Seattle City Council Civil Rights, Utilities, Economic Development & Arts Committee 53119

There we go.

Now I'm really loud.

Can you turn it down just a little bit?

Thank you.

And then we will have appointment of the new director of the Office of Economic Development.

We'll have a presentation and briefing from the Office of Arts and Culture on their 2018 Race and Social Justice Report.

And then we'll hear from Seattle Public Utilities on the state of recycling.

And finally, we'll end the meeting with, again, focused on Seattle Public Utilities and Audit Exit Report.

So with that, I want to kick us off with our monthly edition of Cultural Spotlight.

Jenny, you want to do some introductions?

Sure.

Good morning.

Thanks for having us.

My name is Jenny Ku with the Office of Arts and Culture, and we are joined this morning by Joe Ardinger and Rosalie Miller of the documentary Personhood.

Hi, and thank you for having us here today with Personhood.

We've heard a lot in the news the last few weeks about abortion, the attack on abortion rights.

And this film is, we hope to show that these laws reach far beyond the right to choose and can affect women who have no intention of ending their pregnancies.

Personhood, we're going to show a clip today and we're very excited to be at this point with the film.

Personhood is a story of the rise of the fetal rights movement and the growing criminalization and policing of pregnant women.

And there are now 38 states in the country that have laws that give separate rights to fertilize eggs, embryos, and fetuses.

And as a result, the prosecutions of women for things like miscarriage, stillbirth, and drug use during pregnancy have become very widespread.

And this film looks at this issue through the story of a Wisconsin woman who was jailed under that state's fetal protection law.

And we kind of look at what happens to a woman when you try to stuff two sets of rights into one body.

So this clip is, we're very excited to show this.

This is the opening of our film.

It's still a work in progress.

But it's the first time we've laid our credits on it.

And it's exciting because there are a lot of Seattle artists that will show up.

Here we go.

Oops.

There's a metal cot.

There's hair, fingernails, feces on the toilet.

And I would just think to myself, did I do something?

Like, am I really in hell?

They tell you that there's a war on women.

There is no war on women.

Sorry about that.

That's quite all right.

Well, I have to, let me just type in the, I'm so sorry.

Sure, that's a great idea.

We'll fill the empty air with public comment.

It is, but I'd have to log in.

Yeah.

All right.

We've got Marguerite Richard.

Do you want to set the mic?

And we'll be keeping time, two minutes.

Thank you.

Yes.

I'm here today.

Hello.

You're on.

OK.

I didn't hear myself, just like you before, but you kept on talking.

Anyway, I'm here.

Make a comment in regards to, well, I see you have arts and culture and race, but I'm a culture.

And Judge Brown, Joe Brown graced us and he took freedom of speech to another level.

So if the judge is okay with just saying whatever he wanna say when he came here the other night, I'm okay with saying whatever I wanna say, okay?

He cleared it up for everybody in the audience, okay?

And that's standing up for the rule of law.

So my question today to you, when are you gonna stand up for the rule of law, huh?

You could have Gonzalez, five times violate her oath and then you can make something up, some rules and regulations to try to thwart us and cut us off at the pass when we're not doing no more than what Judge Brown did the other day when he came and spoke to his audience.

At any time you can cut something off because you think it's unfair.

So that means that if our human rights are being violated and you find something that is unfair, you have enough enforcement law in your job to cut it off and say it's wrong.

It's wrong.

Discrimination is illegal.

We don't want it in this country.

We don't want it in the fabric of Seattle.

Therefore, we're going to cut it We're gonna shut it down.

I haven't seen any of that in the tenure that I've been coming down here repeatedly telling these people about the level of Degradation in hell that we're suffering through as a people.

I'm talking about black people Okay, and I wanted to stop and I'm not gonna keep telling you over and over over again to end it.

I

Thank you.

All right.

And now we are going to return to our originally scheduled programming back to cultural spotlight.

There we go.

Sorry about that.

Here we go.

When I found out I was pregnant, I had so many emotions.

I was happy, but then I was like, oh, I need to get my thyroid taken care of.

Like, I had this urgency, like, okay, I need to fix my depression.

I need to go in.

I need to get back on medicine.

I need to fix myself for the baby.

We didn't realize that Wisconsin had, you know, the laws that protected fetuses to that extent that me just trying to even going in and get care and admitting things in my past would cause them to want to intervene.

I thought if you went in for help, like, that's what you got.

You know, they would be caring.

They would listen to you and not judge you and just get you better.

Special service, this is Corey.

Hi, Corey.

This is attorney Courtney Groff calling.

I can put some stickers on you, okay?

Thank you.

This is Greg Krug on the court commissioner.

We're in Taylor County Circuit Court at this time.

The doctors, you know, they told me, they're like, oh, you know, you can be honest with me and nothing you say to me will have legal repercussions.

That was a lie.

I had no idea that they were like rallying all these people together for my fetus.

Under Wisconsin Statute 48.133, we are requesting temporary physical custody of the unborn child whose mother is Tamara Leacher.

Thank you.

That court order, just the words on the paper were pretty powerful and mind-blowing.

Seeking temporary physical custody of the fetus says a lot about where we are in this country right now on this issue.

Thank you folks both at the Arts and Culture for always bringing us timely issues manifest and represented in art.

And thank you for the work that you're doing and we'd love to know more about the film as it progresses.

All right, let's move on to item one.

Noel, can you read them to the record, please?

Agenda item one is appointment 01345, appointment of Robert Wansung Lee as Director, Office of Economic Development.

Greetings, Director Lee.

Thank you so much for joining us again.

So this is the second briefing related to your confirmation.

The last time that you were here with us in committee, we talked about the preservation of small businesses.

We had a bit of a focus on the needs of small businesses associated with construction and development pressures that impact foot traffic, as well as commercial rent costs.

I'd just like to take a minute maybe to do a few follow-up questions.

But before we move into that, did you have thoughts that you wanted to add from just your experiences in your first weeks here in Seattle?

Thank you.

Is this on?

Okay, great.

Great.

What I'll do is pass this out.

Instead of writing long reports, because I know you get plenty, what I thought is to kind of have a visual aid.

And this is something that my directors and I developed in concert with the mayor's office.

And our mission that we would like to propose, and this is just a draft, and down the road, after confirmation, I hope to engage in more discussion with this committee and get input from all of you as well.

But as a starting point, building an inclusive economy is our proposed mission.

The second layer from the base is our core competency as a department.

These are where our expertise are.

And the final, the outer layer in this rainbow, is our service delivery platforms to fulfill the mission.

Eventually, with this graphic, what I hope to do is eventually put all of our performance measurements included, and then the budget that's associated with it.

and then our action plans underneath each of these buckets.

So those are the organizing tools, if you will, we will use to help move the department forward.

That's, it's helpful to have a visual to not just demonstrate your programs in your office and where those programs are focused, but I think the next layer that you discuss will help us understand the proportion of time and resources that you devote to each of those areas.

That'll be very helpful, particularly as we move into the budget process.

Exactly.

Great.

Thank you.

You bet.

So just as follow-up from the last conversation, I had a little bit more of an opportunity to review the materials that you provided to us in response to our questions, and I want to thank you again for doing that work.

I know that was a lot of questions and there's a lot of interest on the part of Council in this position.

In particular, I found interesting the conversation around, and of course I did not note the I think I'm going to return to that one in a second.

So let's talk a little bit about cost recovery around special events.

The city auditor issued a report that highlighted that we can be doing more as it relates to cost recovery for special events, and the reason for the viewing audience that that's has relevancy for the Office of Economic Development is because the special events permitting goes through the Office of Economic Development.

Your office issues the permits and, along with the permits, identifies what the obligations are of the permit holder.

And in many instances, the obligations include funding services associated with the events.

And so the auditor found, particularly as it relates to law enforcement, that we aren't recovering costs associated with law enforcement necessary to manage some of these public events.

Folks in the Office for Special Events rightly point out that many of these events are free speech events, so we have to make sure that we're creating a balance.

And even of those that aren't free speech events, there are events that bring sort of vitality to neighborhoods and downtown and actually have a draw, an economic draw.

So how...

Do you see the city moving in an area that we can both address some of the findings of the city auditor while also preserving the balance necessary in order to continue to encourage these types of events?

Yeah, that's a good question, thank you.

I haven't had a chance to read through carefully the auditor's report yet.

But this is a struggle for most cities, is how do you recover the cost of events?

And it certainly is a struggle because you do want to allow local events and free speech events to occur, but all of those events cost.

It has a pressure on our budget.

I think ultimately it will be a combination of civic, public, and private sector coming out with the right formula based on the scale and the type of events.

And so one of the things that I will do is work with our special events to provide our electives different scenarios.

on how that formula should be structured.

And certainly this pertains to heads and beds fees.

It does pertain to our permitting process and the nature of the event has different types of permitting that's required.

So what I'll do with our special events team is to come up with scenarios for our electives on different tradeoffs that will be involved in how to pay for these events for the long haul.

But this is something that I did meet with the police department on this issue.

And they're very clear to me is that this is an issue that needs to be solved.

But also, when we solve it, one of the concerns that they have raised is that the bureaucracy we just need to make sure that it doesn't cause more paperwork in order to recover these funds.

And sometimes the recovery process itself will cost more than the revenue that you generate.

So it just needs to take that into account.

Great, thank you.

One of the other topics of great interest right now relates specifically to the use on the part of cities of opportunity zones.

There are challenges associated with opportunity zones, as well as, as the name suggests, opportunities.

Can you talk a little bit about your philosophy addressing both the challenges and taking advantage of the opportunities.

So the role of government on the opportunity zone is really to be a broker of investors.

And then for us in the public side to create a portfolio of different projects that's in a line with our values.

And typically, for example, in Portland, there was a supermarket that was closed.

the community wanted to own that property and turn it into a community center.

So we put that as one of the portfolio for the Opportunity Zone projects.

And so from the public side, our goal is to organize all the different community development projects into a portfolio and then have a third party broker those opportunities for investments.

But the challenging part is that for the investors, What they want is they want a lot of different portfolio.

They want as many different opportunities to draw from.

So if you only have Seattle portfolio, then you're not going to attract as much attention as if you had, for example, the whole region or the whole West Coast.

So the question is, how do you strategically organize those portfolios in a way that attracts the type of investors that you need?

And certainly the mayor talked about the workforce housing as an example.

So if that is the values and the priorities of the council and the mayor, then our role in my department is to organize portfolios for middle wage or the workforce housing side and make sure we have enough portfolios on that front.

and identify the right investors for those projects.

So that's, right now there's a website that's being developed and in Portland we developed a website as well with all those portfolios in one area and that's something that we'll do here in Seattle as well.

Another one of the topics that I found interesting in your response related to expanding direct foreign investment in Seattle's economy.

And in your response, you had indicated that there are particular types of foreign investment that It's actually an FDI program, Foreign Direct Investment Program, that are investors who are more predisposed to hiring locally and hiring from high priority demographic populations that we want to make sure have access to career wage jobs.

Can you talk a little bit more about that?

In fact, I have a direct experience in this.

I worked for a foreign direct company in Oregon that was the largest FDI company.

It's called Hynek Semiconductor.

And it's a large plant that was making memory chips.

But at that time, the economy was different at that time where the workers in the logging industry in particular were losing their jobs.

And so the question is how do you retrain them and become high-tech workers in a fabrication plant?

So that was a win-win.

We knew that through a variety of different reasons, economy is evolving and regulatory issues, that those jobs were going away.

And so this company played a crucial role in taking those workers and retraining them into high-tech workers, where wage was higher.

as well on top of that.

So they not only made a commitment to hire the workers who were losing their jobs, but they actually played a role in the training.

Oh, you have to, because it's a specialized field.

Well, I know somebody has to train them.

I just didn't realize that it's the investors themselves who were taking on that responsibility.

Yeah, so what we did is a combination of public and the company and the public workforce development system.

So what we did is we made an arrangement.

where the workforce development agency of that region, which is called Lane Workforce Partnership, would actually do all the recruiting and do the basic training first.

And then once we hire from that pipeline, then we then train them even more so that they understand how to use the machines and the tools and so forth.

And so then we contribute, we make an agreement called First Source Agreement, and that means we will hire locally.

The original agreement was 50% would be local hires, but we ended up probably around 80%.

And also the work ethic of that workforce was great.

And they were happy that they had a job and a future.

And it was a high-paying job.

Average wage at that time in the 90s were like $70,000 a year.

So that was a good-paying job.

And so it's a win-win.

So FDI's activities, recruiting companies, if we can find a way to solve problems in our economy where there's displacement and use that opportunity for incumbent worker training and so forth and first-source hiring, it can be a very powerful win-win.

That's great.

I'm excited to learn more about that.

Can you just talk a little bit about the role that you would like to play working both with the arts office as well as the evolving Office of Film and Music to ensure that we continue to support our creative economy?

Right.

Jobs in the arts, design, entertainment, media sectors.

You may recall the Office of Arts and Culture released a report that was done by the Office of Film recently about the creative economy.

And that report itself showed that we have a lot of gains to do in some of the jobs that are available within the creative economy.

some jobs that are very high-paying, and there are others that are not.

And the racial disparity among the sort of proportioning of the high-paying jobs versus the low-paying jobs just sort of reinforces what we already know about racial disparity patterns in income.

So Randy and I met yesterday to talk about this extensively.

And in Portland, there was a TV show that was filmed in Portland called Grimm.

I don't know if you had a chance to see that.

It's quite an interesting show.

A very small company in Portland got the contract to provide CGI services for that And CGI is a visual manipulation with monsters and stuff in the show.

And as a result, that contract they won for that show, they were able to scale their businesses in ways that they didn't even know they could.

I mean, it was truly a success story for a very small company in Portland.

So as the film industry and the creative economy continues to merge, evolve, technology sector is also providing additional tools.

But the challenging part is as the technology, especially in the software field like CGI, is advancing at a rapid rate because the technology platform is, there's a lot of input and money going into that field.

We also need people with the actual creative mind to take advantage of those tools that is lacking currently.

So in other words, you have the hardware, but not the software.

So Randy's role, and when we talked about this yesterday, is that we need to make enough investments so that the creative, the people, still can have access to advancing their creative learning as we also look at the technology platforms and be able to integrate those two so that they all will benefit from and obtain the kind of jobs that they need.

But right now, the technology side is advancing at a rapid rate.

without the creative community being engaged.

And that disconnect is what we need to solve.

And so from Brandy's side and economic development side, our role is to connect those two so that the artist can actually take advantage of the technology in order to gain the kind of jobs that they need.

And it's a win-win because the technology folks are saying we don't have the creative minds to actually take advantage of it.

And so it's a win-win.

And so that would be the integration.

Great.

Well, I have no further questions.

I find your vision for the department to be an exciting one.

I'm excited to work with you.

Your experience as the former director of economic development in Portland and your service as the regional solutions coordinator for Oregon Governor Kate Brown, and your experiences also working in the private sector, I think, make you a really good fit for our city.

I think we have identified a number of shared priorities.

Absolutely.

With that, I'm just going to go right ahead and move appointment 01345. I'm going to second it, and I'm going to vote yes in favor of your appointment.

And this will move on to full council not this coming, or yes, this coming Monday or not this coming, not this coming Monday because we are voting on a Friday, so we're gonna skip a week.

But we'll see you at full council Monday after next and congratulations.

Thank you so much for your support.

A dead item two is the Office of Arts and Culture, Race and Social Justice 2018 report.

Can you go see if Michael Bryan's going to be joining us?

Greetings.

How are you?

Doing all right.

Thanks for asking.

Happy Friday.

I just sat at the computer, because I have to start.

Great.

All right.

Now, everybody's all settled?

Let's start with some introductions, please.

Just a quick go around.

Hi, my name is Jason Huff.

I am a project manager for the Office of Arts and Culture.

Thank you, Jason.

Matthew Richter, cultural space liaison, Office of Arts and Culture.

Hi, Randy Engstrom, director of the Office of Arts and Culture.

Hello, Randy.

Hi, Lara Davis, arts education manager for the Office of Arts and Culture.

Thank you.

Hi, Calandra Childers, Deputy Director.

Hi, Diana Falchuk, Creative Strategies Initiative Manager.

I'm in a partnership between OCR and Arts.

Fantastic.

Who's going to kick us off?

Good morning, thank you for having us.

I think that our office's racial equity work is probably the most significant force that holds our work together.

I think it guides our aspirational work and our programmatic work in the office.

Up there, I don't need to read you, but our office put forward a commitment to racial equity as a department.

about three years ago, and we use this as a guide for all of the work that we do, including the RETs and the programmatic work that we'll talk about today, but we really envision a world in which we don't have a racial equity plan and a strategic plan, we have one plan that is in fact both.

and that racial equity drives all of the work that we do, and it's not separate and apart from the work of the office.

That commitment is co-signed by the Seattle Arts Commission, who's not up here with us today, but who are our partners in all the work that we do.

We will talk about two specific racial equity toolkits that we did, one in the cultural space world that Matthew will talk about around the Public Development Authority, and one that Calandra will elaborate more on related to King Street Station.

But for a variety of reasons, our approach to this work is less about checking the box of the four RETs and more about how we actually integrate this work into everything that we do.

And so there are challenges associated with that.

The urgency that the institution sort of requires of our work day to day.

realizing that real, really meaningful partnership work with community, really meaningful equity work, we like to say moves at the speed of trust, takes time to build those relationships with community, and just putting a deadline of four things that must be done by the end of the year doesn't necessarily translate into meaningful change or deep relationship.

We're lucky that we've been able to build some of those relationships over time, and I think you'll hear about that in a lot of this work, but the tension between the way that bureaucracy functions and the way that social movements function is an interesting tension to be in.

And I think while we are eager to demonstrate our commitment to these values, we have also found that as we stack new programs on top of new programs on top of new programs without necessarily the resource or the capacity to implement them fully, we find ourselves being sort of overwhelmed and under-resourced.

And so part of what we tried to do in 2018 was carry through some of the previous RET work that we had done specifically at King Street.

Some programs like Creative Advantage have been racial equity initiatives from their origin, but that doesn't fit the box necessarily of an RET in the way that they are designed currently.

I love that move at the speed of trust rather than the speed of deadlines.

Your critique around the citywide departmental standard of four RITs a year is interesting.

Not every department, I think, has gone as far as your department has in integrating this work throughout all of your programs.

And so I get the concept that the sort of four one-off projects may not translate very well to an organization like yours that, again, has integrated racial equity work throughout everything it does.

But I, you know, just because I'm interested in your perspective, Does that critique of that four RETs a year may not be very useful?

Does that extend to, it just seems like the good place to start for organizations that aren't as far as long as you are.

I think it's both about compliance and about aspiration.

And I think if the way, as I understand it, the way toolkits are designed is to train you how to do work in a particular way that is inclusive and centers community.

And I think that's really important, particularly if that's not the practice that you have.

And I think there are departments with 1,000 employees and there are departments with 20, and they all do four RETs.

And so it's a challenge to figure out a system that will work for everybody, but I think that there has to be a balance of what is required and then what is offered, if that makes sense.

That's beautiful, thank you.

I don't think it's a bad idea to do it.

I think we moved our office last year for the second time in 47 years.

We had a lot of changes on staff and we've been without a functioning online grant system for several years and all of that creates an administrative compression that makes time a challenge, it makes capacity a challenge.

That's not an excuse, it's just a reality.

And you know, we will always have challenges as we go on.

I do want to name that I feel like we're in a much better place with the grant system now, and we can talk more about that if you want, but I'm a huge fan of Saad's and the work he's doing at Seattle IT, and I feel like we're getting into a really good place.

figuring out how you evolve your organization as you deal with the constraints of capacity over time, the need grows and the capacity is constrained.

So we're working on it.

We're working to get up to full speed, but we want to be honest about the challenges because It's lovely to get up here and talk about the work that we're all so proud of, but we also know it's a journey.

We're still on it.

There's more we need to do, and we're going to continue to push ourselves.

So with that, I will turn it over to Matthew to talk about some specific RET work.

Thanks.

I'll talk about two programs that we're working on this year.

Both of these programs arose from the CAP report, the 30 Ideas for the Creation, Activation, and Preservation of Cultural Space report.

The first is the Build Artspace Equitably, or what we call the BASE cohort.

This is a cohort of 20 to 30 people.

who spend a year exploring these issues of the intersection of cultural development and real estate development.

The cohort is about equally split between folks from those two arenas, real estate and cultural or community development.

And it's an entirely people of color based cohort.

We just graduated the first cohort about a month ago and are launching our next cohort in June.

It builds capacity in both of these communities to engage with one another.

It seeks to connect these communities back to one another.

They're both really curious about one another and understand that they rely on one another for survival and don't have the tools necessarily to engage directly with one another.

Second project is the creation of a new public development authority dedicated to the retention of cultural space and the holding of cultural space, also arose from the CAP report.

It is another one of these programs that seeks to knit these two halves of the community back together again, the folks from the cultural community and folks from the real estate development community.

It centers cultural spaces as really the hearts of the neighborhoods.

As the city grows, how do we retain cultural identity in these neighborhoods?

And it seeks to hold space for that retention.

On the base cohort project, how are people selected to participate in that?

We've, in the first year, made fairly deep investments in both the Chinatown International District and the Central Area through the Central Area Arts and Cultural District and the Wing Week Museum, and really engaged folks from those two organizations along with folks on staff and from the Arts Commission to both nominate and then vet the proposals that came in from community.

In the second year, we relied on those communities again and also folks who had been through the first year's cohort to be part of a panel vetting team that both, again, the entire first base cohort and staff were able to nominate folks to apply.

And then that smaller group did the vetting over the course of two sessions or two days to narrow it down to the final cohort.

Are you able to keep track post-training how people were able to apply the expertise that this effort gave to these communities?

Yeah, I mean it's exciting both that connections get made within the cohort, development projects move forward and architects are engaged and projects develop directly out of the cohort.

People also gain the skills to then go out and sort of not need quite as much of a translation service to engage with the communities that they're seeking to work with and have a little bit more ability to engage in that conversation directly.

Yeah and then on the I'm sorry let me one more thing we've been exploring like how do we what do you do with a certification with the base certification what do you do with this group of 30 people that we've now created one of the really interesting ideas I think and we were starting to engage a couple of different organizations around this.

is the creation of ad hoc teams of certified folks from that first cohort to jump in and consult to an organization looking to deepen its connection into communities of color, looking to deepen its connection into various cultural identities and real estate projects in town.

Yeah, I mean, it's work that may not lead very easily to a lot of data and reported outcomes.

But to the extent you can collect anecdotes and stories of what has resulted from this work, I think it's interesting and potentially useful.

Before we move on to the next slide, as it relates specifically to the PDA, can you talk a little bit about the timeline for the program and the policy design phase, and specifically what alternatives might be?

If it turns out that the PDA is not financially or operationally viable, though I hope it will be.

About three weeks ago at the most recent Square Feet Seattle event, we released the Structure for Stability Report, which is the 100-page report broadly recommending the creation of the PDA.

We are currently spending 2019, the remainder of 2019, creating a much more We have a detailed roadmap to the creation of the actual organization.

We're in ongoing conversations with CBO, with OED, with other city departments to create the partnerships interdepartmentally and the relationships outside of the city to stand this thing up in the first quarter potentially of 2020. Great.

So it sounds like we're figuring out that it is operationally and financially.

Yeah.

I think it's important to note that we strongly recommended and reflected the recommendation of the folks that had engaged, which is about 100 people, both within the city and without, again, through the RET process as well, that we move forward with the idea.

really diving down into the minutia of budgeting and legal constraints around the organizations and the money.

In terms of what is a fallback plan for addressing these issues, the report itself looked at multiple different models for how to stand this work up.

One of which was as simple as continuing to move forward with an interdepartmental team of different folks from different departments.

focused on commercial affordability and cultural affordability.

And that is one option to keep addressing it just as individual bodies of work within departments.

Right.

And remind me the name of the report that was released.

Structure for Stability.

We'll send a copy to your office.

Please do.

Thank you.

And it's available online as well.

Great.

Appreciate it.

Lara.

Great, thank you.

So I'm going to talk a little bit about the Creative Advantage, which is the Office of Arts and Culture's primary investment in K-12 arts programming.

So the Creative Advantage is our citywide initiative.

It's our K-12 plan to establish equitable access to arts education for all students in the district.

And it's realized through a collective impact partnership between the district, the city, through our office, Seattle Foundation, and many community arts partners.

Since its launch in 2013, we've reached 61 out of 102 schools in the district.

This last year alone, we launched in the southeast region, which includes schools like Aki Kurose, Mercer Middle School, Franklin and Rainier Beach High School.

to add 21 schools.

We also launched the Media Arts Skill Center course at Seattle World School, and this is part of our goal to connect arts to careers for high school students, something that young people asked for in the research phase of the Creative Advantage.

And in the next school year, 19-20, we'll be expanding into additional North End Pathways with the goal of reaching all schools in the district over the next two to three years, so by 2020. Our racial equity outcomes are really focused on increasing access to arts education, not only for all students, but with a clear focus for underrepresented students.

And the research that we did locally shows that that is students of color, English language learners, special education students.

And we do this by increasing certificated arts instruction and through community arts partnerships.

We're also working to increase access to teaching artists of color.

who serve in partnership with schools to provide really meaningful quality engagement for students during the day through arts integration and also provide professional development to teachers.

And that is a direct resource that comes through the Office of Arts and Culture that funds those relationships.

And lastly, we're working to arm practitioners across the board, teaching artists and teachers with culturally responsive teaching strategies that center the cognitive development, capacities, and lived experiences of students of color for the benefit of students of color and for students at large in the district.

I'll end by saying, you know, we do an annual evaluation of the program with an external partner, the Burke Group.

looking at the gains that we're making.

Are we increasing access to the arts?

Are we moving the needle on equity?

And some of the findings from our most recent report are encouraging as they reflect things that have to do with creating a culture shift in schools where the arts are present.

We're continuing to make significant gains in access for art and music, specifically and particularly at the K-5 and K-8 levels.

I will say that racial disparities continue to persist, though, when we look at high school, secondary, actually middle and high school in particular, we see that while students of color are represented and in some cases overrepresented in visual arts programs, particularly black and Latino students are underrepresented in music programs.

And we're looking at the data and talking with practitioners and schools to dig into that a little bit more and understand what's going on there.

It may have a lot to do with what schools are offering, which schools are providing advanced programs that also then provide music programs that connect to a pathway of opportunity that begins in elementary and what students haven't been able to just access that opportunity.

So that's something that we're looking into.

I am happy to say though that when we look at schools that have been involved in the creative advantage thus far, their development and cultivation of 21st century skills and habits and culturally responsive teaching is way higher, 30% higher than schools that are not engaged in the creative advantage.

So those are just some of the highlights about the work and would be happy to answer any questions that you have.

I'm not going to go too deep on this one, because I think you're coming back for a Creative Advantage briefing on June 11th.

One thing I am interested to learn more about, not to suggest that arts education is about employment, it's, you know, about getting people career ready or anything like that because it's arts education, the value of it is so much more significant than career readiness.

But the creative advantage report did identify disparities.

racial disparities related to the types of arts that people are employed in, and it seems that the Creative Advantage program might, by introducing some of the technologies that are used by folks who are in the arts but are in the arts and the higher income, more white vocations, you might be able to find a way to sort of coax, ease into that issue through creative advantage.

And maybe you're already doing that.

Yeah, absolutely.

And we'll definitely talk a little bit more about sort of the career-connected learning, creative workforce development stuff when we come back in June and the partnerships that we're doing are holding interdepartmentally around some of those specific things that you're talking about.

So looking forward to doing that.

Diana.

Great.

So in 2018, we launched the Creative Strategies Initiative, which is part of our longtime partnership between Office for Civil Rights and Office of Arts and Culture.

And it's part of a new culture shift strategy that RSJI is working on.

In this approach, we're using arts and culture-based strategies, everything from actual artist and residence projects and programs, to using artists through an RET process, to arts and mindfulness integrated learning environments, like the photograph that you see up there.

to actually make shift in policy and practice in non-arts areas.

So looking at areas like the environment, in workforce equity, in housing, et cetera.

The project that we spent a lot of capacity on in 2018, which was one of five initial creative strategies projects that we're working on, is called, or was called, Turning Commitment into Action for Environmental Justice.

Partnership between Office of Arts and Culture, Office of Sustainability and Environment and Seattle Public Utilities.

And for that, there was a direct request that came from the Environmental Justice Committee at OSE saying, you know, we have this equity and environment agenda, but we really need policy influencers from historically white-led organizations to actually get behind it and work on what it is to show up in racially equitable ways to move forward in an agenda that actually centers people in communities of color.

And so we developed this cohort model that met for six and a half full days over the course of about four and a half months, working with a team of teaching artists and myself.

The other three folks were from around the area, the Northwest region, all people of color.

working on arts-integrated and mindfulness-integrated learning about structural racism, about what it is to do culture shift work, and about how do we actually make policy change in three key areas around food systems, around green stormwater infrastructure, and around urban forestry.

And that cohort is continuing to work in those three areas.

Those groups are continuing to connect with each other and make change through their organizations, some of which were community organizations, and also through city folks and county folks who are part of the cohort as well.

So that's just a little taste of that.

And so the idea is to sort of replicate this partnership with other departments while using this concept of a culture shift, but having it go from your working with OSC and SPU now, but you're going to be moving on to other departments to use that arts strategy?

Yeah, so that was just the one product that we wanted to highlight for 2018. So there have been five that we're working on.

The biggest one that you've probably heard of is a partnership between SDHR, OCR, and Arts called The Shape of Trust, which kicks off next week.

And it's a multi-year project that begins with an original piece of theater based on stories from our city's workforce of racism, racial equity, and belonging.

And we're using that in a series of cohorts as a teaching tool, the video, for managers, supervisors, and people who advise on HR matters.

So that's just like another example.

Another one is the Chinatown International District Racial Equity Toolkit process, which used to live with OPCD, and it's now with DON.

And so last year we piloted two different ways to embed artists to do community engagement, and we're going to be continuing that this year as well.

Hi, I'm here to talk about the public art program, and I think as Randy mentioned earlier, how racial equity has been incorporated in just the work that we do, and it drives a lot of our decisions, and kind of talking about the work that the public art staff and the public art advisory committee have taken on in the last few years.

You know, we are working to engage and commission artists of color, working with communities of color, and through our partners like SPU and SDOT, you know, we've had some pretty major achievements as far as commissioning a lot of younger artists of color who have now joined the public art field and it's been, it was exciting over the last few years.

I think one of the exciting projects that we're here to talk about is the Ship Canal Water Quality Project that we're partnering with SPU on.

So we have, there are four locations that are located along the Ship Canal that we have worked and we have commissioned three artists for three of the sites.

For the Ballard at the, Bay Pump Station, we have commissioned artist Jeffrey Varege, who is a Port Gamble-Sclallam tribal member, and we specifically had that project.

We wanted to honor Coast Salish culture because the location of that site was where the Shilshol village was.

And so we wanted to make sure that the city had an opportunity to honor that history and that culture.

And so we wanted to make sure that we had a native artist for that.

And then for the two other projects that we had in Wallingford and Fremont, those were just open calls.

The great thing about it is that there were two other indigenous artists that were commissioned for it.

We have Preston Singletary of the Tlingit tribe, who was selected for the Fremont project, and then Ryan Feddersen, who's from the Confederated Tribes of the Colville, for the Wallingford project.

So it's really exciting to have three indigenous artists for those projects, which also go along with Marvin Oliver, who has an artwork project in Salmon Bay as well.

for significant public art projects coming online in the future.

Thank you.

As it relates specifically to public art, we have in the past discussed our interest in the percent for art project moving into using funding derived from these large capital projects to also support live performance art.

Have we had any success in doing that?

Performance art?

Live art, yeah.

That was one of the items that had come out of an old slide report and I think we had talked about making some changes to the program to allow for that possibility.

Yeah, so we have a artist in residence on, Jason, can you remind me which bridge?

Fremont.

The Fremont Bridge, thank you.

So we have a musician in residence.

So we're starting to push a little bit of the boundaries beyond just working within the visual realm.

And we're definitely thinking about a lot of the public art projects as being experiential and using social engagement.

And sometimes that looks like performance.

Sometimes it does end up being in the visual realm.

But I think we're definitely pushing those bounds, and we can definitely give you more specifics on the public art program as a whole.

Great.

So not live art.

We should refer to it as experiential art.

Is that correct?

Yeah.

Okay.

Got it.

I won't make that mistake again.

Thank you.

Do you want to talk about King Street?

Yeah.

So I'm so excited to talk to you about King Street.

This was a project that, as you know, has been several years in the making and went through a really extensive racial equity toolkit where we engaged about 500 folks to really get deep feedback about how we can use this really incredible resource and how we can make it the best use for folks who haven't been traditionally represented within the I keep trying to say public art, and it's not just public art, but within the arts field itself.

We're actually coming up, tomorrow will be our 10-week anniversary of being open to the public.

We opened in mid-March, and I'm really pleased to say that we've had over 5,000 people come through the space in those 10 weeks.

We had about 2,700 for our opening day.

And we've been averaging about 50 people a day that are just walking into the space to experience the Yehaut exhibition that's in there right now, which features more than 200 indigenous artists.

So that feels really successful.

And in three weeks on the same plaza that you see here for the opening day, we are going to be installing and unveiling our first plaza artwork, so a piece of art, public art, that will sort of help identify the space as a cultural hub and let people know that there's something on the inside that they should come and see.

That piece is called Brings the Medicine Sundial, and it's by Kimberly Darianga, and it is being intentionally unveiled on Friday, June 21st, for the solstice, because it is a sundial, and so it's representative of that time.

So that's all really exciting.

But we wanted to talk today a little bit about how the outcomes of the Racial Equity Toolkit really informed how we created the programming and the space.

So I wanted to talk about a couple of the sort of top level themes that came through with all of that outreach that we did.

The first one was around racial equity and inclusion.

And that was, we approached the outreach that we did through a racial equity toolkit process where we really prioritized the voices of folks who haven't been traditionally represented.

And really what came through loud and clear is that it's not just the approach and how we got that feedback, but it needed to be the driving theme in how the programming happens.

And so the programming is really explicitly about showcasing the voices of communities of color and other artists who haven't traditionally had that kind of representation.

And so that is how decisions are getting made.

Decision making is happening through a brand new group called the King Street Station Advisors.

which is a group of about 20 folks that is highly representational on age, on race, on disability status.

We've got folks who are in their late teens all the way up into septuagenarians.

It's a really incredible group of people who are reviewing all of those community ideas and requests and sort of being able to figure out what makes sense to go in this space, what do we really want to prioritize, and where do we want to put our resources.

So I think the way that we've looked at that programming model is really very different than sort of the traditional curator or group of curators that kind of makes the decision from on high.

So the ideas come from community and they are decided on by community.

So that's the first big theme.

The second big theme, which is not too surprising, is that we have to really support artists.

We can't have art without supporting the artists.

And one of the pieces that actually came out of this that I thought was really neat was that we don't want this just to be a presentation space.

We really want it to be a generative space.

We want it to be a space where artists can come in and work on their craft and create things.

expand on their ideas.

And so we actually, through the feedback that we got in the construction process, we moved the artist-in-residence space from, it was originally going to be in a kind of back corner area, really to put it right in the center.

So when you come up the stairway, the first thing you see is the artist-in-residence space.

You can see artists at work in there right now.

We have a really amazing carver who's in there right now.

So that's pretty cool.

And then the last theme that I wanted to touch on was connecting the space to civic life.

And that's the piece that I think we're really looking at right now, now that we have, we're sort of up and running and we're getting our feet underneath us.

So we've been really, we've been reached out to by our partners in so many different departments about how they can host things and have their events in the space.

And that's the piece that we're, So we have to figure out how to get the resources in place so that we can do that in a way that supports everybody.

But I think that's the really exciting piece is knowing we've had thousands of people come through here.

How do we connect that back to everything else that the city does?

Absolutely.

The visits that you're receiving, You don't want to lose that momentum, right, once it's not so new.

So just having an intentional program for always having people in and using the space.

And as you say, specifically connecting it to civic life, I think, is really brilliant.

So I'm glad you're working on that.

It's a great space, and everybody should have the opportunity to use and love it.

Thank you.

I think we talked about the show.

You should come see it.

You, everyone.

And it's an incredible accomplishment.

Just want to shout out Tracy Rector, Asia Tale, and Sapreet Cologne, the three curators who put that show together.

It's more than a show at King Street with 300 artworks.

It's a year-long plus endeavor that involves dozens of sites.

A really incredible thing that we're privileged to host.

That's a bunch of stuff.

You know, I should have said this at the beginning, but there's over 40 staff in our office and any one of them could have been sitting at this table because this is work that everyone values and contributes to.

Looking ahead, we're really excited.

I want to give a quick shout out to Rick Reyes, our Racial Equity Coordinator, officially full-time Racial Equity Coordinator as of Tuesday and really did the lion's share of the work on this presentation.

We're really lucky to have him.

We're excited about the new realizations we can have around public spaces.

We're excited to have a second base cohort where we can learn from and build on the success of the first year.

We're excited to keep diving into the PDA as an instrument of equity and cultural preservation.

You're gonna hear from Lara about the Creative Careers Cohort as a part of Creative Advantage and our contributions to workforce development and the future of work.

I mentioned Ricky as our full-time racial equity coordinator, super excited about that.

And next week, The Shape of Trust, which is arguably the most ambitious sort of equity partnership we've had with OCR, which is a seven-year partnership.

launching with three sold-out shows that are going to bring this program to fruition.

So you'll hear about all this next year, and maybe some other stuff, because who knows where it's going to go, but this is something that we're really proud of and that we enjoy being able to talk about.

Thank you so much for bringing this to me.

I did want to go back to something on the challenges page because I was so immersed in what you were saying about RETS that I'm afraid I glossed over it.

Can you talk a little bit more about what it means to be a granting organization that is functioning without a granting platform?

That's a thing, right?

So our office was chartered in 1971, and since 1971, our primary activity has been investing in cultural organizations.

In 1971, we funded seven organizations.

Last year, we ran nine funding programs.

We funded about 375 organizations.

For many years, we did that with a web-based platform that allowed people to apply through a platform, and then that software would aggregate information.

It was fantastic.

And it worked really well.

And then a couple of years ago, that went away.

And we've been waiting for a new solution from our friends at Seattle IT.

That's what I thought you were talking about, but I just wanted to make sure I heard about this.

We're getting there.

We're making progress.

But it's the time it takes to do that by hand when you get hundreds and hundreds of applications nine times a year is significant.

Right.

And you have a rolling grants process, right?

Yeah.

And nine programs that are essentially annual.

And we've had to adapt that a bit to accommodate the absence of a system.

Thank you.

We'll see what we can do to help.

It's getting better.

We're working on it.

All right, well, again, thanks again for joining us.

Lara, we'll see you later on in June.

I think it's the 11th.

And look forward to hearing more about Creative Advantage.

Great, thank you.

Thank you.

Item three is Seattle Public Utilities on the state of recycling.

Greetings.

Welcome.

Hi there.

Good to see you.

Thanks for joining us.

Let's start with some quick introductions and then we'll kick it off.

Good morning.

Good morning.

Ken Snipes, Chief Administrative Officer and Director of Soloways for Seattle Public Utilities.

Hans Van Duzen, Soloways Contracts Manager, Seattle Public Utilities.

Heather Trim, Zero Waste Washington.

Fantastic.

Thank you all for joining us.

Who would like to get us started?

Heather, are you going to?

I will.

So I don't know if you want to say something, Heather.

No, go ahead.

So we're here this morning to provide you with an update on the state of the current recycling market.

Right now, as you know, there are a number of issues impacting the global recycling markets.

Today, we're going to highlight two of those elements, the first of which is the recycling import limitations that are being imposed by China and others.

So Heather's going to, I think, give some broader context, and then we can come back to the issues.

We're switching it up.

OK, sounds good.

Thank you.

Great.

So I'm going to do a quick presentation that talks about the drivers for why we're in our recycling crisis, and then spend a bit more time on the solutions.

So Zero Waste Washington is a statewide nonprofit working to make trash obsolete, and largely by helping pass laws at the city and state level and doing pilot projects and community-based projects.

So I'm going to talk big picture about plastics, and then some of the drivers, like the consumer confusion, the challenges at our recycling operations, our end markets, and then finish up with solutions and legislative bills that just passed at the state level.

So as you know, we live in a plastic era.

Since World War II, we have had an explosion in the amount of plastic around the world that's being produced and used.

This is showing from 1950 to 2015 by sector, the different types of plastic.

The bottom, which is the blue, is packaging.

Between 30% and 40% of our plastic is being used for packaging.

And this is what's causing some of our biggest problems in our recycling crisis right now.

One of the challenges is that the manufacturers keep introducing new types of packaging which end up not being very recyclable.

Different materials put together, laminated materials in flexible pouches and metal put with plastic in that can right there.

Another challenge is that we, the consumers, are very confused about what to put in which bin.

There's this thing called the three-second shrug.

And that means that if you look at your bins, you have something in your hand, and you can't figure out what to do with it within three seconds, you just put it in whichever bin is closest.

So I hate to admit it, but even I have problems with this, and I work on this stuff, so I should be able to figure this out, and I'm even confused.

We need to make it easier for the consumers.

Well, particularly when there's new packaging that's introduced.

Exactly.

So you might learn it, and then they change it all up again by introducing new products.

Completely correct.

The other issue is, is something compostable or not?

So if you have a fork, right now, if it's brown, you're not tan colored, you're not sure if it's compostable or not compostable.

So the consumers are confused on that.

So as Hans is going to talk about in a moment, in terms of the details, some of the Seattle numbers, we have a crisis that's been precipitated by China National Sword.

In March of 2017, they announced that by the end of that year, they were no longer going to be accepting waste from around the world.

They were accepting 60% of our waste from the Pacific Northwest.

The reason is because we are in a deadhead situation.

We have all this material coming from China and Southeast Asia to our ports in containers, but we didn't have that much stuff to send back.

So it was very inexpensive for us to send our waste to China to be processed and it was cheaper to do that than to truck it to say Portland, Oregon from Seattle.

This has, this manifests itself that they said there were 24 different commodities from textiles to different types of paper and plastics that they would have a standard of .05% contamination.

That is essentially zero.

And the reason that's important is that people don't like to talk about it, but our contamination rates in our bales is 11 to 20%.

Way higher than zero.

And when one talks about contamination, we're not talking about PCBs and toxic chemicals.

We're talking about things that are the wrong thing in each bale.

So paper, metal, glass, food waste all have value if they're in their own bale.

But we have them in the wrong bale, which is 11 to 20 percent contamination.

What was the 0%?

0% is the standard that China sets.

They're saying they do not want any material coming in if the bale has basically anything.

These are two inspectors on the Chinese port, in a Chinese port on the dock.

They used to just look at the bales.

They look OK.

Send them into the country.

Now, they cut them open.

And if they find anything in there, they say the entire load is rejected because 0.05 contamination is essentially zero.

Thank you.

Yeah.

Recology down in San Francisco has been able to get to about a 2% contamination rate by investing in a lot of new equipment in their recycling facility, including seven optical sorters.

So it is doable at the recycling facilities, but it takes a big investment.

So the problem is...

The idea of having better sorters is really to correct the human error though, correct?

Correct.

There are many solutions, but one of them is to make the recycling facility operate better, and Hans is going to talk about this a bit in a minute.

So why do we have such a high contamination rate?

One reason is because when our trucks are going around our neighborhoods, they crush everything down so they can put 30% more capacity into the truck, which is great from a greenhouse gas perspective and from a trucks-in-your-neighborhood perspective pollution.

But what that means is, at the recycling facility, the plastics are now really flat.

This is a couple of weeks ago.

I got to be a picker at the recycling facility, and these are some of the other folks.

We were trying to pick out the plastic film from the line, and I kept grabbing the bottles.

They were so flat, they looked like film.

So the problem is your recycling facility is set up to sort round things from flat things like paper, and the plastics become flat and they get into the bales as do plastic bags, which I'm going to show here.

So this is a mixed paper bale that I encountered at a wood pulp paper facility in Spokane.

It looks great.

It looks like it's all paper.

But when you look up close, you can see that it is not.

It is full of plastic.

So this is, for example, a yogurt or a sour cream cap.

And this is a plastic bag.

See the vertical brown?

That's a plastic bag.

The bags become flat like paper.

So those bales look like paper, but they really are full of plastic and other things.

The other big issue that's causing contamination is that the recycling facilities have these big rollers, which is a system called a waterfall.

The idea is that the paper will float across the top and go into a paper area, and everything else will fall through.

waterfall through, and that will be other things they sort separately.

The plastic bags and film catch on the rollers and clog them up over the course of a work cycle, let's say eight hours.

By the end of eight hours, they're down to 75% inefficiency.

In other words, it's so clogged, very little can go down.

That causes contamination, and then the workers have to go in on the line and use knives and drills and cut the film and plastic off the rollers.

It takes about an hour, at least.

And it's very dangerous for them.

The plastic is like concrete, it's so hard.

And it's also costing us ratepayers because of having to pay for this action that they're doing, plus the contamination that's going into the bales.

So what are solutions?

So basically, there's sort of two areas.

One is reducing the use of unnecessary plastics.

And the other is building markets and restoring our recycling system.

And Hans, again, will be talking about that a bit.

And I'd like to point out that the Seattle team we have is excellent.

So we have Hans.

We have Susan.

We have Sago Jackson and other people at SPU who are working really hard.

And I do believe Seattle is a leader in the US on this.

We are helping push the spear.

So let's start with bags.

Before we jump in, I am struggling with the focus on plastics when I've heard, and maybe I've heard incorrectly, that the contamination issue that China has most identified as the problem is with paper.

Right, it's the paper bales that are contaminated with the wrong thing.

I see.

So yes, paper is the big problem.

But it's not, I've just been assuming it's all dirty paper.

Paper with food waste or wet paper.

It's plastics in with the paper.

Plastics is one of the main problems.

Hans, you'll be able to address a little bit of that in your talk.

While you just explained all the stuff about the plastic.

So plastic is huge.

There are other problems.

But if we could really address plastics, it would help a ton with the paper contamination.

But there's also glass, and there are other problems.

So starting with bags, we now have 28 bag ordinances in Washington State.

Councilmember O'Brien was a leader here in Seattle to get our bag ordinance.

And Bremerton is on deck.

They're getting ready to vote on June 5th.

Congratulations.

Yeah, it's great.

It's been really exciting.

And so we got to the tipping point of being able to try to do a statewide bill.

It failed.

We had enough votes, but on the last day, the leadership didn't let it come to the floor.

But we will be back next year with another one.

But in the meantime, it would be great to update Seattle's bag ordinance to be more and have some of the features that were put into the statewide bill, because we don't know what's going to happen, and things could happen, you know.

It would be great to have Seattle get on that.

Another area are the to-go containers.

What would it mean to update the ordinance?

What elements?

I'd be happy to tell you.

Right now the charge for if you have a paper bag or a thicker plastic bag at checkout is 5 cents.

We would like to see that go to 8 or 10 cents because the cost of paper bags has gone up in the last 10 years to over 10 cents, to 10.5 to 12.5 cents.

for the independent grocers.

So it's very expensive for them and for some of the smaller stores to be providing those paper bags.

Also, it would motivate people to bring their own bag more vigorously if the charge was higher than five cents.

And are you confident that stores are passing those costs on to consumers?

Well, we don't know in Seattle, they might be, but because it's only five cents, since the paper bags are so expensive.

But fundamentally, we want it to be more of an even playing field also for the big stores and the small stores.

So the Safeways and Albertsons can more easily afford this, and their bags are cheaper.

It's the independent stores like the PCCs and the Red Apple and the IGAs.

who are challenged because they have the more expensive bags and they're kind of a lesser advantage overall in terms of economies of scale.

Another issue is fast food.

So right now we exempt fast food.

The state bill would not and some of the newer ordinances do not exempt fast food.

So what's our sense of how well we're doing as it relates to enforcement, particularly in small stores?

I still see a lot of plastic bags in the smaller corner stores.

That's the question.

Yeah, I mean, those are all those topics.

We're going to come back in a few weeks because we have an annual report we provide to you on exactly that topic.

So we're pulling that together.

And those are really good questions that we'll provide.

I'll hold it.

for that time then, thank you.

Although I'd like to point out, we have never advocated as an advocacy group to do a lot of enforcement because we see this as something evolving over time.

So all these things are like recycling.

It's something that organically people do more and more over time.

So the second issue are the to-go containers.

There are now eight ordinances in place in Washington State, and Burien is on deck.

The newest ordinances have it, they ban styrofoam, and the alternative is compostable only.

Seattle does not have that.

Seattle is compostable or recyclable.

And one of the challenges is if you have a plastic box that has salad dressing on it, That's food contamination, and it's very hard to really recycle a plastic box if it's got that food contamination on it.

So there's an area that we could consider for Seattle's upgrade on that ordinance, as well as we want to really encourage durables.

So people, if they're in a store, to be able to have a real plate and a real silverware instead of having plastic disposable.

A big, big issue is water bottles.

We are not feeling at this point that we can ask Seattle to ban water bottles yet because of Flint, Michigan.

Basically, people are not assured that their water is safe.

And we can't assure you that you don't have lead in your at-home piping, although most people have probably fine water.

It's a little tough to go with that from a policy perspective.

But what we are wanting to do is encourage a lot more refill stations.

And in fact, Seattle Public Utilities just funded us with a waste-free grant to do an app.

to encourage businesses to sign up on the app, be on a map, and then they would refill people's water bottles for free.

And we, of course, want to go statewide with this.

So this is an exciting opportunity to really get people to bring their own bottle, but not yet go with a regulatory approach.

So in addition to reducing the plastic, the other big thing that we can do is to build in markets and restore kind of who's paying for the recycling.

And the bill that Sago Jackson from Seattle helped write, and it succeeded in the legislature, it didn't pass as an actual program, but as a study bill, would be to do plastic packaging stewardship.

And that would say that the manufacturers and brand owners would pay for the end of life of plastic packaging in Washington.

That would shift the burden from the rate payers to the manufacturers, like they have in British Columbia and like they have in Europe.

This would be a complete revamp of the system.

This would be amazing.

So we got a study bill which sets us up for legislation in two years at the state level.

It's kind of a state level type of thing.

Another bill that did pass, which is super exciting and will really make a big difference on recycling, is compostability labeling.

It says that if you have something that's compostable, it must actually meet the standard and be compostable and say compostable on it.

Here's a great example.

So these are two splash sticks from a local major company.

And one of them is compostable, and one of them is not compostable.

And you can't tell.

I'm going to pass this down so you can take a look.

They're very difficult to tell.

With this law, which will go into effect in a year, if something is compostable, a utensil or a bag, it must be green or brown tinted.

Otherwise, it can be pink or purple, but it cannot be green or brown tinted.

So this will really help with some of the challenges that we have with people not knowing what goes where and contamination both in both the recycling and in the composting stream.

Green or brown tinted if it's compostable?

Correct.

Okay.

Yeah.

Can you tell which one of those?

Well, there's one one says PLA on it.

Right.

PLA is compostable plastic.

But you can't tell that if you're a consumer.

So another bill that will really help the past is the food waste.

It's going to help plan for reduction of food waste in Washington State by half by 2030. Right now, 17% by weight of what's going to the landfill is food waste.

Food waste, not yard waste, food waste.

That's kind of shocking.

And then finally, I just want to mention that there's a lot of pressure to start to go to waste to energy or to incineration for our plastics.

We strongly oppose this.

We do not want to see Seattle do that.

We don't want to send a mountain of plastics to the landfill or to incineration.

We really want to have solutions.

And then Hans is now going to talk more about that.

Before you hand it over, can you tell me just a little bit about the food waste bill?

What does it do?

So what it does is it's a planning bill.

So it says that at the state level and then also at the local level, the county level, planning for how to actually do the food reduction and what are the barriers.

and things we need to do in terms of finances to deal with the problem.

The challenge is that all the food rescue groups don't have cold storage.

So they don't have cold trucks and they don't have cold storage.

So if they even get all this food, they can't keep it safe.

So that's going to cost money, and we don't actually know how much it is, and we don't know what the other barriers are.

So this is sort of the first step towards that path of really addressing the problem.

Yeah, it was recently Food Lifeline, and this was a hot topic.

Exactly.

There, for sure.

That's great.

On the...

What was the last slide?

Can you go back one more?

Oh, waste energy?

Yes.

So...

What are the options to landfilling and incineration given all of these challenges that we have?

I think the strategies that you identified are helpful, but it seems like they're going to be slow and helpful around the edges, whereas I think from my perspective, it sounds like we have a set of circumstances that need an immediate response so that we don't have to use those other very unattractive alternatives.

When I was 20, I worked to fight an incinerator in my community.

So I really don't want to go back there.

but really don't know how we're going to handle this issue with.

China not wanting to take our products anymore.

Sure.

So there's three or four different answers to that.

One is things are actually moving quite quickly.

Because of China making their restriction, there's a whole lot of entrepreneurial activity in the United States to address that.

There are companies that are coming online who are addressing the three to seven plastics, which are the difficult plastics.

So there's a lot.

Things are happening quickly.

The markets are changing quickly in that regard.

Secondly, there is a chemical recycling process, which is pyrolysis and some other things where you take the plastics back to the molecular level and then you can rebuild the resins and make new plastics.

So chemical recycling might be a good option and there's a facility already in place in Oregon and one in British Columbia.

So we could potentially bring something like that to Washington.

And then thirdly, California just passed and is looking like they will pass a law that is going to really change the dynamic in terms of the packaging, what's allowed, and get us back to that recyclable packaging instead of the not recyclable packaging.

So I would say there's a lot of reaction happening quickly.

Seattle, I think, can be ahead of the curve on that.

But I'm pretty optimistic we do not need to go to waste energy.

Fantastic.

Thank you.

You want to switch the?

We can never underestimate the power of the market to respond to changing conditions.

Back before we had recycling, in New York State, I was working for passage of the bottle bill, again, in the late 80s.

And people were very skeptical that there would be a market for recycled products.

So again, we proved them wrong there, too.

Great.

Thank you Heather.

That was great context and information.

And I and I think your questions are very present and we appreciate the opportunity.

I think there are questions on everybody's mind.

Like you said with the big changes in the market what is happening with our recycling and how quickly as you just said can the markets really adjust or not.

We don't underestimate it but at the same time They're a dynamic force that sometimes does and doesn't change as much as you'd like, so I think those are great questions.

And Ken kicked us off pretty well in just clarifying there's two, and Heather did, two kind of major things that are happening here that we're dealing with.

One, as you mentioned, is the restrictions in China, and especially on mixed paper and mixed plastic, and so covering both those commodities, and as you mentioned, there's a lot of mixed paper in that, and you see that every day, and it forces the questions that you're asking, like what's happening now?

And then secondly, at the same time, there's a major concern around plastic pollution as Heather elevated.

And that has another force that's not directly necessarily related to the China limitations, but it's certainly indirectly related.

And it's a major factor in kind of how we're reacting and how we're understanding.

And you see that in the news every day.

Is that a scare headline or is that true?

Are cities scaling back the recycling programs?

Some are.

It depends on what you have access to and whatnot.

You know, we'll cover what's happening with our recycling in this presentation as you requested.

And we're fortunate in our location that we're on a port, as you know.

and have the opportunity to take advantage of a lot of markets.

But not everybody has that opportunity.

So you don't see it so much along, say, the West Coast, but other parts.

You see where they might be cutting back, depending on what they're meeting and kind of shifting, especially for drop-off locations.

You'll see that.

So yeah.

Yeah.

Typically, cities towards the middle of the country or states are at a disadvantage.

Yeah.

No.

There's some real challenges there, as we'll cover.

So just for context, it's helpful to know what is in our recycling, what we're dealing with.

And this is what our customers put in the recycling, what we collect in the blue carts and bins.

As noted, it's primarily over 50% paper products and then a small amount of plastic.

The total tons per year for our mostly residential customers here are listed in the table and then in the chart you can see that represented as well.

And so when we talk about these market restrictions, we're talking about papers, so that's 56%.

And then the plastics, when we have concern about that, that's about 5%.

So that gives some context on kind of these two big issues and how they impact us.

And then also it's helpful to understand what happens to the material when we collect it, and many of you are familiar with this.

We have a contract currently with a facility here in Seattle Republic, as Heather mentioned.

They're under a contract that's competitively bid out and lasts between 6 and 10 years.

We pay them to process it.

They have a variety of mechanisms, as Heather mentioned, for sorting it, many lasers, Many manual sorters, many mechanical sorters, staff, you know, a variety of mechanisms to break all the commodities apart.

And then they're responsible for finding those markets as they change and selling the commodities and adjusting to those markets.

So that's part of their service contract is to do that.

And then one element we'll come back to is that we retain the market value.

And so that has some opportunities for us, and we'll touch on that.

We being the city?

City of Seattle.

What do you mean, what is market value?

Yeah, good question.

We track what the various commodities are worth every month, and then we retain revenue equal to those values.

So the value of paper, the value of glass, the value of metal.

And we retain that market revenue each month, the city of Seattle does, separate from our processing payment to them.

So Republic isn't receiving the revenue generated from?

They receive the revenue from what they sell it as, and then we ask for the average value of that based on the market indexes.

And so when the markets are worth more, we receive more.

And when they're worth less, we receive less, like now.

We can come back to that, because it kind of plays in kind of how we're positioned and the impacts on the city.

So it's also helpful to understand these challenges.

Heather covered most of this.

China, as you mentioned and was mentioned, stopped importing basically mixed paper and mixed plastic.

It started in late 2017 and then escalated last year in 2018. Related to that, the market values for paper have dropped significantly.

There's other places it's going as we'll cover, but that huge influence on the market that China plays has significantly dropped the value where the other destinations are.

In response, other Asian markets have responded, North American markets have responded, and so China is no longer taking mixed paper and mixed plastic.

They're taking some paper directly, like cardboard, and then they continue to be the largest buyer downstream.

So that's just interesting to know that it's being sorted and processed either in North America or other Asian destinations, but the commodity is still, much of it going to China, because they're the ones that need it for manufacturing new packaging for the most part.

So they're still buying it.

but further downstream, and so they still have a major role in kind of the value and the commodity, and they're exercising that.

So have they stopped importing paper and mixed plastics, or do they just have strict contamination rules that we can't meet?

Both.

They, for the most part, have stopped importing mixed paper and mixed plastic.

There's very few processors that are shipping mixed paper and mixed plastic directly to China anymore.

But is that because they can't meet the contamination rules, or is China saying, we don't care whether or not you're meeting our 0% goal or not, we're not taking it?

Mostly appears to be the latter.

It's hard to tell, and it changes what exactly is said by the government or the industry.

Changes from month to month and period to period.

The fact remains they're not really accepting any right now.

And so that's where their stance is.

And what they say their intent is varies, you know, related to your question, from month to month and from who's saying it.

So anyway, that has meant that the prices have stayed low and that all the other places have adopted similar very high standards.

So it's not like the stuff is going to another market and they have lower standards like everybody.

has adopted these high standards for their bales, and so that's happening in others.

So everyone's responding to that.

And then part of this landscape is the response to the plastic pollution.

We see that as a smaller sliver, but as Heather explained, it finds its way.

into impacting the other materials, and also the response globally to that has played into this, how it impacts for us.

So that's just some of the context.

And then in terms of that market value, what that means to Seattle, the table here shows you that, that our revenue received from the market dropped from $8 million in 2017 to $4.5 million last year.

And then you see that is primarily related to paper.

Plastics did not drop that much.

Glass and metal, which are locally processed and continue, remain stable.

But the paper, which is the majority of the commodity, as we discussed earlier, dropped significantly.

So that's kind of what you see.

And that's what it means for us, and that's what it means for everybody in the world, basically, in some form.

So what happened at the facility, and Heather touched on this in San Francisco, similar in Seattle and the facilities here, including Republic's facility, they had to improve bale quality and types, which they've done.

They diversified the types of paper they sell and then reduced the contamination in it as they and others have needed to.

And to do this, they've reduced how fast the material goes through the plant, they've increased the staffing at the plant significantly, and they've added additional sorting technology.

Just like Heather mentioned, San Francisco, they've added additional laser sorters to the ones they had before, producing a higher quality of mixed paper bale, in this case.

So that was about a 1.5 million upgrade for this particular facility here, Republics, in addition to the, they basically rebuilt the plant in 2016, fairly recently.

And then they've met other markets they've found to ship the material.

So I'll get into a little specifics, because that certainly was an area that you were interested in.

And so I'll come back on that, on what markets and where.

Our role, we manage the contract.

We're the customer here.

And so it's our job to monitor and enforce the contract terms.

A couple of things that means, no disposal of Seattle's recycling, which is something I know we're curious about.

And so we've made sure that they continue to move our materials to market throughout these challenges.

And that's something we want to reassure our customers, that we continue to take the recycling and it gets processed into recycling.

And then also we have standards in there for higher value.

So to make sure that our material is processed in a higher value method into new products.

So we have those standards.

So we monitor, we get reports on that, we track that.

But then we also work with them on partnerships.

We'll talk a bit here about our plastics is now being processed all in North America.

And we've worked with them on those connections and to support that and to introduce them to other people that we're meeting nationally and internationally that might provide new markets.

And then the market risk, like you asked about and we just displayed, has given us one reason we do it is to self-insure, basically.

Like if we didn't take on that market value risk, we would be paying a premium because it's a risky endeavor.

So we would be paying insurance and a premium on that, basically, and we choose not to.

And over 30 years, we've gained a lot, a lot of value over the market risk.

And today, we have a lower value, and that is a challenge, certainly, for us financially.

But it allows us, A, to not pay that premium, and secondarily, to not enter into a contentious area of contract terms with the vendor.

Almost every city locally has had to pay additional fees over the last year, and nationally, did that matter because of the loss of value in the recycling market?

We've been insulated from that because we own that risk.

So certainly a challenge for us to own that, but an opportunity as well.

And it avoids any conversation about our entering that, because we already have that.

So that's been helpful in Seattle.

So now, most interestingly, where does it go?

As we've mentioned here expanding significantly into domestic markets quicker than we might have thought And to other Asian I mentioned already China's this biggest buyer downstream So if you look at the different materials, there's a picture there of glass that has and continues to go locally just down the street to be further sorted and then made into glass bottles right here on the Duwamish.

Metals stays locally, always has, continues to.

So that's two large commodities.

Plastics, which we've talked a lot about, the higher value plastics have tended to stay domestic anyways.

Those would be bottles and jugs.

The lower value plastics, as you see, were 85% exported just in 2017. And now it's basically zero for Seattle.

I put less than 20% because it's changing every day.

And as mentioned, we worked with the plant to make sure they could find a local market for that, which they're doing.

They're sending the lower value plastics, a portion of it to a plant right in Canada, and that portion is greater than the amount we send them.

So although they're still sending some, And to be clear, we don't have the entire feedstock in that facility.

So there's other plastics that are still going offshore.

And I won't be surprised to see that change, because for a variety of reasons, that continues to be a challenging thing to ship plastics overseas.

And I wouldn't be surprised to see most of it come onshore.

paper, the cardboard was 60% exported and now it's dropping every day under 20% and mixed papers was 98% sent to Asia in 20, sent to China even in 2017 and now less than 60%, it's probably about 50% this month is being sent.

So plenty still being sent but as they've improved the bail quality, as the prices have changed, they're finding more and more North American markets every month to ship that too.

And so that export number is other places than China.

Yes.

What do we know about the environmental protections for some of those other places?

Yeah, the short answer is not enough.

And we'll come back around to that.

But yeah, I think that's a concern for all of us.

And we've been exposed to that more and more.

And so that is an outcome that we and our partners are focused on, is learning more about that.

So because we don't always know enough about where that goes.

So yeah, we'll talk about that more in this presentation.

I think that's an excellent question.

So this is some of the other things we've done.

And certainly Heather touched on most of this outside of just the recycling plant contract and our partnership with the recycling plant.

Big thing was in early 2018, we had a plastic summit with a lot of private and public entities.

We focused on some of the challenges there.

We focused on some of the follow-up actions.

And I mentioned a follow-up action coming right out of that was moving low-value plastics from the Republic facility to a Canadian facility.

So that was a great outcome and a number of other actions that we're taking out of that.

And then a big thing was to sit down regionally all through the year last year.

with partners in government, industry, nonprofits, and others to come up with really understanding what the problem is, what the opportunities are, and what our solutions could be.

So that was a big effort, a big lift last year, and now it's moving on to action.

And I do want to highlight just some of those without getting into too much detail.

And then, as Heather mentioned, we're continually involved with a variety of national and international players on this.

And so you see some of the nonprofits and the government entities that we're working with kind of every day to find solutions.

So the Recycling Task Force really focused regionally and comprehensively on what the solutions would be.

They came up with these goals to cover the whole spectrum of recycling in terms of the customer, in terms of the markets, in terms of the systems, the demand for the commodities, what the commodities look like, the manufacturers, so to make sure we were comprehensive in our approach, and that was a team effort throughout the region, like I said.

I'll just highlight some of them.

There were 20 specific actions with specific timelines on them starting right now, and some of them that relate to the topic that we're talking about today.

Heather covered these.

State legislation was a big focus, right?

On the heels of this task force work last year was the Washington Legislative Session.

And so the Recycling Development Center was created, and that's very helpful to focus on local markets and infrastructure here in Washington State and technology.

So that was a key win.

Plastic stewardship, Heather mentioned this.

That very strong legislation was put forward.

It turned into a study bill.

We think this is a great opportunity.

Obviously, it's an opportunity much greater than just plastics, but this is a good focus area for us to start with.

And it has recycled content legislation in there, which helps, so we're pleased with that.

Further items from the task force, pilot projects on domestic infrastructure, and I mentioned moving mixed plastics locally to Canada, and we'll continue to look at additional expansion there.

We hear from the poly-coated cartons, milk and juice cartons, what not, about opportunities there and what that might or might not look like.

Film, Heather mentioned the challenges with film and Seattle's leadership, we prohibited a lot of film from our waste stream and that helped.

We did the color coding thing around compostability and that helped.

But nonetheless, there's still film there and regionally there is, and so we're looking at what it might look like to make that more of a drop-off commodity, if that makes sense or not.

And certainly that's something we'll be coming back to you for conversations throughout the year and beyond.

Local markets, we continue to partner right here in the county with King County and Seattle on what we can do to make those connections.

And then, you know, we are aware of the challenges around single-use packaging and what we can do through requirements, which we've done extensively on foam and straws and bags, and what we might do going forward and then what we might do with our customers.

So both voluntarily in terms of outreach and then in a regulatory fashion to reduce the amount of that low-value material in the recycling.

And then just wrapping up some of the other items that you might be interested in from the recycling task force, unified messaging.

We realized the need to be really clear to the customers in the city, out of the city, in the region, and consistent.

And so we've been working across jurisdictions to do that.

And then we're working on downstream impacts as well.

And some of that's beyond certainly even our action.

Like the most interesting thing was the Basel Convention recently adopted, amended its requirements for countries that are importing materials needing to provide permission for that.

And that gets to your question about do we really know what happens?

And I think we're seeing much more.

from private industry wanting to know what's happening and be accountable to it, to countries wanting to know what's happening and be accountable to it.

So we're going to take advantage of all those efforts around accountability, and then also we are going to work with the King County to figure out what what we can learn, what's doable in terms of some of that tracking of material and stewardship as it goes downstream, because I think that's something we're all curious about and concerned about, is knowing if it's going to be shipped somewhere, is it going to be handled in appropriate fashion.

And so are you saying that this convention will create some oversight and reporting regulations if a country is accepting imported materials?

Yeah, potentially.

The Basel Convention allows countries to reject material without their permission, basically, and you're seeing that more and more.

I mean, China is a major world player and they can write their own book to some degree.

But then there's some other smaller countries that need that support.

And so it allows them to set the terms of what they'll accept materials.

And then, yes, it puts monitoring in place.

I mean, some of this you've seen with electronic waste and the challenges of that over the last decade.

And the Basel Convention has provided a framework for that monitoring.

And so that's just one mechanism.

And there's other things.

And like I just mentioned, the manufacturers are tuned into this.

And so they're doing the same thing.

You see all that in electronics.

The electronic manufacturers wanted to know, OK, so I need to own that, the awareness and the information.

And there's a lot of moving parts there.

And we're just a small player.

But certainly, we want to see that.

And so we can wrap up now, but sustainable packaging, in addition to our own stewardship and the state stewardship language, we're looking to partner with manufacturers to adopt sustainable packaging practices.

So we work with certainly the National Sustainable Packaging Coalition.

We held the conference here with them in April, and so that was fantastic.

A lot of players were here, a lot of interested parties.

And we continue to work with them locally and nationally have manufacturers step up and make their commodities, their materials more acceptable to our system since we're the receiver of the system, at least for the time being.

And so we're kind of working that voluntary measure as well as we look also for regional legislation.

And then just in terms of reaching out to our own customers, venues like this are great.

We appreciate the question and we know it's on everybody's mind.

And so as I mentioned, we're doing this regionally.

We have a regional campaign to reach customers and basically remind them to only put what's on your instructions in the cart, to take that second to think about and make sure it's an acceptable material in the cart, and to take a moment to make sure it's empty, clean, and dry.

So that helps a lot.

We've seen a lot of opportunity there.

And then also, we are aware that's an opportunity to talk to our customers about, a variety of things in terms of waste prevention, but certainly single-use packaging.

Like this brings the awareness that these materials get handled many times and go many places for just a single use on our part.

So if we can take additional measures to reduce the amount of single-use packaging in our lives, it's a great opportunity.

Heather mentioned the food scraps as well.

If we can reduce that, we see that as well.

So we're aware that this is an opportunity for us to share that as well.

So that's just some of the things that are going on.

It's a very dynamic and moving It's a policy area for us right now.

But some success.

Certainly a lot of it's come domestic now, and so that helps.

Is there something more that we can do?

I mean, I understand that a lot of the companies that are producing single-use packaging are not local companies.

They're national companies.

But is there something that we can do to incentivize locally for local producers the reduction of single-use packaging?

I think there's definitely some possibilities, and I think we'll certainly continue that dialogue as we come back.

Have we done, for instance, an inventory of producers of products here locally that are producing this kind of packaging?

I think that would be helpful for us to get our arms around, again, the local businesses that are engaged in these kinds of practices that we want to discourage.

Yeah, I think exactly.

I mean, we're looking for lots of opportunities around durables and what can be done in the food service there.

And I think as we move forward, you know, through with you and with the executive on food service packaging, we've taken a lot of steps, but there's a lot more steps, as you're saying exactly, that we can look on how to both elevate the right practices and require more specific practices.

I think that's exactly right on.

Thank you.

Can I add one more thing?

So to clarify on the downstream of the paper, so China still needs the pulp and this is what the pulp looks like in case you've never seen pulp.

So it's not slurry, it's actually dried out stuff that what that is.

So our mills in Washington are now taking a lot more recycled paper and they are now exporting that in big bales to China.

So kind of processed.

Pulp.

Right.

So they're taking it, but they're taking it once it's right.

Once the plastic and everything is removed.

Yeah.

Yeah.

OK.

Super helpful.

Thank you, Heather.

Fantastic.

Well, appreciate you coming and joining us.

Want to learn more about some of the specific actions coming out of the task force and the prior to the task force, the summit.

Would love to get some materials that identify, I see that there, There's mention of follow-up actions for partnerships, tracking legislation and regulation on the summit piece.

Likewise, a detailed regional action plan on the task force piece.

Would love to learn more and dig in and see where I can help out.

Fantastic.

Yeah, it's very exciting.

Thank you.

And we'll see you soon on the recycling report in another couple of meetings.

Thanks.

Item four is Seattle Public Utilities audit exit report.

Good morning.

Hello there.

Greetings and welcome.

I am Lori Tish with Moss Adams.

Thank you, Lori.

And I am Tyler Perrick with Moss Adams.

Thanks for joining us.

And so this is the exit report.

Yes, it is.

The bookend to your last visit.

Exactly.

You want to just sort of give us maybe the big picture of what you're here to do, and then we'll dig into the presentation?

Certainly.

And actually, our first page of the presentation is the big picture.

The purpose of our audits, really, to audit the financial statements.

of the three utilities within Seattle Public Utilities.

And these are, we work in conjunction with the Washington State Auditor's Office, so there are no duplication of efforts.

You'll see when Tyler walks through the areas of audit significance and efforts that we work hand in hand.

For example, they audit the cash and investments at the treasury level with the city, and so we rely on their work in conjunction with ours.

And part of that is because the financial statements of SPU do roll up into the city's comprehensive annual financial report.

Another purpose of our audit is the opinions that go along with those financial statements are relied upon for the bond issuances that occur during the year for each of the utilities.

Now, our scope, just as a reminder, we do audit just the financial statements.

So, we don't get into efficiencies or economies of scale or other areas that might be covered by different types of audits.

Management does draft the financial statements and they do provide the supporting schedules to us and then we take over from there and do conduct our audit procedures.

As you know, when we came earlier for our planning meeting, we walked through those.

We did issue unmodified opinion for each of the three sets of utilities, water, drainage and wastewater, and solid waste.

We had no material weaknesses noted, no significant deficiencies reported, and we did not provide a written letter of recommendation.

So very clean audit this year.

Tyler is going to cover some of the key points of our audit that we hit, and then I'll wrap up with the required communications.

Thanks, Lori.

Over these next couple slides, I'll just walk through kind of some of the larger areas and significant areas related to our audit, pretty high level.

Kind of working through the slide, a big portion of the funds are related to their capital projects and their plant, utility plant.

And one of the things that we do is that as part of our audit is to make sure that costs that they've incurred are being capitalized appropriately as opposed to being expensed on the fund.

And as part of our testing, we will reach out and select certain projects and actually meet with project managers to kind of get a sense and an understanding of that project to see if it's the cost associated with the project are appropriately capitalized.

And that's kind of something I'll call it a holistic approach.

to just get a good understanding, because sometimes you can get down into the weeds of the numbers, but to really, you have to have an understanding of what you're looking at to really ensure that it's something that's correct.

Kind of moving down one thing I will say for this year It was a quieter year on related to bonds as there were no bonds issued by any of the funds during the year But we still look at covenant compliance.

We still confirm outstanding bond debt with bondholders at the end of the year and we're also looking to see if interest expenses is appropriate for the year as well and And then finally, as part of our audit, and we mentioned this on our opening presentation of the audit, we look at internal controls during the first half of our audit to get an assessment of the control environment around the funds, processes, and controls to kind of think of it like a checks and balances that they have.

So we're looking at different business cycles that they have Expenditures, payroll, how they close their monthly financial statements, their plant, their capital project workflow, if you will.

And that's something that is built in and is part of our audit to get comfortable of what they're doing on the day-to-day flows up into the financial statements and it's accurate.

We also look at some of the larger environmental remediation liabilities that are out there and looking at any sort of updates during the year related to projects that are out there.

So we also meet with project managers that are kind of overseeing those larger environmental projects.

And if there's change in estimates, which would increase a liability, for example, that's something that's part of our assessment.

And we found that Seattle Public Utilities are appropriately reflecting those liabilities on their statement of net position at the end of 12-31-2018.

We also, from a litigation standpoint, we send an attorney confirmation to the city of Seattle attorney to kind of get an overview any matters or contingencies that might be out there and to see how that is reflected in the financial statements, which we were also comfortable with how SPUs recorded their results.

From an operational standpoint, we're looking at kind of the revenues that are being recorded by all three funds during the year as well as expenses.

We set independent expectations based off of non-financial data.

historical information, any trends, to kind of come up with our own assessment of where we would think revenue and expenses are at.

And that's something that, again, we, from our expectation and comparing it to SBU, it was reasonable to what they've recorded for 2018.

What is the reference to landfill closure post-closure care on this slide?

Yeah, so the landfill post-closure care, that's referencing the solid waste fund.

And it's kind of a unique thing to that fund in that it's related to, there are some accrued liabilities that are related to kind of the landfill.

And the governmental accounting standards board requires that all future estimated costs that are expected to be incurred be put into your balance sheet today.

So it's really a future, it's an estimate of all future costs related to the eventual permanent care of that landfill and the closure and the post-closure care.

So that is recorded into the financial statements.

So, yeah, I believe it was mid last year, SPU came back to the city council and this is the closure of the South Park landfill.

And there was a settlement with the state and a private property owner as well.

And the city or SPU took on, it was a $20 million liability over, I believe, the next 20 years for the remediation of that property.

Right.

But as it relates to the work that you're doing, you're not monitoring that We're fulfilling the obligations of the agreement, but you're monitoring the finances associated with?

Well, it's all part and parcel when you are committed to any type of environmental remediation liability, which a landfill somewhat does fall into that category.

We do look at the agreement.

We look at all of your requirements.

unique to landfills.

The GASB actually has a statement devoted entirely just to landfills and the capping of those landfills and the care and the post-closure care.

So we do ensure, from an accounting perspective, that all aspects of those costs have been accounted for.

And the costs are necessary to fulfill the obligations.

Yes.

All right.

Thank you.

And then kind of moving down a little bit, key change, if you will, for 2018 was the change in accounting systems, which was affected in all three funds.

And we, as part of our Moss Adams team, we have team members who are specifically specialists within information technology and auditing kind of those IT systems.

So we bring them in every year.

But especially for 2018, we had them kind of look at that transition from the old accounting system to the new accounting system.

And we didn't identify any areas of risk.

So it was clean.

And then finally, the management discussion analysis, that's the first part of the section of the financial statements.

And then as well as the note disclosures, we, as part of our responsibility, we're looking at and making sure that kind of those state management statements are representative and in accordance with kind of the accounting standards, which is, was one of the things that we had done as far as our review of their statements.

So we're required to make a number of communications to the governing body, which we will do right now.

The first one, the significant accounting policies are continuing to be explained in note one.

So if you don't have a whole lot of time to read the financial statements, note one is a good place to start because you'll get a good idea of the various accounting policies.

There were two new adoptions this year.

GASB statement number 75 related to post-employment benefits, health care subsidies, that sort of thing.

Very similar to the pension standard a couple of years ago, that liability is now required to be recorded onto your balance sheet.

So you have to estimate what the future payments are going to be for the existing retirees.

So that was implemented, and it was adopted by retrospectively restating the beginning balance of 2017. So it basically kind of went back in time, took into account the past impact, put it all into this year's balance sheet, and it's all very well explained in the notes, the impact.

It wasn't a significant dollar amount as far as the restatements, but the utilities did comply with the GASB requirement to do that.

The second one that was adopted is regarding capitalized interest.

So the GASB has determined that governmental entities are no longer able to capitalize interest into their self-constructed assets.

But because Seattle Public Utilities can use regulatory accounting, which means you're able to match your expenditures to your rates, The utilities have decided that they are going to continue to capitalize interest.

And the kicker to that is that you'll just have to make sure that the rate cases, your rate budgets incorporate this interest cost going into the self-constructed assets.

So that was adopted this year.

Really no change because you always have capitalized interest.

You will continue to capitalize interest.

But from an operational standpoint, There will have to be some checking done to make sure that that estimate of the capitalized interest gets put into the rate cases each year.

Of course, every set of financial statements contains estimates.

And we've listed the primary estimates here that relate to unbilled revenue, which is really just your cutoff.

So as of December 31st, there's a certain amount of services that have been performed that have not been billed yet because they'll be billed in January, for example.

So there's an estimate on that.

Estimates for any type of allowance for doubtful accounts.

All of the environmental liabilities that Tyler spoke of, including the landfill closure and post closure, those are estimates.

And they're very sophisticated estimates, usually helped along with attorneys and engineers and such.

And we do come behind that and just make sure we understand the rationale and the reasonableness of those estimates and get comfortable with them from an accounting standpoint.

Next, just to cover adjustments, we had no adjustments.

There were two reclassifying entries.

And what that means is we just found an item within the drainage utility where instead of being a trade receivable, it should have been recorded as due from other governments or due from other funds.

So it's really just within the receivables category we proposed.

And they did record that reclassification entry.

We did receive a representation letter from management.

We had no disagreements with management throughout the audit and were not aware of any consultation that they would have performed.

We had no difficulties encountered in performing the audit, but I did want to mention there was a delay in the issuance of our opinions.

They were approximately a month later than normal.

That is because, as I mentioned earlier, we work hand-in-hand with the state auditor on certain of the accounts that are audited, and we had to wait on the cash balances at the city for the state auditor to perform their work.

Apparently, there were some delays in the city being able to fully reconcile and get to a final balance of cash, and so we were we had to just basically sit and wait for that to be done before we could finish our work.

So as a result, the statements were issued at the end of May as opposed to the end of April, which is our normal time frame.

And lastly, we are independent with respect to both the utilities and to the city of Seattle as a whole.

And so as it relates to last year's audit, there were some business practices recommendations, I think in account and information technology.

Do you go back and check to see whether or not those were, those recommendations were acted on?

Yes, we do.

And we keep a running tally of that.

There were some information technology points noted again this year.

We did provide those to the utilities IT staff as well as the city's IT staff.

We've had several meetings with them regarding the disposition of those items.

Most of the ones from last year had been cleared.

We had a few more come up this year that I would say, again, really fit the description of business process improvements rather than control deficiencies.

And we feel like they have a good plan to address them.

And in fact, many of them have been addressed as of today.

Again, keep in mind we did our work at the end of 2018, so several months have gone by.

Well, I'm glad to hear that the cooperation from SPU is strong as well as the financial controls being strong.

Thank you for confirming that for us.

Yes, you're welcome.

You can see from our acknowledgments that we continue to be very impressed by the tone at the top, the openness to everyone throughout the utility to auditors coming in because we are very invasive and time-consuming.

in our requests and some of the things that we ask.

And we really do feel like there is a good attitude in place at the utility as far as being very open and being open to recommendations to best practices and improvements to internal control structures.

So, again, another audit under the belt here.

And, again, it went very well.

Thank you.

Thank you so much for joining us.

Appreciate it.

Appreciate the good news.

And with that, it's 11.42 a.m.

The meeting is adjourned.

Sorry for getting a little behind schedule.