lot more stringent upon septic systems and the densities that you can build around them. All it needs to be is one or two septic systems that messes up your water table, and you'll get into a different dilemma. I'm just-- there's a lot of move afoot. I can tell you there's several representatives and state senators that are talking about this very issue. So we've asked them to take a look at it. I understand your concern in that process -- and we've talked about this before. In no way, shape, or form will public utilities come up and say, "We want to take people off of their septic systems and force them online." Page 15 November 28,2001 We're just providing a plan to show you some of the courses of action that are out there and what the cost of those courses of action are, sir. The rates that you'll see today are based on a 5-year plan, the first 5-year piece of that 20-year plan. But if we didn't have a vision for that 20-year plan and try to get the things that needed to be built just in that 5-year period of time and we didn't have the perspective over 20 years, the rate structures and the impact fees that you'll see today would be a lot higher than they are today. So it was good for us to take that holistic view to look at the population and the possibility of what it could look like in Collier County over that 20-year period and then peel the plan back into the first 5 years and then give you those rates or what they kind of need to look like. COMMISSIONER HENNING: Thank you. MR. HAGAN: As I identified earlier, with the high BEBR projection that we used for the conservative growth, it shows that in 30 years or even earlier than 30 years it would be greater than the buildout population. So we've modified the conservative approach to use the high BEBR curve for ten years from 2000 to 2010, essentially, and assumed the average BEBR values in 2030, which are near the buildout populations, and then assumed a straight line increase between 2010 to 2030. So there's a bit of a flow in our curve. It start off using one growth rate and then levels off to a more moderate rate. Comparisons of some of the estimates with the buildout show that using the conservative estimate, we're showing 233,000 in 2006 growing to 394,000 in 2021 with the buildout being the 503,000. That's the conservative estimate. The moderate estimate, of course, is somewhat less than that. But we're only really interested at this point in the 20 years because that's what our plan is based on, 20 years. Both approaches wind up being around 70 to 80 percent of Page 16 November 28,2001 buildout in 20 years. That resulted in this curve here which shows the total range of sewered population in the county. This is only the folks that are on sewer. This is based on October 1st of each year. You can see the blue curve is the conservative line for growth, and the red line is the moderate estimate. The green line is the county planning section's estimate, but that's only for the existing water and sewer district. It does not go outside those boundaries into the rural fringe. The gray line that only goes -- the low line there -- that only goes out to 2005 is from the previous Master Plan for wastewater. It shows that in -- even in 2000 that's the starting point based on the census information, and 2000 of that estimate was about 80 to 85 percent of what you actually had in the year 2000. So the previous estimate was a little low and is lower than all of our growth projections. I have a few graphics that I don't believe are in your handout that show the makeup of this. COMMISSIONER COLETTA: Could I ask you one question, sir? MR. HAGAN: Yeah. COMMISSIONER COLETTA: You mentioned something a little while ago on sewer or water. Do you have to be on both, or can you be on just one or the other? MR. HAGAN: You could be on one or the other. In fact, right now I think you have some customers that -- well, I guess you have customers that are served wastewater in the county and water by the city. COMMISSIONER COLETTA: Don't you -- the sewer is tied right into the water bill. In other words, you use so much water, and you're able to determine the sewer bill; is that correct? MR. HAGAN: That's right up to a certain limit. COMMISSIONER COLETTA: So what do you do when the Page 17 November 28,2001 people are on water with the city and the county is the sewer part? Do you have to -- do you have some collaboration? MR. MUDD: Yes, sir. What we do in that particular -- Jim Mudd. What we do in that particular case is we do all the billing for the city in that particular juncture just to make it easier for the taxpayer. So we'll get the usage from the city on the water side of the house and determine the sewer bill, and they'll get one bill. Then once we get the proceeds in, we divvy it back out and give the city back their piece. COMMISSIONER COLETTA: Sorry to sidetrack you on that, but it was a piece of information I wanted to know. MR. MUDD: Yes, sir. There are other people in the county that have water but they have septic. I don't know of anybody that just gets sewer, and I would have to go to John Yonkosky to find that out. COMMISSIONER COLETTA: What about Golden Gate City, if I may ask while we're at it? Commissioner Henning, is it some places just receive the water? COMMISSIONER HENNING: Yes. MR. HAGAN: Okay. We used the conservative growth curve to do the planning, the what-if planning, for our five-year increments, and I have some graphics, as I said, that aren't in your handout that we just developed to show a little bit about how that's made up and to make some additional comparison. On this graphic we're showing just the estimated population within your existing water and sewer planning area. You can see the need in the curve that starts about 2010. That's where we started to moderate the growth curve from the high BEBR estimate. You can see also the planning section's estimate that was done in parallel to ours which is pretty similar. It starts off at the same place because we were a little bit ahead of your planning section in the development of this. They started out using our number for the estimate of the Page 18 November 28, 2001 water and sewer population in the district. This shows the water-and-sewer district population in total, not just the sewer customers but all customers within the district. Of course, you have some homes that are on septic tanks within that district. This shows the additional areas that may be served and how that was built into the estimates that we're using. The top one is the total existing sewer area and -- within the water and sewer district. The lower curve shows additional population in Golden Gate Estates, Golden Gate City, some of your unsewered areas and growth within those areas, OrangeTree, and the rural fringe. You'll see that we don't start any population growth or show any population growth in Areas A to D until about 2006. And then the basis of the growth was that buildout would occur in 2050 for the rural fringe area. But that's the total population within the boundaries that we show on the graphic on the board over on the wall. But just looking at the sewer population, that's what this graphic identifies. The upper curve is your total water and sewer district population. Anyone in between is either on a septic tank or is served by a private utility. You can see that here it's not until about 2006 that we're showing a population growth in the other areas or bringing on some of those unsewered populations into your service. But that's population -- and I think this slide is in your handout. We had to turn the population into wastewater flows that would be treated. We had historical information from your north and south service areas and determined that per capita wastewater flows in the north is 145 and in the south 100. We use for all other areas 120 gallons per capita per day. The 145 is consistent with the previous Master Plan. The 100 is actually lower than the previous Master Plan, which had used 120. We have a few graphics here that show what the projections of Page 19 November 28, 2001 the wastewater flow does compared to the capacity of your north and south plants. The north plant is now a 17.6 -- essentially, a 17.6 million-gallon-per-day plant. The growth projections show that that's adequate within the next few years. You're under a concent order to increase that capacity to 30.6 by -- and have that online by 2005. And you can see through this graphic, using the conservative growth curves that we showed earlier, that you have quite a bit of additional capacity, unused capacity, in the first several years. We've been with county representatives approaching DEP to lower the expansion of that plant and save the cost or at least postpone the cost, and they're looking at that very favorably. We're presenting this next graphic to them that shows only half of that expansion occurring by 2005, and then continuing the second phase of the expansion up to 30.6 by 2010. This graphic illustrates that with the conservative-growth approach that we've been using there would be sufficient capacity to do that. COMMISSIONER FIALA: Will they be giving us an answer soon? MR. HAGAN: Yes. In fact, just yesterday we were on the phone with one of their decision-makers explaining some of these graphics. They wanted some additional information that we've provided. I think it's -- they're going to look at that favorably. MR. MUDD: I'm sure -- the director of the Fort Myers office, Rick Cantrell, basically said he's not going to force the county to do anything stupid as far as capital improvements are concerned. We just need to provide them the information, and we'll be keeping that dialogue. We didn't -- when they told us to go from our requested five to ten just to make sure, we didn't have the Master Plan done and didn't have that backup data-- and, again, as I mentioned last night, we weren't in a very good negotiating position at that time. We're in Page 20 November 28,2001 a better one now, and they've got an open mind to our request. So we should be hearing something back from them in the next week or so. MR. HAGAN: At the south plant you're currently under expansion to bring that up to 16 MGD. Again, this is using the conservative-growth curve. And that 16 MGD plant would be the final expansion of that plant and would be adequate through this 20- year planning period. You can also see on the graphic the need of this plant expansion because you're approaching and almost exceeding the capacity of the plant in the next couple of years. MR. MUDD: Commissioner Fiala, I would like to bring your attention to the graphic for just a second. Last year on the north side we hauled about a half million gallons of sewage to the south plant because it had a little bit extra capacity. You'll notice from this graph that this year I think we're going to be pumping sewage through our interconnect from the south to the north because the 5 million gallon expansion -- which we're going to have a ribbon ceremony on Friday for-- is up and running. The other thing I would like you to pick out from this graphic -- and we'll talk more about this Friday during the AUIR presentation, and you'll get to see it a little bit more in detail. But another thing you should see from that, based on the plans that we had from the '96-'97 Master Plan, is that they were going to take the next plan expansion in the south in digestible doses. They were going to do about a 3 million gallon expansion, and then they were going to do another three, and then they were going to do the final two. Well, if you take a look at that chart and that population projection, you'd see that based on the need that community over a ten-year period of time would never be out of a construction zone. So we made a decision, and we advised the commission that it just makes good sense for that community that you don't put them through that trauma with all of those trucks and stuff going back and Page 21 November 28,2001 forth. So I think that graph kind of gives you an indication of what kind of dilemma there would be if you had to stairstep that in, and it would be over a short period of time, less than a ten-year period of time. It's just not -- COMMISSIONER FIALA: Then in 2003 when we fall short there, that's when we're going to be pumping the stuff to the north end. MR. MUDD: Yes, ma'am. We're going to put that interconnection in the middle of January of this year. We've got an equalization tank going up on the south side, too, that will be ready for the high season, and we'll make that interconnection if we need it this year also. COMMISSIONER FIALA: Okay. Thank you. MR. HAGAN: This graphic illustrates the planning, design, and construction timeline for development of a new plant. We show as many as three new plants. The Master Plan identifies the years that they may need to be in service. The planning for that and the negotiation of property and that sort of thing takes some time. And we're showing here that it may take five years to have that in place. Of course, not much growth can occur in those areas until you have wastewater service available. So -- COMMISSIONER HENNING: Where is this service area at? MR. HAGAN: Well, this would be in the rural fringe areas where we've identified three additional plants. But initially you have to identify or do a site analysis to determine the size of the property that you need, acquire that property, and negotiate, and that takes some time. So if there's going to be additional plants, the planning for that has to be started early on. Even if the design and permitting takes place at some later date, sites need to be identified early on. MR. MUDD: For instance, out in the OrangeTree area, Page 22 November 28,2001 Commissioners, knowing that in 2011 we have to take that facility on or that population that they've got there, based on agreement that we have, we've started this year to go out and identify some particular land that's out there just to the east of the county fairgrounds. We just finished the appraisals. The appraisals took us almost four months. Now we need to get back with the landowner, who we've approached before, and talk about a lease with option to buy. Because it's not budgeted this year for any kind of expenditure to take that land on, so we'll have to put that in the '03 budget. We would like to get a placeholder for that land to make sure it doesn't disappear off the market and turn into a development or a PUD so that we can put that utility out in an area that can have some natural buffer from the neighborhood. Because that's one of the dilemmas that we've got with the urban -- the two plants that we have right now. They're in the middle of a neighborhood. COMMISSIONER COLETTA: Mr. Mudd, this is all conditional upon, of course, the final plan coming down from the Governor and the rural fringe committee plan that they're putting forward. I mean, I don't want to panic people out there who think they're going to be forced to go on sewer at this time. MR. MUDD: No. You're right, sir. All the areas except for OrangeTree, they don't even get into the rate issue. They're out there in the second five-year iteration or third five-year iteration. The OrangeTree area, though, we're going to need to start to procure that land in order to take that facility on. I mean, last year they hauled sewage to our north plant, and they started again this year because their plant can't handle it, so they're hauling again. COMMISSIONER COLETTA: So we're not talking about residents in Golden Gate Estates being forced to hook up to sewer and water. Page 23 November 28,2001 MR. MUDD: No, sir. What we're talking about in this plan is just in those boxes based on that rural fringe plan -- COMMISSIONER COLETTA: And that's if that rural fringe plan passed all the way down. MR. MUDD: Yes, sir. COMMISSIONER COLETTA: Thank you. CHAIRMAN CARTER: But I think what's important here, Commissioners, is that the plan says as communities grow or as you get more congestion of people that -- you need a plan to say when this happens, when it reaches a certain point, we must be in a position to have the land and have the structure and do all that due diligence so that when that reaches that critical point -- it's like Marco City today. When I first lived there all of the community was on septic. Little by little, street by street, they took you onto a sewer system and, you know, that happens over time. COMMISSIONER COLETTA: That's true. That's true, but we've got a unique situation out in Golden Gate Estates. There's homes on 2 1/2 acre lots totally self-sustainable for water and with their own septic system. There's no reason now or in the future for them to have to hookup unless the state in its infinite wisdom passes some sort of decree, and then we'd be dealing with a new matter. MR. MUDD: But I will tell you, sir, based on the rural fringe and where they've laid those plants out, it does have a capacity if that ever did happen that you would be in a good position to do that. COMMISSIONER COLETTA: There's no problem with capacity because we can always share with the rest of the county where it will be needed. MR. MUDD: Yes, sir. If you look at those blue boxes that he's got out there -- if the rural fringe does come into being, you've got -- those aren't districts that you see that get squared off. But you'll see the north water plant -- some of that area gets focused over to the Page 24 November 28, 2001 OrangeTree plant in the boundary. And then if you take a look at the plant in C- 1, C-2, they pick up some of the south water -- south sewer plant's capacity. If you take a look at the plant -- the future plant, D-1, D-2, they take the south part of the south sewer plant. So they're taking some of the pressure off of the two plants, but you also -- at the same time there's growth happening in Commissioner Fiala's district. So it's going to get a little bit more congested. The demand is going to be there in that urban area for that south plant. Now, I'll also tell you that Mr. Matson, okay, a great person -- we heard him here a couple of weeks ago from the Lely community -- he said, "Well, dam it. Why don't you build it someplace else?" The previous slide basically showed you that it takes about a five- year time period in order to build it someplace else. We need to get ourselves in a position where if that's a decision of the board that you've got some room to make that decision. Right now you're pretty well stuck. COMMISSIONER FIALA: What you're really saying or what I hear anyway or what I'm interpreting is we haven't -- for years and years now we've been pinching that nickel and not planning for the future, and now we've been caught short. Yes, we're having a lot of the repercussions because of it, not only physically with plants flowing over and roads not adequate because there hasn't been any planning, but a lot of people who -- their taxes have been kept low so as not to plan for the future, and now we're taking the big hit. But we've got to do this if we want to plan for the generations to come. So I'm just delighted that you're doing this. MR. MUDD: Yes, ma'am. One little correction, and I don't mean to nitpick, but rates -- utility rates aren't taxes. Okay. And I would like to make that clear. COMMISSIONER FIALA: Oh, that's an important thing to say. Page 25 November 28, 2001 MR. MUDD: It's a service charge, so I would like to make that distinction. COMMISSIONER FIALA: Thank you. It's a user fee. COMMISSIONER HENNING: I would like to make a clarification, please. So we're going to do a Master Plan for wastewater to cover all of Collier County, am I correct, all the citizens of Collier County? MR. MUDD: (Nodding affirmatively.) COMMISSIONER HENNING: Now, Commissioner Coletta asked a question that it won't affect Golden Gate Estates unless somebody in Tallahassee changes the rules and would they need to hook up. So, therefore, we have this extra capacity because we built it for anticipation of servicing all of Collier County. MR. MUDD: Sir, what we're basically doing is -- these plants have expansions. They can be expanded in digestible doses like we're doing the north plant and the south plant right now so that you only bring on what you need in that particular area. When you purchase the property, you get it big enough so that-- if you have a projection of what you think it's going to be -- that you've got that footprint. If it doesn't come, then you only-- as the population increases, then you bring the expansions on. An expansion outside of building a new plant -- what we basically showed you is the typical five year for a new plant. Once that new plant -- COMMISSIONER HENNING: I've got it. MR. MUDD: It only takes about a year and a half to bring the expansion on. COMMISSIONER HENNING: You don't add that -- you don't build that facility or expand that facility until the decision is made to bring that customer on. MR. MUDD: Yes, sir. Page 26 November 28, 2001 MR. OLLIFF: Correct. This is not a plan that is fixed in stone for 20 years. No 20-year plan, hopefully, that we ever develop is going to be one that this board isn't looking at on a regular basis, tweaking, updating, making adjustments to it. Frankly, we haven't had a long-range plan. We need to at least start looking in the long term. But the board will get opportunities regularly to look at this, and we're going to do a better job, frankly, of keeping up with that population and customer base number to watch that line to make sure that we're keeping a good handle on is it increasing like we thought it was going to. If it's not increasing like we thought it was going to, we don't have to expand plants as quickly as we're projecting right now. But, on the other hand, we should have in years past been watching that line better so that we're not waiting for updated census information to know, goodness gracious, we've got a heck of a lot more customers than that original old plan projected that we were going to, and we don't have the plant capacity to be able to handle it. So we've got to be able to have a long-range plan, but also have regular watch and interval looks at it so that this board participates in making sure that we stay current. COMMISSIONER HENNING: Thank you. COMMISSIONER COLETTA: I'm a little curious about one thing. In all the numbers I've seen that shows Golden Gate City, which is a separate sewer system -- I understand that it runs independently of the county. How come Immokalee didn't appear on that graph? I'm a little bit at a loss on that. They are part of Collier County. COMMISSIONER COYLE: They don't produce it. COMMISSIONER COLETTA: Yes, they do. CHAIRMAN CARTER: I thought you were shipping all of yours west. Page 27 November 28,2001 MR. MUDD: Sir, basically it depends on where the water/sewer boundaries are going to be. That's a decision that you make based on what we have for D-1, D-2, C-1, C-2, B-1 through 3, and A-1, A-2. That is the most that Collier County planners are taking a look at as far as the water/sewer district, so it's outside the boundary. COMMISSIONER COLETTA: I see that. I noticed Golden Gate is on there and Immokalee wasn't, but there's no problem. Immokalee has it well under control. MR. MUDD: Yes, sir. If at some time in the future your predecessor decides 20 years from now -- you're going to have long longevity here on the board-- that Immokalee should be part of the county water/sewer district, then that's a possibility, sir. COMMISSIONER COLETTA: Thank you. MR. HAGAN: Okay. In summary, for the wastewater master plan, the recommended 20-year projects are to upgrade the north county facility to 30.6 million gallons per day, and basically the recommendation is in two phases; upgrade the south county plant to 16 as the ultimate capacity of that plant; construct up to three new plants as development dictates in those areas. Also, interconnect existing and new plants -- you're going to interconnect the north and the south plant, but as these other plants come online, we're looking at interconnecting all of the drainage areas that go to these plants for reliability. Also, implement biosolids or sludge handling by pursuing a contract with the local private composting facility, and upgrade the transmission facilities, pumping stations, and force mains to meet growth demands. And with that Roger Howell from Greeley & Hansen will talk about the water master plan. MR. HOWELL: Good morning. For the record, I'm Roger Howell with Greeley & Hansen. I'll talk about the water master plan. Basically, we used the same growth projections in the water Page 28 November 28, 2001 master plan that we developed and Dave discussed for the wastewater master plan. This graphic shows the capacities of existing and future water plants. I'll just point to the board here a section. You have two existing water plants. The north water plant and the south water plant are shown with those kind of open starts over there. In the future we're forecasting, based on a conservative growth, that you'll ultimately need two more water plants; one in the OrangeTree area, which will be adjacent to the proposed wastewater plant in the property that you're purchasing up there, and the second new water plant will be in the south on property that you already currently own. You have a 42 1/2 acre site that you currently have the Manatee pump station site located on. Now, the graphic that I have up shows the capacities of the existing and proposed water plants. The existing north water plant is already maxed out. You've expanded that to its ultimate capacity at 20 MGD. The south water plant is currently undergoing an expansion to 20 MGD also, and ultimately that plant will bring your total water plant capacity up to 52 million gallons a day. MR. MUDD: Can I bring -- one little piece that you need to -- Jim Mudd again. The line -- the growth line and the capacities are a whole lot tighter here. You should be able to pick that out on the graphic. You can do that because you have above-ground storage of potable water, plus you have an ASR that's in Manatee at that distribution site. You have 400 million gallons of potable water and an ASR down there, and those above-ground and below-ground storage capabilities give you some -- you can get a lot closer with your projection when the capability comes online, because you can get it to the customer -- you can store water and then provide it. You can provide the stored water to them. It doesn't have to be made the minute you put it out on the line. So your capability and your demand can be a whole lot tighter Page 29 November 28, 2001 on that chart. It's one thing that you should pick up on. The sewer system is a little bit different. There is nowhere to hold it. You pretty much have to treat it the minute that you get it or within hours of when you get it. MR. HOWELL: Another thing that this graphic shows is that your existing water-plant capacity -- you'll run out of capacity in about the year 2010. So starting in 2010 we've shown the first of the two new water plants coming online, and then that plant has an ultimate capacity of about 20 MGD. Then in 2018 you would need the fourth plant. The other thing I would like to point out is this is, again, based on conservative growth. Jim mentioned aquifer storage and recovery. We've recommended in the water master plan that we try to maximize the use of that. In so doing that will essentially postpone the need for these additional plant expansions. The more that you can utilize aquifer storage and recovery as well as conservation methods, that postpones these plant constructions. But the plant is based on the expansions as we have shown them here. Likewise, with a new wastewater treatment plant, a new water treatment plant has a similar timeline. You need about five years from the start of acquisition of property to completion of construction. Now, in the case of the proposed south water plant, you already own that property, so that timeline would be a little bit shortened. But, again, that doesn't happen until the year 2018, and you've already started -- as Jim mentioned -- some negotiations for the property at the OrangeTree site. To summarize quickly the recommendations in the water master plan, expand your existing south water treatment plant to 32 million gallons a day; construct two new water treatment plants to meet future water demands; make the best use of aquifer storage and recovery to minimize plant construction and postpone the need for Page 30 November 28, 2001 those expansions; and, also, likewise with the wastewater plan, we need to upgrade the transmission facilities to meet the growth needs. So what do the -- what do the water master plan and wastewater master plan result in? Well, this shows in five-year increments the requirements for capital improvement costs. You can see for the first five-year increments, 2002 to 2006, we've identified roughly about $470 million worth of capital improvements. The average for each of the five-year increments over the next 20 years is roughly about $400 million. Now, these costs that we've shown here are escalated costs. For instance, in the third five-year increment, 2012 to 2016, those costs have been escalated at 5 percent per year so that in today's dollars that would probably be about half that cost. These are the costs that would be expended at the time that they're required. Now, I don't believe that you have these slides with you. You may or may not. We've also looked at a comparison of the costs in the 2001 Master Plan that we've done with costs that were included with the previous master plan. There's quite a stark difference as you can see here. For the water master plan -- these costs are the 2002 to 2006 CIP. Previously it was $23 million; now we're at $158 million. Likewise, with wastewater previously it was $26 million. Now we're up at $268 million. The overall difference is somewhere between eight and times -- a factor of eight or nine times of what the previous number was. That goes back to several factors which I'm going to talk about here. I think Dave mentioned earlier or showed on the graph -- do you remember the bottom gray line, the bottom gray line? The previous population projections were quite a bit lower. In fact, our starting point in the year 2000 for these master plans was 14 percent higher in terms of population. Then we are going up at a more accelerated rate. Page 31 November 28, 2001 The number of projects as a result of the change in population-- the number of projects significantly changed. For instance, in the previous water master plan for the years 2002 to 2006, there were 3 projects. We now have 47 water projects. Now that's a combination of the additional needs resulting from the increased population. Also, I think a lot of it has to do with -- as Jim mentioned -- we took a more holistic approach. We included everything relating to the water-- to your water needs. The earlier plan did not include cost escalations due to inflation. For instance, the water master plan that was previously done in 1996, you're using those numbers now in your current impact fees. If you were just to scale up those costs from 1996 to the present, it would be -- it would result in a 15 percent increase in cost. So what that leads to is you're paying for 2001-2002 projects with 1996 dollars that were allocated. CHAIRMAN CARTER: In all your projections for the future, I hope we're correcting that through everything that we're doing. I mean, if I've heard everything correctly in my own briefings, I am shocked at what I see this morning that we -- that it was done so badly. You know, I guess it doesn't make any difference how badly or why. Why is irrelevant. We just don't want to make the same mistake in the future. MR. HOWELL: Agreed. For comparison on the water treatment plant side, I've shown in the years 2005, 2010, and 2015 a comparison of what was in the '96 plan versus what is in the current plan. You can see in the year 2015 the water treatment capacity that was allocated or was forecast in the '96 plan was 39 million gallons a day, and we're up at 72 million gallons a day. That's pretty stark. It starts to put the whole thing into real numbers. MR. MUDD: What I would also like to show you from that chart is the fact that for a ten-year period of time you weren't going to Page 32 November 28, 2001 have any growth as far as water is concerned. You're at 39 million gallons a day. I don't know what people are going to drink, but it's a little obvious to me that it's pretty unrealistic. So as we looked at the master plan early on, and really last spring brought it to light, even when the north water plant came online, we had almost a moratorium because we were short on water, and that was several years ago. We've been right on the border of moratorium every time you turn around as far as an expansion is concerned. And I'm not saying get way out ahead, but you need to have it there so that it comes online. When he talks about high BEBR for a ten-year period of time, when I look at the last three years' permits, building permits, it's parallel to the high BEBR line, and it hasn't ramped off one bit. It's staying right up at the high BEBR side of the house. That's just from a building permit. That's another one of those checks and balances that we brought on. We've got to check it out early on because we weren't keeping track of capacity that was on or being built against what was promised out, and that changed last November as we started to go through that process. So just as you look at that slide, it should jump out at you what was going to happen over a ten-year period of time. I'd scratch my head and say, "What? All of a sudden it's just going to lop off, and we're going to be done?" I don't think that's realistic at all. CHAIRMAN CARTER: I think that's really key, Jim, because I don't know how many times people say, "Well, stop the growth. Put on moratoriums." You have to build out moratoriums. You can't impose a moratorium and not do anything. You have to take action to get out of it. And you can't stop people from coming into an area. So the reality is you deal with what is reality and plan for the growth and manage the growth instead of letting the growth manage us. That's what's happened here. It's a disaster. We closed our eyes Page 33 November 28, 2001 and said, "Nobody's going to drink anything." Now we're really, really getting whacked with it, but that's reality. So I know it's hard for everybody to understand. COMMISSIONER COLETTA: Commissioner Carter, basically what happened, if you want an explanation of how we got to this point -- it's really real easy not to have to plan for the future if you're not part of it. When a commissioner is here, he's only here for four years. Their outlook is for that four-year time, and they want to make life as comfortable as possible. Staff gets in the position to make those decisions usually in the last four or five years of their time before they retire. Why make life difficult? It's been -- it's been only in the last -- I've got to give the previous commission credit for starting the ball rolling about six months before we took over. So it's only been a short time span where we've been looking out 20 or 25 years, seriously looking out at that, without coming up with excuses not to do it. We're taking a terrible beating for it, but we'll continue to do it I'm sure. CHAIRMAN CARTER: I agree. I've lived here for 23 years, and I knew it was growing, but I made an assumption that we were planning for the growth, and that was wrong. COMMISSIONER COYLE: Have you finished with your presentation? MR. HOWELL: I have, I think, one or two more slides. COMMISSIONER COYLE: Okay. MR. HOWELL: Another factor that comes into play is your bid prices for treatment plant construction have been quite a bit higher than previous estimates. Just as an example, the south water plant expansion that's underway right now, in '96 that was estimated to be at a cost of about $3.20 a gallon, and the actual cost that was recently bid came in at $4.75 a gallon. When you're talking about 8 million gallons, that's real money. Page 34 November 28,2001 The north wastewater plant water acclamation facility expansion was estimated at 19.5 million, and it's essentially double at 40 million. So all of these are factors that come into play. You also have a consent order, and the cost of the project identified in the CIP associated with that consent order are around $12 million. That's improvements that you have to do just to catch up and comply with that consent order. We've also been involved or you have also been involved with several good-neighbor projects associated with your treatment plants: Noise attenuation at the water plant, an odor-control facility at both wastewater plants, architectural improvements, things like that. Also, the previous master plan did not recognize the rural fringe. That was maybe not even a twinkle in anybody's eye back then, and it's not a reality yet. But if that does happen, that results in the need for additional infrastructure to provide service out there. You will need quite a bit of that infrastructure just to provide the service out to OrangeTree, but, you know, the rural fringe areas do have their components as well. That completes what Greeley & Hansen had to say about the Master Plans. CHAIRMAN CARTER: Commissioner Coyle has questions. COMMISSIONER COYLE: Before we get into the rate structure discussion, I just need to understand some of the assumptions that have been made. Does the plan call for ultimately serving the people who now do not have -- who now have septic systems beyond just acquiring the space and land for building something if that becomes necessary? I think, Jim, you answered that question earlier. I just wanted to make sure I understood it. MR. MUDD: We looked at it with, without, and partial in that process. The recommendation is we take on folks in the years out, the out years. It's not within the first five years. For instance, we Page 35 November 28, 2001 have right now -- Commissioner Fiala was at a meeting down with Port-A-Prince. We're upgrading their water and sewer lines because we took it over several years ago, and it was a nightmare when we took it over. Things haven't changed because we haven't done anything to it, and this year we're going to make a significant improvement. But there are 30 septic systems out there, and we've gone the extra way to provide them. Yes, they have to pay the impact fee, but the hook-up cost is part of our fine from the north sewer plant, and that's going to help pay for taking their septic system out of commission and hooking up the line to their home and things like that. But they still have to pay the impact fee. We've worked out a finance mechanism where they can pay that impact fee -- in their case it's anywhere from $500 to $1,000 -- and pay it back in increments over a 7-year period of time. COMMISSIONER COYLE: I-- MR. MUDD: But those are 30 septic systems we're taking on right now. We also have been in some dialogue with one or two other communities that are on septic that want to come over into the system. In that particular case, we would organize an assessment district. They would have to take a vote amongst the homeowners. It has to be over 50 percent for that assessment district, and then we would bring that facility on. So slowly we are bringing septic systems on that are within the urban area right now with the county, okay, and that has been continuing over a series of years. COMMISSIONER COYLE: Okay. What I'm trying to get at is whether or not the rate increases that you're likely to propose today are, in fact, funding the capacity in anticipation of taking all of these on, or are we staging that capacity development based upon what might happen in the future. MR. MUDD: Sir, we're staging that facility, and the only ones Page 36 November 28, 2001 that we're going out actively and trying to acquire within this first five-year period of time is out in OrangeTree. That's because we've got a contractual agreement. The other facilities down in the C area and the D area don't happen until the second five-year period of time or the third five-year period of time. So the rates and the impact fees that you're seeing today are basically paying for what's going to happen in the next five years. And basically what that is is only the things that are happening within our urbanized area. Urbanized area is one mile to the east of 951, and there's a straight line. The only cost outside of that is in the OrangeTree area where we're trying to acquire the land and possibly start going through the design of that future facility, and that's because we've made an agreement for that already. COMMISSIONER COYLE: Just so I understand and it's clear, if we bring on the rest of Collier County ultimately from septic systems to our system, there will be an additional charge for capital improvements at the point in time when we make a decision to do that; is that correct? MR. MUDD: Sir, they would pay an impact fee, whatever the standing impact fee is that we're charging for a new home, when they came onto that facility. COMMISSIONER COYLE: But the capacity to treat it is the thing I'm talking about right now. MR. OLLIFF: I think, to get to your question, the answer is that the existing customers today are not -- and we've worked very hard to make sure that the existing customers today are only paying for system improvements to the system that they currently have. COMMISSIONER COYLE: That's what I'm getting at. MR. OLLIFF: In other words, any improvements that DEP is requiring us to have in terms of fallback plans, interconnections, those kind of things that the current customer will benefit from, that Page 37 November 28,2001 current customer will bear part of the charge for it. But any of the expansion to the new system we're trying to make be borne by those new customers that will come onto the system. COMMISSIONER COYLE: Good. Thank you. Now, two other questions: Do the population estimates consider seasonal peak fluctuations, or are they average populations? MR. HOWELL: We considered peak populations. COMMISSIONER COYLE: Do you average it over the year? MR. HOWELL: The population -- the treatment plant capacities are based on the -- on the wastewater side, they're based on the maximum month wastewater demand, so that's essentially a peak seasonal flow. MR. MUDD: And on the water-- let me go a little bit farther. He just told you about the wastewater for the peak month. On the water side, we went to peak month also. But if you look at planning you should go to the peak three days on water. Because we have some storage capabilities with the ASR and issues like that I told them -- if you went to the peak three days, it would be a lot more as far as water capability is concerned. I asked them to maximize more wells in ASR for potable water. We're putting potable water down in the ground and bringing it -- we're doing that right now at Manatee. We've been drinking that for the last couple of years, and it's fine. It's to maximize the wells so that we have the capability to bring more up faster when we need it to make that peak three days level out to the peak month. So we went to the peak month, sir. COMMISSIONER COYLE: Okay. The final question is, we don't yet have approval to reduce the capacity at the north plant from 34.1 to 24.6 during the period of 2005 through 2010. Are the rates based upon getting that approval, or would we re-examine the rates if we get the approval to reduce the capacity? Page 38 November 28,2001 MR. MUDD: The rates you're going to see today, sir, are based upon getting the approval. COMMISSIONERCOYLE: Okay. Thank you. Thank you, Mr. Chairman. CHAIRMAN CARTER: Thank you, Commissioner Coyle. Again, I think our experience of averages was with the north sewer treatment plant last year. They built that plant on averages, and when you got to peak we had horrendous problems. So thankfully today we're building on peak so that we don't get into that box again. So if anyone is concerned about why we do that, you have to build for peak or you're going to get into a desperate situation during that period. COMMISSIONER HENNING: The question I need to understand about the population and the projections of 2030 in the BEBR -- I think a lot of people's assumption is that Collier County is going to build out to four hundred sixty-five, less than a half million. What I see here is as high as almost a million. Are we using units per acre, or is it just a projection growth? MR. MUDD: It's projection growth. What I would also say to you -- and I'm going to need Greeley & Hansen to come back up again because what you saw on the high end was a million, but I don't think we used the high end. We came down on the conservative side of the house. Can you help me on those numbers, gentlemen? THE COURT REPORTER: Your name, please. MR. HAGAN: David Hagan, Greeley & Hansen. That's right. We showed a buildout for the urban area of 500,000. That's within the expanded water and sewer district, and that's excluding Marco Island and Naples, which I think is another 70,000. So a total would be on the order of 575,000 including those areas. That's consistent with the planning section's estimate or using Page 39 November 28, 2001 the planning section buildout estimates. That's based on density. So we were making sure that we were -- our population projections were within those buildout numbers. COMMISSIONER HENNING: Okay. So we are using density as the land is allowed to be rezoned at 16 units per acre? Four units per acre? A combination? MR. HAGAN: Right. COMMISSIONER HENNING: So we're not using what is existing on the ground. Let me give you an example, and maybe we'll probably get to my answer. Within the urban area, base density is four units per acre. What we're actually seeing asking for rezone is 1.2 units per acre. So, you know, are we using what actually is on the ground or what it can be built out at? MR. MUDD: What we're basically looking at is -- when he started the presentation, he looked at a whole host of ingredients in order to come up with the population projections. In those areas where we get out to the D's and to the A's and the rural fringe, it's based on density because we don't have anything else to go by. I would say in the urban area they've looked at density, but they've also looked at use. Okay. They're trying to figure out where that line is. But you're right. They could have density in a PUD for four units per acre, and they only build out to three. When you look at -- and I'll give another example. When you look at Lely right now on St. Andrews -- and that's a pretty well-established neighborhood, and yet they're still building new homes on those spare lots because it's still within their density. So there's nothing to preclude that PUD from reaching their full density, unless they put a home on two lots in between it, and that stops it. But if it's a vacant lot, even though it might not be sellable, readily sellable today, it doesn't mean five years from now it can't be. Page 40 November 28, 2001 So they've erred on the side of the density, sir. MR. OLLIFF: I think the easier answer, maybe, is in the short run we have used actual populations and actual increases in customers in our district area to be the driver for how we're developing our population projections. Once we get out into the second half of this master plan, then we start looking at sort of the worst-case densities in some of those areas. And that's where I'll bring you back to this is a fluid plan, especially out in those years, and we will need to keep a much closer watch on the actuals as we get into the fifth year, the sixth year, the eighth year, and the tenth year and make adjustments to this plan, because you are probably right. While the Growth Management Plan may provide a certain amount of density, what actually gets built may be significantly less than that. MR. MUDD: One of the things that you're going to get to see and we haven't presented it yet is rates. You told us to invert the rates to give a jump start for conservation. As you know, the City of Naples is around 300 gallons per person. Collier County under our last master plan, they took a swing and said that it was going to be 185. Over the last couple of years we're at 205 in Collier County. The average in the United States is about 145. So can you do some things? Sarasota did. They really inverted their water rates a couple of years ago, and they were up at the high end where we are right now. They're down to 88 gallons per person on that inverted rate. It took them three years to get there. I'm not too sure we want to go as heavy-handed as they did. I mean, on the high end they're charging $10 a thousand gallons. What you're going to see in the rate studies is something around 435 on the higher end. What's that going to mean to some businesses? Let's talk about the Ritz. What it's going to do is it's going to double their water bill. They use 9 million gallons a month. So when you take that on the Page 41 November 28, 2001 higher end, when they were paying 2.35 before and now it's four something, it's going to double their water bill. Is that going to tell folks they probably need to get different shower heads and different kinds of toilets and some other things and maybe put a little placard in there that says, hey, "conserve water." It might help. We hope it does. But if that conservation, that inverted rate, does conserve water -- because what you're going to see in the rates is we're back-- I told them to come off the 205, 210 that we've been seeing and bring it back to 185. Take a little risk. But if it gets pushed down to 145, we don't have to build the water plants, the water expansions as fast. So that's going to prolong the capital. So we're going to adjust rates more often than we have in the past so that when we see those kind of trends we can change. That's why I asked them to have an execution matrix in here so we know exactly what projects needed to be bumped off because we could prolong them based on the water usages that we're seeing. So that's going to come, and that's another piece to this great picture that we've got. If we get decreasing water, you get less stuff going out your sewer too. So it has a dual effect. It can prolong those expansions or those new plants from coming online or the next expansion to that new plant coming online because of it. CHAIRMAN CARTER: That is a great plug and advertisement for the water festival, May 7th to 1 lth, next year where our theme is "every drop counts." I think the attendance will go up substantially after we get done with all of this. Magic Fingers, are you ready for a break? Before we go to the next point, we need to do that. (A break was held from 10:35 a.m. To 10:55 a.m.) CHAIRMAN CARTER: All right. Thank you, ladies and gentlemen. We are back in session. We are about to go to the next part talking about rates -- impact fees. I'm sorry. It's all tied together. Page 42 November 28, 2001 Commissioners, as we go through this section, also keep in mind this master book that's in front of you will give you everything you ever wanted to know on these studies that were put together by the consulting team. This is about a $600,000 investment to get to where we are this morning. So I would encourage everybody to keep it as a great reference, and to address community meetings on specific issues. You've got everything right in this binder. Yes, sir. COMMISSIONER HENNING: Go right ahead. MR. ORI: Thank you. Members of the commission, good morning. My name is Robert Ori. I'm a principal with Public Resources Management Group and the county's waste consultant, and I was the principal in charge of not only reviewing the proposed water and wastewater impact fees, but also your water and sewer rates. So you're probably going to see me for quite awhile today, so bear with me if you can. If you have any questions as I'm going through the presentation, either stop me and ask me the question, or if you want to wait until the end, I'll try to address everything I can for you. The presentation I'm going to give you today on the impact fees is the same presentation I gave to the CBIA and the Development Services Advisory Council. They've seen this information. It was presented to them. I think we've appeared before them three times in total, not collective for each, but they have seen this presentation. I would like to say that as I go through this, if you have any questions, you know, please stop and holler. If I'm going too fast or I'm not clear, please let me know. What I want to do today quickly is to provide you with an overview of the fees, discuss how we determined the fees, the basis for the fees, per se, and also give you an idea what kind of fees we're looking at right now based on the capital improvement plan that Page 43 November 28,2001 Greeley & Hansen just presented to you a few minutes ago. That's kind of what we're going to do today. I'm not going to talk about water and sewer rates at this point in time. These fees, obviously, will feed into the financial presentation for the water and sewer rates. But if there is a rate issue or rate relationship you may want to discuss, let me know, and I'll try to answer with this presentation or ask you to wait depending on how it goes. The purpose of the impact fees -- the application is very common in the industry. The county has been utilizing water and wastewater impact fees, I believe, or I think I heard, since 1978, so approximately 22 years. I wish I could tell you how many millions of dollars it's brought to the county which has allowed us to construct facilities, but I don't have that number, but it is a common tool used in the financing of capital improvements related to system growth. Obviously, we want to recover that capacity applicable to new users. That's why you have the fee. If you didn't have the fee, then you would have to put that financing and benefit and carry cost on some existing users of the system which would be in the form of rates essentially. What it really is -- what we're really trying to say is that, basically, "growth pay its own way." That's what we're trying to look at here. The long-term effect is we want to maintain the existing rates for monthly water and sewer service. Obviously, you want to shift the costs. It links to financing capital expenditures for future users. It obviously reduces the debt burden that the county will incur. That is, if we have impact fees on hand, we don't have to go externally and borrow funds for the program. We can utilize the impact fees. That's kind of what the purpose of the fee is for. Where are you today relative to the fees? Back in 1998, August, you changed your fees. The water fees are currently $1,275 per ERC. Page 44 November 28, 2001 The wastewater fees are slightly higher at $1,575 per ERC. An ERC, what is that? That's an equivalent residential connection. We've tried to link all of your customers into a common denominator. The best way to think about it is ERC is a single-family residence. That's the lowest denominator. It kind of gives you a feel of what an ERC would be. Obviously, if you looked at a hotel, a 7- Eleven, it could be multiples of ERCs. So if I said a hotel was 20 ERCs, that's equivalent to 20 single-family residences, per se. That's why we look at the ERC basis. The ERC links to level of service, and that's a very critical point that I'm going to talk about in a minute. You have three classes of customers for how you apply these impact fees: Single-family, multi-family, and commercial. As I mentioned earlier, single-family is considered one ERC, but you do have a provision in your ordinance that says if this single-family residence is over 5,000 square feet or over 4 bedrooms, you'll look at it almost as a nonresidential approach. I think that's a prudent type of application. You made that change back in August of 1998. If you think about it, ERC represents a typical user. Obviously, a five-, six-, seven-thousand-square-foot home isn't real typical compared to a three-bedroom, two-bath house. That's why you've done that. The multifamily impact fees are unit based. It's based on the numbers of units in that account. There is a further division in terms of the number of square feet per unit. I believe that the first range of zero to 750 square feet is a multiple ofERCs. I believe it's .3, and it graduates up as the units get bigger. What it states or basically the assumption is that as the multi-unit gets bigger, it's more akin to a single-family residence, so to speak. If you have a 2,000-square-foot multifamily home or unit, that's pretty similar to a single-family unit. Commercial is based on what's called meter equivalents. Those are the factors. You look at the size of the meter, and it's a Page 45 November 28, 2001 predetermined ERC value. It's based on published information provided by the American Water Works Association, the hydraulic demands or instantaneous demands of the meter that's utilized by the Florida Public Service Commission and regulation of rates. To give you an idea, a three-quarter inch meter would have a meter equivalent of one. A two-inch meter would have a meter equivalent of eight. That's to give you an idea. That's based on the demands of the meters themselves. That's what you utilize there. In our review we're not looking at the methodology, per se, as to how you calculate the fee and apply the fee to the customer. What we're looking at is what's the level of fee to be charged or the rate per ERC. COMMISSIONER FIALA: And then over 5,000 square feet you charge a higher rate -- MR. ORI: You could based on the meter equivalent. COMMISSIONER FIALA: -- for a single-family residence? MR. ORI: If it's 5,000 square feet and they have a 1-inch meter, they pay a higher impact fee. What they do is -- what you do is you say, "5,000 square feet, let's look at the nonresidential basis." If they have a larger meter size, they have a larger impact fee. They're placing a greater demand on the system by the fact that they're demanding a larger meter is the assumption used in your ordinance. Criteria for the impact fees, the fees are applied uniformly to all customers. We don't have sectors or divisions within the service area. The service area is reflected as a combined service area or total system concept. There's two issues with the impact fees that you need to be aware of; one deals with the level of service, and one deals with the capital costs. Both of those are very important in terms of what's the rate per ERC. I'm going to discuss both of those right now. In terms of level of service, we need to go back to 9(J)5 of the Page 46 November 28, 2001 Florida Administrative Code. It links capacity per unit of demand. What is the capacity of the system? What are you trying to set aside? Roads could be cost-per-lane mile or use of roadways. For water and sewer it's usually gallons per ERC. How many gallons of capacity do you want to set aside for these folks? If you think about the master plan or what they're talking about today, they kept talking about capacity, units coming online, etc., and I think there was a mention -- I think Jim mentioned 205 gallons per water going to 185, I believe. That's a level of service. What he was talking about was gallons per ERC or gallons per person in that sense. So we kind of do the same thing. We look at what is the level of service first, and then we turn around with what are the capital costs, look at the two together, and get the rate per ERC. We looked at the Florida Public Service Commission Chapter 25-30, FDEP design standards, historical usage levels, the Growth Management Plan, and obviously the 2001 Master Plan that your consulting engineers mentioned. If they're planning for capacity of your system under a certain level of service, I think the impact fees should follow that same level of capacity. For us the water or the level of service recognized was 350 gallons per day per ERC. That's about 10,000 gallons a month of water use. When you heard the 182 value from Mr. Mudd, that was a per-person number. This is a per ERC number. This includes 2.3, 2.4 persons per household on average to give you an idea of why there's a difference there. That is the same level of service as in the 1998 study, and it pretty much follows all these areas of items we looked at, the Growth Management Plan and the master plan, etc. In wastewater we have a 250-gallon-per-day ERC factor. It is less than water. One thing you may ask is why. Irrigation demands. You know, obviously, we don't use wastewater except for reclaimed water to irrigate, per se, but that Page 47 November 28, 2001 is the major difference. This is a change from the prior study. The last study had an ERC factor of 280 gallons per day average daily flow. This is now 250 gallons per pay. What does that mean in general terms? For each 1 million gallons of wastewater capacity, I can serve more ERCs because I've lowered the level of service to raise the number of ERCs I can serve. That reduces the per-unit cost. We recognize a lower ERC factor in this analysis. By the way, that ERC factor was also consistent with the provisions and changes in the master plan also. In terms of the analysis itself, that's what I call the improvements-driven method, and we looked at your total capital costs. We looked at your existing facilities, etc., and tried to link the capital expenditures and capacity additions to the level of services. That's what I called improvements driven. It's not system buy-in where you look at all the existing costs and having to buy a piece of that. Actually, we kind of did that, but we looked at the future. You've got a master plan here. As you'll see, you don't have much capacity in the existing facility, as you heard, so obviously we need to look to the future, and that's exactly what we did. We did recognize available capacity of facilities. If you had some existing capacity, we melded it into the calculation because those facilities can serve a few thousand ERCs in general. We wanted to put those together to recognize that. This kind of level will actually dampen the fee a little bit, but that's kind of what we did. The capital improvement plan was based on the 2001 Master Plan as discussed by your consulting engineers. We looked at a planning horizon of 2002 to 2011. One thing that was mentioned is we had a five-year plan horizon for rates. That is correct for the rates that I'm going to discuss this afternoon after this presentation, but I went ten years of future planning for several reasons. One is I wanted to link the full capacity of expansions to the customer base. Page 48 November 28, 2001 If you have some piecemeal expansions, one piece may be pretty expensive, and the next expansion may be little. We tried to link them together and get the average Also, this ten-year horizon is your most recent expansion. You cost for that. the more critical issue relative to have a better denominator idea of what's going to happen in the first 10 years than 20 years. We looked at the ten-year evaluation. I call it the period of least uncertainty, per se. We know we're going to have 6 or 7 percent growth in the next several years, and we know we're going to have to have capacity immediately to serve that growth, and I looked at that. But there's a big issue here. We talked about population projections, etc., and I want to make a point there. In terms of the impact fee, population projections are critical, but I looked at the capacity of the facilities that were coming online. What I did not do is say if I've got a 10 MGD water plant coming online but I have 1,000 ERCs of growth, I didn't try to capture the full cost of that 10 MGD from the 1,000 ERCs. I said that 10 MGD can serve 2,000 ERC. I got the per-unit rate of the 2000 ERCs, the average rate, so if there's a delay in population it won't affect the impact fees too much because it's the average cost of that capacity for that facility. Population on the rate study is very critical. A good example is if you defer a plant, which means you get to defer financing and let growth continue to generate impact fees, obviously that affects your whole financing plan, and it does have a great impact on rates. I wanted to kind of mention that a little bit. Although it's very important here, at the same token I wanted to let you know I looked at the capacity of the facility itself, not how many people are going to pay to recover it, per se. The planning horizon and the study we looked at, there's about 24.6 MGD of water capacity coming online. Everything I talk about is average annual daily flow. You'll see different numbers from the Page 49 November 28, 2001 master plan. The reason why is I always talk annual average because your level of service is a gallons-per-day average daily flow. This is an average-daily-flow number. So I take the capacity, bring them down to an average-daily-flow basis so I have consistency through my level of service and the capacity we're adding. So if you see slightly different numbers, that is the reason why. These are the planned additions that were in the master plan, but I think it was mentioned before that wastewater is on a maximum- month basis. Well, it's received for that maximum period. What is the general demand for the year on average? We bring that down a little bit to get the average demand, because you go to the size of the demand for that monthly spike that you have. Wastewater capacity got about 26.8 MGD annual average daily flow, and you can see the amount of dollars that we recognized for treatment plant capacity for water and wastewater only. Basically it's about $257 million for water and over $350 million for sewer. We've also got transmission facilities in the analysis, about $185 million of combined water and wastewater facilities. We've also recognized projects that are ongoing today, construction work in progress, per se, plants or facilities that have not come online yet that's under construction that was not in the master plan. The master plan started fiscal year 2002 and looked at completion dollars to finish these projects, but they're not on the books yet either. A good example is the 5-million-gallons-a-day expansion to the North Collier Water Acclamation facility, which your ribbon cutting ceremony is in a matter of days. Well, the master plan for that project was $500,000. But if you think about it, you've spent millions to get there, and I need to recognize the full gamut of that project to be consistent and recover the full cost. Because although someone could argue that it may be an existing facility in a week, it's there to Page 50 November 28, 2001 serve future growth. No one has connected to the plant yet. It's all there for future growth. We want to make sure we have those costs built in, so that's why I recognized the 2001 construction work in progress. The total capital cost of facilities we've identified, as you can see here, is about $800 million of need. I'm not saying all that is in the impact-fee calculation, but $800 million is what we identified. Now, if you think about the bar chart you saw earlier in the consulting engineer's presentation, there's about 450 or 400 million -- if you remember that -- you can see I'm pretty consistent with that. Even though we have some slight differences with the 2001 CIP, etc., we're very, very close. There's some costs, obviously, we didn't reflect from the master plan. The master plan updates certain studies. We didn't include those in the fee calculations, but that kind of gives you a feel in a nutshell of the magnitude of the dollars we're talking about. In order to try to maintain what I call the "fair share" principle and make sure that the future customers pay only their fair share, we recognize some adjustments to the capital dollars that you saw there. For example, pure capital dollars relate to replacement that benefits only existing customers. We're not going to recover those in an impact fee calculation. However, if this facility has excess capacity -- and we're taking out this unit of property and adding this unit of property in a slightly greater amount so that little sliver-- because you now get a higher-priced facility that we have recognized -- but anything allocable to existing users for replacement is not in there. We did look at improvements where there was existing capacity to meet future needs and allocated them between the existing and future users to get the now current rate per ERC, per se. We recognize the retirement of existing assets. We made sure -- we didn't want to double count anything. If you had grants, like you Page 51 November 28, 2001 identified some transportation grants for fiscal year 2002 for some transmission line projects, that's contributed capital. We backed those out. We backed out -- any EPA grants that you see from many years ago, we backed those out. We've also recognized what I call debt-service credit that you're going to fund some of this project through debt, and when future customers come online, they'll be paying debts service from those rates. So we even gave a credit for that also. It was quite material, six or seven hundred dollars in ERCs for both systems. It was quite material. So we're trying to recognize fairness as much as we can here in the calculation of the fees. To give you an idea about the capital improvement program, you'll recognize some of these numbers. The 337 over there on the water, the 462 at the bottom there on the sewer, and you can see how much was identified as existing versus future users. Why I wanted to show you this is, for example, for water there's $337 million of identified need in the next ten years. Almost a hundred million dollars of that was removed from the calculation entirely. Example, we talked about -- well, sewer would be a good example, the Golden Gate line extensions. If we serve Golden Gate and there's a provision in the master plan for maybe some extensions, that's all collection related. Golden Gate should pay for that, for example, with assessments or whatever, but a new user impact fee shouldn't be in there. We've excluded that. System rehabs are good examples. We didn't put those in the impact fees. Supplemental water for irrigation demands where you're getting raw water or reclaimed water, that raw water benefits only that area that's getting the reclaimed water. We didn't include those type of costs in the analysis. So that's why you see the future versus the existing. I wanted to kind of bring that together. Another good example is the automated Page 52 November 28, 2001 billing meter reading system that you're looking at. That was not in here also. So these are some of the items that we didn't include to kind of give you a feel. Is it still a big number for future? Yes, it's still a big number for future. We're talking almost $250 million for water and over $400 million for wastewater. So it's still a big number. I wanted to mention that we did not allocate all of it. What does this mean? When we look at the water plant capacity, water transmission, which we looked at it individually and added it together-- and wastewater is the same -- we got an average rate of about $7.82 per gallon for capacity. If you remember the 350- gallon-per-day level of service, you take the $7.82 times 350 and get $2,740. You can kind of see how that level of service means a lot. If it was 300 gallons per day, obviously you'll keep the same $7.82, and the impact fee for ERC would be less. The level of service is a very critical assumption. There was some talk earlier, I think, when the consulting engineers were talking about some of the projects and the prior calculations. For example, the water had $23 million in improvements in the last water impact fees. One expansion, I believe, was a MGD expansion to an existing facility, small dollars. There was talk about that. The cost per gallons, the bid cost, I think was 475. The initial estimate, I believe, was 320. Do you remember those numbers? That $1.55 difference times 350 gallons a day, assuming nothing else changes, is $542. That's to kind of give you a feel of what those numbers do. That's just a piece of all of this, but you can kind of get an idea. You know, that's a major difference. But that kind of gives you a feel here. Wastewater is $11 -- over $11 a gallon with a requested fee of $2,850. Are these fees high? Yeah, they're a lot higher than neighboring Page 53 November 28, 2001 communities. I cannot tell you they will not be. Let me show you what the change is first so you can see that. It's substantial. If you look at your existing fees of about $2850 now, they'll be going to $5,580 if you accepted it, and that's an increase of about $2,700. It's a lot of money. However, based on the CIP you have today and what you need to finance, you'll need these fees to fund the financing program. As you'll see, as I get to the rate side, you'll need these fees. That's the impact to future users or future connections of the system. Let me show you how it compares so you get a better picture of where you are. I'm going to walk over here if you-all don't mind. That's where you are today. The bottom bar or the blue and in your case the solid green is the water impact fee. And then the red or the checkerboard would be the wastewater impact fee. This is for a single ERC, which we've been talking about, and we would have assumed, obviously, water and wastewater. So most of your customers that you serve are water and wastewater. Then the column with the lines is the average of all the other utilities to kind of give you a feel for where that average is. If you look at this, you can see you're well below average right now compared to some of these communities. If you adopt 100 percent of the recommendations, you'll be at the top end of the curve right now. Hillsborough County has a higher fee than you do in the south/central, central service area. The point I want to make there is it represents two charges. It's an impact fee. They have what's called an accrued guaranteed revenue fee. It's a carried cost on the impact fee. They charge both of those at the time of development connection. That places it then right over you. But the interesting thing is, if you look at the water -- you have a lot of water projects. You've got reverse osmosis and membrane softening facilities. If you look at the solid green line and go kind of Page 54 November 28, 2001 across, there's a lot of utilities that are higher than you by itself on water. For example, Sarasota County is much higher. Hillsborough County is slightly lower than you. The Englewood water district is almost identical. Then you have in the sewer, if you look at the sequence of the bars, you can see there's others that are higher than you; Lehigh and Lee County, Hillsborough County, Charlotte County. I can tell you Sarasota County is going to be raising theirs. They're going to be raising theirs. That's the other thing I want to mention. You heard about the schools of Lee County and their impact fees probably on the news last night. Several of those utilities will be looking at rate adjustments. I know Lee County is coming up for one. I talked to Sarasota County on the wastewater side. I know they are looking at trying to raise their rates. Bonita Springs, I believe, was raising their rates and whatnot. The other thing you need to think about when you do the comparison by itself is how do these folks calculate their impact fees and what's in them. For example, the City of Tampa may have received a lot of grant funds, per se, or contributed capital from the EPA, and they would have low impact fees because you can't charge folks for funds that you got for free. You couldn't do that. Plus, your impact fee reflects the future costs, all brand new costs, the highest costs or today's costs, not the old embedded costs. So there's some differences there. But that's where you would be if you adopted all the fees. We have done a capital funding plan, and this will go into the next presentation. The funding of this program -- remember, I've shown existing costs of the master plan that benefits existing users and, plus, we have the new development. I mean, this full master plan you're looking at, the brunt of this will be shared by both. Page 55 November 28, 2001 Nothing's going to be all allocable for new development. The existing rate payers, as I will talk to you in the next presentation, will be required probably to see a rate adjustment to meet these needs. To give you an idea of what we're looking at, which I'll show more detail next -- this was actually prepared prior to the rate one -- we're looking at rate adjustments between 4 and 8 percent on water and 12 to 20 percent on sewer. I'll give you more absolute numbers later. In fact, in 2005 there could be another one. That's the issue of plant deferral. If, for example, growth stops you're not going to build the next increment of capacity, and new debt service will come on, and that will get pushed out. If growth occurs faster, things will change. If you avoid the impact fees, for example, each month of avoiding those impact fees are worth about a million dollars of collections. That's a lot of money. So however you look at this, if it's not collected from the impact fees, it can only go to one place, especially if you issued bonds to finance it. It can only come from one place, and that will be existing rate payers. Yes, sir. COMMISSIONER COLETTA: Just a question, and possibly I should wait for it, but I'm going to throw it at you now. We're talking about peak demand times that we're building everything to; is that correct? MR. ORI: I'm not sure I understand your question. COMMISSIONER COLETTA: In other words, what we need as far as our increases go and all of that to be able to cover costs is to be able to meet the peak demand. Our whole infrastructure had to be based upon a peak demand which take place from late November through May. MR. ORI: That's correct. COMMISSIONER COLETTA: At that point in time, what we're doing is we're building for that demand. We have a heavy Page 56 November 28, 2001 demand in the winter and a lighter demand in the summer. Okay. Basically, what we're having here is the full-time residents are subsidizing the snowbirds, the winter residents, those come down here in the winter. We're paying a rate all year long based upon a peak demand that we're not utilizing. They're paying half a year -- well, on the rate part. On the impact fees it's another story. Then again, too, we're paying for their -- when we set up we're paying for peak demand for people that are only here six months a year. MR. ORI: Well, on the impact fee first, the reason why you have that impact fee is so as that new development occurs they pay their fair share of the capital costs for those dollars. Then what you do with those dollars is part of the financial plan of the county. You have two uses you can do with them. You can fund new facilities as it keeps going and growth is continued. You want to avoid service which provides benefits to existing rate payers because you didn't borrow. Another thing you can do is you can pay the expansion-related debt service on borrowings -- previous borrowings for those impact fees, again, to dampen current year revenue. There's simple things you can do. But the purpose of this impact fee is to make sure growth pays its own way to the benefit of existing rate payers. You don't want to put this capital cost on existing rate payers. Part of the issue, obviously, with any financing program -- keep in mind this increase is not just for only labor. It's related growth. We've got a hundred million dollars in existing capital needs we've got to do. A good example is line relocations. You've got a lot of those going on. Millions of dollars are going in, and it will provide you a lot of benefit. As a utility person, you usually put these lines in, and the remaining service line or the usefulness of these lines could be 20 or 30 years, but they now had a mortality hit. You had to move them. You had to remove them from service and put in brand Page 57 November 28, 2001 new pipe. You can't take this pipe out and put the same kind in. COMMISSIONER COLETTA: I understand. MR. ORI: So that's part of this also. COMMISSIONER COLETTA: But impact fees in themselves do not pay for everything. MR. ORI: No. COMMISSIONER COLETTA: So it comes to the user itself is paying. MR. ORI: There's a timing issue. COMMISSIONER COLETTA: And it's built into their rates, and the rates are for 12 months a year. MR. ORI: That's correct. COMMISSIONER COLETTA: But it's based on peak demand. MR. WIDES: Commissioner, if I may just for a moment -- again, Tom Wides for the record. Another thing to think about on the user-fee side is, in fact, as you'll see when Mr. Ori gets into his discussion on the user fees, the lower-end rates, the base rate, the availability rate for water did not change in our study. The availability rate for sewer changed by a dollar per month. So when you talk about the discussion of where are we getting hit or where will the rates change, it starts to change as Jim -- as Mr. Mudd described earlier when you get into those inverted structures. You start to see a heavier impact on the higher users. There again, even if folks are not here during the summertime or in the heat of the summer, that's when they're using a lot of that water. So they are sharing -- although they're not physically here, they are sharing a big part of that usage factor that we're developing in these rates. So whether they're here or not, if they're using it to irrigate their yards which -- COMMISSIONER COLETTA: I understand. I'm very supportive of the split rate where you pay more for heavier users than Page 58 November 28, 2001 you do for light users. My concern is the same with the roads. We have a peak time of the year, and I feel like we're subsidizing the tourist industry. We're subsidizing the snowbirds, the full-time residents are, to be able to maintain it at the higher peak times. I'm sure we're going to get into this as we get into more discussions, not only on roads but on utility costs and whatever parts that have peaks and valleys. MR. MUDD: Sir, when that snowbird or when that part-time resident leaves -- at one time I was a blackbird, but that's okay. Commissioner Coyle understands that. When our part-time residents leave, their water and sewer bills still keep coming to them. They don't stop when they walk out of their home. They still get the availability charge and whatever water they've got on their irrigation system. So they're still getting billed for-- right now a $17 availability charge for sewer and a $12 availability charge for water. That comes to them every month no matter if they're here or not. And if they use irrigation water while they're gone, then their meter ticks, and we read it, and they get billed for it. COMMISSIONER COLETTA: That's a good answer, and I buy it, and I think you've got the answer that I was looking for. I just want to make sure that we're not subsidizing it just because we live here 12 months a year. MR. ORI: Commissioner, that's one reason why the base charge of $29, combined water and sewer, is where it is. That's called ready to serve. I've built you the plant, and now it's ready to serve you, and if you never used anything I'm not capturing any dollars from you. COMMISSIONER COLETTA: And, God bless you, I need you to stick around and help us apply it to the roads. MR. ORI: We have a lot of tolls there. CHAIRMAN CARTER: Toll roads. MR. ORI: Anyway, that does happen. That does provide you a Page 59 November 28, 2001 lot of financial benefit on the rate side. There's no doubt. As I will discuss with you later on, one of the effects of the rates was to -- although these look somewhat substantial, we tried to minimize the average user, the year-round resident as much as possible. We have a lot of need, both from an operating standpoint and from a capital standpoint, whether it's future, existing, and from a financing standpoint, which we're going to talk about in a few minutes. I think it's really good today that they brought the master plan impact fees and the rates together, because that's the only way to really look at what we're bringing. I guess what we're bringing to you is the financial plan in the long term, and this is part or a piece of the capital funding for the new development, and then I'll talk to you about the existing users too. The recommendation that we will probably be bringing to you later on -- I think in December -- obviously the fees are based on the recommended CIP identified in the master plan. We recommend the document fees as presented. Make them effective as soon as you can based on your policies and wishes, obviously. Each delay -- a month delay is about a million dollars in recovery assuming you go to the full fee. In phases I would have to determine that, but I just want to give you a feel of what that is basically. The existing rate methodology and collection process, we see no problem with that. Leave it the way it is. You should review this fee every year for adequacy and CIP changes. In your ordinance -- your ordinance has a provision in it that says you will review rates every three years. What that ordinance makes your staff do is, you've got to go back and make sure and true up the CIP and your impact fees stay consistent. It doesn't say you look for three years of growth and that's it. It says you've got to review it. You've got an ongoing planning process. What we don't want to do is over-recover our impact fees from our new development, but we don't want to under-recover Page 60 November 28, 2001 either. That's why that's in there to do that. We recommend -- and I think the staffs doing it -- looking at it every year. You've got a major capital improvement program. You've got rural fringe areas and issues coming there. We all know prices have been rising. If oil prices double again, I'll tell you the cost of pipes will double, and who knows what will happen. So it's good to do that. So that's why we recommend you continue to do that. In terms of the use of the funds collected, as you get this 9, 10, 12 million dollars a year, remember I mentioned there's two things you can do with it. You can fund capital or pay debt service. I recommend you fund capital first and try to avoid future financing. Interest rates are very low right now. Once you've got the debts, the rates are set at that debt, if it stays the same. But if you avoid future debt, you don't get into the whole having all these fixed costs on your systems that you've got to pay if growth stops. Also, if growth does diminish, there's a risk here. If you look up the counties to Hillsborough County, back in 1986 they built under the assumption that growth will come if they built. It's a little different here. Growth is here demanding it. There they said if they overbuild, it will all come. Instead of going in increments, I think-- and I can't remember how Jim called it, the stairstep, they went all the way. Well, they have the highest rate in the state. They've been in financial turmoil for many years. They almost got their bonds rated to junk bond status about four years ago, which would have affected not only the utilities but general government. They're very healthy today. They took a lot of steps. One of them was the impact fees. I'll be very honest with you. That $5,000 fee they're charging helped them quite a bit in that, and they raised rates. They looked at everybody and said, "We've got to get out of this financial turmoil." Page 61 November 28, 2001 But if you use impact fees to pay future capital, you don't have that debt burden there. The debt burden is a rate requirement. That's what I would recommend that to you first, but if you don't need -- if capital slows or your level of service drops because of conservation or whatever, then turn around and pay off the bonds. Get rid of the debt. That's what I would do second; keep an eye on that. Basically in our financial plan we're utilizing all of these fees to fund this capital program for the next several years. That's what we're doing in the financial plan. So that's where we are. With that I'll open it up for any questions or comments. I know I went pretty fast, but I know we have a lot more to talk about and you were here pretty late last night, I guess. CHAIRMAN CARTER: Questions by members of the board. MR. MUDD: Commissioner Carter, you do have one speaker, Mr. David Ellis, on this particular item. CHAIRMAN CARTER: Thank you. Mr. Ellis. Do you need the lights, David? MR. ELLIS: No. I'm okay. If you're ready to go back up with the lights, that's fine too. I'm David Ellis. I'm with the Collier Building Industry Association, and I really wanted to take a few moments this morning to talk about a few different things, a few philosophies and then a few specifics in relation to the actual impact fee ordinance that's been proposed. First of all, I do want to, again, make a comment. Commissioner Carter has been leading a group of community folks for the last-- gosh, it's getting close to a year now, Commissioner Carter, I suppose right after the first of last year. We've been meeting on a regular basis to talk about water conservation and ways we can build that into our community. Certainly, if anything, this gives Page 62 November 28, 2001 impetus to that whole discussion, and I compliment you for being ahead of the curve on that. We're actually doing some things in the building industry to look at some of those things this year, creating work programs locally, working with FPL and some of the other utilities. Hopefully, we're looking to do things continually better and better and better in Collier County. In the same light, I also want to compliment your staff. In the last couple of weeks when we've become aware of the rate increases, they've been available and open and thoughtful in their discussion with us about some of these things. I'll also tell you that when we talk about impact fees -- and I was just thinking this is probably the first time I've been in front of the four of you to talk about impact fees. Real quick I want to go back because oftentimes our industry's philosophy on impact fees will get confusing. We believe growth should pay for growth just like you do. You'll hear me say it time and time again: The industry that I represent is willing to pay its fair share in relation to growth. We just want to be very sure that the share we're asked to pay is our fair share. I, frankly, come into that discussion always carrying the burden that every cost we add to housing and new construction in Collier County is borne by the citizens of Collier County, and it makes housing less available for many of those in our county that can least afford to take on that burden. So, I mean, I always want to balance that discuss. I take it very seriously that when we talk about a $3,000 increase we're talking about hundreds of people in Collier County who will not be able to afford to live here because of that increase. I also will tell you that a $3,000 increase in the cost of a house gets passed on. The guys that I work for, they collect that. They don't pay it. So I'm also very -- you know, when the cost of lumber Page 63 November 28, 2001 goes up, guess what? The price of the house goes up. When the fees go up, the price of the house goes up. So when I come, I come talking about all of these things, and I want you to kind of hear where that comes from. Frankly, I'll tell you right now Collier County has the highest or some of the highest impact fees in the State of Florida. We certainly have acknowledged it in our community as one way we're going to pay for infrastructure. Once again, we want to make sure it's fair. If you look back on your notes from '99 when we upped the road impact fees -- maybe it was 2000, early 2000, I was the only speaker that day. I basically said mainly the same speech. I'm concerned about what it does to the cost of housing. We want to make sure it's fair, but if it's fair we're willing to do it. Again, in that light I want to discuss a few things. Probably my biggest concern about what we've talked about today isn't so much what was presented and does it make sense, but it's really the process in terms of the time frames we've had to really look at this as a community. It was probably three weeks ago or so that Tom Wides called me and said, "Hey, we've got this report. We'd like to present it." We set up a meeting within a matter of days. They came one night and spent a great deal of time speaking to some of the leaders of CBIA with basically the same PowerPoint presentation. We didn't have the backup at that time. The next week -- the next day, I'm sorry, it was presented to the Development Services Advisory Committee with the same PowerPoint and was referred to a subcommittee who met with the guys for probably three hours that night. I wasn't able to stay. I had rural fringe that night. But they presented it to them, and at the end of that meeting they basically said, "We're moving ahead." You know, "We're proposing an effective date of January 1." Page 64 November 28, 2001 I've got to tell you, I love the thinking in the county in terms of the long-range thinking, some of the creative thinking, some of the right thinking in terms of planning so that we don't get into some of the messes we get into. But, also, I'll tell you when we're talking about a plan that adds up to over a billion dollars, I want to make sure it's the right plan. Because the factors that go into that plan, go into that fee, go into the cost of that house, and affect the people of Collier County. That's the concern. And when I talk about the process, I know that we're going to talk about roads later this year and impact fees. I know we're going to talk about schools. I want to make sure that when we talk about those fees it doesn't -- you know, I don't get that report, have a few weeks to digest it, and it's going to go into effect, because I want to make sure it's right. You know, again, it's an interesting study, and frankly, I approach all this as a person who doesn't understand a bit in terms of the actual technical philosophy of this stuff. By looking at it a lot of it makes sense. From the presentation a lot of it makes sense, but there's some things that make me scratch my head. I will tell you I've met with the staff and asked them some of those questions, and they've answered some of those questions, but I've got to tell you when I go back to the people that I represent and they say, "Dave, can we be 100 percent satisfied that it's right?" I have to tell you, I just can't be sure. I have to tell you, other than what you've heard today and although the Development Services Advisory Committee did hear it, they never commented on it. They haven't had time to dig into the numbers and the charts in here. That's a concern for process. It's a genuine concern for process, and I want you to think about that, because when we consolidated the impact fee ordinance three or four months ago, we didn't really set up a process for how we would Page 65 November 28, 2001 do it. I would encourage you to think that we probably need to revisit that and say, "This is how we're going to adjust these things with reasonable time frames and stuff so we can have input." When I look at this, there's some assumptions in here that do make me scratch my head. And I know your staff probably has answers for some of them, but I want to make sure we dig into those numbers and they're right. When we talk about the fringe, we make an assumption that changes are going to take place there. I'm on that committee. I don't know that those changes are going to take place even today. Even if we propose it and you-all buy into it, I'm not sure the governor and cabinet are going to. We talked about sewer and changes in the future there and what's going to be delivered or what's going to be necessary. I sat in on a lot of meetings in my career about septic and sewer systems. I'm not sure the state's ever going to take the bull by the horns and make the required changes. When I look at this thing, there's some questions I have. It assumes that in the next five or six years we need to acquire something like 50 -- almost 50 million dollars worth of land for new plants. I haven't seen the study that says we need new plants. Could we expand existing plants? Could we build one big plant where we don't affect different -- you know, when you start talking about different plants and different places, we're starting to talk about environmental impacts in all of those areas. We're talking about different economics. I don't know the economy of scales of how plants work. Could we build one large one in an area without a lot of environment impacts that could service that whole thing instead of building two or three new ones? I mean, it's almost a philosophical question. I don't know the answer to that question, and I don't think the study has been done. Now, your staff could -- probably with their background and Page 66 November 28,2001 knowledge could probably stand up and start giving the answers to those, but I would like to talk about it as a community instead of just approaching it in this way. Also, I mean, some of the other assumptions that I see in the numbers when we talk about the actual construction, I'm told -- and again I've talked to some people that are pretty sharp about some of this stuff too -- that we're assuming contingencies of upwards of 30 percent for costs in materials, costs in labor, and costs going into some of the construction, and that's a lot of money. I also understand that we built in -- and I heard this today. I don't know if-- and I may have misinterpreted it, but I heard that we've also built in a $ percent inflation factor each year. I'll tell you, in the last ten years I haven't seen 5 percent in any year. Again, I compliment your staff for being conservative and thoughtful in that regard because we don't want to end up on the short end of that stick, but at the same time I want to make sure the fee we charge eventually, based on those numbers, is fair to the consumers and the people that are moving to Collier County or the business people that are coming to Collier County. I kind of got on a roll there. The other thing is, when we start talking about the deep- injection wells and the need for more of those wells, I talked to your staff about this, and they gave me an answer, and it may be a good answer, but I do worry. Why do we need four? Right now we've got one in the south. I know through the consent order we need one in the north. But do we need more? Right now it's my understanding with the staff that there are people waiting for that reuse water. Now, ! know it has to do with capacities and peak flows and where we put the water and those kind of things, but at the same time I don't know if we sharpened our pencil enough. Those were expensive projects. The cost that they talked about, that was almost Page 67 November 28,2001 $43 million for the installation of those wells. Could we do it a different way? Now, staff might say, no, this is the best way, but I haven't had that discussion. I don't know that you've had that discussion. I know that the ASR and some of the other ideas of the injection wells have been a controversial issue in our community. I want to make sure that we just don't say, "Hey, that's what we're going to do." I don't know that we've had that community discussion. Also, when we talk about the impact fees, are we -- there's no credit proposed if somebody built a structure that had design standards in it that saved water. I think that's the kind of carrots we need to be looking at. Now, I don't even know if these guys have plans or philosophies for that but, boy, what if we created incentives in the impact fee structure that if you built a home or built a business that was designed through its system to save, that would actually create an incentive for that process. Commissioner Carter, we've talked about all kinds of things in our committee about this. Those are the kind of things that I don't see in this that I would like to see. One of the other things I'd really like to assure you guys on-- and I'm very sensitive to this -- when we went through that impact- fee ordinance reconstruction, we set a time limit. We said that every three years we're going to look at these guys. When I look at those ideas of these 30 percent contingencies or 5 percent inflation, it seems to me we can probably be a little more exact, because 2 or 3 years from now I'm going to be standing here again talking about the same fee again. It's not like we're going to set it into motion and 20 years from now at my retirement party we'll be laughing about the day we updated the ordinance. We're going to be talking about this as a continuing community dialogue, so I'm not quite as afraid of contingencies into the future and laying that extra burden in the short Page 68 November 28, 2001 term on people. Now, again, I say that those are very generalized thoughts from a person, in my perspective, who sees this in a very generalized way. I'm sure your staff can probably answer some of those things in specifics, but I have to say those are concerns that come just from my basic review of this process. And I will tell you, although certainly as you have been aware and I've been aware that some of these increases were coming -- increases -- the plan which I think we all assumed would result in increases was coming. It's been a pretty short time frame for those of us that really look at these things that care about these things. I have to tell you, if you were proposing 100 percent increase in the rate, the user rates, you would have a crowd that you couldn't believe down here. At the same time -- and I realize you're not. But at the same time you're proposing 100 percent increase for the people that can't be here because, frankly, they may not live here yet. They may be your kids who happen to decide to buy a home three years from now. Those are the people I'm speaking for in terms of representing today. Please think about that in terms of the philosophy. Just a couple of quick thoughts as I close. One of the things I never want to forget -- one of the reasons why we had what we had at the north plant wasn't just because of funding or wasn't just because of planning. Part of it was because of execution. That plant was designed or was planned to be finished a couple years in advance. Now, we all participated in a very active community dialogue on some of the reasons why those things didn't happen, and there were some good reasons and maybe some bad reasons, but all that being said, it was behind schedule. Had it met it, we wouldn't have had that particular challenge. It doesn't mean we wouldn't have some of these capacity issues we're still facing today, but part of this is execution. Page 69 November 28, 2001 The same thing with the roads. We've had that discussion too. As we go back into it, please keep that in mind, and please keep in mind two more things, the affordability issue. That's an important issue for our community. I worry as I look at these impact fees. Right now it's about $9,000 per house. If it was $3,000 it's $12,000 per house. If we look at the schools, it would be -- by the end of the year we'll be talking fifteen, sixteen, seventeen thousand dollars worth of impact fees to build a house in Collier County. I have to tell you, I wear a different hat some days. I'm the chairman of the affordable housing committee in Collier County. That worries me for Collier County. It worries me about the message it sends to people coming here and businesses coming here. Frankly, the last thing I want to mention is the effective date of this ordinance and how it will affect the industry. If we create an effective date of January 1 -- I know you're not adopting today, but say we moved ahead and you adopted it at your meeting December 10th or so. COMMISSIONER FIALA: 1 lth. MR. ELLIS: 1 lth. A January 1 time frame for the industry is just unworkable in terms of their absolute delivery of what they committed to in the pipeline. If you've got a doctor today negotiating to build a new office building, his impact fee may go from $20,000 to $40,000. It may not be permitted. It may be at the architects right now being designed, but he's committed in concept to a contract. Now, good builders already have in their contract that if the fees go up, the price goes up, but does that doctor have 20,000 extra dollars to build his new practice? What does that do? I mean, I think there's some significant concerns there. I'm not saying that we shouldn't raise the fees. I'm not saying that we shouldn't look at these things regularly. I'm saying that we need to Page 70 November 28, 2001 approach this -- because in the business environment we've got to be careful with what we're doing and the message we're sending to the people that are coming here and to the businesses that work here. COMMISSIONER COLETTA: If I may, you know I agree with about 95 percent of everything you said. Let's take one thing at a time. Oh, by the way, I don't know how many people realize how many different committees that you serve on within the county. I know it's the affordable housing committee. You serve on the rural fringe committee. I'm not too sure what else, but I know every time I go out I see you. COMMISSIONER FIALA: Workforce housing. COMMISSIONER COLETTA: You're always there for the community. It's not just your job here. You take the whole community right at heart. What is the situation on this January 1st cutoff?. I'm worried about due process here. Is this saying that somehow we can make it work or maybe we hold a special seminar just for the contractors so they can see where we're coming from? If January 1 st is a date that's absolutely written in stone that has to happen, what can we do to bring everybody in this particular industry up to speed on what we intend to do so that they can respond at the time we're going to vote on it? MR. MUDD: Commissioner -- Jim Mudd again. We provided the information as fast as we got it. We've been on a fast track because our plans were so messed up. COMMISSIONER COLETTA: I know. MR. MUDD: When you get the plan, you also have to work rates, so we were doing them both at the same time and trying to keep track of what the planning department was doing over in community development at the same time in the process. We presented it. We started in the first part of November as Page 71 November 28, 2001 soon as we could get to them, and then provided them the detailed information. I will tell you as far as time was concerned I wish we had a lot of leeway in that process because we're under a consent order for the sewer issues. There's about $300,000 worth of construction that needs to take place in order to make the 2005 deadline, and we've got a series of in- process type of projects that need to be done in that. We're going to have to borrow money for those particular items. My -- to be exact about what it's going to cost about as far as how long -- say they came in for a 90-day extension to the start date, the first thing I would say to you is -- there was some shots that were thrown, and I'll send one back. When the impact fees for roads were increased, the building industry did a run on the bank. Everybody went in for their permits as fast as they could. Lee County increased by $2,200 their school impact fee or created one yesterday. It was a January 1 start. They were so leery that they were going to have a run on the bank that they made implementation today, and that was made last night. If the building industry makes a run on our bank, my checkbook will go belly up, and we'll go into a moratorium. I've told the building industry that several times, David, and I'm not telling you anything new. CHAIRMAN CARTER: This is the rest of the story. MR. MUDD: So here's the rest of the story. I need to make the loans to do the building in order to make the consent order to keep us out of moratoriums. So we are on a fine line. We are doing the best we can to make sure that that happens in the best way we can. If their extension or time that they need in order to do the particular study that they would like to do, if that causes us to get into a delay, that's $10,000 a day that we're asking the taxpayers of Collier County to pay in a potential fine. I'm not saying it's going to happen. There's Page 72 November 28, 2001 some things we can do to take some slack out of projects and cut them to the bare bones in order to get it done, but we run that risk. MR. OLLIFF: The other thing to keep in mind is you heard the consultant indicate to you that every month means a million dollars. So for every month that we don't implement this fee, that's a million dollars less in revenue than you would have gotten when you would have adopted the fee. Obviously we want to try and provide as much time as possible, but as David also indicated, this is a fluid process where we will be reviewing these on a much more regular basis. David will be involved in that process clearly early on from this point forward. We try and bring the industry in as early as we possibly can. I think David has a good point. We probably need to develop some systems that will allow for future updates to have a full and regular review by not only CBIA but Development Services Advisory Committee, as well, prior to you getting them. COMMISSIONER COLETTA: You brought up a -- you've got a very good answer for that question, and I buy into it to be honest with you. Sorry that it's coming down the way it is, Dave. I'm sure the industry will react in a short period of time that they have to do whatever they can to recover. But one other thing you brought up was in the cost of housing, and I know Donna and the other commissioners here are very sympathetic to the affordability of affordable housing, entry-level housing. Our demographics in this county are going to change dramatically with what we're doing here today and what we're going to be doing in the near future. As we start to raise the impact fees, we immediately cancel out middle-income people from buying homes. It's going to change. This county won't have a balance. I'm going to mention it now. We need to come up with an impact fee that's going to be able to help us Page 73 November 28, 2001 buy down the cost of certain areas to be able to put affordable houses there. I know this is something we talked about before. This situation is getting progressively worse as we go along. We have to be able to buy down the price of land to be able to put in affordable living space for the average person that's going to take care of everything in this county, including the sheriffs deputies and the nurses. CHAIRMAN CARTER: I agree with you, Commissioners. We have to find some way if we deal with it -- hell, we have to deal with it. There's no ifs, ands, or buts. Whether you buy down land costs, you've got to offset it somewhere. It still does not preclude us from what I'm hearing over here of a million bucks a day or ten thousand. I mean, that gets to be serious, serious revenue. COMMISSIONER COLETTA: It's very serious. CHAIRMAN CARTER: We have to find a way through it, David. MR. ELLIS: Well, I do agree from what Mr. Mudd is saying about the million dollars, and I heard what the consultant said too. A lot of that's based on the fees and the things you heard presented today, which I would still contend I'm not sure is what we need to do as a county. I mean, it may be, but one of the things I go back to is I would rather be prudent in terms of what we implement and that we make sure it's right. If it means another 30 days of analysis and going through this process -- you know, I think as a community, I betcha -- it's going to sound kind of awkward to say, but I betcha I can find you $1 million in this $1.4 billion in a month in looking at the process and sharpening our pencils even if it's just on those contingencies. I guess that would be my concern coming back. Again, you know, Jim and I have had that dialogue, and I don't disagree. Please don't misunderstand me. I'm not saying put this off indefinitely or we Page 74 November 28, 2001 shouldn't do this. I'm just saying if we do it, let's make sure we do it right so that when it comes out it's appropriate for everybody involved. The users pay the right fee, the new folks pay the right fee, and it's just right. From what we've seen today, we may be headed in the right direction. But I've got to tell you, I'm not comfortable as anybody of us should be. Again, that's not meant to reflect any lack of confidence in staff. I've got to tell you these guys came in last March and saved the day. We're very appreciative of their approach to this process. Again, I'm appreciative of their long-range thinking and their right thinking, but yet I'm very concerned about what that means. So I don't know mean to -- I don't really know how I can counter that. I can't bring you a million dollars and say, "Here's the interest on it while we look at it." But I've got to tell you there has to be some consideration of that, and there are going to be business implications of what it does to people in Collier County. Those folks aren't here today, frankly, because most of them really -- we got notification of this workshop -- and I'm not trying to bring this up, but when we heard about this workshop, it was two or three weeks ago. Most of them, I think, had the impression that while -- COMMISSIONER COLETTA: No. They're stuck on Immokalee Road. They couldn't make it here. MR. ELLIS: We'll talk about that in a minute, I'm sure. Really, you know, I think you're going to see a different mode in a couple of weeks when this comes up for a vote from the industry because there's got to be a backlash. They're going to come in and tell you horror stories about the effective date, and I really want you to be considerate of that because there may be a much greater than a million dollar impact to the economy of Collier County. Again, I can't measure that either, so I don't mean to sound reactionary or Page 75 November 28, 2001 difficult, but I think you're going to find that there's going to be challenges coming back the other way as well. CHAIRMAN CARTER: Thank you, David. Commissioner Coyle. COMMISSIONER COYLE: David, I'm very sympathetic to the problems that you've raised. I view this as a very complex study. We certainly are not experts, nor are you, with respect to estimating these kinds of things, and that's why we've brought in some consultants to help us do this. I believe you should have additional time to review the calculation process of these rates. However, I feel relatively certain that if we delay the implementation date pending review we are likely to be here in February or March faced still with disagreements about how these things have been calculated. I'm not sure that two people with somewhat different interests would ever be able to agree upon the assumptions that we've made in developing this study. But I think the important point -- and it's been said twice by Mr. Mudd and by the county manager, and I think we need to emphasize it again, is this process is going to provide for frequent review. I would certainly be in favor of having you take a look at this process, our calculations, over the next several months, three months or four months, and determine if you can find anything wrong with this process. If it is flawed in some fundamental way, then I think we would be willing to take a look at it. Would we not? MR. MUDD: Sure. COMMISSIONER COYLE: If we've set these things too high, I think we should be willing to reduce them if we find that we've some basic mistakes. The problem is, by putting that review off for a period of time, it has some rather severe ramifications. But I would like for you to review these things because I don't think any of us can say with certainty that these are absolutely correct and justifiable. Page 76 November 28, 2001 With respect to the impacts on the industry you raised, I understand those very clearly also. The review process, the frequent review process, is not going to solve the problem of the doctor who has to pay his impact fees now to get -- or January 1 st to begin construction, but it will mitigate the long-range impact on the building industry. If we review it frequently, it will not have, hopefully, the bad affects on the building industry that could occur. It very easily could occur. And when we're talking about those bad effects, we're talking about salaries, employees. We're talking about lumber purchases and other businesses not getting income. So there's a ripple effect for that whole thing, so we must be very sensitive to it. That's why I think it's important that you and the building industry hold our feet to the fire to review and justify these things. Just don't expect us to do it in the next 30 days. That's the only thing I can say to you. I think you should have the opportunity to come back to us and make recommendations about how we can improve the accuracy of this process. I think we should be obligated to take a look at it when you do that. MR. ELLIS: And, Commissioner, one of the troubling things or one of the disturbing things on the front level is if you look back, this fee was actually updated in August of '98. That's three years ago, which is about the time frame our ordinance calls for. As a matter of fact, when we started looking at it, I said three years was about right. The fact that in three years -- the way I think of impact fees is very simple, and I kind of welcome you to think of it in the same way. I think of this little house and its impact on the big system. How has that little house's impact on the big system doubled in three years? COMMISSIONER COYLE: Because it was too small in the first place. MR. ELLIS: And that's certainly one of the answers to the Page 77 November 28,2001 question. But at the same time I went back to Mr. Ward, who was my predecessor, his notes, and it was a big 'ole thick file, you know, where he was absolutely convinced, based on the memos he sent to the county and the review we did as an industry, that at the time based on what you were doing, not that the process was wrong, but based on the amount of money the system was taking in, that you were actually mischarging the industry or the new folks that were coming to town then. We never really have taken as much of a look at this as we have for what this results with on the fee. Anyway, it's a long story. COMMISSIONER COYLE: Well, I think we're all concerned about these kind of increases. It's not something we want to do. It would be great if we could keep them all at the same level, I guess. But there are demands on the government that we provide essential services. We can't provide the services at the current level. We can't even get the money to build these capacities that we're looking at. So I think it's essential that we proceed rather quickly with this, but I do encourage you to have somebody take a look at these things. If you want to get your own consultant to review this stuff, I think it's a wonderful idea. Then come back to us, and we can discuss specific areas where perhaps we're wrong. MR. ELLIS: I suspect in the next couple of weeks we'll be able to come up with some more specifics. Again, I apologize for coming with generalization or broader thoughts -- COMMISSIONER COYLE: It's understandable. MR. ELLIS: -- but that's about what we've had a chance to do. COMMISSIONER COYLE: I understand. MR. ELLIS: I appreciate that. MR. MUDD: One point I need to let the commissioners know -- and David brought it up. One of the things he said was, "Well, how could the rates increase?" One of the things, if you remember at the Page 78 November 28,2001 budget process we went through this year, it was mentioned that user rates or the rates that we got from the users for water and sewer were paying the debt service completely, all $11 million worth in a particular year, even though some of that debt was impact-fee related or brought on by impact fees. We've corrected that in the '02 budget, and there's -- I'm using a number off the top of my head. I think it was either $4.5 million or $5 million of this year's budget. That debt service is coming out of impact fees to pay that debt service off versus the user fee. Those are the type of corrections we've made to make sure -- we started this presentation with what says "growth pays for growth," and we were going to try to uphold that. Then there was the fair practice to make sure that restoration, rehabs of existing systems didn't fall upon the growth industry, the development industry, and that it was paid by the users, because that's the cost of doing business. We did our darnest to try to do that. What I'll also say, if you remember those bar charts before and you notice that the first five years as far as capital improvements was higher-- okay -- it was about $580 million. Then if you look at the second five-year increment it was around $480 million. Okay. You'll notice in the impact fees we took it over a ten-year period of time and just didn't look at the five-year period of time. If we looked at the five-year period of time, the increase in impact fees would have been more than it is right now that we're proposing. But because these are long-term loans, okay, then you can spread it out, okay, you can take more of an average. I think Mr. Ori did a good job. I want you to understand that we tried to give the benefit of the doubt just about to everybody we could. COMMISSIONER COYLE: Let me ask one followup question. Page 79 November 28,2001 When we get to the point -- if the board does approve these increases and we get to the point of bonding those increases, will we scale back the percentage that we bond to allow some flexibility in the event there is an error in this calculation and we can thereby reduce the rates? Do you follow what I'm saying? MR. MUDD: Yes, sir. We're only going to bond for what we need to build. We're not going to bond -- just because it's cheap interest rates, we're not going to go in there and suck up five years' worth of capital improvements. We're going to lay a series of bonds out every year based on what the budget and the need is in order to do that construction. So, no, we're not going to bite off more than we can chew, nor are we going to get ourselves in -- MR. OLLIFF: I also believe that you're not going to be in a position to be issuing any major bonds based on these impact fees until the industry clearly has had several months, if not a year, to be able to review this, come back to you with any recommendations that they might have, because, again, you've got to remember that most of your bond issues that are going to be coming up are going to be based on major plant expansions that have yet to be designed in those cases. COMMISSIONER COYLE: So that gives you some flexibility, David. CHAIRMAN CARTER: Commissioner Coletta. COMMISSIONER COLETTA: I just wanted to make one point. As far as Mr. Ellis's background in affordable housing, it's very extensive. He's quite a resource to the county. It goes all the way back to, I guess, Jacksonville. MR. ELLIS: Yes, sir. COMMISSIONER COLETTA: I followed his history very closely. He's a person that we can rely on for good data, and I would consider him an expert in the subject. CHAIRMAN CARTER: David, I want to thank you for your Page 80 November 28, 2001 thoughtful comments. One point you did raise about land acquisitions, I have suffered through for three years the failure to acquire land for road right-of-ways. It would be my philosophy to buy land at today's prices when we need to in anticipation of, and if we don't need it we'll have that opportunity to sell it in the future. Because I think that would probably be the best investment we can ever make. But I don't want to be caught short and have to pay a huge price in the future, either through condemnation or whatever, to acquire that. MR. ELLIS: Commissioner, I'm very cognizant of the fact that one of the reasons why our impact fees are so high is because we haven't been -- it's like on roads. The per-lane-mile factor we used in our road impact fee calculation two years ago was the highest in the state. Nobody pays more in their impact fees for the construction of roads. One of the reasons why is how we acquire right-of-ways and do those things. I'd love us to make those systems better. I guess what I was really trying to say is, do we need three new sites? Could we do it with one? Philosophically, could there be some economy of scale that we haven't truly investigated? It was more of rhetorical questions. And I would love to see us do it not only the best way, but if we bought that land for $50 million with impact fee money and then 12 years from now sold it, I would be assured, I would think, that the people that paid those impact fees probably wouldn't enjoy the benefit of that money returned to them with the interest or the increased value. I mean, that's really where the concern comes from. It just needs to be fair. That's really what I recommend. I just want to make sure it's fair, right, and just. Some of those questions even with a good study -- I could probably hire a consultant and say, "refute all of this," and I'd come back with different ideas. And probably along the same Page 81 November 28,2001 lines we could be sitting around saying, "I think you're right and you're right." I sat here one day when I first got here and heard a consultant tell you with great conviction that density reduction in the urban area was a great way to do certain things, and it runs -- right now I can hand you a pile of trade magazines this high that tell you that that's bad thinking for urban planning, but yet it just goes along the lines of -- again, I don't mean to be critical. I just want to be thoughtful in that regard, and that's really what I wanted to try to bring today. I know we have to do what we have to do to make sure Collier County has the appropriate infrastructure. I just want to make sure that how we pay for it and who we ask to pay for it is the most appropriate. CHAIRMAN CARTER: Thank you, David. I really appreciate you being here and all of your input on all of the committees. Again, the water festival, thank you for being there because that's where we're going to build the incentives. MR. ELLIS: I'm sure we'll be here when this comes up on the agenda, and I'm sure there will be more contractors here to speak particularly to that timing issue. I think you are going to find that that's going to be ongoing and a very dramatic concern for the industry. CHAIRMAN CARTER: Well, we appreciate that. And, Commissioner Coyle, welcome to Boot Camp II. MR. ELLIS: By the way, I do want to say thank you for the extra time and you-all not limiting me to five minutes. It was a very important topic for the industry, and I appreciate that consideration by your staff. Thank you. CHAIRMAN CARTER: Thank you. COMMISSIONER HENNING: Two questions. We have the ability to make a decision today, am I correct, on these impact fees and water rates? Page 82 November 28, 2001 CHAIRMAN CARTER: I believe you're correct. MR. OLLIFF: I believe this meeting was scheduled as a regular board meeting. It was advertised as a regular board meeting. But I'll have to look to David to confirm that for me. COMMISSIONER HENNING: The other question is, the impact fees that are proposed for January, is it for today's growth, or is it for ten years of growth? MR. OLLIFF: Yes. COMMISSIONER HENNING: It's for ten years? Twenty years? MR. OLLIFF: It is for today's growth, tomorrow's growth, and everything that we're anticipating between now and a ten-year period. We're using that rate, based on the population that we're projecting, to develop a revenue stream that will fund the capital improvement plan that you see before you for a ten-year period. COMMISSIONER HENNING: I guess David Ellis made a very good point. We're making assumptions. We don't know really what's going to happen in the rural areas. MR. OLLIFF: Absolutely. COMMISSIONER HENNING: So we're collecting fees on assumptions, and that to me is a little scary. COMMISSIONER COYLE: Can we deal with it by reducing fees at a future point in time to compensate for overcharging? MR. OLLIFF: You will have an opportunity to adjust these fees. If you adopt the plan as presented on an annual basis -- because the consultant has recommended that we look at these fees every 12 months. Mr. Chairman, after David responds you did have the late addition of an additional public speaker. CHAIRMAN CARTER: Someone might want to tum that projector off so we don't blind our county attorney. Page 83 November 28,2001 MR. WEIGEL: In regard to the action you can take today, Commissioners, you do have -- this has been advertised as more than a workshop. It's a regular meeting where you can, in fact, take full significant actions like you could as any board. In regard to impact fees or water and sewer rates, the fact is those are not agenda items for you to approve in the final form today. The direction you could give today, again, in a formal way is for, in fact, such an item to be considered at a specific board date. The staff, of course, has to assure that for any date that's chosen the appropriate statutory advertising dates are met for either impact fees or water and sewer rates. CHAIRMAN CARTER: So we can make that decision today even though it's an announced-- MR. WEIGEL: You could make the decision -- no, not the final decision. You could say, "We do want to hear this," and have it heard pursuant to the laws of notice, and then set your date. Both Tom and Jim and I will tell you if the date you set is a date that, in fact, can be met within notice requirements. CHAIRMAN CARTER: Well, let me ask you this question, and then I'll poll the board. What about the next board meeting? Is that sufficient time? MR. WEIGEL: We think it is. MR. OLLIFF: That's what we anticipated, Mr. Chairman. In fact, in terms of sequence, we anticipated the board adopting the master plan today as being the only official action of the day, but then having us advertise for the December 1 lth meeting all of the ordinance amendments and new resolutions that are necessary to adopt the fees that you see before you. CHAIRMAN CARTER: So we can? MR. WEIGEL: Yes, you can. It appears under both the rates and for the impact fees you have a ten-day notice requirement. The Page 84 November 28, 2001 question may come up, is there any further notice that's required under Chapter 180, which I will opine applies to municipalities. The county in regard to water and sewer rates is under Special Act 88- 499. To the extent that it might not apply, it's under Chapter 153 of the General Statutes for water and sewer districts. Both of those specifically provide for the 1 O-day notice requirement which can still be met for the December 11 th date. So, you're in good stead if you wish to go that route either way. CHAIRMAN CARTER: Thank you, sir. We have another speaker. MR. OLLIFF: You do. You have one, Dawn Jantsch. MS. JANTSCH: Good morning. Dawn Jantsch representing the Naples Area Chamber of Commerce. My apologies, Mr. Chairman, for being late. I've discovered an amazing ability to be in two place at once. Today I've been at three. All I want to say is just a few sentences. I can't be as eloquent as David Ellis, nor can I be as long, because I'm not as good at the topic as he is. But I do want to say to please remember workforce housing. I would be lax in my position in representing the business community without saying that. We still remain concerned that this is one of the most regressive forms of a tax that can possibly be created. This takes the homes for our police officers, our firefighters, our nurses, our school teachers, and those who are so important to the infrastructure of the continuance of our community and places them in the position of not being able to afford a home. Please remember that as you move forward on this. The other thing I want to say is please remember the process. As a committee member of two of your committees in this county -- I served on both the rural lands and the rural fringe area lands committees. It's got this really long title. I can never do it right. But Page 85 November 28, 2001 I've been on those for two and a half years, and I would be frightened to think that anything like this would bypass the committee within proper process without the opportunity to review it very carefully and make sure that it's exactly what is in their recommendations. Those are citizens that serve their time just as you do without pay and would hope that they would receive the opportunity to have all their questions answered in a timely manner with proper review of this. So I ask you that you look at that. Thank you for allowing me to speak late. COMMISSIONER FIALA: Dawn, I'm so glad you brought that up. I think one of the things that we always forget when we talk about affordable housing -- I'm going to say affordable now. People forget that there's a workforce out there that wants to own their own home. Our kids all graduate from high school, vo-tech, two years of college, Edison Community College, International College, and they want to own a home. And it's important that they do, because the owner-occupied workforce housing is always a well-kept neighborhood. People worry about rentals, but owner occupied is always well kept. So I'm with you. And being that I have that committee, I would love to have you sit on it with us, give us suggestions, and work closely with us. I've already got David. Thank heavens. MS. JANTSCH: Thank you very much. CHAIRMAN CARTER: Thank you very much for being here with us this morning. MR. OLLIFF: Mr. Chairman, although you're, I think, wishing that this workshop and this portion of it was over with, we still have a couple of agenda items left on the utilities side. We have one more speaker, Tony Pires, but we're not to that issue yet. We're still covering that. And at the conclusion of 2-C on the agenda, which is where I think you wanted to speak-- Page 86 November 28, 2001 MR. PIRES: If I may, I think the issue has come on this one, and I think it would be appropriate to speak on one aspect only. If I may I'll be brief. David has mentioned-- Tony Pires, for the record, with Woodward, Pires & Lombardo. David has mentioned an issue with regard to the ability of the board to advertise and meet the advertising requirements to both implement and adopt the impact fees and the new user rates at the December 1 lth board meeting. He mentioned a statutory reference to Section 180.136 of the Florida Statutes which he believes only applies to municipalities. I guess if you have a number of lawyers, we'll all get into disagreements, but this was a law adopted in the year 2000. It says -- the word "municipality" does not appear. I'll read it verbatim: "Before a local government, water or sewer utility increases any local government" -- it doesn't say before a municipality -- "before a local government, water or sewer utility increases any rate charge or fee for water or sewer utility service, the utility shall provide notice of the proposed increase to each customer of the utility through the utilities billing process. The notice shall state the date, time, and place of the meeting of the governing board of the local government," not municipality but the local government, "at which such increase will be considered. The notice required in this section is in addition to any notice and public meeting requirements for ordinance adoption as provided by general law." Now, I understand -- David and I believe in the home-rule concept to say that the board may be acting under its special act under the general concept of home-rule powers for unchartered counties, but I would submit to you that this is clear and unequivocal language from the legislature that any local government intending on increasing any rate charge or fee for water or sewer or utility service needs to go one additional step. They probably took that -- I'm not Page 87 November 28, 2001 trying to define the legislative intent, but it seems that they were very intent on making sure that each and every customer was aware of that fact. I would submit to you that notice issues are very sensitive issues if anyone were to down the road -- I'm not saying I would, but if anyone were to try to challenge any adoption of any new increased rate user or charge based upon improper notice in this fashion. So I would submit to you that on this issue I think it would be appropriate to err on the side of caution. I don't think you would be erring. I think you would be comporting with the legislative intent. Thank you for the opportunity to address you. CHAIRMAN CARTER: Thank you, Counselor. I will have our counselor respond to that. He may want some time to think about that before he responds. MR. WEIGEL: I'm ready to respond right now. CHAIRMAN CARTER: Okay. MR. WEIGEL: Well, I brought the statutes to Tony's attention. Now, the statute that he just cited to you or read to you was 180.136 is from a section or act that pertains to municipalities. It's true that the particular statute he mentioned uses the word "local government," but the last words of the statement of Statute 180.136 was "general law." It affects other general law. What we have -- what Collier County has been operating under since 1988 is a special act. That is not a general law. The special act 88.499 specifically provides on page 142 of the act that (as read): "Notice of a public hearing setting forth proposed schedule or schedules of rates, fees, and charges shall be given by one publication in a newspaper published and circulating in Collier County at least 10 days before the date affixed in such notice for the hearing." It also specifically states -- and this is a special act pertaining solely to Collier County -- under construction of law (as read): "The Page 88 November 28,2001 provisions of this act shall be liberally construed to effect its purposes and shall be deemed cumulative, supplemental, and alternative authority for the exercise of the powers provided herein." It goes on to say, and I quote, "The exercise of the powers provided in this law and the issuance of bonds or other obligations hereunder shall not be subject to the limitations or provision of any other law or laws except as expressly provided herein." I think it's very clear. Now, the home-rule concept which Collier County enjoys in a nonchartered county is under Chapter 125. And 125 has nothing to do with what I just stated to you. So I feel very secure with what I told you before and what I told you now. CHAIRMAN CARTER: Thank you, Counselor. You have two other agenda items. MR. OLLIFF: The next agenda item is the water and sewer rates. MR. MUDD: Commissioners, I'll also say as they're getting ready for this, there is no decisions that are being asked of the board today. Commissioners, I have about an hour more for the rates depending on your questions and the reclaimed water process. And then we need a decision about when you want to do lunch. CHAIRMAN CARTER: Are those -- MR. OLLIFF: We had anticipated being done here by noon. We had anticipated then starting from twelve to two o'clock to have that working workshop or working lunch workshop. We've got a number of staff members that are here in anticipation of that. I guess I'm just looking to the board to decide, because I know I've got at least one of the commissioners who needs to leave at the conclusion of that two o'clock workshop. CHAIRMAN CARTER: Can we just eat lunch up here and you talk? Page 89 November 28, 2001 COMMISSIONER COYLE: That's fine by me. MR. MUDD: What about the staff members? CHAIRMAN CARTER: I mean, if the public -- we apologize. MR. OLLIFF: As long as the board still intends to have that workshop, I'll keep them here. COMMISSIONER COYLE: Is there any way we can go to the recommendations rather than going through all of the slides that lead up to the recommendations? Then we can ask questions about -- you know, if we have a concern about how you arrived at that decision. Don't let my schedule influence the issue because I can stay another hour or so after that. Don't worry about that. MR. OLLIFF: Okay. COMMISSIONER COLETTA: I, for one, want to see all the work that led up to it. CHAIRMAN CARTER: Well, that's fine. I plan to be departing this commission between 2:30 and 3 this afternoon. So wherever we are -- COMMISSIONER COYLE: That will make two of us. CHAIRMAN CARTER: That will be two of us. MR. OLLIFF: That's fine. We'll just plan on plowing ahead and doing the best we can and try to pick up a little time as we go. I'll just keep the staff here. CHAIRMAN CARTER: Do you just want to have everybody that's having lunch here just spread it around? I mean, this is not like the loaves and fish, but I'll share. MR. OLLIFF: By all means, if anybody is interested in bringing lunch in -- Subway is open -- you can feel free to bring a sandwich back in eat and participate. CHAIRMAN CARTER: As the board will tell you, we're just going to eat and -- COMMISSIONER COYLE: These things keep getting bigger, Page 90 November 28, 2001 don't they? COMMISSIONER COLETTA: Why don't we take five minutes while we grab our lunch or two or three minutes. CHAIRMAN CARTER: We'll just take five and grab our lunch and get right back into this and go right on through. (A short break was held from 12:25 p.m. To 12:36 p.m.) CHAIRMAN CARTER: We are back in session. We're going to have a presentation on how we got to the fees. MR. ORI: Members of the Commission, again, Robert Ori for the record, principal, Public Resources Management Group. Those sandwiches sure look good. COMMISSIONER FIALA: Would you like a little bit? MR. ORI: No, no, I'm kidding. I'm only kidding. What I'm going to do is switch gears and talk about the water and sewer rates. I know we don't have a lot of time. I'm going to try to go a little bit faster for you. Again, stop me if I'm going too fast, but I will try to fly through some of this. What I want to do is talk basically about the projections in customers and sales, what I call the revenue requirements of the system -- the rates are designed to recover that -- the CIP funding plan, the adequacy of rates, and certain other issues. But I also want to talk about the design of rates, which I think is critical here. Because even though we know what a rate adjustment may be, how you design the rates may affect users in different ways. So I want them to talk about that. I want to start off, though, with the business principle, "The water and wastewater system is an enterprise fund" -- and I think this was mentioned earlier on at the very beginning of the project. "Enterprise funds should be used to account for operations," but it's really for the cost of providing services, the services that are recovered through user charges. Page 91 November 28, 2001 To me, that's the governing principle in terms of water and sewer rates. This was a quote from the governmental accounting standards board, which we all -- well, for me as a CPA it's dear to my heart here. I think that's a business principle, and that's kind of how we went forward to make sure we recover all our revenue requirements, cost of service and design rates to make sure we do that. That's why I mentioned let's start off with that. The financial forecast, you heard earlier rates with five-year financial forecasts. That's what we did. We looked at the fiscal years 2002, your current budget process, through the 2006 time frame which was the first five-year solution, so to speak, of the CIP master plan to give you an idea. We did that, obviously, to identify trends, issues, strategies, any changes in management policies, things of that nature, and we want to make sure that we have a rate and financing plan that will recover all of the dollars that need to be recovered from your system. In the analysis of the forecast, we looked at service area demands, expenses, the CIP, and the funding of those projects and the adequacy of rates. Service area demands, just to kind of give you a picture of where you are in 2001, the most recently completed fiscal year on average -- this is taking the customers through 12 months and divided by 12. On average for the fiscal year, you serve 35,000 or almost 36,000 water accounts and almost 38,000 wastewater accounts. Now, you'll see another number up there, a 70,000 meter equivalents and 60,000 meter equivalents. Do you remember my discussion of the ERCs that a single-family residence equals 1, a two- inch customer could be 8 ERCs or meter equivalents. That gives you a feel that you've got twice as many meter equivalents or single- family residences than you actually have meters in the ground. You have a lot of multifamily customers out there. Condominiums, for Page 92 November 28, 2001 example, can be served by one meter that could be 120 or 150 ERC or meter equivalents. That's why they're different. I like to look at the bigger number because that links us to capacity and really the overall size of your system. You're really a fairly large system. You serve over 70,000 meter equivalents, per se. Why they're different, even though you have more wastewater accounts, the fact is on the water side you serve a lot of master meters to residential complexes such as condominiums and things of that nature. That's why you have that. What do you serve? In terms of the accounts served, 86 percent are single-family residential. To kind of give you a feel now, although you see that, 86 percent of these 37,000 or 36,000 accounts are single-family residential. Here's the classification of the meter equivalents. About half are single family, 33 percent are master metered, and 13 percent are commercial and other, which includes irrigation and things of that nature. Service area demands, since 1998 we enjoyed significant growth of the system, hence that's why we have capacity limitations, and I'll talk about it in a second. Basically, you can see on these bullet points here you've added between eight and nine thousand accounts for water or sewer. The growth rate, if you put the two together, is around a 30 percent change in three years. That's phenomenal, phenomenal growth. Eighty-eight percent of that growth, account growth, was single-family residential, but we've got to keep up with this growth. We looked at the plant capacity of your system. Some people call it the checkbook. This links back to the impact-fee calculations to some degree, average daily flow of water and sewer. You can see we don't have much capacity here on an average daily flow basis, maybe seven or eight thousand ERCs with all the plants combined. One plant may have no capacity. Some plants may have a little bit. Page 93 November 28, 2001 But our reserve ERCs is how much we have commitments for or letters saying we have ERC, come on in. It's greater than that, and we've got to expand our system. That's what we're doing today. The 5 MGD expansion will be on its way soon, hopefully within a week, and we're doing the 8 MGD expansion -- I think it's the south plant, I believe, is where that's going on. So we're trying to meet these needs. You need to expand -- whether we add any more plants way in the future, we need to do some expansion right now. Okay. That's what I'm trying to point to there as far as the expansion plan. Obviously, we've got to meet the service area demands in the near term, not the five-year forecast period. We expect to continue at recent levels. This large growth -- we expect it to continue for the next several years. Our population projection or growth projections that links back to that population issue I discussed was based on the Growth Management Plan and the estimate prepared by the comprehensive planning section and the University of Florida, the Bureau of Economic and Business Research. Also, we looked at the master plan projections. We're consistent pretty much with the master plan project except for the very tail end. We actually lowered it a little bit. We expect significant growth for 2004, about 7 percent compounded, a very high growth very similar, actually, to what you just incurred in the year 2001. This is around five or six thousand accounts a year, tremendous growth. Then for conservatism they have -- conservatism for the master plan is you've got to have higher growth to make sure capacity is there. Conservatism for the rate plan is you don't want to have too high of a growth if it doesn't occur. A little bit of a flip side here. So we had a little declining growth based on the initial plan here of 2005 to 2006 of about -- I'm sorry, about 1,700 accounts. The 5,000 was the ERCs. Excuse me. So about half the growth rate, still pretty Page 94 November 28, 2001 strong around 4 percent to give you an idea. Where we're talking today is this fiscal year basically right here. We also -- keep in mind under drought conditions, for the last several years water sales have been high. Then we had the restrictions and water sales dropped. We looked at that. We reduced average use for customers. Example, if I was using 10,000 gallons a month, my forecast says 9,000 gallons a month. That's kind of what that means. I've dampened it a little bit for normal weather, per se. It was also noted we have a lower rate of growth in our water and sewer sales. The observation I want to make to you is that -- this continued growth adds an element of risk to any financial plan. High growth provides risk. If you build the facilities and growth does not come -- I can put on my Hillsborough hat that I mentioned earlier to you -- the existing customer base has to fund the carrying cost of existing capacity. That's why we're doing capacity in incremental stages to keep an eye on that so if growth does slow we can push back expansions and try to limit the amount of capacity that's available and capacity used to get the most economic bang from our system. But I wanted to mention that, and that's why I want to review this financial plan every year as well as you review the impact fees also. Revenue requirements, once you look at what we're going to serve in terms of customers, we've got to look at what it's going to cost. That's the expenditures from the operation and maintenance, renewals and replacements of your system. Those are ongoing improvements to allow assets to meet their useful life. If you take a pump out of a lift station, the lift station can continue for 30 years, let's say, and also major improvements may extend the useful life -- a line relocation, for example, as well as the capital expansion projects required to meet the long-term growth needs. These costs are usually funded by impact fees supplemented Page 95 November 28,2001 with debt because of timing issues. Obviously, you can't wait for all of the impact fees to come in and then build the facility. You almost have to build a facility as you know it's coming and then collect. Then the issue is, then how do you use the funds that I talked about earlier? That's typically how those programs are done. If I'm going too fast, let me know. I'm trying to speed up for yOU. Operating expenses were based on the fiscal year 2002 budget. That's basically your approved financial plan for the current fiscal year. We did recognize system growth and changes, inflation, anticipated personnel additions to the system in the next five years, additional costs associated with the capital program. If you expand the plant, you may need to add staff, for example. Increases due -- we also had increases in revenues due to reuse rates, which will be discussed later on today, and we do have a contingency allowance of 3 percent of operating expenses in our numbers. Why I put a contingency allowance in the O & M expense, unknown events that may occur, changes in regulations that we're not aware of today can happen, major changes -- droughts, for example -- may affect you. Plus, you don't go back and review rates but every three or four years, and if there's a major change, inflation goes to 20 percent, for example, back in early '80s -- well, 15 -- you know, you're covered, so we have that in there. The average increase of expenses is around 5 percent. I looked at the operating ratio of your system. The operating ratio is the amount of operating expenses exclusive of depreciation divided by your total revenues. That's about 66 percent. So 66 cents of each dollar goes to pay operating expenses of the system. How does that look? Well, Moody's investor source rates bonds. The average for the nation is around 64 percent or 65 percent. This ratio is right in line where utilities should be, so I felt fairly Page 96 November 28, 2001 confident to some degree that at least it wasn't out of line; that you're consistent with other utilities. The capital improvement plan includes not only the master plan, but also capital projects associated with the approval of budget; vehicles, equipment, machinery, whatever, those things. Again, we looked at a 2002 to 2006 forecast. To give you some idea what the next five years is all about, you have about $174 million of water projects in there, and here are some of the major items that are there. We've got the RO plant expansion to the south county facility, about $48 million. There was discussion about land acquisition for future water treatment plants, about $5 million. I think the number mentioned earlier was $50 million. This is the water side in the next five years. Obviously, it's very prudent to buy land and reduce costs today as a plant held for future use and whatnot. You've got some wells, etc. This does not add up to all of this. This is just some of the major items. Here's the capital funding plan that we have in the financial analysis for the rates. Of the $174 million about 28 percent or almost $50 million will be funded from water impact fees. Right now we plan to issue about $105 million of bonds to meet this need. You have an account called the water capital account. That's funds you have on hand basically today set aside for capital improvements. This would go more for the renewal replacement items I talked about, the capital account. This is even more for the growth side and major asset additions. Then you've got annual rate revenue of about 2.3 million. That's basically departmental capital. That's your furniture, fixtures, vehicles, that type of stuff that you have to replace every year. They have short service lives on them. A car -- a meter reader's truck may last eight years, so you're constantly turning these vehicles and things over. That would be them. That's the five-year number, not an annual number. These are the five-year Page 97 November 28, 2001 numbers. That's kind of the forecast that we have in terms of funding. On the wastewater side, we have a much more aggressive capital improvement program of over $300 million. If you remember the chart, again, it's about four hundred thirty or four hundred forty million. If you add the two together, we're around the four hundred million just to give you an idea. Here are some of the projects there. You can see we've got major expansions going here. This includes a portion of the most recent expansion going on, which happens to be finishing this week, the $5 million at the north county plant. We also have some land purchases in the northeast facility also. It kind of gives you a feel there. In terms of funding, it's pretty similar to what the water was. Impact fees will fund about 28 percent or $82 million of this need and with debt financing the remainder. The other items are similar to what I talked about in water. Obviously we would rather use more here than here. It's all in relation to growth, and what I will show you is what the staff is doing to actually improve that number. Yes. COMMISSIONER COLETTA: I don't mean to interrupt-- MR. ORI: That's okay. COMMISSIONER COLETTA: -- but I didn't want to go too far without asking the question. MR. ORI: No, that's fine. I'm trying to go fast for you. COMMISSIONER COLETTA: The injection wells for the wastewater system -- MR. ORI: Uh-huh. COMMISSIONER COLETTA: -- this is water that could be sold to the golf courses and to larger projects. I guess even homeowners too. Is this cost going to be borne by them alone? Are they going to be the end users, or are they going to be paying for this in full? Page 98 November 28, 2001 MR. ORI: Well, I'll try to answer that on -- MR. MUDD: Mr. Ori, let me help you here. Jim Mudd again. The injection wells for those expansions are part of the planned expansion. It has nothing to do with using that reclaimed water again. It is -- if the plant goes out of service, in this particular case in sewer because you've got an upset or high BOD and the bugs can't get the sludge to settle enough, the plants goes out of whack; you use a deep injection well, and the water never comes back up again. You send it very deep, about 1,200 feet down into a cavity where the water is in worse shape than what you're sending down there. The injection wells here are in lieu of perc ponds that we've got up at the north plant, and that only has, like, a day, day and a half. As you saw during the springtime, we were out of whack for about eight days, and those ponds overflowed. That's what these injection wells are for. It's not ASR wells where we would take the water -- the reclaimed water down to secondary drinking water standard and bring it back up again for irrigation. The reclaimed water projects that you have down there, part of that $45 million on your slide, part of that are for ASR wells to bring that water back up again. When we give you the reclaimed water presentation, the one right after this, we'll talk about that a little bit. But the capital improvement programs, ASR wells, in order to use water again because we're trying to get to dual irrigation system within the county, those ASR wells are in the capital improvement program and will not be borne by the reclaimed water users. But we'll talk about that at great length, and I'll show you the difference in the next presentation. MR. ORI: Not to contradict what Jim also said, we have recognized that if there is a rate increase in reclaimed water, it will go as a revenue to the system to fund the overall financing plan at the same time. We have recognized some revenues there. But I agree Page 99 November 28,2001 with him that it's all going to be just for this. It's a benefit to the whole system also. The capital funding plan, this is the crux of the major capital dollars. Even though 66 cents goes to operations, as we all know we talked about $400 million of capital needs in the next five years. We want to spend some time focusing here because this is where it's going to be coming back to you several times, either in the forms as we talked of impact fees today, but also bonds. Sometimes staff will come to you and talk about external financing. It all relates to this, so we have to make sure we have facilities in place to meet those bonding needs when you do have to finance these programs. Our financial forecast does include utility revenue bonds and financing from the state revolving loan fund program. That's a fund administered through the Florida Department of Environmental Protection of the state with low-interest loans, and staff has recognized that. What staff also directed me to do was to utilize the commercial paper program. I think we've done that in the past. What that does is it allows us to borrow funds as we need them over time to reduce the interest. We don't issue a bunch of bonds today. We build up to it and get permanent financing tomorrow. What that does is limit the amount of interest carrying costs we have. Instead of borrowing a hundred million today, we borrow ten million and then twenty and then thirty. The interest cost is less, and it allows me to have -- it allows a system to have growth which pays capacity fees which then finances the permanent financing -- low-interest permanent financing. It's a very good program. It shifted a lot of dollars out to the future. It minimizes upfront rate increases and allows more flexibility. If growth slows expense doesn't occur. You haven't issued a bunch of debt up front to do it. It's a very good program, so we're looking at the commercial paper program. Like I said, it does Page 100 November 28, 2001 postpone debt repayment and allows the growth to occur by fees and reduces borrowing. Either we have a hundred million dollars of water or a hundred million in sewers. Actually, if we borrowed all of it today it would be a lot higher than that. The debt financing on the SRF loans, it's primarily for the wastewater system. They're low interest rate loans. They're tied to projects with high-priority status. Staff gave me these projects with major wastewater expansion, but they're low interest. The impact fees are a primary source of the internal CIP funding. Remember, I mentioned it's about 27 or 28 percent. It does recognize the impact fee rate increase I discussed earlier. If the impact increases, it's phased in, reduced. Absent any change in CIP, obviously that will affect the financing plan; probably not tomorrow, but you're talking about years three, four, and five. Obviously, we have some cash today, but it will affect the overall financing plan as you go. As I mentioned, it does assume the county growth projections and whatnot. As I mentioned earlier, the financing risk when you look at the investors, Moody's, Standard & Poors, is incurring debt prior to growth materializing. We want to minimize that as much as possible, hence the phase in of the project. I think it's a very, very prudent thing to be doing at this point in time. We don't want to overbuild. We've got $400 million, so we've got to borrow a lot of money. We've got senior and junior lien bonds. You can see the utility revenue bonds. You have those outstanding today. As of October 1st, I think you've got about $112 million dollars of bonds outstanding in your system. You refinance a lot of those bonds and achieve interest-rate savings, and that's what you have out there today. Existing rates are paying that today as we speak. These are the bonds we have identified in the future. We've got -- the first three are senior lien bonds. We did commercial paper Page 101 November 28, 2001 programs. You'll see Series 2003, for example, was issued for the next fiscal year. We're borrowing through commercial paper. We get to a project completion status, turn it over, issue bonds, and start with the commercial paper program again for 2005. If these projects got pushed out, we wouldn't borrow the commercial paper. This would have stayed in place, and we'd then wait and collect impact fees. So that's what the staff's trying to do, and to kind of give you a feel -- that's why this number is lower than these numbers. Even though we have a lot of dollars up front, we're using available cash, available impact fees, and the commercial paper program to give you an idea. It's quite an aggressive financing program. The other thing I do want to point out is we have a series of bonds, 2007, which is beyond our forecast period that will come online. So the more we can defer, the better it will be for us obviously. As part of this bond issuance, you have a repayment pledge or I call it a debt service requirement for your bond resolution. This is to protect the bondholder that will provide you money to build these projects that's not funded from other sources of impact fees. You have these covenants in place today basically. On your senior lien bonds, you have to have net revenues and impact fees to cover 1.25 times your debt service payment. What that means is that revenue is the total revenues of the gross revenues of the system without impact fees, less those operation and maintenance expenses, that 66 percent number; that number plus the impact fees you collect in the year has to be 1.25 times your annual debt service payment for that year. So if you have a debt service payment of $10 million, let's say, you need at least $12.5 million of net revenues and impact fees to meet that. If you don't do that, you're in what's called a technical default situation, and you're required through your bond resolution to raise your rates. That's the surety you've given me as a Page 102 November 28,2001 bond investor that you will have the ability to pay me back my loan to you. Are you in trouble here? Not at all. You've got very strong debt service coverage -- very strong debt service coverage at this point. The other part of this, though, is you've got to make 100 percent of your annual required payments. Your first thought may be, "Well, isn't debt service my only other payment?" Well, no. If you have a renewal replacement fund deposit -- there are certain funds in the resolution that you must maintain, and if they're not maintained you've got to fund them also. Again, no problem there. You also have a debt service requirement for your junior lien bonds, your SRF loans. Once you pay these, you've got to have net revenues after the debt service payments to make 1.25 of that payment too. Again, it's a surety to the state that you'll pay. The proposed rates that we have in here will adequately meet all these rate covenants and allow you to issue the additional bonds. That is the other test I don't have up here. To go to the market you have to have rates and revenues in place prior to going to the market, and it's called the additional bonds tests. That test says that when I go forward with this new bond, my rates have to be sufficient not only to pay the old debt, but I have to add the new debt to it, and I have to meet that coverage need. That's called the additional bonds test. An investor would not want to give you money if your existing rates couldn't fund the debt service payments from the new bond. That's what they want to make sure of, that they're there. Obviously with the amount of debt-- that's why I'm going so far on the debt- service side. When you saw this bond, we have to have rates for that. That's the reason why we're looking at rate adjustments here in the next several years. This rate adjustment you see here is a system-wide adjustment. Page 103 November 28, 2001 I haven't talked about residential. I haven't talked about commercial. Based on our analysis here of the operating expenses, the debt service -- and you can see the change in debt service over time and the other revenue requirements, which would be capital funding, things of that nature. You can see that we need about a 7.6 percent increase in water effective January 1 st, which is what we assumed, and potentially in 2005, depending primarily on the program, another 7.38 percent. That's what we are looking at in water right now. MR. MUDD: Mr. Ori, before you change that, is it time to talk to the commissioners about the last time the rates were adjusted in '97 and what the Consumer Price Index has done since that time? Because this stutter-step increase in rates every three years or so doesn't do justice to that process. MR. ORI: Well, the Consumer Price Index -- I think it averaged around 2 percent, if I recall, or maybe 2.4 percent. MR. MUDD: I think it was 9 percent on the rate side of it. It was 11 percent on the impact fee side. MR. ORI: Yeah. It's around -- the Consumer Price Index has changed to about 9 percent since you last had a formal rate review, but also in 2000 you had a rate reduction of 1 to 2 percent. That's -- we're trying to recapture a part of that rate reduction because we've got a major improvement program. So you have some inflationary effects on the system obviously. Obviously, also, there was a timing issue relative to funding versus the impact fee collection. And, if you remember the analysis, we had over $100 million of capital projects available to the existing users of the system, and existing users are who's on the system today, and they need to finance that. COMMISSIONER COYLE: Could I ask you a question, Jim? MR. MUDD: Yes, sir. COMMISSIONER COYLE: Is it possible to index these rate increases or rates to increases in inflation so that we're not hitting Page 104 November 28,2001 people with large increases every two or three years and that we sort of average it over a period of time? MR. MUDD: Yes, sir. That's what we plan to do from 2003, 2004, through 2005, to make sure we do index it so that the rates don't have to do this kind of increase as a one-time thing. And I basically told my folks, "We never want to do this again because this isn't fair to the taxpayers at all." MR. ORI: And I do not have indexing -- MR. MUDD: The rate payer. MR. ORI: -- for these rates right now. These are stand-alone adjustments. COMMISSIONER COYLE: You're going to show us indexing later, I guess; right? MR. ORI: Actually, I haven't had a chance to discuss it. We can discuss it. Many utilities do index. It does avoid these large increases. If I could turn to sewer, it's a little bit worse picture. Remember, we had $175 million of water projects. We have $300 million of sewer projects, hence the larger increases there. Again, I have a two-phased increase here you could adopt and then index thereafter and avoid a lot of the second increase. The thing I like to always say on indexes is I think indexing is a good thing. It avoids large increases. I also say "indexed correctly." What I mean by that is a lot of people index the whole rate. Like I know Daytona Beach does this. The city of Jupiter on the east coast does this. If the index or the CPI was 2 percent, they raise the whole rate 2 percent. Well, that's good from a utilities side, but when I put my customer hat on, you know, the debt service piece may not have changed, but the O & M is what you're trying to index. So when we go to indexing, we need to think about how you want to do it and the simplistic way to index the whole rate. The way to do it, I think, correctly and how the PFC does it up in Tallahassee Page 105 November 28, 2001 is to index the O & M side. That's something we can discuss. We'll discuss it with staff and bring it back. You could say 50 percent of the index. There's so many ways to look at it. But the key here I want to mention is that the sewer needs an increase to fund these major capital expenses we have going on. We have a 5 MGD plant expansion coming on within weeks. We've got two more steps, I think, coming in that require funds, if you remember the stairstep of capacity in the master plan. We're continuously adding capacity, and we have to fund that. That's the reason primarily for this increase, besides inflation and the reduction we had before. Again, the reasons for the adjustment, your last review was in 1987. Inflation and growth have impacted the system. You had a rate decrease of 1 to 2 percent of the incremental operating costs associated with implementation of the CIP. Although there's growth, for example, when you expand plants, you have to add staff. There's stairstep additions. You need the staff there. Then you kind of grow back into them again. There's nothing we can do about that in many instances. We've got that. Even though staff has been trying to stairstep, we have those additions. We have to finance CIP, obviously, and we need to meet these rate covenant requirements. The other point I want to make to you, though, is the 2002 budget, which is our current financial plan, maximizes the use of all of our cash. We're taking out everything, basically, to start funding this program because we're behind the eight ball. All of our impact fees, a lot of our capital improvement budgets -- we're getting pretty low. We want to maintain adequate working- capital balances. In our forecast we maintain at least a 60-day balance. I think at the end I'm around 80 days of operating revenues. That's not a lot of Page 106 November 28,2001 money. All you need is one major hurricane coming through here, and you can have an impact. A good example is what happened in Panama City Beach. As you all remember, Opal and Erin, I think it was, came through back to back up there. Panama City Beach had -- although they had FEMA money came in to fix the facilities, they didn't replace the lost revenues. They had about a 10- or 15-percent loss in revenues for that year when those hurricanes came through because people weren't using the service. It's things like that. You know, we want to make sure we're financially healthy. Plus, if we're going through the bond market, they look at financial stability also. They want to make sure about that. So those are some of the reasons for the adjustments. Let's talk about rate structure for a minute. Once we know what we want to try to target, how do we do it is what rate is all about. Your rates right now -- you've got a base facility charge and a volumetric charge. When Mr. Mudd mentioned, you know, the seasonal guys are back up north and paying that $29 a month, that's that. That doesn't go away. It isn't based on flow, and the volumetric is your usage charge, water and sewer. You have a conservation rate structure now, which I'll talk about, and your rates are consistent among customer classes. They all kind of have the same rate structure, which is also generally consistent with what FPSC does, the Florida Public Service Commission. One of the business principles or rate principles given to me by staff was to try to minimize the impact to low-end residential users of 5,000 gallons or so. Let's try to keep that down and shift those dollars to other users, commercial high-end users, etc., and you'll see that we did that. This is what the proposed rates and existing rates look like for Page 107 November 28,2001 water. Here's your base charge. You'll see no change in the base charge, and we've expanded the box now. On the existing side, you really have three blocks, 0 to 10, 10 to 20, and above 20,000 gallons. Those are your three blocks. We've moved it to five blocks. The reason why I did that is 5,000 gallons is roughly the equivalent to indoor use or what I call essential use. Studies have been done that the average water user uses about 55 and 75 gallons per day per capita for indoor use. At 65 gallons, 30 days, and, say, 2.4 people per household, which is the most recent statistic, that's 4,680 gallons for typical indoor use, so we put the first block at 5,000 gallons. Let's target the indoor use. The only reason why I did this -- I'll talk about it later. Then we started expanding it. We wanted to give a higher conservation incentive. We want to hit those guys that are using 100,000 gallons a month that shouldn't be using 100,000 gallons a month. I call it the superblock. We're going to $4. Remember, Sarasota is at $10. The Keys are expanding their blocks. They're going to almost $8 in this last block to give you an idea. As you can see already, this is quite a change. That's what the existing water rates are for what we're proposing right now. COMMISSIONER COLETTA: Question. What is the average home use? MR. ORI: If you wait I'll get to that. COMMISSIONER COLETTA: Okay. MR. ORI: Sewer has a much more simplistic rate structure. There's your base charge. Because of the relative increase, 7 percent water, 16 percent sewer, I've got to raise the base charges. I cannot get it all in this volumetric rate. But I am raising the volumetric rate from $1.94 to $2.22. Also, staff has directed us saying, "Well, why don't we raise the billing threshold on sewer in the residential class." Right now any residential customer that uses over 10,000 Page 108 November 28,2001 gallons of water, their sewer is capped at 10,000. They suggested bringing it up to 15,000 not only to provide additional water conservation incentive, but if I have more billing gallons I get to reduce this rate a little bit which affects the low-income user a little bit more. So that's why we did that. I had 10,000 gallons there. I think the rate was around the 240 range. I kept the 10,000 gallon minimum. I'll show you how that's going to affect the residential class. I'll show you that in a second. That's the proposed rates there. I did not change, basically, the rate structure so much except for the conservation, which you'll notice I did raise the rates a little bit to meet the needs. Okay. The water system rate adjustment. The residential user, 5,000 gallons or less, no change. Commercial/master residential, they'll get a higher proportion increase. Part of the reason is, as I went back to the meter equivalent factors, their base charge went up proportionately. It's equitable and justifiable. Also, because of the changes in the usage blocks, I've got high blocks at the end. If you have a very commercial user that has not been using the incentives, he will get a higher-than-average rate increase. The excessive water users, all the people who excessively use water, will experience above-average rate adjustments. They're not going to get 6 percent. They're going to get 16 percent, hence reduction. What I did in my rate design is I did recognize price elasticity adjustments. I estimated that because of the rate increase you're going to have declines in water use, and I reflected that in designing these rates. So if I had a million gallons of water sales in 2003, I may design my rates for 900,000 gallons of water sales recognizing the price elasticity. And the price elasticity factors I used is based on published information with the South Florida Water Management District or SWFMD. Page 109 November 28,2001 The wastewater side, residential user, again, with 5000 gallons or less, a lower-than-average increase. High residential users, a higher-than-average increase. That's the additional conservation incentive I also mentioned. Commercial/master metered, a higher increase primarily due to the meter equivalent factors, and the flow charge was increased at a higher rate than the base charge was. I had more emphasis on flow here. Here's your question -- you were asking about what's the average customer. 50 percent of your bills have 5,000 gallons or less for residential single family. Your average is 9,000 gallons. If I take all the gallons divided by all the bills, it's 9,000 gallons. COMMISSIONER COLETTA: Are you allowing for the factor that people aren't there for, like, half the year? MR. ORI: Yes. COMMISSIONER COLETTA: When you're using that, you're not dividing 12 into the total? MR. ORI: I looked at all the bills. If you have -- in fact, I've got it here. I think I have it. I hope I have it. COMMISSIONER COLETTA: I'm just trying to see what a 12- month resident -- MR. ORI: This is a period of 12 months. Most of your real residences are between four and nine thousand gallons, roughly, but 50 percent of the bills are for 5,000 gallons or less on your system, which is amazing. I've got the statistics somewhere over there. There's a lot of zero bills. You think, "Well, yeah, I guess there would be because people go home." So that's why we want the higher base charge of $29. That's why you want that. Again, this is 86 percent of your account, so there's a lot of flow here. This is the rate adjustments for water and sewer combined for the standard residential customer. You're currently paying $45.90 for 5,000 gallons. It will go up Page 110 November 28,2001 about $2.40 or about 8 cents a day roughly, and it would go to $48. The utility average is around $43. In the back of your handout you should have received my slide. In the very back of the handout you should have a blue sheet. After that there's a survey that I used to show you what the utilities are charging. The first three pages are water, wastewater, and combined wastewater for residential. Then there's a two-inch meter there also for commercial to kind of give you an idea. COMMISSIONER HENNING: Before we move on, I need to get this slide. Commissioner Coletta brought it up, full-time residents and part-time residents. Could we take a look at what the users or full-time residents are using? MR. ORI: Well, the problem I have with that, Commissioner, not that I don't want to argue with you, is I don't know in the billing data who is seasonal and who is not seasonal. I could be seasonal, go home, and leave my irrigation system on. I could be seasonal and turn my service off and get my base charge sent to me up in Michigan, let's say. The data I have is I have an account number, and it's been closed. I could be permanent but went on vacation for a month. It's a little difficult for me to tell you who's seasonal and who is not seasonal, but I can tell you the exposure of bills by customers. I have a typo on this sheet, a good one for me. This should be -- it's not $42. That should actually be $48, so actually you're less than the average. I caught that and, obviously, didn't get to change it. I apologize for that. One other point I want to make with this is that water and sewer -- you can see the rate increase percent is less than the higher user for residential, and it's a 10,000 range. This kind of gives you an idea of how we tried to structure the rates a little bit. But we have the comparison in the back. We can even talk about that later if you'd like to talk about what some of the other utilities are doing. There's Page 111 November 28,2001 some very good information and trends in here that are pretty interesting. COMMISSIONER HENNING: Before we move on -- MR. ORI: Yes, sir. COMMISSIONER HENNING: -- are we penalizing the full- time resident? That's the question I was trying to get at. MR. ORI: Uh-- COMMISSIONER HENNING: Because they're here using-- flushing the toilets, taking a shower. MR. ORI: Well, what we tried to do for the full-time resident -- since 50 percent of your bills are at 5,000 or less -- that does include the zeros. What we tried to do is -- we wanted to make sure that the values in three or five or six thousand gallons, which is more of a full-time customer or low-end user or low-income customer, didn't get impacted tremendously. What we were concerned about is if you were permanent but you were an excessive user. Whether you're permanent or not, you shouldn't be using eighty, ninety or a hundred thousand gallons. You should be using twenty or thirty or forty thousand gallons. So if you're permanent for that water conservation, we have impacted you on this rate design. Our concern was more that the three, four, five, six, seven thousand gallon user, which is more typical of your single family with two kids, the average in Florida and the average in your area, we want to make sure that they think it's the right increase. That's how we tried to structure it. COMMISSIONER HENNING: Did you take into consideration national average of uses? MR. ORI: I do know that the statewide average for water use in Florida is about 7,000 gallons, and this is real close to that. Five thousand is indoor use. That's why I didn't pick that block and things of that nature. Yeah, we tried to focus on that band for four to seven Page 112 November 28, 2001 thousand gallons to get the minimal rate adjustments and still keep your pretty significant base charge. COMMISSIONER COLETTA: Basically, what we're looking at here -- to simplify the whole thing, by charging less for the smaller user, encouraging people to use less water, not only to conserve water, but people at the higher end that are going to want to water their yards and be wasteful of water, you're going to be paying for the infrastructure. They're paying for their fair share of the peak demand. MR. ORI: Right. COMMISSIONER COLETTA: Once again, with the infrastructure you have to put in place to be able to satisfy it, why should we pay for the high end, the people that are going to be demanding to use tremendous amounts, to try to spread that across the whole billing sector. This way here we're picking it up so that the people that are holding their water down, they're getting the benefit of it. Those people that don't care and want to do what they've always done will be paying for the infrastructure. COMMISSIONER HENNING: Right. I-- MR. ORI: This graph actually shows what you just said. For the first five or six thousand gallons, there's no change at all. But as you go to those higher ends and you go above your 350-gallons-per- day average daily flow demand, we're going to start socking it to you a little bit. South Florida Water Management District will like this rate structure a lot better than what we have now. They're arguing for higher conservation needs. This is the pure average, 9,000 gallons. I mean, that's the pure average again. But what you just said, here is the picture. COMMISSIONER HENNING: What we can do as board members, each individual one, is take a look at our bill. We know how much people live in our house and how this is going to affect us Page 113 November 28, 2001 and our neighbors. COMMISSIONER COLETTA: Commissioner Henning, we get ours from a well. District V draws their water from a different source. MR. ORI: You're down here. COMMISSIONER COLETTA: We move out the middleman. MR. ORI: We tried to help him. We didn't want to impact him down here -- no. I'm only kidding. COMMISSIONER HENNING: Well, we're going to change that. We're going to hook you up to water and sewer. CHAIRMAN CARTER: Let's put a meter on your well. MR. ORI: That may come some day. Your point is a good one in terms of public relations. If you've got guys out here that are using 100,000 -- you've got people using over 200,000. You can identify them individually, send them letters, and target them directly. Your rates are going to double if you don't do something. You'll be amazed. You'll see something happen. We did a little rate study in a town called Gulfstream on the east coast. It's about a one-square-mile city with $3 million mansions on the ocean, and no one thought they would conserve, and they did conserve over 15 percent. They didn't get that way just spending money foolishly. But it will also help you target a public relations program for water conservation. COMMISSIONER COLETTA: Once again, it's amazing how much water you can save if you plant native Florida grasses. MR. ORI: If you do it right. COMMISSIONER HENNING: And share showers too. MR. ORI: It's kind of hard to see on the commercial side, but we have an increase in this rate here. CHAIRMAN CARTER: Guys that are just married always talk like that. Page 114 November 28, 2001 MR. ORI: We have an increase in the base charge of two inches. Why I picked two inches is the predominance of commercial customers are 3/4 inch and 2 inch. It seems like there's a lot. Yeah, you have 1, 1 1/2, 4, 6. But you can also see, again, the major spike out here. If you're an excessive user on commercial, we want to get you. It's because we go so far out with 400,000 gallon it's hard to see this increase here. But we have an increase there also, whereas on the residential it was minor. Let's talk about sewer. We mentioned the block change on sewer. This is the 10,000 gallon billing threshold here, and this is the rate increase. Why it goes up like this was the flow charge was greater than the base charge. We had a slight increase in the base charge, and then it goes up a little bit. But you can see the slope continues well beyond the 15,000 gallons. That was the direction of staff, to get more billing units, dampen that rate to help the permanent area out here a lot more. That's why we're trying to do that. I wanted to show you that. What happens is, these folks that use ten to fifteen thousand gallons will get somewhat of an increase to give you an idea of what that picture looks like. We did the same thing on the two-inch customer, I believe. You can see, again, it follows the same general slope as before with the higher increase here, and then it keeps on going. Why it widens again, we have a higher flow charge increase and base charge increase. That's kind of a picture of what the rates are looking like. There is something else I want to mention. We have a two-part increase on our financial plan now. We can index. I think if you index you'll probably need to look at something immediate. But something else we would suggest you do is adopt a mandatory water-restriction surcharge policy. What this policy does is -- it's the South Florida Water Page 115 November 28,2001 Management District imposes restrictions on you like they just did, and you've got to reduce water demand. What is that going to do to you? Well, it's going to reduce your revenues. If you just issued a bunch of bonds through me and you've got to pay me, how are you going to pay me if your water sales went down 15 percent? What I recommend you do, if South Florida imposes restrictions, you increase the flow charges only to maintain margins and send a price signal to conserve. However, I would not put this charge on the zero to 5,000 gallon user of indoor use. If you're doing indoor use, how can you conserve? Don't hit them. I talked to South Florida Water Management District about that. They liked that idea. They recommend that idea. They also like this quite a bit. Preserve your margin, provide incentives. At the same time don't hit the permanent user using 5,000 gallons. This does not affect sewer, by the way, just water. So I would recommend you may want to consider that. That has no effect on this financial plan you see here. That assumes no restrictions at all. But I think you need an out just in case there's a problem. It can only be turned on by you and turned off only by you. COMMISSIONER COLETTA: I'm not only amazed at the fact that we actually came up with an idea ten months ago, but here it is. It does happen. Congratulations. MR. ORI: Oh, well -- they didn't tell me that. COMMISSIONER COLETTA: Wonderful. I'm extremely pleased. MR. ORI: That's kind of where we are. I know I went fast, but you have another presentation. We come to you to ask you to approve or consider the plan of finance is what I called it, at least the near-term rate adjustments. You'll need to -- I think you should look at approving the rate structure revisions that we have for you that Page 116 November 28, 2001 we're going to bring to you in a couple weeks. As soon as practical, I think you should implement some sort of rate adjustment, not only to finance the capital plan and show Moody's Standard & Poors bond investors that your rates are sufficient, but to make sure you maintain working-capital reserve. That's critical to me personally. I think you should evaluate this rate plan annually with your impact fees. If sewer gets pushed out, growth occurs faster, then your financial plan obviously is going to change. That's that population discussion I had at the very beginning of my presentation on the impact fees. This is where population really affects it. Rate option, you could adopt two phases of rates or one rate with a phase in or 1 percent indexing, whatever, and I would hope you really think about the restriction surcharge. That's kind of where we are today on the rate recommendations. With that, I'll open it up for any questions and try to -- I gave you a lot in about 20 minutes but ... CHAIRMAN CARTER: Questions from the board. MR. MUDD: You have one speaker. sir. CHAIRMAN CARTER: Okay. Thank you. MR. MUDD: Mr. Pires. COMMISSIONER COLETTA: We have one public speaker, Excellent presentation. MR. ORI: Thank you very much. Sorry I had to go so fast. MR. PIRES: Thank you very much. Mr. Chairman, members of the board, Mr. Olliff, Mr. Mudd, my name is Tony Pires from Woodward, Pires & Lombardo, and I represent some community development districts who may be impacted by this. I guess one concern is if it's possible to have factored into the issue with regard to the rates and the step rate the fact that -- for example, in Fiddler's Creek they have a master meter where they then -- potable water is used for irrigation because there is no reuse water Page 117 November 28,2001 available down there for irrigation purposes. So the master meter for the district may register more than 50,000, yet that water gets distributed to all the various users or other end users within the district which may use less than 5,000 gallons per month. So if there's a possibility to have a bulk-rate agreement or an agreement with large users like that, I think that would be appropriate, because it would be in spirit and keeping with the idea. I don't disagree with the fact that South Florida will be looking at step rates and conservation rates to encourage conservation of water, but I think it needs to have some mechanism in there to account for basically redistribution on both bases by entities such as Fiddler's Creek. With regard to step rates and conservation rates, we would ask this board also -- I know you have a ton of stuff on your plate, but in this issue with regard to water usage and water conservation, if you could encourage South Florida to basically enhance and speed up the process of reviewing and permitting applications for alternative water usage. I've been advised that one individual who I know has been trying for a couple of years, for example, to get alternative sources for irrigation and other purposes, and the bureaucracy and the bureaucratic hurdles that have been thrown up through South Florida have made it difficult, if not impossible. I think that would be of assistance to encourage alterative uses of water or other sources of water other than the potable for irrigation purposes. With regard to the rates going up dramatically, I've heard the presentation and the aggressive capital improvement program that serves as the predicate for an immediate increased rate adjustment. I understand Mr. Ori -- in fact, I'm dealing with Rob. He's very, very good. It's always a pleasure working with Rob or on the other side of the table with Rob. But I think from the perspective of the consumers Page 118 November 28, 2001 out there -- I know I argue -- the consumers out there -- we request that any rate increase be implemented phased in and gradual as opposed to the shock that's going to occur. I think particularly the shock if you don't follow the statutory -- what I still believe, contrary to your county attorney's opinion, and that's another attorney's opinion, is if the customers do not receive in the mail a detailed notification of an upcoming public hearing that their rates could increase dramatically, I think that sticker shock would be greater than this board is probably anticipating today. I think a gradual phase in of that would be more appropriate. And then revisiting or indexing things to not have that occur in the future I think is very appropriate -- to have that indexing occur in the future. With regard to the reuse rates -- and correct me if I'm wrong. I'm not a numbers guy. I'm not an analyst. I look to other consultants for that advice. But it appears from my analysis of the executive summary it did not have all the backup materials -- or the PowerPoint materials that Rob used -- it appears that there's a double hit with regard to the issue of reuse water. It appears that the cost of distribution of the reuse water is already taken care of in the wastewater rates. And then the reuse rates, it appears there's another indication of that cost being passed on to the consumer. I just want to make sure that's not occurring. But I understand -- I've had someone indicate that that may be a possibility, and I think that would then run contrary to the concept of the rates being just and equitable. I think, once again, Rob can address that if I'm wrong. I'll gladly be corrected on the record. But it appears to be a situation where the cost of distributing the reuse is already factored into the wastewater rate, and then there's another time it's allocated to the reuse rate. COMMISSIONER COLETTA: Mr. Pires, if I may, I'm really Page 119 November 28,2001 not excited about using our drinking water supply to irrigate golf courses. I think that they need to move forward into the reuse water or else to contract for injection wells to be able to store the water from the heavy summer rains when we have it and be able to have their own supply to draw from. I really am not excited about cutting the rate to the golf courses. I think they're one of the primary users. They're one of the reasons why we have to have the facilities built out to the point that they are. There may be another answer, maybe raw water. I don't know. But the drinking water going to golf courses to irrigate them or giving them a break on the price, I'm not for it. MR. PIRES: I'm not talking about golf courses. I'm not here representing a golf course owner. I'm representing the community development district who has its own internal irrigation system. For example, in Fiddler's Creek the county does not own the internal irrigation lines. For Pelican Marsh the county does own the internal irrigation lines. There is no recognition of the fact that one community has the carrying costs internally of the O & M of the irrigation distribution system where another community may not. Additionally, I agree with the idea of using as much reclaimed water as possible for irrigation purposes and not utilizing potable water. I think you hit upon a point that -- I've been advised there's, like, 42 customers dying or waiting to use reclaimed water as opposed to potable water. I guess when I was mentioning about the reuse rate -- and Rob can correct me -- is the reuse rate charges for the cost of the lines and the distribution, but it appears from the executive summary that the cost of distributing the reuse water is already taken care of in the wastewater rates. Those are -- one other aspect is, I think it is important, and I think it would be appropriate from the public as a whole -- I'm taking off my other hat -- that notice of these rates be Page 120 November 28,2001 included in billings to the public. Otherwise, I think there would be a tremendous sticker shock the next time they get their first bill. I know you can say, "We advertised. We followed the statutory criteria" that you believe is appropriate, but I think that this board should more appropriately wait three weeks. It takes three weeks or four weeks to notify everybody individually. Thank you very kindly. COMMISSIONER HENNING: And that's a real concern of mine in business. You try to let your customer know before you raise the rates. MR. MUDD: The original -- the original shot on this one was we were going to get this to you earlier. Okay. Do you see the 1 January? One of the things I was going to recommend on the 1 lth of December is the fact that in the rate structure for the individual users maybe a notice of the rates going up and about a two month -- ''Here's your bill under the old structure." Okay. "With the new rates in effect this is what it's going to be. Please conserve. Please watch your irrigation" and those kind of things to let them know so that you can get a change in pattern or habit and the way they do business with their water so that they have that opportunity to get that corrected so that they don't have that sticker shock. That was the intent, and I was going to basically recommend that we give it another quarter at least or three billings to give them under the old system, "Here's what your new rate is going to be with a start day of 1 April or 1 March, whatever the board desires in that particular case. There's no intent to just having a light switch on and off. They deserve better than that. COMMISSIONER HENNING: I think it would be important to have a notice that we're going to be discussing rate increases on a certain date, you know, the due process, giving them notice that they can come in and have discussions before we do it. Private utilities do Page 121 November 28,2001 that all the time when they go through the PFC. The customer does get notice through the bill, and then there is a hearing on that. MR. MUDD: Yes, sir. CHAIRMAN CARTER: Other questions by the board? COMMISSIONER HENNING: The -- I heard Tony Pires give an example of Pelican Marsh owning -- we own the irrigation lines. I don't know if there's any other cases out there, but from what I understand in these communities is they own their own irrigation lines. The question is, how do we get to own Pelican Marsh's irrigation lines? MR. MUDD: That's a good question. If you wait for the next presentation, we're going to ask them to pay for the maintenance of their own line as we give the reclaimed water issues because there's a different rate structure for them in the next presentation for reclaimed water. It was part of an agreement that was made years ago in order to get reclaimed customers to come on to the system. There are two particular entities that we own. We not only give bulk, but we give pressurized and the distribution system, and that's Pelican Marsh and Pelican Bay. COMMISSIONER HENNING: I guess the last question is -- I think Mr. Pires brought up a good thing. We want to encourage using recycled water. These communities want recycled water, but we cannot produce enough. So what is the alternative besides raising the rates? MR. MUDD: Sir, another alternative -- well, one of the things Mr. Pires alluded to, but he didn't say it-- another alternative water source is more wells. That doesn't take the pressure off your aquifer. That just diverts where it's coming from, and all you're doing is short- circuiting it. It's raw water versus potable water. COMMISSIONER COLETTA: How about injection wells? MR. MUDD: ASR wells. There is a move afoot in Florida Page 122 November 28,2001 along with the Everglades restoration project to use surface water during the wet season and move it down into an ASR and bring that back up again for irrigation or to rewater the Everglades during the dry season to make up for what man's done to it. That move is afoot out there. ASR is a controversial issue still. We have an ASR potable water well. Part of our study this year and part of our budget is to -- we had $100,000 to go look at potential land sources to take surficial -- the water just below the surface that goes through the filter of the land down in the surficial aquifer and take that down to an ASR well and bring it up for irrigation later, instead of taking it right off the surface during the wet season and bring it back up in the dry season. I don't know if you've got that slide or not in your presentation, Joe, but that's what we're taking a look at this year in order to augment the dual water system that we have in the county. COMMISSIONER HENNING: So what is the alternative for these customers on bulk, these residents who we serve who -- MR. MUDD: They could go in and get their ASR permit to take it from the surficial aquifer and take it down into an ASR well and bring it back up from an ASR well in the dry season to preclude the pressure that they would draw on the lower Tamiami aquifer, and it would give them a supplemental water source. A lot of communities are doing that right now all over the State of Florida. So, for instance, Fiddler's Creek. Nothing prevents them from getting their own ASR well, taking water where it's very plentiful during the wet season -- instead of letting it rush off sheetflow, drawing that down into an ASR, and then bringing it up in the dry season and using it for a watering source. That's about it, sir. I wish I had a better alternative. It's the only one that's out there. COMMISSIONER COLETTA: And it is expensive, but once you pay for it, it's there forever. Page 123 November 28, 2001 MR. MUDD: Yes, sir. CHAIRMAN CARTER: Mr. Cheatham. MR. CHEATHAM: For the record, my name is Joe Cheatham, wastewater director for Collier County. I want to make a brief presentation on the Collier County Wastewater Resource master plan report recently completed by our consultant, Mesmer CDM. I'm going to give you a little bit of an overview of the reuse system. We'll start from how we got started in this business, where we're at today, and where we're going. Then Tom Wides, administrator for the public utility, will talk about the rate structure presented in the report. We got in the reclaimed water business in the late 1980s. The Imperial development up on the North Trail was our first customer. In the south end of the county, Lely development and Foxfire were some of our earlier customers. Right now we have 27 customers in our system all with different kinds of agreements and different costs. The costs started out at 2 cents per thousand gallons and accelerated over the years to 6 cents per thousand. In 1997 it went to 13 cents per thousand gallons, although we didn't start charging them 13 cents until the year 2000. We had a little problem billing. We have two regional wastewater plants with a combined capacity today of 13.5 million in annual flow on the north end and 8 million gallons on the south end. Right now Collier County is the No. 1 county in the State of Florida for distributing reclaimed water to customers per capita. With the work we've done over the years with the City of Naples, ourselves, Florida Water Services, we're the leaders in the state per capita for reclaimed water. The goal of our project was to conserve potable water supplies. We want to make sure that the water we're using for potable water is used for drinking and not irrigation the best that we could and, also, to promote the use of reclaimed water for irrigation. Page 124 November 28, 2001 As I mentioned we had 27 agreements. Last year we treated 5 billion gallons of wastewater in Collier County. We distributed 3 billion gallons of reclaimed water with about 70 percent reliability or satisfying all of our effluent disposal. Now we have 74 clients on the waiting list. That waiting list grows each day. Combined capacity of that waiting list is about 9 billion gallons per year. So you'll see we do not have near the capacity to supply the demand for irrigation water in Collier County. We also want -- in 1999 we came to the Board of County Commissioners and asked them, "Do we want to be a wastewater utility and have effluent disposal? Do we also want to get into the reuse utility business?" And the answer was, "Satisfy the effluent disposal needs by your existing customer base and meet their average peak demand." Now, the average peak demand is one inch per acre per week. Now, some of our clients use less than that, and some use more than that. Also, we want to have a system more reliable. Now, what reliability means is when they need the water we have it for them. Now, as you know, during the dry season or during the months of March, April, and May our demand goes up for reclaimed water for irrigation needs around the community. That's when our flows go down after Easter. Our supply goes down, but our demand goes up. So the board instructed us in 1999 to look at other sources of water to meet that demand we have from our customers. Through the dry season we're about 2.5 million gallons per day short through the months of April and May. In the past three years, we've had to actually ration reclaimed water because the demand has been so great. We recently started a project out on Immokalee Road near 951 called the Immokalee Road well field project. You might know it as Mule Pen Quarry. That project will be going online this January to actually bring on 2 1/2 Page 125 November 28, 2001 million gallons per day of our shortfall. We have a capacity of 3.5 million gallons per day out of this well field. Actually, it's a well -- a shallow well next to the quarry. It's using, really, the ground to actually help treat that water as it moves through the quarry into the distribution system. As long as it meets the reclaimed-water standards, it's safe to be used for reclaimed water by the State of Florida. Another part of the study is to develop cost savings or cost sharing between the wastewater customers and the reuse customers. Right now the reuse customers pay O & M costs based on the level of service. Now, what is level of service? We have three levels of service. One is a bulk customer. That's where the water is pumped to the site, usually stored in some type of holding pond and usually a one- or two-day supply. We supply that at low pressure and a lower cost to us. So, really, bulk is the way we like to deliver our water to the customers. We also have a customer that has a pressured system. That means we have storage tanks on site or some type of pressure system on site that provides them pressure. To get pressure means more energy, more pumps, at a higher cost. We have two systems that have pressure systems and distribution systems where we actually pressurize a system for them and distribute it to sprinkler heads and also read their meters. But all three of these levels of service had the same cost of 13 cents per thousand gallons. Now, the O & M costs that would be included in this reclaim water cost are personnel services, electricity, chemicals, and whatever it takes to renew and replace the new system like new pumps, replacement motors, new values, whatever it takes to keep the system up and running. Now, in the reuse capital cost allocation, the wastewater customers pay for capital costs for going into the deep-injection well Page 126 November 28, 2001 for effluent disposal. The reuse customers pay the differential between injection-well costs and getting the water to the reuse customers. The wastewater customers pay for anything that pertains to regulatory requirements, such as monitor wells, reliability improvements such as new filters or enhanced chlorine systems, operational enhancements to the treatment plants, and any major system as far as a major pipeline in the regional system expansion. These costs will be still spread among all of the wastewater customers. Now, I'll turn it over to Tom Wides to talk about the rates. MR. WIDES: For the record, Tom Wides. As you look at the recommended rates, back approximately two months ago we went to the major contractual users, which are primarily the golf course communities. Again, as Joe has just related, for the three categories in our current scenario, we have the bulk, we have pressurized, and pressurized and distributed all paying a rate of 13 cents. Now, again, this is keeping in mind they're all on a contractual basis spread out over a period of time. We originally proposed rates of approximately 33 percent-- 33 cents, 43, and 71. Those included an element of capital costs. At that time we became convinced that some of the capital costs needed to be borne by the sewer users also, not just the reuse users, because it is now our resource for them. Finally, what we're recommending today is a bulk rate of 26 cents, a pressurized rate of 34 cents, and a pressurized and distributed rate of 65 cents. Again, this is the distribution rate. This is the usage rate for these areas. Again, I think they much more realistically reflect our current costs. What is interesting is when we did a similar rate study in 1997, in fact, our study showed at that point in time that bulk rate was already around 27 cents, 26 or 27 cents. So in many ways this study has reconfirmed what we saw in an earlier time period. Page 127 November 28, 2001 As you go to the next slide, you'll note that the bulk of the rate charges here -- again, if you look all the way to the right, you'll see the rates of 26, 34, 65 cents. As Joe alluded to earlier, you have a few components here in the rates, operational costs and O & M type costs and a renewal and replacement type cost in the system. Again, as you see in that upper level, the pressurized and distribution area, there's a much heavier component of renewal and replacement costs due to the internal work that we need to supply that water to that area. One of the things that should be noted is, what we're talking about here is a structure that's based on, again, the contracts with the number of golf course communities and country clubs. There are also approximately 1,300 residential users that are also using effluent water as a single source to irrigate their yards. They are under the same 13 cent rate right now. They are also being -- they are also incurring approximately, for a 3/4 inch meter, a base charge of $4.35 a month. So similar to what you saw on the sewer and water side, it's the same thing here. We would affix that same base rate of $4.35 on the day we were to move up the actual rate based on usage. But that's the structure as it stands today, and that's what we are recommending to the board today. If you look at one more slide, again, looking at communities that are on golf courses and communities that are under contract with us today, you can see that the layout of where the existing customer base is -- most of our customers are in that bulk rate scenario of 22, and we have 5 pressurized and 2 in the area of pressurized and distributed. So the primary or the heaviest rate here or the heaviest impact is in the bulk customer. MR. MUDD: Tom, if I can just interject real fast -- MR. WIDES: Sure. MR. MUDD: Jim Mudd again -- what you see on this slide is Page 128 November 28, 2001 basically what the current rate is and what the rate should be to cover the charges that we've got today. Right now we're bringing in about a half million dollars in revenues every year in reclaimed water. Our 0 & M bill is about $2.1 million. So we're in a shortfall of $1.6 million every year, and those costs are being pushed off at the sewer-rate customers, and they're paying for that shortfall. I just want to make sure that you know that. COMMISSIONER HENNING: I have a question on that after Tom. MR. WIDES: Go ahead. COMMISSIONER HENNING: These O & M costs, is that this new development here such as the Mule Pen Quarry? ASR Technology? MR. MUDD: Mule Pen irrigation is a short-term fix to meet our contractual obligation for a 3-million-gallon shortfall that we have on our current contracts. That well field is a capital cost that the reclaimed customers are not carrying in this. Our recommendations in the previous slide back were -- can you go back, Bala, please? One more. Our original proposal was 33, 43, 71. That's with Mule Pen in it. But three years from now the Mule Pen facility is going to be turned into an ASR, and it's not going to be just for -- we're just not going to take out of Tamiami. What we'll do is we'll draw surficial, take it to an ASR -- that's what our proposal is -- and then bring it up from the ASR during the dry period to give us that dual irrigation. At that time it would become almost a utility issue for the rest of Collier County. And because of that fact we took that capital cost from Mule Pen out from that charge and came up with the recommended one. COMMISSIONER HENNING: Okay. What about the ASR? Is that part of this recommended -- THE MUDD: The ASR wells are capital improvements to come Page 129 November 28,2001 into a dual water system, and the capital costs for reclaimed water are not in these rates, sir. COMMISSIONER HENNING: Okay. Who will bear that cost? MR. MUDD: They will be in the sewer rates and the sewer impact fees. COMMISSIONER HENNING: Huh. MR. OLLIFF: The only point I wanted to make, especially for new board members is I think some history about why we are where we are is important. You need to remember that back when Collier County initially became a reuse-water supplier that was pretty new technology, and a lot of people out there who are the users were unsure about what the impacts of reuse water was going to be in terms of watering either golf course communities, commercial developments, or especially residential home units. I can remember when we first got our first customer on board there were issues that had to do with everything from snail population growth to all sorts of things. We were trying to find people who would take it. Frankly, we were trying to find people who would take it at any cost, because at that point it was a disposal expense on our end. It was a byproduct of the wastewater plant which we had to spend millions of dollars every year to get rid of that product. When we finally started to get some clients onboard, we were charging about 2 cents a thousand, as I recall, for our initial customers, and after we got some experience and history under our belt and saw that not only is that not a bad source for irrigation water, but it is, frankly, a very good and a less expensive irrigation source of water. In fact, it's less expensive than most people can pull up raw water out of the ground and water their developments with. It also doesn't have the byproducts of the iron content and some of the other things that raw water has. Then all of a sudden it became a high- priced commodity. Everybody wanted it. Page 130 November 28, 2001 So, you see, if you'll look at the number of contracts that we have over time, the rising rates reflecting our history, and the communities acceptance of it, today, Tom, I believe we are the No. 1 reuse utility in the State of Florida. We can -- we probably have three times as much demand right now as we have product. MR. WIDES: Absolutely. Again, in line with the comments that Joe Cheatham made a little bit earlier, we are well ahead of the pack. In fact, we have a waiting list that is tremendous. COMMISSIONER COYLE: Does this proposed rate structure impact the number of people who are likely to want to continue receiving wastewater? MR. OLLIFF: As long as wastewater or reuse water is less than what a large commercial customer can generally pull water, raw water, or given the scarcity of large raw-water permits that are going to be available in the future for a lot of these type of developments, I don't think so. And what we need to do now is recognize that what we have is a valuable commodity, and we need to start recovering our full cost for it rather than making our wastewater customer bear the cost for that system. MR. MUDD: Sir, to help you with the economics a little bit, if you punched your own well to bring your water up, you're talking anywhere from 50 to 65 cents on the thousand gallon in order to recover that. That's the ballpark. When you start breaking over that 65-cent range it gets -- somebody will find an alternative way to punch their own well in that process. I will also say -- when you say pressurize and distribute it, you've got to know that we take the water from the plant, take it through the line, keep it at a certain pressure, and take it all the way to their sprinkler head. That's what distributed is, and there's two customers that do that. Pressurized is -- it's pressurized on the line and then they take it from the meter and then they distribute it out to their sprinkler heads Page 131 November 28, 2001 so that the maintenance of that distribution line is theirs from that master meter. Bulk is we take it to their pond and drop it off, and then they take it from their pond and move it. CHAIRMAN CARTER: Have we determined an implementation date yet? MR. MUDD: Sir, everything that you've seen today says 1 January. It's at your discretion of when you want to do that. They have a budgeting issue too. Most of those customers have a budget just like we do that starts in October, and to change that rate in the middle might cause some hardship, sir. CHAIRMAN CARTER: What would be a workable solution to that? Because I met with a group of golf course superintendents that isn't opposed so much to change as they had already budgeted and billed out their homeowners for -- MR. MUDD: You make it effective 1 October, sir. CHAIRMAN CARTER: Okay. I think that would really work for them. COMMISSIONER COYLE: 1 October of next year? MR. MUDD: 1 October 2002, yes, sir. MR. WIDES: Commissioners, just in closing, again, to reconfirm that these rates really do -- they reflect what we actually saw a few years back. We're seeing the same kind of rates. So it's really one study bouncing off of another and reinforcing it. The last thing I would like to show you here is when we talk about the existing customer list, when we talked about pressurized and distributed, you can see the two communities there -- next slide, please -- with the pressurized community customers and the bulk customers. You have that attached in your packet there, but at least it gives you an idea which customers we're talking about here. Other than that, the last thing I would like to say is that, in fact, Page 132 November 28,2001 we have made sure that we balanced the revenue side by allowing a benefit of approximately $1.6 million to come back to the sewer customers for this reuse -- additional reuse revenues that were coming in to offset some of that cost that's going against them. Thank you very much. CHAIRMAN CARTER: Thank you. Questions by the board. MR. MUDD: Commissioner, you have one speaker, Mr. Dale Walters. MR. WALTERS: I have a handout. Can I bring it up? CHAIRMAN CARTER: Yes, sir. It becomes a matter of public record. Thank you. MR. WALTERS: Well, good afternoon. I thank you for the opportunity to talk about the reuse water. My name is Dale Walters. I'm the golf course superintendent at Royal Palm Country Club. I'm also on the board of directors for the Everglades Golf Course Superintendent Association and the Florida Golf Course Superintendent Association which represents the State of Florida. Twenty-five years ago I came to Naples as a golf course superintendent at the Moorings, and during that time effluent water came into use in the city, and I worked there for 15 years. We used the effluent water. I've been at Royal Palm for 10 1/2 years, and we've been using effluent water during a considerable amount of that time. The original concept that's been mentioned here with the effluent water was that we were doing something good for the environment. We were recycling water, putting millions of gallons of water -- districting it over the whole Collier County, what turns out to be billions of gallons of water per year. What that does is recharge the water system, and that's a benefit to everyone. Not just the golf courses; it's a benefit to everyone that lives here. So we're doing an Page 133 November 28, 2001 environmentally good thing for everybody. And I just wanted to point that out. I think that that should be taken into consideration. If we weren't doing that, we would be taking water out of the aquifer. I have that option right now to use well water and take it out of the aquifer. We don't do that. We only do that when effluent water is not available and, frankly, with the changes in prices it would be less expensive for me to use to go to the well water. That would be the way for me to go budget-wise. I believe that question was posed a minute ago, and that's not quite true that it would be a lot less for me to use well water, in fact, than to use effluent water. One thing I wanted to mention is that Royal Palm was one of the original people -- Lely development area was one of the original people to be a user on the south county plant, and in doing so they purchased land and deeded it back over to the county so that a facility could be put on that property to hold 1.2 million gallons in a tank. And in addition to that we purchased a pump to help with the irrigation of the system, to keep it pressurized, and going back through the records with the club, they've spent several thousand dollars to assist and make sure that when the original startup was made that we were helping out the county to get on the effluent water. So there's some due diligence being done by our club which, I think, staff and commissioners ought to recognize that in the past we've tried to help out. The effluent water, of course, is a commodity that a lot of people want. I'm not sure you're going to have a lot of people wanting it when these prices are mentioned to them because you're going up quite a bit for them to go online. They know what we're paying now, 13 cents per thousand gallons, is reasonable. I'm going to mention in my handout that on the first page I put that on there so that you would recognize that this was an agreement for delivery and use of treated wastewater effluent for spray irrigation Page 134 November 28,2001 of golf courses, and the one that this is for is Royal Palm. If you turned to the second page -- and I've highlighted the second and third page or what I would like to read out of our agreement. I didn't give you the whole agreement because it's -- I wanted to save some paper because it's quite a bit of paper for the whole document. So we'll only get to the issue of charges and related considerations. At the bottom of the page where it's highlighted for you it says, "For furnishing of the effluent the district shall charge and user shall pay a rate of 2 cents per thousand gallons of effluent delivered. Said rate per thousand gallon charge shall be in effect for a five-year period commencing at the time district begins delivery. It is anticipated, but not warranted, that said delivery will begin in the mid 1900s" -- 1990s. I'm sorry. The date that we started on effluent water where it was being charged was April 5th, 1994, so our five- year period is up. The next paragraph I want to read following that is: "The district shall have the authority and right for the sixth and succeeding years of the 20-year agreement to charge user a rate per thousand gallons of effluent not to exceed the cost of production and delivery of the same. It is anticipated, but not warranted, that said rate shall not exceed the rate then currently being charged by the City of Naples to the city's contract customers." If you'll take note, it says that the rate is not supposed to exceed the cost of production and delivery. I think there's a discrepancy there in what we're hearing and from what's been presented to you. Royal Palm adjoins -- the golf course adjoins the south county plant. We share a fence, a common fence, with the plant. Our water is delivered, as you've seen up there, under pressure, but everybody is getting it delivered pressured to them. It has to get there. It doesn't get there by gravity. We happen to get ours pressurized so that we can irrigate right to our system. So there is a cost for every club to Page 135 November 28, 2001 receive the water and their electricity and their operating expenses. So I don't know how you can single out the fact that I'm pressurized because we haven't used power when every other club is getting water delivered to them but under power. If you would turn to the next page I gave you, it comes out of the report, the Camp Dresser & McKee report which I received recently. The report is the Collier County wastewater resource planning report, and it's the revised final draft of September 2001. If you look at the first page, it shows the operating revenues -- and I have those highlighted for you. It's the reuse irrigation revenue, and on the far right column -- again, that's highlighted for you -- it shows that they have a $500,000 revenue. Down below that I have it highlighted where it begins to list the operating expenses. And if you'll look at the next page, again, on the right-hand column, it's listing all the reclaimed water expenses. And if you'll turn to the third page, it shows where the total expenses for reclaimed water is $855,029, which means there's a net loss of $374,539. So we've heard some discrepancies this morning on what that cost is. We were hearing much higher than that that they're losing. If you look at your next page that I gave you and, again, I've highlighted for the year's budget $993,463. That's the budget for 2002 for their operating expenses. If we can assume that the income or revenue next year would be $500,000, because the fee is 13 cents per thousand for everyone, and if we took a 100 percent increase, 26 cents, we can see how they got to the rate being 26 for the bulk user, and that would equal out to about a million dollars which would meet the cost of the operating expenses. However, they're asking for more than that for users like myself who have it pressurized. They're asking for 34 cents, 8 cents more per thousand than the 26 cents as I'm showing you here in their Page 13 6 November 28, 2001 operating expenses that would come out equal. So my point is -- back in our agreement it points out that the costs should not exceed the cost of production and delivery. Delivery is to the golf course. That's in our contract. We would receive the water delivered under pressure. It's in our contract. It should not exceed the cost of production. So my point is, we're seeing an 8 cent increase there that really doesn't work out financially. The county is making a profit here. Also, my concern is that nothing is mentioned about that there's other users of this water. There are median strips. There are parks. And the county themselves uses this water. That's part of the cost of production and delivery, and they're not mentioned as being users of it and the cost to do that. Therefore, whatever that is -- I don't know -- that should be deducted because the users, the golf courses, should not have to pay for the water that doesn't go to the golf courses or the other developments. There are some developments that use it. Again, I just wanted to mention that I think that you ought to take into consideration with these increases that it would be less expensive for me to use water if I went back to using a well. I don't think that's environmentally the right thing to do. I think we should use the effluent water. I think it's the right thing to do because we're recharging the aquifer. And through the monitor wells that we know about that are along the coastline, we know that we are doing a good thing in preventing saltwater intrusion. So we know the benefits, and the benefits are for everyone in this community we're recharging the aquifers by using this water. So I'm not -- I don't want to upset the apple cart here and say, "We're going to" -- you know, I don't want to be pushed in the wrong direction and start using well water. I want to use the effluent water, but I want to use it at the cost that was in our original agreement, that we're paying the cost for production and delivery, and not something Page 137 November 28, 2001 where there's a profit made. I also want to mention, again, about the -- remember also about the other users that the county has, which is themselves for parks, medians, and their own facilities. Really that's all I had. Thank you. CHAIRMAN CARTER: Thank you very much, sir. I'll let Mr. Mudd address your concerns. MR. MUDD: The difference in the figure of about $300,000 as far as the difference between what we're bringing in and what was talked about is there's a debt service that isn't in that sheet that we had to go out and borrow dollars in order to lay the distribution lines and that kind of process. So that's there. Okay. There's a chart that we had in your original briefings that I gave you a month and a half ago that showed that particular thing. I was asking that question just a second ago, and they don't have that original briefing with them. The next issue is, from what I've been told, our parks that use reclaimed water pay a fee just like everybody else goes. As far as that process is concerned, this is a service. If it's a median to a strip, then we charge road and bridge because that comes out of the admin fund. It isn't a 408 type of fund. It's not an enterprise fund. So we don't give out a free service to anyone. COMMISSIONER COYLE: Do they pay the same rate that you're proposing? MR. MUDD: MR. OLLIFF: Yes, sir, absolutely. I wish we had a break, but we don't. COMMISSIONER HENNING: That probably is a better reason to -- Commissioner Carter's suggestion to put it off until October. That's when our fiscal year starts for each of the departments too. MR. OLLIFF: I think when we bring this back to you, we'll bring you some implementation options. At least you need to see what the revenue impacts are to that. And if there's anything Page 138 November 28, 2001 significant, obviously you'll want to know that before you make those decisions on the revenue side just as well as you do on the customer sides. We'll show you that because there's a number of options between January and October. CHAIRMAN CARTER: Any questions by the board, or are there any other speakers, Mr. Mudd? MR. MUDD: No, sir. CHAIRMAN CARTER: Okay. THE COURT REPORTER: I'd like to take five minutes. CHAIRMAN CARTER: A five-minute break for the reporter. It's your break. MR. MUDD: Commissioners, I will also tell you just off the record that the City of Naples is looking at their reclaimed water rates right now, and they will have their new rates out the third week of December. COMMISSIONER COYLE: Do you know what they'll look like? MR. MUDD: Not yet. They haven't done their study yet. COMMISSIONER COYLE: Okay. (A break was held from 2:12 p.m. To 2:22 p.m.) (The meeting recommenced with Commissioners Coletta and Coyle not present.) MR. MUDD: Commissioners, on our agenda right now we are at 2-F which is budget reconsideration. CHAIRMAN CARTER: Thank you, sir. There is a -- okay. Then I think we better deal with that, because there was a whole list of items by each commissioner. I know I have to be leaving by three. I know Commissioner Coyle has got the same problem and Commissioner Fiala. We have roughly about 35 minutes to address that, sir. COMMISSIONER FIALA: It looks like we're going to have to Page 139 November 28, 2001 reschedule the other ones. CHAIRMAN CARTER: I believe we will. Do we have another workshop this week? I think we do, don't we? COMMISSIONER FIALA: We have two on Friday; right? MR. MUDD: Sir, you have MPO Friday in the morning, and then right after the MPO at two o'clock we go into the AUIR. COMMISSIONER HENNING: What are we doing Saturday? MR. MUDD: Sir, I'll do anything you'd like on Saturday. CHAIRMAN CARTER: And that workshop on Friday will be fairly extensive in terms of what we have to cover, so I don't see any room in there. MR. MUDD:. Yes, sir. It's going to be extensive, too, sir. CHAIRMAN CARTER: What is -- the MPO is from 10 to 127 MR. MUDD: It's from 10 to 2, sir. CHAIRMAN CARTER: Ten to two? MR. MUDD: Yes, sir. That's why we scheduled it at two o'clock to have the AUIR. CHAIRMAN CARTER: Does anyone know why we have such an extensive MPO meeting on Friday? COMMISSIONER FIALA: Here she comes. CHAIRMAN CARTER: I was looking to see if I could find another hour for a workshop starting at one and try to pick up some of this. MS. WOLFE: Dawn Wolfe, transportation planning director. Actually, we don't anticipate the MPO meeting running past noon. That was to give the members an opportunity to have lunch and deal with their business prior to entering into your next workshop. So you do have time in between the MPO meeting. In fact, I don't believe it's going to be a very heavy agenda. You may be finished well before noon. CHAIRMAN CARTER: There's three board members here. I Page 140 November 28, 2001 don't know who's planning to be at the MPO, but I would recommend to this board that instead of starting at two we start at one. That would give us an hour to try to catch up on some of the things we're going to miss today. COMMISSIONER FIALA: That's fine with me. I'm here all day long anyway. COMMISSIONER HENNING: What are we going to miss today? COMMISSIONER FIALA: Our questions and answers that we were going to discuss. CHAIRMAN CARTER: We have a whole list, and I don't even know if we'll get through all the budget issues. COMMISSIONER FIALA: Being that we were scheduled to be here from 10 until 5 anyway on Friday for the MPO and AUIR, I would think all of our time here is planned to be spent here, so we might as well. CHAIRMAN CARTER: We're not getting our e-mails answered or letters answered or phone calls returned. COMMISSIONER FIALA: Please understand. CHAIRMAN CARTER: Yeah, please understand we've been a little busy. (Commissioner Coletta is now present.) COMMISSIONER HENNING: Another item on our agenda is just a general discussion. CHAIRMAN CARTER: Yes, you're right. It may be that we may have to split that up and find another time. Let's deal with the budget. May I suggest that we have a one o'clock start on Friday if we have to pick up any leftovers from the budget considerations, and if there's any other issues on that joint list that we need to deal with. Have I got a problem with that, Mr. Weigel? MR. WEIGEL: No, you don't. Perhaps some further flexibility Page 141 November 28, 2001 -- you may not want it -- but that is, if the MPO is over well before noon, as long as you go on record today of a time or an event certain that you're going to continue this meeting over to, you could continue it at the conclusion of the MPO meeting. This board ascends the other MPO members and will go into meeting, and you know that's going to be before noon if you need an extra -- more than just an hour before your two o'clock afternoon thing that goes on. CHAIRMAN CARTER: So we could reconvene -- we could continue this meeting until one p.m. On Friday? MR. WEIGEL: Oh, absolutely. No problem with that. CHAIRMAN CARTER: Okay. If that meets with the approval of the board -- do I have three? Whoever can show up at one o'clock. COMMISSIONER FIALA: We're nodding. CHAIRMAN CARTER: Okay. Reconvene at one o'clock. MR. WEIGEL: I'd take a motion and vote on that at this meeting today. You don't have to do it right now. You can do it before you dash. But at any rate, do it and that way you've met your notice requirement, and you've done it by an official act. COMMISSIONER HENNING: Why don't I just make a motion now since we have almost a full board to continue the business from today's meeting on to Friday at one o'clock. COMMISSIONER FIALA: I'll second that. CHAIRMAN CARTER: I have a motion for-- I have a motion by Commissioner Henning and a second by Commissioner Fiala. All in favor signify by saying aye. (Unanimous response.) CHAIRMAN CARTER: Opposed by the same sign. (No response.) CHAIRMAN CARTER: Motion carries 4-0. Note that Commissioner Coyle is just returning. A motion was made and passed by the board that we would Page 142 November 28,2001 continue this meeting after we finish approximately by three today to one o'clock Friday and start an hour ahead of the others so that we can clean up whatever we miss in this. COMMISSIONER COYLE: Sure. I'll vote in favor of that. CHAIRMAN CARTER: Okay. So it's 5-0. All right. Thank yOU. to-- Mr. Mudd, I'm going to give it back to you. You're taking us MR. MUDD: Sir, we're at 2-F, budget reconsideration. COMMISSIONER HENNING: There's three things that I brought up yesterday. One thing that I gave a lot of thought and got some input on is we mentioned about cutting the merit pay for this year, but it's in next year's budget. What that does is it will affect the people who are getting a little bit of bonus for doing a good job. It's the type of thing that we're asking our employees to strive, and we are going to compensate you for it. During hard times in private business in the real world when we're in an economic downturn or a certain business that provides a product that's not doing very well, there are cuts. One thing that we might want to consider instead of an incentive would be a COLA. That way the ones that are doing well and we want to reward for doing a good job, they're not the ones taking the brunt of it. It's spread across the whole board. Any input on that, Tom? COMMISSIONER FIALA: I'm sorry. I didn't -- I had to step out to wash my hands. What did you want to do, Tom? I'm sorry. CHAIRMAN CARTER: He's talking about merit increases for not this fiscal budget year, but the ones that are implemented next year, Commissioner, from my understanding. COMMISSIONER HENNING: Well, it's for this year. You do a good job this year, and you get it through your -- it's next year's Page 143 November 28,2001 budget on the merit. But what I'm saying is, instead of doing that, do a cost of living increase instead of merit. CHAIRMAN CARTER: But cost of living goes to everybody. Merit is truly merit. Cost of living you have to take across the board. I don't think you can discriminate on that issue. I'll ask legal counsel. MR. WEIGEL: Well, Commissioner Henning's point is, and you just also illustrated part of it, is that cost of living as a budget- reducing feature will touch all employees, whereas a merit increase by its very nature would not, in fact, touch all employees. Of course, Tom has told you, you know, how the statistics and the fractions are in regard to percentages that have been used this past year for both, 2.9 percent for cost of living for all employees, but the merit increase is obviously varied above and below 3 percent. MR. OLLIFF: I think in response the board will make budget policy recommendations and then have that discussion generally in February of this coming year. I do think it's important for this board and for your staff to have a good understanding of what merit pay plan we're going to use because we are basing it on this year's performance, assuming that we are going to have a merit system similar to the one we currently have in place, and so that employees have an expectation about what's going to happen in October of next year. So I do think Commissioner Henning is right that if we're going to have a discussion about next year's merit pay plan or COLA, we probably ought to do that and have that full-blown discussion in February when we establish the budget policy for fiscal year '03. I'll also indicate that there needs to be recognition on the part of the board that whatever pay-plan adjustments we make, you need to keep in mind that they are not just a percentage that affects your agency. The percentages that we developed that included pay-plan adjustments, merit pay, and COLA for this year was the same Page 144 November 28,2001 percentage that was used and provided for all the constitutional officers as well as for your agency as well. Generally, what we do for them is provide them the same fixed percentage of gross payroll that you do for your agency. They can distribute how they choose to within their own agencies. I think that under our current circumstances the board may, rather than trying to dictate or decide how to implement the pay plan, simply look at the total gross percentage available for our pay plan adjustments for all of the agencies next year as part of your budget policy and make some adjustments in that regard but allow your managers to make a decision on how they're going to disburse that. COMMISSIONER HENNING: Great. I'm great with that. CHAIRMAN CARTER: I think if I'm understanding, we really -- I want our employees to understand that we're not touching anything that you already have. What we are saying is for the next year, come February we're going to have a discussion about all of the variables that go into this, whether it's COLA, a cost of living index, merit adjustments because it is an agency-wide impact. It is not just what the Board of County Commissioners do for Collier County government. So I think that would be a realistic approach for us, and we'll know a lot more by that time on how everything is being affected and where we are. COMMISSIONER COYLE: Can I address that issue just briefly? MR. OLLIFF: Absolutely. COMMISSIONER COYLE: I haven't seen an employee evaluation form, so I don't know how the process works. But what I really always liked to do was to have a component of compensation based upon specific performance objectives, not just doing a generally good job, but making sure there were no erroneous zoning approvals made, making sure that we, for example, achieve an X Page 145 November 28, 2001 percent decrease in overall operating expenses within a department, whatever those goals are. It would be very good for all of us, I think, if an employee could tie their performance directly to how much money they're likely to get that year rather than depending upon someone to provide a general performance appraisal. Now, I suspect it's not really as general as I'm making it out to be, but if you understand my point at least and if you feel that's an appropriate thing to do, I would like to see it evaluated. But I think whenever somebody makes a zoning -- improper zoning approval that just cost them $500 off of their salary, pretty soon I think we're not going to be making too many of those. MR. OLLIFF: It's a good point. You can use pay for performance to affect employee performance in a number of different areas. If, for instance, we wanted to emphasize -- I know some of the commissioners had talked about interdepartmental relations and project teams that work together and having transportation and community development work together. You can develop incentive programs that have team recognition and rewards and bonuses. There's a number of different things you can do. I will tell you that your current system does require that supervisors develop a very specific list of what we call key result areas that are as objective as we can make them, and then there's always room for improvement in that. I will tell you for my division administrators, for example -- Mr. Mudd will laugh-- the action plans that were developed for them were probably eight pages long and as detailed as anything that you have ever seen in or out of the military. They knew exactly what was going to be expected of them and what they would get in return should they meet certain performance standards. I will not tell you it is that specific or that good all the way down through the organization, and there's always Page 146 November 28, 2001 room to make some improvements in that regard. That's the kind of discussion I think we ought to have probably in February about what kind of system we're going to have. But, frankly, from a policy perspective, I would probably rather see the board focus on percentage numbers. I'll let you look at this year. If, for instance, we set aside 6 percent of gross payroll for cost of living and/or salary adjustments, and the board feels like under the current economic conditions that needs to be 4 1/2 or 4 percent or something significantly less than that, whatever it may be, you tell me what you want to work with, and I'll put together the best doggone plan that I can to motivate the employees that work for you to get the job done. COMMISSIONER COYLE: Could we tie it to CPI? MR. OLLIFF: I think that's a discussion we probably ought to wait until February to have and decide where are we at that point in time and establish our budget policy then. COMMISSIONER FIALA: I know we had a major increase in health insurance for our employees this year -- MR. OLLIFF: Yes, ma'am. COMMISSIONER FIALA: -- which, of course, most of their raises went to paying for. When were you advised that there was going to be this tremendous increase in health insurance? I mean, will our February discussions take that into consideration? MR. OLLIFF: What we do is we have what we call an actuarial report done which tells you where you are in terms of your -- we are self-insured as an agency, so for the most part we cover our own insurance expenses. We can have reports done prior to February, I believe, that can give us an actual indication of what we spent to do some straight-line projections or even some projections that take into account seasonal changes and how much we actually spend for insurance. They can tell us what we can project for our next budget year. We generally do Page 147 November 28,2001 that each year in February to March when we do our budget policy planning, but I will tell you in rounds numbers your health costs -- and it's not just yours; it's health costs across the country -- have been increasing somewhere between 12 and 15 percent annually. And we'll do everything we can to try to control that. But I will tell you that as a general philosophy, too, as an agency we have had employees paying significantly less in terms of their contribution for health-care insurance coverage than other agencies, and we are trying to fix that. We are trying to incrementally increase the amount of contributions employees make to that until we get to what we think is an industry standard of about 20 percent. COMMISSIONER COYLE: If you will let me digress for just a moment, these rapidly inflating healthcare costs are likely to occur even more greatly in the indigent-care program, but nevertheless -- CHAIRMAN CARTER: Oh, my gut. Can you pull it out? COMMISSIONER COYLE: I better watch it. He's got a gavel. CHAIRMAN CARTER: It's true. It's a national problem. I think one of the things that has worked for us in recruiting is that we have had a favorable healthcare program which is made attractive for people to come and work for us even -- you know, keeping in balance pay scales and everything else. So I don't want to lose the edge with it, but I want to bring it into the realistic national perspective. MR. OLLIFF: And you need to pat yourself on the back a little bit this year, because for the first time in this county's history this county has partnered with what they call the big five. We had -- and you instigated this. This agency reached out and grabbed the school board, the City of Naples, the City of Marco -- who's the other agency? There were five total agencies. And we've been negotiating because, frankly, you have a very limited number of healthcare providers in this community, and the only way that we felt we could have any leverage in terms of developing better control on our Page 148 November 28,2001 healthcare costs was to put all of those employers together and walk in there with bulk on our side. And I think we've been able to not only negotiate much better prices for your employees and other agencies as well, but I think we're helping the healthcare industry by getting a grip on what they're doing in terms of service provisions, standardizing some of their service provisions, and getting a grip on one of the more important areas which is pharmaceutical drugs and prescription costs. COMMISSIONER FIALA: Can you tell me one more thing, please, and maybe you'll know this. What is -- for the cost of living in Collier County versus the other 66 counties, is ours the highest or the second highest for cost of living; do you know? I know Monroe County is up there as well. MR. OLLIFF: Mr. Dunnuck is waving in the back of the room. I think he's telling us his last look was about fifth highest in the state. COMMISSIONER FIALA: Fifth highest in the state7 MR. OCHS: Yes. That's correct, Commissioner. CHAIRMAN CARTER: Leo Ochs for the record. MR. OCHS: Yes, assistant county manager. I think you're referring to a state index called the Florida Relative Price Index, which is a relative ranking of what they call a representative mixed basket of goods and services that are ranked among all 67 counties. Collier, for all the time that I've been here looking at that industry, typically runs somewhere between 8 to 5, so our average is probably within the top 5 counties in the state on that index. COMMISSIONER FIALA: When I heard that cost of living -- I mean, for rental properties they feel that it's fair to charge -- like, the beginning lowest rate for the lowest, lowest income is $600 and then, like, for average it's $730. I don't know if-- and heaven help you if you have any children who are in daycare. I don't know how people can afford to live here. Anyway, I was wondering where we rank in Page 149 November 28,2001 the cost of living. Thank you. COMMISSIONER HENNING: Chairman, to get back online. The other thing I had was the Community of Character. That is not the Dover-Kohl study. CHAIRMAN CARTER: Community of Character? COMMISSIONER HENNING: Right. CHAIRMAN CARTER: Thank you. COMMISSIONER FIALA: Could you explain to our audience what the difference is between the two? COMMISSIONER HENNING: Well, the Dover-Kohl study which citizens participated in is -- it was transportation issues. It was land-use issues. It was how we built our -- how our streets look, how our median looks, and we actually had a little bit of rural fringe in there, too, in the rural areas. And the other one is the character of the individuals like they're doing in the school system right now, which is a very good program, of integrity, commitment, things of that nature. Those are those personal things showing people how through choices and how they lead their lives how they can make a difference in the community. COMMISSIONER FIALA: And that's what the president introduced to us as a nation, didn't he? COMMISSIONER HENNING: Exactly. The only reason I'm bringing up these things is because of the budget cuts and those type of things. I know that each and every one of us want to build good communities by bringing up some of these programs. CHAIRMAN CARTER: How much did we budget for that, Commissioner? COMMISSIONER HENNING: I believe, if I remember right, it was $165,000. MR. OLLIFF: I didn't have time when I got out of here at 10:30 to check. Whatever that amount is we've just -- we're going to go Page 150 November 28, 2001 ahead and move that amount, and I'll provide you a follow-up memo. We'll put that back into the general fund reserve based on the board's direction last night. COMMISSIONER FIALA: Okay. So are we going to then eliminate that committee altogether, or are you going to try to work with some volunteers? CHAIRMAN CARTER: No. We wanted to keep the committee together. One thing I might just offer as a suggestion, what if we had employees that wanted to participate on a 50/50 basis, in other words, they pay 50 percent and we pay 50 percent, and they want to participate in a program like that? Would that -- that would reduce whatever that number is by 50 percent and still those who want to move forward will have an opportunity to do it. COMMISSIONER FIALA: Wait. I think I'm lost here. You mean it costs people money to participate in that committee? CHAIRMAN CARTER: Well, we had-- yeah, it costs money to do the program. COMMISSIONER HENNING: My understanding from Tom's indication is there wasn't a lot of our employees interested in this program; am I correct? MR. OLLIFF: I'll tell you the truth. Right now your employees feel like they're doing all they can to get their jobs done. We're training the heck out of them in the things that we have to, safety issues. We're doing some first-line supervisory training that we felt was important based on some employee surveys that we did. We have a whole series of training programs that are required for employees through their first two years and then through their first five years and through their first ten years while they're here. I'm not sure that your employees are ready to take on any additional training programs on top of what they already have. CHAIRMAN CARTER: Then forget what I said. I'd say it's Page 151 November 28,2001 time to remove it from the budget to a time when, A, people may be less stressed and, B, we have more opportunity to participate in it. MR. OLLIFF: But I do think the idea of continuing to create the committee of citizens from the area who might be able to work on developing some no-cost theme-type efforts between the school board, the city, and the county in terms of some character-awareness type of issues. I still think that's a good idea. I think you've already got your applications in hand for that committee, and we probably ought to proceed with that. CHAIRMAN CARTER: Other items on budget reconsiderations? One thing I mentioned to the county manager this morning briefly is we are in programs where we have a life expectancy on a vehicle, and I was going to look at equipment of that nature. And whatever the current schedule is, before you replace it is there an opportunity to pick up another six months or a year out of automobiles, trucks, whatever it is, and not have a corresponding increase in maintenance where it wipes out the savings. I don't want to go there. But if I can buy another 12 months out of the vehicle, what are the possible savings by having a longer amortization and use of a vehicle versus expending new dollars. I don't know how many we're buying and how many we're leasing. Maybe you can give me some kind of an idea on that and what would the savings be. MR. OLLIFF: I can't answer that flat-footed, but I can tell you that within the 3 percent reductions on the operating side, when I went back to the department of directors and I was asking them to give me recommendations on how and where they would make that happen, a number of them were doing exactly that. They were deferring vehicle or heavy-equipment replacement for some period of time in order to be able to recognize some current-year savings. I'll also tell you that I've tasked the budget office during the off Page 152 November 28, 2001 season with working with both road and bridge, water and wastewater, to do an analysis for me of lease versus purchase on all of our heavy equipment, because I'm being told today that leasing equipment, at least certain types of equipment, makes more financial sense than does buying it and trying to sell it out at the end. I expect to get that within the next couple of months for you to consider some things there. But I will go back, and if the board wants us to take a look at that, are there some opportunities to be able to stretch out current vehicle replacements, maybe get our fleet management department to bring you back a report that can show you at least what can be gained or if they think we're on the brink where if you replace equipment any later than we currently do, then your maintenance expenses don't provide the cost benefit for you to do that. COMMISSIONER FIALA: Would this be also fire department and EMS? CHAIRMAN CARTER: Well, if we control it. COMMISSIONER FIALA: That's what I meant. CHAIRMAN CARTER: The EMS in our dependent fire districts, yeah, you could apply the same principle there. Yes, Commissioner, that would be good. MR. OLLIFF: You have centralized fleet maintenance, so all of that equipment is controlled through a central fleet department, and they can do that analysis for you county-wide. COMMISSIONER HENNING: One thing that Neil Dorrill did, and I commend him for it, is taking the EMS vehicles and going from a gas engine to a diesel engine. Those vehicles are very expensive with the heavy chasse and the box and all of that. Throw a great engine in there, and we were getting, I think, 200,000 miles out of these before replacement. I only had one more item, and then I'll be quiet for a day. Page 153 November 28, 2001 MR. OLLIFF: Before we leave the fleet thing, I just want to mention to the board so you know as well, we continue to participate in the Ford Motor Company's program where we're getting loaner vehicles from them. In a lot of cases, we're driving Ford vehicles that are probably at this point 2004 model year cars doing some testing for them. We do that through high mileage departments like the veteran services department, but we're also participating with them in programs that use multi-fuel type vehicles and electric vehicles. Last year we had on loan from them a fully battery-powered truck that we were running through fleet management for them. Frankly, it wasn't worth the time that we had it. But the other thing we're looking at this year are some split-battery-and-fuel vehicles and split-type fuel vehicles. So we're trying to do as much cutting-edge kind of looking on the fleet management side as we can to keep our fuel costs and our fleet costs down. CHAIRMAN CARTER: Commissioner Coyle. COMMISSIONER COYLE: Just to follow that topic a little bit -- I'm sorry. Did you get your question answered? COMMISSIONER HENNING: No, I didn't. I had one more but-- CHAIRMAN CARTER: Let him go for it. COMMISSIONER HENNING: The last item was the impact fee waivers for the healthcare field. Those impact fees, the way it was structured -- it was the interest on it, and that money we can use directly for roads. COMMISSIONER COLETTA: May I make a comment on that? CHAIRMAN CARTER: Yes, Commissioner Coletta, you may make a comment. COMMISSIONER COYLE: We're going from left to right. COMMISSIONER COLETTA: And I knew we were going to Page 154 November 28,2001 come to this. It was inevitable because we have two factions, the good ones and the bad ones. No, I'm just kidding. You're actually good people. COMMISSIONER COYLE: We just have no compassion. COMMISSIONER COLETTA: No, I wouldn't even say that. CHAIRMAN CARTER: Watch, you'll get a black hat at the Christmas party. COMMISSIONER COLETTA: I want you to weigh this thing against what we're actually talking about. The things that we were talking about the other day to try to maintain is the health, safety, and welfare of the community, and we put that above everything else. We're trying to save money. Now, we would no more consider cutting back on the fire department's fuel or going to the ambulances and taking away certain medications from them that are lifesaving. Why do we want to go back and take the very essence of our society here that's going to be there at the time of an emergency and tell them that we can't help you, that we came across and now we're going to take it back, that you're on your own, and if there is an emergency, though, we'll be here to try to get the help when we need it? These people are doing basically what a lot of communities do as a government function, and they're doing it at no cost to the government. This is nothing more than something to help them or encourage them to increase their infrastructure to offer more services. The nicest part about it is that every single time this comes up -- and so far there hasn't been anyone to come up, but when it does I'm sure we'll hear about it -- every time it comes up, you have the right of refusal based upon what the need is. It's not something that's automatically doled out. I suggest we leave that alone, leave the money in the fund, and then when it comes up we can deal with it on a one-to-one basis. Of course, unless you don't want to face the Hospices of the world and Page 155 November 28, 2001 the Red Cross, and then I might understand why you would want to get rid of it now. COMMISSIONER FIALA: abused women? COMMISSIONER COMMISSIONER COMMISSIONER COMMISSIONER COMMISSIONER COMMISSIONER Are you talking the shelter for COLETTA: HENNING: COLETTA: HENNING: COLETTA: HENNING: Yes. No, no. Yes. That doesn't qualify for it. How do you know? Well, if you look at the last item, the last agenda of that consent, there was $180,000 of deferrals of impact fees on the consent agenda. It was just -- MR. OLLIFF: That was actually a SHIP-funded program, and that was one of the projects that, I believe, when the board established their SHIP budget, which included a number of Fred Thomas projects in Immokalee, this is part of that $2 million of SHIP money that the board has. CHAIRMAN CARTER: Right. MR. OLLIFF: That was one of the specific products, I believe, that was included in that budget. The program that you're referring to is a program where we established $100,000 set aside annually out of interest earnings from impact fee funds. The board on a case-by-case basis will review and decide on applications for impact fee waivers from agencies that meet what are federal tax guidelines for health, safety, and welfare type of agencies. The board has the ability to decide on each and every case whether or not it wants to grant that impact fee waiver or not. But Commissioner Henning is right. If we didn't have that program, that $100,000 could go towards whatever the impact fee -- COMMISSIONER COLETTA: Right. It would build about one-fifth of one mile of road, which would be absolutely tremendous. Page 156 November 28, 2001 We could put it right in middle of Immokalee Road so people can see an example of what a four-lane road will look like. COMMISSIONER HENNING: why I brought it forward? COMMISSIONER COLETTA: COMMISSIONER HENNING: Can I answer your question on Please. Go ahead. It's because we told the people out there that we are going to collect and keep the impact fees at the highest level. And then my opinion -- and maybe it's only my opinion -- is then we give it away to not for profit. That's one of the reasons. And on your comment, I think these organizations will still survive without us giving that $750,000. COMMISSIONER COLETTA: dollars? COMMISSIONER HENNING: thousand five hundred dollars. COMMISSIONER COLETTA: Seven hundred fifty thousand Well, I'm sorry. Seven A hundred thousand dollars is the maximum amount that could be used in one year if we have people to be recipients of it. You have the ability to refuse every single one of them as they come down. If you don't think that the Red Cross is -- that their expansion -- which they're not doing, by the way. I'm just using them for an example. And, by the way, my comments earlier were meant in jest. They weren't meant to demean either one of you. You're both doing an excellent job. But I'll have my fun when I get the chance. The thing is, you do have the right to reject. You have the right to reject case by case. I don't think this county does enough to try to help and to try to move things forward as far as non-profits go. This is why I'm heading up this committee. I'll stand by this opinion until the sun sets today and comes up tomorrow. COMMISSIONER HENNING: And I give every Sunday. Page 157 November 28,2001 MR. OLLIFF: Mr. Chairman, just a suggestion. Since this is really a workshop format for this particular issue and the board is not going to make any decision on any of these issues, perhaps the easiest thing to do is as each one of these items comes up, rather than debate whether or not yes we're going to or not, then just decide whether or not you want us to include this on the list December 11 th for the board to actually make a decision on it. COMMISSIONER COLETTA: We do. CHAIRMAN CARTER: And I've got to scoot in five minutes. I want to give Commissioner Coyle his opportunity here. COMMISSIONER COYLE: I'll be very brief. With respect to the leased vehicles, do we have an option to get maintenance with those leased vehicles, maintenance and service arrangements, or do we perform those ourselves? MR. OLLIFF: I want to say that the ones that we currently have leased-- and we don't lease a lot of vehicles currently. That's why I'm having them take a look at whether or not there's a cost benefit for us to do that. We use the providing dealership to provide the maintenance while we have the lease. COMMISSIONER COYLE: My point really is this: I don't know how many vehicles we maintain ourselves or how large of an expense our vehicle maintenance department really is. I'm not interested in trying to put anybody out of a job, but I think we need to evaluate the alternatives with respect to outsourcing some of that. There's a way to do that without putting any current employees at jeopardy, and that is letting them bid on this, too, and make it part of the budget. So I think there are ways to deal with that issue, and I just ask that you give it some consideration to see if it makes sense. MR. OLLIFF: For your history, I think we recently came out of a period where we were privatized. We had privatized fleet maintenance for probably close to 7 or 8 years, and probably the last Page 158 November 28,2001 5 or 6 we have been running our own shop. We can take a look at that. We always want to be competitive, and we'll bring you back some proposals if the full board wants us to take a look at that in terms of privatized fleet maintenance. We privatize probably as many services as any government in the state does right now. We usually go through a list where we do some comparisons between us and other communities. We are a firm believer in privatizing around here. We're just short of Fort Myers Beach which runs what they call government light up there. They only have about six employees, and everything else is contracted out. There are pluses and minuses to fleet maintenance contracts, but if the full board wants to discuss that on the 11 th, we can put that on the agenda too. COMMISSIONER COYLE: Well, that's up to the board. I just made the suggestion. CHAIRMAN CARTER: I like the idea of always going back. I think I raised it when I first came to the board, too, Commissioner Coyle, but we've got a different management team now and one that I think is more attentive and proactive than we had at that time. I think it's time to revisit all those questions again. COMMISSIONER COYLE: Just one last thing, and it's the issue I touched upon last night. I just ask that the board let staff take a look at the capital improvement projects to see if there are any that should be postponed or, in fact, cancelled and if there are any alternatives with respect to the capital improvement program. And if that evaluation could be done, then we can take a look at it and decide whether or not it's worth making a decision to do it. COMMISSIONER HENNING: Commissioner Coyle, I think that we're going to get into -- we're going to see a little bit of that tomorrow. COMMISSIONER COYLE: Okay. Good. Page 159 November 28, 2001 CHAIRMAN CARTER: The other point I have, Tom -- and maybe you've done this, is we provide facilities for the other constitutional officers. Have we had an opportunity to go back to each constitutional officer and ask them is there anything that we've appropriated for them into their budgets that may be postponed or delayed or reduced that would help us in this process? MR. OLLIFF: We have not had that conversation as of yet with them. I can tell you that your property appraiser is absolutely crying for some space over there. He beats on me on a regular basis about his need for space. He's at the point where he's telling me he cannot hire and fill positions because there is no physical place to put some of them. We have been working between with his agency and -- trying to split his agency and keep them on campus. The only option that we have to do that is, frankly, to move the supervisor of elections as an entire agency off campus, and we're looking at options to do that. The supervisor of elections is happy to do that if we can find appropriate type of space. That is the only crying space need outside of those that are waiting on that court-related agencies building. That is the money that you have in design money in this year's budget, and it is a large project. It is a $30 million project. It includes a parking garage and a six-story building here on this campus that's programmed for the next fiscal year. We can go back and look at the proposed residents of that building and have that discussion with them again and see if there is an opportunity to defer. There may be less expansion needs from some of their agencies based on issues of late, but we would be happy to go have that conversation with those agencies. COMMISSIONER COYLE: Will construction of the North Naples satellite facility result in some relief here with respect to Page 160 November 28, 2001 office space? MR. OLLIFF: That's a good question. I don't know. It's primarily constitutional officers who are using the satellite facility that we are building in the north end. I think what it will really do is probably allow us to eliminate a lot of the leased space that we have for constitutional officers already up in the north end. We are currently leasing space for the tax collector, the property appraiser, and the clerk of courts all in Greentree. It will at least allow us to eliminate those lease payments that we have every year there. CHAIRMAN CARTER: And the ripple effect is the people won't come down here. We don't have parking problems. We don't have a lot of things that exasperate that situation. I don't know the numbers, but I was getting the feeling as we went through that that whatever we were paying in debt service in that building would be offset by what we're giving up in paying in lease dollars and all the other things that we have to consider. COMMISSIONER HENNING: And just a heads-up. The clerk of court's going to be knocking on our doors for space. He gave me the story that he has employees under stairwells working out of an office, and he's going to come see you. MR. OLLIFF: He's scheduled to see me tomorrow as a matter of fact. I can tell you specifically about the clerk -- I mean, the property appraiser and the supervisor of elections. I believe I would be able to give you the same story about the clerk who I know we've just recently put some of his staff out in the hallway in the courthouse building, so I'm sure that's why he's coming to see me. And you have a statutory obligation to provide space for the constitutional officers, so they have a legitimate concern here. CHAIRMAN CARTER: And I know the sheriff's budget was very large. You know, everything seemed to be justified, but I don't know if he has any deferrals in his that he can accomplish or not. Page 161 November 28,2001 COMMISSIONER COYLE: It's still like dungeons and chains rather than an $8 million jail. MR. OLLIFF: And that's one of the projects the board may want to specifically consider. Let me run down the list while I've got all five of you here and make sure that these are the items you want me to bring back to the board for a formal vote on the 1 lth. I will assume that the Community of Character reductions do not need to come back and that I've got sufficient enough direction from you that we don't have to have a separate discussion about that. CHAIRMAN CARTER: I'm okay about it. Is everybody else? You've got five nods. MR. OLLIFF: The second issue was, obviously, the pay-plan issues, but I'm assuming that we are going to discuss those when you develop your budget policy as you normally would in February or March. Okay. Vehicle replacements, the direction that I'm taking from that is that you simply want us to go and have the fleet management department do an analysis of that in terms of replacement, life cycle, and bring you back some information. CHAIRMAN CARTER: Right. It may not affect it so much this year, but it might affect it more next year. That's going to be equally as important. COMMISSIONER COYLE: Would that include a cost-benefit analysis of leasing rather than purchasing? MR. OLLIFF: We are actually already in the process of doing that, but we will make sure the board is included on a copy of that report. The impact fee waivers program-- COMMISSIONER COLETTA: Definitely bring that back. It's worthy of discussion. Page 162 November 28, 2001 CHAIRMAN CARTER: I really -- I really -- myself I don't have a problem the way it is because it gets passed on case by case. COMMISSIONER COLETTA: I don't have a problem with it either, but Mr. Henning asked for it for discussion. I would like to give him the opportunity. COMMISSIONER HENNING: We discussed it, and I'd like to see the program cut. I know I see two people like the way it is. So there needs to be a consensus of at least three; otherwise there's no sense in discussing it. COMMISSIONER COLETTA: I'm very much in favor of keeping the program, but I don't want to shorten your ability to be able to bring the case up if you'd like to present it. I know I'm for it. I think that I've got two other people to keep it in play. CHAIRMAN CARTER: How many want to bring it back? COMMISSIONER FIALA: Let me first say, each one that's brought up is brought to us individually so we have a say on each one that comes to us; right? CHAIRMAN CARTER: Yes. COMMISSIONER FIALA: It's not like a blanket -- CHAIRMAN CARTER: It's capped at $100,000, I believe. MR. OLLIFF: Yes, sir. COMMISSIONER FIALA: For the whole year, right, not just for one agency? CHAIRMAN CARTER: Oh, no, no, no, the whole year. MR. OLLIFF: $7,500 per agency; $100,000 annually. COMMISSIONER COLETTA: I've got two problems here. One, I'm totally in favor of the program, and I'll fight to keep it. Two, I don't want to shorten your process to be able to bring it back. It's your call. COMMISSIONER HENNING: No. I think we need a straw vote here like we're saying. Page 163 November 28, 2001 CHAIRMAN CARTER: Commissioner Fiala. COMMISSIONER FIALA: I want to vote on each one individually. CHAIRMAN CARTER: Okay. I want to vote on each one individually. COMMISSIONER COLETTA: I do too. It's 3-2. COMMISSIONER HENNING: Then we don't need to bring it back. COMMISSIONER COLETTA: Okay. I appreciate that. I didn't want to shorten the process so that you didn't have your -- COMMISSIONER HENNING: And I don't want to waste your time. COMMISSIONER COLETTA: Thank you, Tom. MR. OLLIFF: Re-review of capital improvement projects. You can either leave that to us to do and bring you back some recommendations, or if you want to go back through your capital budget, you certainly have the ability to do so. COMMISSIONER COLETTA: Suggestion on that. Could Mr. Coyle work personally with staff on reviewing that? MR. OLLIFF: You would have to ask Mr. Coyle that. COMMISSIONER COLETTA: I thought we could draft him as our representative. Being that he's a new commissioner, I'm sure he's more than willing to do it. COMMISSIONER COYLE: I wouldn't mind. I'm sure the staff is going to object. But I'll be happy to do that. I'm kidding, Tom. MR. OLLIFF: That's fine. We can come back and develop a list of projects between Mr. Coyle and myself and let the board reconsider those. The last thing was the idea of privatized fleet maintenance, and I'm not sure how or if you want to take a look at that. CHAIRMAN CARTER: I think it was running a cost-benefit Page 164 November 28,2001 analysis, Commissioner Coyle, to find out should we or shouldn't we. COMMISSIONER COYLE: Or any other programs you think would be appropriate to bring it to our attention. COMMISSIONER HENNING: Okay. One thing you may want to consider in privatizing as each department has vehicles, and he's talking about the maintenance side of it, is -- COMMISSIONER COYLE: As well as the sheriff's vehicles, all of those things. COMMISSIONER HENNING: I think that's under the sheriff's privy, isn't it? MR. OLLIFF: It is. COMMISSIONER COYLE: It is? It's all his? MR. OLLIFF: Yes, sir. COMMISSIONER COYLE: We just approved a lease for a building for maintenance of police vehicles. MR. OLLIFF: We provide space. The board's responsibility is to provide space. That's why we provided a leased space for his fleet maintenance operation. But how he buys vehicles, tums them over, and actually maintains them are the sheriff's responsibility. COMMISSIONER HENNING: The suggestion I was going to make is that each department has their own vehicles and, you know, if they can get it maintained out there like changing the oil or something as simple as that cheaper than what we can do, that might be a way to look at it. That would be an incentive for each department to cut their budgets. MR. OLLIFF: Yes, sir. COMMISSIONER COLETTA: Well, I wasn't-- CHAIRMAN CARTER: There's two other commissioners that haven't made an input. COMMISSIONER FIALA: I can wait until tomorrow. COMMISSIONER COLETTA: I really would like to put mine Page 165 November 28,2001 on the table now if I could. I'll take just a second. One, I think for the benefit of our audience we ought to be able to give the people here what our employee ratio is versus the population in comparison to the rest of the counties in Florida. Mr. Olliff, do you recall what that was? I know it was very good the one time that I saw it. MR. OLLIFF: Off the top of my head, I don't have that, but I can provide that for you. COMMISSIONER COLETTA: Yes. I think that would be an interesting thing to draw a comparison because some people are under the impression that we're very heavy in employees. The other thing I would recommend -- and I think it would save a lot of money -- is I noticed that -- I watch different people work with the county, and they all seem to have a different cell phone provider. I would like to see about the possibility of one provider where we can get one price that might be able to save us a considerable amount of money. Also, certain types of limitations to the use of cell phones where they -- I know in the commission office we're very, very careful that if a personal call ever happens we pay for it. We reimburse for the call. I want to make sure that's happening with the rest of the county staff. The other thing I have is that we're talking about budget cuts, but I would like to offer a possible incentive to bring funds in from the end that I've always been quite concerned with or one of our shortfalls has been as far as money goes, and that's the -- I went to the Florida Association of Counties last week. We were putting together our package to send on to the legislative delegation, all the different commissioners. I made the proposal to them that we redraft -- that the legislative body consider redrafting part of the tourist tax where now they allow for an extra penny for coliseums and baseball parks, but to add the terminology for roads. The tourist industry definitely impacts what we're doing out there for roads and the fact that the time Page 166 November 28, 2001 of the year our roads are most crowded is the time the tourists are down here. This 1 percent would help to pay for it. The other commissioners there were very enthusiastic about it, and it passed by a very large margin and is being sent on to Tallahassee. I'd like to see us do a lobbying effort to try to move this forward. It's by far not all of the answer, but it's going to help. We can cut all we want, but we're going to have to find other revenue sources too. The other thing is that I seriously believe that we're under- utilizing our productivity committee which was put together to do the very thing that we're doing. These are -- you know, you have to meet them individually, attend one of their meetings. You would be very impressed. I know I was. These are the leaders of different companies. They've been in the county. They've been in government before. They know the whole process from beginning to end. I think if we brought them in and asked them, "Listen, we have to come up with X number of dollars. We would like for you to review this part of government," these people could do it very professionally and come up with some rationale that would exceed what we can do right here on this board. COMMISSIONER FIALA: You know, I read all of their minutes from every one of their meetings. COMMISSIONER COLETTA: I do too. COMMISSIONER FIALA: They have such good input. It's too bad that they don't have more exposure. I think they're like a great area to weed out all of the things that we don't even need to have brought before us. MR. OLLIFF: Actually, the last major issue that the board has tasked them with -- and keep in mind they have an annual work plan. They have already got a full year's worth of work ahead of them. In fact, they just established what their work plan is for the upcoming Page 167 November 28, 2001 year. The most recent large project that they've got is a review of the Airport Authority. COMMISSIONER FIALA: I read that. MR. OLLIFF: In fact, while I was sitting here today, we made the final plans and arrangements for them to come to you in January along with the Airport Authority to have them present their plan and for the Airport Authority and their director to provide their responses to their recommendations. And I think the most important thing that's probably going to come out of that is a recommendation that this board meet with the Airport Authority board on an annual basis to go over how did we do this year, what are our plans for the upcoming year, what changes to the business plan are we going to make, and making sure that this board and the Airport Authority board are on the same page. You're right. The productivity committee is a great group, and I think you'll see that when you see some of their recommendations coming forward in January. CHAIRMAN CARTER: Board members, thank you. The meeting is continued until one o'clock tomorrow. MR. MUDD: Friday, Commissioner. CHAIRMAN CARTER: Excuse me, Friday. One o'clock on Friday. There being no further business for the good of the County, the meeting was continued to 1:00 p.m., November 30, 2001. Page 168 November 28, 2001 BOARD OF COUNTY COMMISSIONERS BOARD OF ZONING APPEALS/EX OFFICIO GOVERNING BOARD(S) OF SPECIAL DISTRICTS UNDER ITS CONTR~.~ JAMES D. CARTER, Ph.D, CHAIRMAN /',:?bTW"~GIi~'E,~ BROCK, CLERK These minutes approved by the Board on presented or as corrected /,,/,g/4~ , as TRANSCRIPT PREPARED ON BEHALF OF DONOVAN COURT REPORTING, INC., BY MARGARET A. SMITH, RPR Page 169