Parks, Public Utilities & Technology Committee 62624

Here we go.

Good afternoon, everyone.

It is June 26, 2024. Meeting of Parks Public Utilities Technology Committee will come to order.

It is 2.03.

I am Joy Hollingsworth, and I am the chair of the committee.

Will the clerk please call the roll?

Council Member Kettle.

Council Member Rivera.

Present.

Council Member Strauss.

Present.

Council President Nelson.

Present.

Three council members are present.

Thank you.

And for the record, Council President Nelson has been excused and Council Member Kettle is at another event and he said he will join us later.

So looking forward to his presence.

Colleagues, I can turn this way because there's nobody to my right.

We have three items on the agenda today.

We have a public hearing.

That's a discussion and possible vote for Council Bill 120800. It's an ordinance that would authorize the current use of taxation for a pee patch at 4613 South Lucille Street.

That is in South Seattle.

We also, following that, we have a presentation from our phenomenal SPU to provide an update on the ship water quality that is in council member Strauss's district.

He knows a lot about that project and I'm sure will give us some cool facts as well.

And then also finally, we have our first of three briefings from SPU for the 2025 to 2030 strategic business plan and the three year rate path that they'll be presenting today.

And we will now consider the agenda.

If there's no objections, as I look to my left, the agenda will be adopted.

Seeing a thumbs up, that means that there's no objection and the agenda is adopted.

We'll now move on to public comment.

We'll open up the hybrid public comment period.

I would like to note that this public hearing for this agenda item is the one, I can't read that.

This public comment is for the agenda and then we'll have another public comment for the PPATCH.

So there's two public comments today.

Clerks, how many speakers are signed up today?

Currently, we have one in-person speaker signed up and there is one remote speaker.

Thank you.

Each speaker is going to get two minutes.

Clerk, can you please read the instructions for public comment?

The public comment period will be moderated in the following manner.

I will call on speakers by name in the order in which they registered, both on the council's website or from the sign-up sheet available here in council chambers.

We will start with in-person speakers first.

If you have not registered to speak but would like to, you can sign up before the end of the public comment period.

Just go to the council's website or by signing up on the sign-up sheet near the public comment microphone.

The online link is listed on today's agenda.

When speaking, please begin by stating your name and the item that you are addressing.

Speakers will hear a chime when 10 seconds are left of the allotted time.

If speakers do not end their comments at the end of the allotted time provided, the speaker's microphone will be muted to allow us to call on the next person.

The public comment period is now open and we will begin with the first speaker on the list.

The first and only speaker for in-person public comment is Alex Zimmerman.

See how my dirty damn Nazi fascists.

Pause the timer.

Mr. Zimmerman, time after time, you have been warned.

We have two Jewish households up here, and the Nazi salute is not going to fly with me.

It's disruptive.

It's abusive.

And I'm just not going to tolerate it anymore.

You've been warned.

That's the last time we're going to allow that type of salute, especially in this committee.

You may proceed.

Thank you very much.

I very appreciate you.

I recommend you read Ninth Circle Decision about Nazi salute.

because you for my understanding not enough have level for understand nine circle decision and everything what is you talking right now it's absolutely not legal but i forgive you you know what has been many people in this chamber absolutely idiot to me i'm so sorry yeah okay no problem i want to talk about utility number two you know what is mean utility plan is a huge plan you know what is mean it's a huge For 750,000 people, it's huge.

What if you have this right now?

It's nothing.

Look, one man coming, talking about this.

Where is another 750,000 people here?

Not coming.

Why?

Because they don't believe you.

Because you, for many years, make life in Seattle miserable.

All of it.

For 20 years, what if they talk here every meeting?

Yeah, almost.

So my proposition, very simple.

Make people involved in this business because people supposed to be doing something.

750,000 idiot supposed to have opinion.

You know what this mean?

They have right for opinion.

For this, I told you many time, open better room in first floor one day per week from nine to nine because many people cannot come.

You know, they working.

Yeah, it's working.

Make money, have families.

Yeah, so they can come and talk for three minute like all civilized people talking.

Like I talk from Tacoma to Everett more than 4,000 times for my three minute.

You need to understand everything what is you doing smell like a fascism with Nazi Gestapo principle because you control.

You control make from Seattle 750,000.

Concentration camp.

Give people little bit freedom.

We have constitution.

First amendment and freedom of speech.

Remote speaker was next.

We will now move to the remote public comment.

Once I call a remote speaker's name, staff will unmute the appropriate microphone and an automatic prompt of you have been unmuted will be the speaker's cue that it is their turn to speak.

And then the speaker must press star six to begin speaking.

Jordan Sullivan.

It looks like they're not present.

Our public comment is closed for today.

All right.

Thank you, clerk.

The public comment period is now closed and we will proceed to our items of business.

Clerk, will you please read item agenda.

I always mix this up.

Read agenda item number one into the record, please.

Agenda item number one is Council Bill 120800, an ordinance relating to current use taxation, approving an application for current use taxation of property located at 4613 South Lucille Street under the King County Public Benefit Rating System.

This is for public hearing, briefing, discussion, and possible vote.

Awesome, thank you.

I'm now opening up the public hearing on this Council Bill 120800. Clerk, do we have any speakers signed up for this specifically?

We have one in-person speaker.

Okay, each speaker will get two minutes.

And can you please read?

I don't think we need to read the instructions again, but let's go ahead and just move straight to public comment.

The first and only speaker for this public hearing session is Alex Zimmerman.

And Mr. Zimmerman has left the chamber.

So is there anyone online?

No one online present.

Okay, the public hearing for this is now closed.

Being that there's no member of the public here present on the hearing, obviously this is now closed.

Before we proceed to a possible vote, Presenting on this bill is Bill Bernstein from King County and Yolanda Ho from Central Staff.

Oh, Yolanda's here.

Sorry, I should have looked up.

I'm just reading the paper.

Yolanda, so grateful for you to be here.

You're great.

Please introduce yourself for the record and just jump in about this council bill.

Thank you.

Toasting, okay.

Yolanda Ho, Council Central Staff.

I'm just getting that presentation up here and...

There's other things in that way.

And yes, Bill Bernstein is online.

I think I saw his little tile on there.

So, okay, here we go, full screen.

So I am just gonna do a brief presentation about this council bill 120800 and more just kind of provide context for the committee as this is the first time you all are taking this up.

And so that is my plan.

So this presentation will provide an overview of the current youth taxation program specific to open space.

Please pause.

For the record, Mr. Zimmerman's behavior right now is disruptive in chambers and I'm asking him to leave and he's doing that very nicely.

Thank you, Mr. Zimmerman.

Yolanda, back to you.

Okay.

And I'll also just give an overview of the process for reviewing and approving applications, and then do a description of the application before the committee today.

Before that, I wanted to make sure Bill had a chance to introduce himself.

Sorry, I forgot about that.

Hi, I'm Bill Bernstein with the King County Department of Natural Resources and Parks, and I'm happy to answer any questions that might arise after Yolanda's presentation.

bill.

So just in terms of understanding what current use taxation is, it is an incentive that was created by the state to encourage property owners to voluntarily maintain open space farm and agricultural and timberlands on private land by taxing the property at a lower rate based on its current use rather than the typical assessed value based on the property's highest and best use.

So in King County, applications for current use taxation for open space are evaluated based on a public benefit rating system, which is also known as PBRS.

So I'll be using that acronym.

promulgated by King County in accordance with the revised Code of Washington, Chapter 8434. Examples of open spaces that may be eligible for current use taxation include buffers to public lands, linkages to pedestrian and bicycle trails, designated historic landmark sites, and urban open spaces.

In terms of the process, the King County Department of Natural Resources and Parks, DNRP, accepts and reviews open space current use taxation applications and uses a rating system under the PBRS to assign a recommended point total to each application with bonus points for allowing public access to the open space and conservation easements.

Properties must be eligible for a minimum of five points in order to qualify for the program.

Higher point totals result in greater reductions in property taxes.

For example, a property with five points would have its assessed value reduced by 50%, whereas a property with 35 points or more would have its assessed value reduced by 90%.

After DNRP reviews eligible application, it creates a report recommending enrollment and the amount of property tax reduction, the total points assigned to the property or the application.

Property owners must maintain open space in the same or better condition for the duration of the property's enrollment in PBRS.

But in terms of the process beyond that application, both the county, King County and the city's legislative bodies must then each hold a public hearing and separately vote on whether to approve the property's enrollment in the program.

So, and just for the committee's awareness, the city's practice has been to consider all applications recommended for enrollment by King County for current use taxation in Seattle from the previous year within a single bill.

King County only received one application last year.

So that's why there's just one associated with this bill.

Last year, there was again, only one previous year, there was only one application and some years there are none.

So it's not super frequent.

Property taxes are levied just in terms of understanding the fiscal impacts to the city.

Property taxes are levied to raise a specified amount of revenue in a given year.

And this amount is divided by the appraised values of all properties in Seattle.

The reduction in the appraised value of properties that are participating in the PBRS do not decrease the total amount of revenue received by the city.

These reductions result in a marginal levy rate increase to all other properties.

So there ultimately is no fiscal impact to the city results from approving these applications.

So onto, if anyone has any questions, just let me know.

But onto the specific application before you all today.

It is for the Hillman City Pea Patch, which has been in operation since 1994, and it consists of two parcels that are owned by Grow, a nonprofit that supports organic gardening and pea patches, and the center parcel you see before you in this map is owned by Seattle Parks and Rec.

It is located at the southeast corner of South Lucille Street and 46th Avenue South in the Hillman City neighborhood in District 2. And the application is to reclassify the west lot to add more PBRS categories.

It has been enrolled in the program since 1999, which would further decrease its taxable value, and then to enroll the east lot for the first time in the program.

DNRP recommended a total of 63 points for this application.

And, oh yeah, I can just move on to that.

63 points as shown on this slide.

It received a pretty high score because there was a conservation easement on the property and it also provides kind of unlimited public access.

If this application is approved, it would result in decreasing the taxable value of the property by 90%.

And in terms of the process, King County held the required public hearing in November of last year, and the County Council approved the application in January of this year.

So if the City Council approves the application by passing Council Bill 120800, King County would then incorporate the lower taxable values in its 2025 tax rolls.

Thank you, Yolanda.

That was great.

I would love to see if my colleagues have any questions regarding this.

Council Member Strauss, I see you pulling the microphone.

Yeah, thank you, Chair.

I don't have any questions.

I've worked with GROW in the past, preserving the Ballard Pea Patch.

Great organization.

I think this is a common sense decision.

Thank you.

Thank you, Council Member.

Council Member Rivera.

Chair, I just want to thank Vanessa for being here today, but also we were able to I have a conversation before this meeting in preparation for this meeting, so I don't have any questions.

Thank you.

Thank you, Council Member Rivera.

Thank you, Council Member Strauss.

Thank you for your questions under, and thank you, Yolanda and Bill for the presentation, the quick presentation.

Under the council rules, a bill cannot be voted on the same day as public hearing, unless the rules are suspended.

And given the results of the hearing today, I recommend that we suspend the rules by unanimous consent to allow us to vote on the bill today and refer it to our city council.

And if there's no objections to that, which I'll pause, the rules will be suspended to allow the committee to vote on the same day as it was held.

Hearing no objection, the rules are suspended and we will now proceed with a committee recommendation.

Before we vote, I'd like to thank Bill and Yolanda for your work on this.

We know that pea patches are incredibly important to our city.

It creates a community and connection and also it localizes our food and it shows people how we can be able to grow things with beautiful soil and in our land.

Thank you, Yolanda, and thank you, Groh, and thank the county, Bill, and all your work.

I now move that the committee recommends passage of Council Bill 120800. Is there a second?

Second.

There's a second and a third.

It has been moved, seconded, and third to recommend the passage of the bill.

Are there any comments?

Okay, Clerk, will you please call the roll for the Committee to recommend that the City Council pass Bill 120800.

Council Member Rivera?

Aye.

Council Member Strauss?

Yes.

Chair Hollingsworth?

Yes.

Three in favor, none opposed.

Motion carries.

Committee's recommendation to pass Council Bill 120800 will be sent to the July 2nd, 2024 Council meeting.

If there's no further questions, we'll move on to agenda item number two.

Clerk, will you please read agenda item number two into the record.

Agenda item number two is a Ship Canal Water Quality Project update for briefing and discussion.

Presenting today are Andrew Lee and Keith Ward from Seattle Public Utilities.

Awesome.

Keith, Director Lee, we really appreciate y'all being here, as always, and looking forward to the presentation about the ship water, the, you know, canal, the water quality canal project.

Thank you so much.

Did I say that right?

No, I didn't, but...

Water quality project.

Water quality project.

Thank you.

That's easy to think about.

Thank you, Chair Hollingsworth and members of the committee.

We have two really important agenda items for you today, and I want to thank you for the opportunity to talk about them with you.

The first is an update on the Ship Canal Water Quality Project, which will keep more than 75 million gallons of polluted stormwater and sewage from flowing into Lake Washington Ship Canal, Salmon Bay and Lake Union in a typical year.

A little over two months ago, we came to this committee to brief you about SPU's combined sewer overflow program.

and the Ship Canal Project in particular about their project cost and schedule update that we were in the midst of performing.

Today, we're here to give you the results of our analysis.

And with me today is Keith Ward, who is the executive sponsor of the Ship Canal Water Quality Project.

So I'll pass it off to Keith now.

Thanks, Andrew.

I'm having a little, I'm trained to deliver a mega project, but not to get this up here.

So I'm going to get some help from Alex.

Yeah, please.

I pulled it over.

I think I should have just.

Oh, that's okay.

Chair, if I may, while they're setting up, I just want to correct and apologize to Yolanda.

I think I said the wrong name.

I had Yolanda in the brain, but I think I said Vanessa instead.

Yolanda Ho, our really trusty central staffer, apologies.

Thank you, Chair.

No worries at all.

Okay, let's start again.

All right.

Thank you.

Thanks, Andrew.

We're here to talk about a project update that we've just completed for the Ship Canal Water Quality Project.

I'll provide a brief overview of the project, factors in our costs and estimates, some challenges on the project the past few years, and the results of the cost and schedule update we just completed.

So the Ship Canal Water Equality Project is an investment in Puget Sound and our region.

Once it is operational, it will reduce Seattle's combined sewage overflows, or CSOs, by more than 75 million gallons per year on average.

On this project, we have a joint project agreement with the King County Wastewater Treatment Division that includes a cost split of about 65% SPU, 35% King County.

Construction is taking place in five locations and includes a 2.7 mile long storage tunnel.

In 2013, the city signed a consent decree with the U.S.

Department of Justice, the EPA, and the Washington Department of Ecology about combined sewage overflows.

The consent decree reinforces the city's commitment to meeting the state and federal requirement to reduce CSOs to less than one overflow per outfall per year on a 20-year moving average.

Since 2013, when the consent decree was signed, SPU has made significant progress by completing more than 50 sewer system improvements to increase system efficiency, including projects like increasing wastewater pump station capacity, replacing outdated passive control systems with modern smart gates, and lining and replacing pipes.

We've also completed at least two large green stormwater infrastructure projects that manage nearly 13 acres of impervious area in CSO basins, which keeps stormwater out of the system.

We've completed over 1,000 rain gardens or cisterns installed on private property to manage stormwater runoff through the RainWise program.

And lastly, we've completed four storage facilities for a total of 5.4 million gallons of storage added throughout the combined system.

And in 2017, SPU will complete construction of our largest ever capital project, the Ship Canal Water Quality Project, which will provide 30 million gallons of additional CSO storage and reduce the number of CSOs in Seattle by nearly half.

We've made considerable progress on the project the past 10 years, which is shown in this timeline.

We've completed the design for all of our projects, and this phase is shown in the light blue bars.

We've completed construction on one major construction project and nearly complete with two more, and just received bids for our last remaining project, the Ballard Pump Station and Conveyance Project.

Until a month ago, we did not have cost certainty on this last project.

Because we now have either completed or have bids for all of our construction work, we have more cost certainty on over $470 million of construction work.

I'll talk more about this later.

We've completed over $410 million of progress on the project so far.

We expect to have the entire facility complete and operational by 2027, which is shown by the yellow star.

In 2019, SPU asked to renegotiate the terms of its wastewater consent decree, and confidential negotiations involving the U.S.

Department of Justice, EPA, the Washington Department of Ecology, SPU, and the King County Wastewater Treatment Division have been ongoing since 2020. Recently, negotiations were concluded, and today, the mayor transmitted the draft consent decree modification to council for review and approval.

This modification includes a ship canal water quality project completion date of December 31st, 2027, which aligns with the schedule shown here.

I want to quickly cover how far we've come the past seven years of construction work.

Our first construction package, the Bauer Early Works Project, built a new permanent pier, removed contaminated soil, and brought power to the site for future tunneling operations.

Our largest construction package, the storage tunnel, is almost complete.

We selected this contractor in 2019, and they've been working for the last four years through the pandemic at each of our sites.

They completed the storage tunnel after 22 months of tunneling in June 2023, and they are nearly complete with heavy construction work and will finish this fall.

Our third construction package, the Wallingford Conveyance Project, is in construction and will also finish this fall.

The final ship canal water quality project is the Bowerd Pump Station and Conveyance Project, which will construct a new 12 million gallon per day pump station in Bowerd to drain the storage tunnel and build a new eight-foot diameter tunnel to bring combined sewage overflows to the storage tunnel instead of overflowing in Salmon Bay near the Bowerd Locks.

In this slide, you can see the alignment of the new conveyance tunnel, as well as a rendering of the completed pump station from the new public pier that we rebuilt at the end of 24th Avenue Northwest.

This project will start construction in the fall of this year and will be complete in 2027. The project will also be responsible for startup, testing, and integrating all the components that were previously constructed by other projects.

There's a lot of terminology in cost estimating, but I wanted to highlight two key factors that were influential for the revised cost estimate I'm talking about today.

The first is escalation.

This is what will cost a complete work in the future.

Our national experts break the project down into components such as construction labor, steel, diesel, concrete, soft costs, and property costs.

The second factor are risks.

Construction projects have risks.

We plan for and manage risks through our risk register and integrate risk reserves or contingencies into our project cost estimates.

Risks can impact not only the cost but also the schedule.

It's important to remember that our cost estimates include not only a single estimate for future for work in the future, but a range of possible outcomes based on various scenarios.

This type of estimating is best practice for mega projects and is practiced by other agencies such as the Washington Department of Transportation and Sound Transit.

Given the uncertainties, long duration, and complex underground construction projects, we use various best practices to manage this type of megaproject.

This includes precise estimates of escalation in our cost estimates and then tracking future escalation projections, managing a comprehensive risk register, and managing costs through monthly reviews, value engineering, project cost reviews, and financing options.

This is a chronology of a few key budget-related items since 2018. In the blue, we set our current budget in the spring of 2018. Councilmember Herbald was chair of our committee when we developed this budget due to changes in historical rainfall and an increase in regional construction market cost.

At that time in 2018, Seattle's commercial and infrastructure construction market was one of the hottest in the world.

I was also brought on board about that time, and in order to develop this budget, we initiated an extensive 10-month-long cost estimate review and reconciliation process.

Working with national experts, we evaluated all the key factors and we worked with the mayor and city council to set the project budget at 570 million at a 65% confidence.

A 65% confidence means that there is a 65% chance that costs will be at or below the estimated budget and a 35% chance the estimated costs will be exceeded.

Included in this estimate was an estimate of $60 million in escalation.

Since 2018, we've been managing costs, risks and uncertainties and implementing cost reductions.

Construction of the storage tunnel began in 2019 and we updated the council on the project and that we were on track to deliver the project at 570 million.

In 2020, as we all know, the global pandemic began, which disrupted supply chains, decreased productivity and created a shortage in construction workers, among other impacts.

Right at the beginning of the pandemic, escalation decreased, but then it increased to levels far beyond the historical averages in 2021 and 2022. In 2022, our tunnel boring machine named Mud Honey after the Seattle grunge band encountered a 12 foot diameter boulder affectionately named the Mega Boulder.

We updated the council about this risk event which impacted the project.

We also discussed that the project budget would exceed the $570 million value and that we would update the council in 2023 after we received bids for our last construction project.

In 2023, we received bids for that package, but decided to rebid the construction package to reduce costs.

And we just recently selected a contractor for this package, so we can now update council on the project budget and schedule.

A major challenge for us is record high escalation for items like construction labor, materials, and equipment.

We discussed this with the City Council on two presentations in 2022 and in April of this year.

Our 2018 cost estimate was completed during what is considered a period of high escalation from 2017 through 2018. And we assumed that Seattle would return to the historical average of about 2.3% within five years.

But starting in 2021, escalation increased at between 11 to 24% annually.

This was record setting and impacts the bids construction projects received.

As you're likely aware, this record setting escalation has also impacted budgets for many other regional and national mega projects.

This figure shows how escalation compounds over time since we set our $570 million budget in 2018. Our 2018 estimate of cumulative escalation is shown in blue, and the realized and future estimated escalation is in green.

Contractors will be starting work on the $187 million-powered pump station and conveyance project later this year and will be completing the work through 2027, which is shaded in purple.

We received bids for our $255 million storage tunnel construction package in mid-2019 before escalation rates increased.

So there's no risk of escalation price increases there.

Also shown here is when we solicited bids for the Bowerd Pump Station and Conveyance Project, which I'll describe more in a few minutes.

We've also encountered underground risk events, including one that was less than 5% likely.

Our tunnel boring machine encountered a 12-foot diameter boulder, as I said, which we believe is the largest boulder ever seen in a North American tunnel alignment.

Our team, including the contractor, worked diligently to assess and then grind through the mega boulder and to not have to remove the boulder from the surface, which would have impacted a major arterial and local businesses.

The contractor asserted damages of about 3.5 months of scheduled delay and over $17 million in costs.

We also discovered underground infrastructure that wasn't accurately reflected in 100-year-old historical records called as-builds.

These are records in which people document how they actually installed new infrastructure.

Unfortunately, this differing condition cost us about $1.8 million.

Some best practices in cost management we've completed over the life of the project include finding over $67 million in cost reductions through three major value engineering and cost reduction efforts.

We've also secured $341 million in three low interest rate federal and state loans, which will save rate payers $267 million over the life of the loans rather than conventional financing over 20 to 30 years.

As described earlier, we recently opened construction bids for the Ballard Pump Station and Conveyance Project.

It was first bid in 2023, and SPU received a single bid for more than $65 million over our budget, including contingencies and reserves.

After opening the bid in 2023, SPU evaluated it and tried to understand the large cost variances and why there was only one bidder.

We held debrief conversations with bidders who dropped out of the bidding process and convened a group of national project delivery experts to help us evaluate the situation.

In the end, the city and county decided not to award the bid and proceed with the rebid process.

A big part of the rebid process was to understand changes in the marketplace and how to attract more bidders to create what we call competitive tension and reduce project costs.

We solicited input from the contracting community to inform what changes to make in the project and ultimately made several changes to contract terms regarding risk allocation along with some smaller scope changes.

We advertised for bids again in January 2024 and opened bids at the end of March of this year.

We received three bids and all three bids were between 4% under and 2% over the engineer's estimate.

After evaluating the bids, we selected a contractor last month, restructuring the design and contract terms and rebidding the construction.

package saved ratepayers $22 million.

We will start construction on this final package in the fall of this year.

Looking forward, we will continue our reviews of project scope, schedule and costs, as well as risk registers and other cost management practices.

We also work to manage construction costs and to contain those.

We've been working on a comprehensive update to our project budget and schedule since late 2023. And now that we have cost certainty on our last construction package, we can provide revised cost and schedule estimates.

The new budget is $710 million at an 80% confidence.

This means that there is an 80% chance that costs will finish the project at or below $710 million and a 20% chance the estimated cost will be exceeded.

This level of confidence is normal for other megaprojects.

As I said, so far we've accomplished over $410 million of work, so there's about $300 million of work remaining.

SPU's remaining cost share on this amount is about $234 million.

SPU is committed to managing these costs within our strategic business plan rate path with no impact to the city's general fund, and this will be discussed more in the next briefing.

I want to connect the revised cost estimate to the cost increase drivers that I showed earlier.

Our revised cost estimate, as I said, is $710 million, and it is a $140 million increase to our 2018 estimate.

80% of the cost increase, $112 million, is from three categories shown in green, escalation increases, direct pandemic impacts, and underground risk events.

Direct pandemic impacts include high rates of worker turnover in the construction industry, which impacted productivity and hence impacted schedule, which also then results in more escalation.

The remaining category shown in gray represents design refinements to concept level cost estimates for parts of our project that were in the very early planning stages in 2018, including our Ballard pump station and conveyance project.

And finally, this project has been impacted by escalation, the pandemic, and underground risk events.

Our new project budget, as I said, is $710 million with an 80% confidence, and we anticipate completing the project in 2027. SPU's share of these project costs are managed within our six-year rate path, and there is no impact to the city's general fund.

As we look ahead to the final three years of this project's construction, I want to remind us of the end goal.

Once this project is finished together with more than 50 other projects we've completed since 2010, we will have eliminated approximately 175 combined sewage overflows per year and reducing our combined sewage overflow volumes by more than 50% annually.

We are making significant improvements to our region's water quality.

Thank you.

Thank you.

Thank you both.

Thank you, Andrew.

Thank you, Keith.

That was great.

I want to pause and just say for the record, we're joined by Council Member Kettle.

Thank you for joining us today.

Let the record reflect that we also said that you notified us that you would be a little tardy today because of previous engagements.

So thank you.

Do any of my colleagues have questions?

Council Member Rivera and then Council Member Strauss.

Thank you, Chair, and thank you for the presentation and for being here today.

And I remember your last presentation about some of this work, actually, so appreciate, really, it's an update.

I do have a question about the impacts to the rate payers when you say costs will be managed within the strategic business plan rate path.

And I think you might have said this last time you were here, but can you just remind us what impact this will have on rate payers?

Yeah, I'm happy.

We'll be talking in the next presentation about our proposed rate path, which just for context is about 4.7% per year over the six-year timeframe.

And so that's what Keith is referring to.

We'll manage the cost within that rate path.

We've calculated based on our last time, you know, what is actually the impact on the rate, it comes out to about 0.2% over the six years.

So when we talk about different rate drivers, it is one of a number of rate drivers, but arguably a smaller one compared to some of the others.

Thank you.

Thank you.

Council member Strauss.

Thank you for the presentation.

Just I'm gonna repeat back a couple of things that I heard just to make sure that I got it correctly, which is that the numbers before us today You've only, the 710 at 80% confidence, that's something that you've only been able to really identify in the last few months because this rebidding process has gone out.

Is that?

That's correct.

And within that, if you had gone with the original bid from a few years ago that we only had one response, that would have been, back of the envelope math, $732 million?

Exactly, about $22 million more at least.

And so we were able to do savings.

As I was looking on slide 15 with your...

Yeah, we'll just slide back there.

We always know that in any project there is some escalation.

We did note that in 2021, nationwide escalation occurred at higher rates than we could have predicted because of the unpredicted pandemic.

So just as I'm looking at this, it's almost...

I'm seeing 36% the underground and design refinements.

And yes, Ballard was its own city when some of those things came in.

And if a dead horse hadn't shown up in a reservoir, I won't go on.

Just to say, it looks like about 36% are more typical.

You've got 64% that are pandemic related or escalation.

And so if you even just took a little slice out of that escalation, we're closer to a 50-50% split.

Just back of the envelope.

For escalation or sorry?

For pandemic related.

Yeah, that's a great point.

We broke direct pandemic because we were able to actually see that at 5%.

But if you just, you know, alternative reality, if we'd gone back, we never had the pandemic.

we would probably be taking out 60% of the cost increase at least for that.

So the 5% plus, sorry, it would be 64%, the 5% plus the 59%.

Yeah, thank you.

And then I believe it is slide...

2011, when we're using this graph, the 28, the blue line, the 28 projected trend, that I assume had some inflation escalation built into it.

Was that the 60 million overrun projection?

Well, actually, yeah.

So if we go back in 2018, if we remember, Seattle actually had the highest number of tower cranes in the nation.

Yeah.

And that was right, so we were at that point, escalation was above our normal average of 2.3%.

So when we developed the 2018 budget, we actually assumed that it would take five years to get back to the historical average.

So we kind of built in extra escalation.

The total value of escalation on the project, including five years to get back to the normal was 60 million.

And so once, you know, as you can see here, the green line is almost on top of the blue line starting out.

We were right on track there, and then COVID hit, and it went way above that.

So it exceeded the $60 million by far.

And I'll note here on the 2024 actuals and projected trend, at the beginning of the pandemic, you were below.

Yes, slightly below.

Right, and for a mega project, that's very difficult to do.

Just, we can go back to...

the slide 14, if you will, just you were under projected budget.

The pandemic came in, created all of these uncertainties.

We hit an erratic boulder that no one could have foreseen.

And you were still able to, you breezed over this rather quickly, but I don't know that the general public understands that The other option than what you chose was to actually close down Schillscholl Avenue, which is a heavy haul corridor, go through the heavy haul corridor concrete that is poured there and shut down one of the arterials leading in and out of Ballard.

Yeah, and we encountered the boulder at 1 p.m.

on April 21st, 2022, and by about two weeks after that, In our team, with our engineering team, we were developing a backup plan.

We always develop contingency plans, and that was one of the plans that we could have implemented, which would have probably taken out both lanes of Shill Shoal.

We would have basically had to design and construct a shaft, literally break the boulder up, backfill it, and then the machine could move forward through that.

And over about four days in early June of 2022, the contractor was able to successfully grind slowly through the boulder.

Did you have a cost estimate to what the secondary option was of digging the shaft down?

I don't believe we developed a specific cost system.

And I would say based on the costs for our other shafts, probably including, you know, the contractor will have a delay claim, probably in the $10 to $15 million at least.

Okay, and that would have been on top of what we already incurred, that 17 number, is that correct?

Correct, yes.

So just back to the envelope math here, while we're seeing this very large number before us, what we did not know about was the pandemic.

And then the other two items is that you've already saved us $22 million in addition to another $15 to $17 million.

So colleagues, I make that statement here because this number is big and scary.

and the team has done a very good job to reduce this number.

Last question here, are there any grants or federal funding that we should be seeking to offset this cost escalation?

On this slide, under slide 13, second row, so the utility has done an incredible job of acquiring years ago three low interest rate loans.

state and federal, which are about $341 million.

And so that'll save the ratepayers about $267 million over the 20- to 30-year life of the loans, as opposed to, like, conventional bond acquisition of those bonds.

So there's been some great financing options on this project as well.

Job well done.

Thank you.

Thank you, Joe.

Awesome, thank you, Council Member Strauss.

Any other questions?

No?

Well, thank you all.

I know that we're looking forward to the strategic plan presentation that's gonna cover some of this as well and answer some of the questions the other council members have.

So thank you so much.

We're looking forward to the project.

I know you're all looking forward to the project being completed as well.

So looking forward to it.

Thank you.

With no further questions, we'll proceed to our item agenda number three, item agenda, agenda item number three into the record.

Agenda item number three is resolution 32136, a resolution relating to Seattle Public Utilities adopting a 2025 to 2030 strategic business plan for Seattle Public Utilities and endorsing a three-year 2025 to 2027 rate path and a subsequent three-year 2028 to 2030 rate forecast to support the strategic business plan update.

Awesome.

Thank you, Alex.

We're looking forward to this.

And I also want to give out a shout out to my favorite Hennessy, Bob, who's in the audience.

It's a running joke.

It's my favorite Hennessy.

Thank you, Bob.

I didn't mean to put you on blast, but I think it's, you're not a shy guy.

And as we are figuring out our presentation and getting that settled, Council Member Strauss, do you have an interesting fact about Ballard you'd like to share?

Where the erratic boulder was located was adjacent to the ice rink in Ballard that was operational when the Seattle Metropolitans won the Stanley Cup.

We know that the Stanley Cup was won just this week.

And so urban lore says that the players that won the Stanley Cup also skated on the ice rink in Ballard adjacent to the erratic boulder.

That is so cool.

He is our Council Member Kettle named Council Member Strauss, our council historian.

And that is faster.

If I had typed that in AI and chat GPT, that would not have come up that fast.

So thank you, Council Member Strauss.

Director Lee, all yours.

Thank you, Chair Hollingsworth and members of the committee.

This is gonna be the first of three presentations that we're gonna have on our 2025 to 2030 strategic business plan.

And the plan, I'll talk about what it does, but really it's the document that guides the services that we deliver to our customers.

And it's really focusing on the next six years and how we're planning on doing that and paying for it.

And just a reminder, funding for these services that we'll be discussing are paid for by utility rates, not by the general fund.

And importantly, the plan really helps SPU focus our work to better meet the needs of our community.

and give our customers a predictable three-year rate path and also a projection for the next three years.

In short, this single document really brings together all of our service goals, our drivers, and our challenges, and our plan for how we will work through them.

With me today are Danny Purnell, our Director of Corporate Policy and Planning, and Carl Stickle, our Finance Director.

and Brian Goodnight from council staff, and who honestly shouldered quite a bit of the work that went into this plan.

And I'll refer to it and I'll be giving the entire presentation, but they're here to answer questions.

And I just want to give credit to them because they've done an amazing job of assembling this document.

We can go to the next slide.

So I'd like to begin by grounding us in SPU's mission and vision and our focus for the future.

Our mission is shown on the left-hand side, and then our vision is shown on the right.

People sometimes ask me, you know, what does it mean to be community-centered, one water, zero waste?

The community-centered part is obvious.

We're here to center our work on serving communities, especially the most vulnerable.

The second part, we believe that all water has value, and everyone has the right to access safe, clean, and healthy drinking water.

And lastly, we're committed to a future where we're not producing waste, where everything is reused, and where we're not polluting our precious water bodies.

These statements, our mission and vision, get codified in every single strategic business plan.

Fortunately, these ones are actually the same as the ones in our last one, and so we didn't see a need to change them.

Go to the next slide.

This is a recap of what our strategic business plan is.

As I mentioned, we update this plan every three years, so our last SPP strategic business plan was adopted in 2021. The plan identifies our business goals and strategies and includes our plan investments and initiatives across our three lines of business.

And then central to the plan is our six-year projection of our rates.

We call it a three-year rate with an additional three-year rate forecast.

And what I'll say is we know, and we've heard this from our customers time and time again, transparency and predictability are really, really important to them.

And the strategic business plan is our tool to be both transparent and predictable, but I'll add a third word on that, which is to be accountable.

We view our strategic business plan rate path as our commitment and our promise to our rate payers.

And frankly, we've done a really, really good job of keeping our rate commitments since we published our first strategic business plan in 2014. And I'll talk about that a little bit more in subsequent slides.

The period of this SPP that's covered in terms of rates is from 2025 to 2030. Our next update to this would happen in 2027. Despite what Mr. Zimmerman suggested, that we hadn't done a lot of customer engagement, we've actually done quite the opposite.

We've done a tremendous amount of customer engagement, and I'll talk about that on the next slide.

But one of the key ways that we get input from our customers is through our customer review panel.

We call them our CRP.

They meet with us over the course of years to understand our business, to review our proposals and provide feedback to us, and also review our rate projection.

Noel Miller, who some of you have met, is the co-chair of our CRP, and he will be here at the next meeting to provide the CRP's feedback on the plan, which is also included in a letter to Council.

After the plan is adopted, the CRP continues to have a really critical role in monitoring our execution of the plan and tracking our performance and whether we're meeting our commitments.

Go to the next slide.

I mentioned that customer engagement was a critical part of developing the strategic business plan.

And to that end, we had 20 customer re-panel meetings.

And that includes people like Noel, who is a retired former utility director and resident of Seattle.

It also includes people like Noel's co-chair, Amanda Richer, who is a strong advocate for the unhoused.

We also have representation from the business community and the real estate community, the Port of Seattle, the Office of Housing, sorry, Seattle Housing Authority, waste reduction advocates, small business owners, and others.

It's a wonderful cross-section of our city representing the entire city in the review and engagement on the planned development.

We also did a residential survey along with online focus groups and research.

I mention these online focus groups because it never ceases to surprise me how people see us or sometimes don't know this, but when they get to know us, they're consistently just really floored at the work that we're doing, and they're so impressed, and they're so glad that we're reflecting their values in our investments.

In our partnership, we also had a partnership with Department of Neighborhoods, where we attended a number of community events, and that's shown on the right-hand side of this picture.

I had a chance to visit a few of these community events, and it was actually wonderful to see our community engaged and providing feedback on our water and wastewater services.

And Director Lee, I think if it's okay, can we ask questions throughout the presentation?

Yeah, please.

Okay, Council Member Rivera.

Thank you, Chair.

Thank you, Director Lee.

I just wanted to ask questions about the 20 community meetings you had.

Can you just talk a little bit about those, where you went across the city and sort of what that looks like?

I just want to make sure constituents know when we're talking about outreach, since this is something constituents really care about, as do we.

that we really show, you know, when we say we do these meetings, what does that mean?

I think that's helpful if you don't mind taking us through that.

Yeah, and I'm going to let Dani Purnell chime in, and her team was working on that.

But, you know, the 20 was referring to our customer review panel meetings, and so those were kind of a smaller group of folks representing the city of Seattle, but we did do a significant amount of outreach to communities and in communities, so I'll let Dani talk about that.

Thank you for clarifying.

Sorry.

Sure.

Yes, this is on, sorry.

We have a fantastic partnership with the Department of Neighborhoods and they worked with us to identify over 13 outreach events in the summer and fall that were health fairs and community events that were already taking place.

and we went with them and DON's community liaisons and provided a series of survey questions that were in language and translated related to our services and also brought along some of our customer program staff to do outreach at the same time.

Terrific thank you Danny and can I maybe you already do this and I know we're in close contact so I really appreciate the partnership always and just know that we're ready and willing and able to help get the word out when you're doing the community outreach because I know it is hard to reach all of the residents of the city you know all 750,000 about residents in Seattle and so we are really a conduit also to help with that.

So I know that, like I said, we partner greatly together, and I want to continue that and help where I can in getting the word out.

Yeah, so appreciated.

Yeah, it is a wonderful partnership with the Department of Neighborhoods, and they're helping us not just with outreach on the strategic business plan, but with a lot of other community engagement that we're doing in our capital programs, et cetera.

So it's a really great partnership.

Just returning to the slide quickly, I will say from all of these engagement opportunities, we heard four things over and over from our customers.

And those four things are shown at the top kind of in the colored words there.

We heard that they care about reliability and consistency of our service.

We heard that they care about sustainability.

All of them care about the environment incredibly.

We heard that they care about equity and making sure our services are equitable across the board.

And lastly, they care about affordability.

And so these values have really kind of permeated throughout the strategic business plan.

And I'll talk about that in the next few slides.

Just to close off this slide, lastly, we've notified people through our website and other digital and ethnic media about our plan adoption process.

So we've let them know that we're here today, that we'll be at the next couple of meetings as well.

Okay, next slide.

Our strategic business plan includes 21 proposed initiatives and investments that are summarized and organized on this slide, separated out into our four focus areas, which are service, environmental sustainability, equity, and affordability.

The first thing that I will note before I kind of dive into the slide a little bit is that the highlighted initiatives and investments in no way, unfortunately, do enough justice to the work that we do on a daily basis.

There's so much more that our staff do just to keep the water running, the toilets flushing, the garbage picked up.

What this really focuses on though is how we're planning on advancing our work and so improving on it over the next six years.

And so with that, I'll provide some brief highlights and I'm happy to go into more detail on these, any of the bullets if you're interested.

On the top left and in the service box, we have worker facilities that are insufficient to meet our needs.

Our primary backup control center and staging area for our north side crews is in a seismically unsafe building.

And so, and it's again, our backup control center for our entire water system operations.

And our primary facility that we use is actually in a liquefaction zone.

So we have a substantial risk just in those two facilities.

So one of the things that we have as a significant investment proposed in the plan is the development and construction of a new north one water operations facility.

And our hope would be to acquire a parcel in the next year and then work towards design and construction of the facility in the following years.

Another key investment in the top left box is bringing our water treatment plants in-house.

We have two water treatment plants that serve the 1.6 million people in our city and the greater Seattle King County area.

Both were constructed in the early 2000s, and they have been operated through design, build, operate contracts, meaning we have non-city staff operating these facilities.

It's been a good relationship, but I will say firsthand that during the pandemic, I wanted control of these facilities actually, because we had very little control over the staffing and the continued operation of them.

And so these contracts will be expiring soon, and we're looking to bring these operations in-house.

On the bottom left in the equity box, one of the things that we're looking to not necessarily implementing in the next three years but starting the planning process on is advanced metering.

And so, that would be switching over from manual read meters to wireless meters so people can get their hourly water consumption and also be notified in the event of a water leak.

This provides a significant advancement in customer service.

And so, in the next couple of years, we are prepared to do planning for implementation of AMI in the next decade.

We're also in the process of evaluating our customer affordability programs.

And I'll talk about what we have in place right now, but we're going to be assessing whether we can improve those programs to be more supportive of our customers who have trouble paying their bills.

And then on the bottom right in the affordability box, we have some of our core asset management work.

So that includes repairing, replacing aged infrastructure, well as providing more resiliency in our water system in the event of an earthquake and we also have efforts to look at more alternative funding and financing like we have for the ship canal project as well as a new strategic technology plan that will expand on our use of technology systems throughout our utility so i skipped over the sustainability box on the upper right because i have another slide to talk about that but i just want to pause and ask if you have any questions on any of these proposals councilmember kettle uh thank you chair hollingsworth and uh

Mr. Lee, thank you very much and the team for being here.

I have to ask the question or follow up on the point regarding, as in my goal to turn every committee into a public safety committee, emergency preparedness.

I note your point about having facilities in a liquefaction zone, a seismically unfit building.

These are very important points, and it's really important to address now as trying to deal with it later.

So thank you for bringing it up.

And it also highlights, because this is a theme, as you can imagine with me, with the folks upstairs highlighting how this public safety element needs to be part of the planning system.

It needs to be part of the comprehensive plan.

It needs to be part of the transportation levy and the transportation plan, but also across the departments and the issues that they're facing.

Because in the end of the day, If the earthquake hits, we want to have this resiliency, so we have the service, we have the capability, and it could make a difference in terms of somebody in that situation, living or dying, you know, do they have water?

Because sadly, not everybody's got three weeks' worth of water at their house, and sometimes it's impossible.

So, you know, what efforts you do on the front end, on that front, as it relates to emergency preparedness, is really important, so thank you.

Yeah, really appreciate you emphasizing that point.

Yeah.

Thank you, Chair.

Any other questions on this slide?

And I can go to the next slide, which we'll talk about the sustainability.

Okay, I'll keep on going.

And I've separated this out because our department has an incredibly strong commitment to public health and the environment, and that really shows in the strategic business plan proposed investments.

Specifically, we plan to spend a considerable effort on ensuring that we have a robust and resilient water supply for the next 50 to 60 years.

you remember we just came out of a drought last summer and fall and we know that climate change is going to have long-term impacts on our future water supply so we are doing a 50-year planning effort towards that end to make sure we're securing again a strong and resilient and reliable water supply for the next 50 years we're also following the city's goals of carbon neutrality and we're spending money to realize that goal by 2030. We've talked in the past about reducing pollution, specifically stormwater and wastewater pollution, and we'll continue our efforts to do that through projects like the Ship Canal Water Quality Project in accordance with our consent decree.

I already talked about the One Water Facility.

Next, we'll be investing more in community resilience.

The focus of a lot of this effort is in the South Park neighborhood.

and Georgetown where we had the tremendous floods just a couple of years ago.

In partnership with the King County Flood Control District, we'll be making investments in the Duwamish to address sea level rise.

And we're also gonna be expanding our low income assistance programs for failing side sewers, which is a huge advancement for our customers who have a hard time paying for those unexpected bills.

Lastly, we see our role as an activator of green jobs and also for circular economy in which every commodity is used and reused again.

A great example of this is our building deconstruction grant program, where we were incentivizing building deconstruction instead of just disposing of demolished goods, demolished kind of wood and lumber into our landfills.

We received a $4 million grant from EPA earlier this year related to salvaging and reusing wood from residential buildings.

And this will help promote more business activation in our city around this work.

And we're doing similar work around food waste recovery, where we're actually giving money to organizations that are seeking to find new and innovative ways to connect food that would normally be thrown away to communities of people that are struggling with food security.

Go to the next slide.

So all the services and investments that I just described to you are made possible by the rates that our customers pay.

And so with this is kind of, this is a key slide of the strategic business plan.

And here is our proposed summary of our three-year rate path and our three-year forecast.

First, just to orient you on this slide, the left-hand side has the funds or the lines of business, so water, wastewater, drainage, and solid waste.

And at the bottom of the table is the combination of all the funds.

Across the top, you can see the years 2025 through 2030, and on the far right is the average across the six years.

So I'll start off with the overarching message, which is shown on the bottom right-hand corner.

we are proposing an average 4.7 annual rate increase for all the combined utilities from 2025 to 2030. And for reference, we were at 4.2% from 2021 through 26. So it represents a half percentage point increase from our previous projection.

You can also see in the dark blue boxes under the years 2025 to 2026, that for drinking water and for solid waste, those rates are already fixed.

And so that's a 2%, 2% for drinking water and the 2.5% for solid waste.

Those were adopted by council ordinance in 2022 and 2023. In addition to the 4.7 overall six-year annual rate increase, I'd like to focus on the blue columns that's in the rate path category, which are really focused on the next three years.

You can see that for 2025, we're proposing a combined utility rate of an increase of 3.7%.

And for 2026, it's a 3.9% combined bill increase.

Both of those increases, I'm happy to say, are actually well below the current rate of regional inflation.

And I'll talk a little bit more about that in the next slide.

The only other item I'll point out is that for wastewater and drainage, you can see the 555 and 5551 percentage point increases that we're proposing for 25 through 27. You'll see those numbers again, actually.

And so this year we're gonna be coming back later this year, this summer with our drainage and wastewater rate increases.

And those will be the exact same rates that you'll see in that proposal.

I just wanna close off this slide by saying these rate projections have been reviewed and recommended by both our customer review panel, which is that body of representatives that I mentioned before, as well as the city budget office.

Go forward.

So people are always gonna ask, what are your biggest rate drivers?

And they are summarized here.

And the first and most obvious one is inflation.

We've been in a period of record inflation in the past two, three years, and Keith talked about construction inflation specifically, but we all know it's impacted everything.

Regional inflation in 2023 was 5.8%.

Regional inflation in 2022 was closer to 8% to 9%.

Unlike many others in the region, we did not increase our rates above and beyond our previous strategic business plan commitments.

And I'm happy to report that our proposed three-year rate increases are below the regional rate of inflation.

The second main rate driver is the increased cost in our capital program.

Some of this is driven, obviously, by things like the increasing cost of construction that Keith mentioned.

But in addition to this, we have to still meet our regulatory requirements.

And that's for things like sewage overflow reduction projects, sediment cleanup, and of course, our aged infrastructure.

And our infrastructure continues to age.

It doesn't follow a nice, smooth kind of pathway.

It actually continues to increase.

And so these costs are again going up every single year.

And while we have an excellent bond rating and are oftentimes able to get favorable interest rates on our bonds, we also know that those interest rates have increased substantially over the last several years.

Last major driver is the amount that the significant amount of money that we pay to others.

And I'm gonna focus in on this in another slide, but our largest contract, our largest single contract is with King County for wastewater treatment.

And our next largest contracts are with our garbage haulers for college and waste management.

King County's sewage treatment rates are projected to increase annually from 5.75% up to about 8%.

by 2030, which is also a significant driver of our rate increases.

And again, I'll talk about that a little bit more.

Go to the next slide.

Mr. Lee, can I ask a quick question?

If you could go back to that slide, please.

Can you go back?

The aging infrastructure point is a very important point, back to my earlier point in terms of its resiliency.

But it's also very important in terms of like the comprehensive plan, you know, our densification.

And I love like the waterfront project because it was such a big hole for such a long time.

I knew they were doing a lot of infrastructure work.

My concern is we press forward on densification, which is needed, but if it's on top of aging infrastructure, this is like Microsoft loading up on top of the old MS-DOS.

At some point, it doesn't work anymore.

Is there any specific areas of the city that you are more concerned with related to aging infrastructure, or is it kind of across the city?

Is there any concerning areas from your perspective?

Yeah, it follows development patterns pretty closely.

And so I think about the area that I live in in Northeast Seattle, most of that was developed in the 1940s.

And then you have areas like Ballard or like Queen Anne area that might've been developed more in the 1920s.

And so the age of the infrastructure is very closely related to the time of development.

But the other key factor on that is age isn't not always a good indicator of quality.

And so ironically, some of the construction that we had in the pipes that we built in the 1920s are better than the pipes that we built, say, in the 1950s, right, or in the 1940s.

And so it just varies.

And we have actually a very complex kind of asset management models to look at the age and the type of material, as well as the soils that they were built in and things like that, because those can also have a huge effect on the reliability.

But that all helps us inform when is the optimal time to replace the aged assets.

Mr. Thank you.

And thank you for the aged point, too, as the eldest member of this committee.

Mr. Point of personal privilege to ELKS members.

So, this next slide is really trying to say in the midst of all these drivers that are forcing cost upwards, we have an incredible team of people that are actively working to push our costs downwards and keep our rates as low as possible.

Our work in saving money for our rate payers is really multifaceted.

The first category is just good financial management.

And we save a considerable amount of money just by refinancing loans, right?

When there's a good interest rate, we refinance and we've saved tens of millions of dollars just through that getting lower interest rates.

It also has to do with getting a good bond rating, right?

And I'm happy to report that we actually, in our most recent water bond rating, we got the highest AAA rating for our water bonds, which just means lower interest rates that we're able to pass on to our rate payers.

Pursuing alternative funding is another critical way that we save money for our customers.

And Keith mentioned the amount of money that we've gotten for the Ship Canal, which is translating directly to savings over the life of the loans.

But we're also actively pursuing more than just that.

And so for the Ship Canal in particular, we're actually going to be applying for more state revolving fund loans.

And so to account for some of those increases.

And that's not just for the Ship Canal.

We talked about earlier about the King County Flood Control District.

We're pursuing those funds wherever funds are available.

The infrastructure bill that was passed earlier this year, the Climate Reduction Act as well.

We're constantly looking at ways to reduce our costs for our customers.

And then lastly, we're looking inwards.

And inwards means continuous improvement.

We have a very active lean continuous improvement effort, which is focused on reducing waste.

And that initiative alone has saved us thousands of labor hours, actually, in work that we do every day, which also translates into savings for our customers.

So I talked about King County, and I do want to make a point on this.

I've mentioned this before.

From the chart, you can see that King County's proposed treatment rates are ranging from 5.75%.

And this data is actually low now.

It's old now.

It used to be 7%, but just earlier, I think either earlier this week or last week, the county adopted projections that go up to 8.25%.

And so...

This has an incredible impact on us, and it can't be understated.

As you can see from the bottom table there, our proposed rate path, if we didn't include King County, would be around 3.15 percent average over the six years.

With the county increases, that increases up to 4.7 percent.

And I'll talk about the impact on the bill, but about half of what the customer is going to see in terms of an increase on their bill is going to be money that we're paying to King County.

And so it has a substantial impact.

Go to the next slide.

So a significant portion of our bill also goes to pay city and state taxes.

And we're a huge contributor actually to the general fund.

And you can see, in fact, we're expecting in 2025 to pay about $140 million in city taxes.

These taxes, which are as high as 20.57% and no less than 13% are included in all of our rate projections.

And it does amount to our customers paying obviously a significant amount to the city's general fund.

Go forward again.

I mentioned in the beginning that in the spirit of transparency, predictability, and accountability, we treat our strategic business plan as our promise to our customers that we're going to hold fast to the rate path that we publish in our SBP.

And as you can see in this chart, that's what we've done pretty much to a T.

Our previous strategic business plan rate path was an average of 4.2% annual rate increases.

And if you look at those numbers from 2021 through 2025, for the past six years, we've come in under that actually at about 4%.

And that's despite record inflation that was around 8% in 2022 and 5.8% in 2023. And you can see from our future looking forecast, which shows our newly projected average annual rate increase of 4.7%, we plan to stay very committed to that.

And our commitment would be to come at that or ideally below that.

Go to the next slide.

This slide is just, you know, we always compare ourselves to our neighboring West Coast utilities.

And this chart shows how we've compared against our neighbors for the past couple of years, specifically for drinking water and wastewater.

As you can see, the pandemic and the effects of runaway inflation forced a lot of our neighbors to increase and adopt rate increases that were in the neighborhood of 9 percent up to 13.8 percent or even 17.2 percent.

And so many utilities have gone that direction of really, really stark increases.

We recognize how disruptive that can be for our customers, and it speaks volumes that I think that we've kept our rate commitment despite those incredible increases for the past several years, and we intend to keep and continue doing so in the next several years and the years to come.

Just last few slides.

On a per-month basis, our typical single family pays about $186 per month on their drinking water, wastewater, and solid waste bill.

They pay also on their property tax bill, their drainage rate, which is separate from their bi-monthly bill, actually, because most customers get a bi-monthly bill.

The cost of utility services will increase about $10 to $13 per month on an annual basis between 2024 and 2030. Over the six-year time period, the typical monthly bill will increase, as shown on this, by about $55.

As you can see from this chart, a little less than half of that growth in that bill is from costs that we'll pay to King County for wastewater treatment.

Next slide.

In terms of where our customers' money goes towards, this is kind of showing on a typical 2025 bill.

About a quarter of that money will go towards capital financing.

So this is all the new construction that we're doing.

the asset management, the regulatory-driven projects, et cetera.

About 30 percent of that will go towards our day-to-day operations and maintenance.

Then about 15 percent and 30 percent, so about 45 percent, is actually money that we will pay to others.

And so 30 percent of the bill will go to King County and also our solid waste collection contracts.

That's for ecology and waste management.

And then 15 percent, I mentioned earlier, is taxes and fees that we'll pay to the city and also to the state.

Just closing off, I think I just wanna emphasize and we recognize that all that, these are high bills for our customers to pay.

And there's a portion of our population that has a really, really difficult and challenging time paying for their bills, their utility bills.

With that, we actually have one of the most generous financial assistance programs in the country.

We have a lot of different avenues available for folks to be able to tap into those funds, and some of them are listed here.

The Emergency Assistance Program, is a program for income qualified customers where we're just helping them with either one or two bills during the course of a year.

And this is just recognizing that sometimes people deal with hardships, whether it's a health unexpected health difficulty, another unexpected bill that they're faced with or unemployment.

And so the emergency assistance program is there and available to them for that.

We also give considerable payment flexibility to our customers up to three years, actually, in some cases.

And so just to help them spread out the cost of some of those high bills.

We have a community donation fund, that's a voluntary contribution to help people in need.

And then recently, just in the last couple of years, we've started this side sewer assistance program.

And this is just recognizing that our customers, when their side sewer fails, it can be very traumatic.

They get hit with a $15,000 or even a $20,000 bill I've seen them as high as $40,000 or $50,000 even, especially if it's in an arterial.

They have to go across, you know, a significant amount of paving.

And so, the Sides for Assistance Program provides no-interest loans to low-income customers if they need it.

And so, it's a great avenue that we didn't have available before.

And then lastly, we have our Utility Discount Program, which offers a 50% rate discount to income-qualified customers.

And all of these programs, we're going to be taking a close look at them in the latter half of this year and coming back to you with some recommendations that we have on potentially revising those programs or expanding them, again, to provide more assistance to our customers who are in need.

This shows just, again, the total value of our utility discount credit program.

And this has also been worked into the rate proposals that we've put forward before you.

The total credit, the total amount of those credits is estimated about $30 million, and we're planning on continuing to grow this over the next six-year time period.

And so you can see the proposed rate path assumes annual enrollment growth of 2,500 participants per year.

And so that equates to about $2.8 million in new credits each year.

So that completes the presentation.

Again, I'm happy to answer any questions about any of the elements of our plan or our rate path.

Thank you.

Awesome.

Thank you so much.

I know it was a lot of information.

And SPU, you all do such a great job with planning out for the future, strategic planning.

I've just been really impressed with the thoughtfulness and the knowledge of SPU and your entire staff.

And I know it's hard as we are continuing to build our city and the infrastructure investment pieces that we have while we're increasing our population, but also to keep it affordable.

And I say it every time I go, we have the best clean drinking water in the country.

It's the best tasting everywhere we go.

And I think we're really extremely lucky to have the watersheds that we do and to have the people very knowledgeable about it, keeping the drinking water safe.

And then obviously the great job that you all do, sending our trash to Oregon, which I'm very happy about.

That's a direct shot at our duck down there.

Anyways, do any of my colleagues have any questions?

Yes, Council Member Strauss, the duck.

Thank you for coming back a couple more times.

I have a long list of questions.

I'm not gonna occupy our shared time here today.

I do look forward to digging into it with you because as you may remember, I have a deep interest in our utility discount program and softening the cliff.

that is there right now.

And what I think a lot of Seattleites are unaware of is the program itself, because there's a higher eligibility rate in the city than we have enrolled.

We'd love to work with you there.

I'll just note that during the last rate cycle, over the last three to four years, we have been able to keep rates lower than inflation, and that's been another one of the silent highlights of Seattle navigating the pandemic, where people were in a very dire situation.

Many people lost their jobs, et cetera.

We don't need to go back and rehash, but we did not increase those costs to them.

I will, Chair, ask if Brian Goodnight has anything to add, if that's appropriate.

Thank you for that.

Yeah, no, absolutely.

I'm so sorry, Brian.

I saw you there.

My apologies.

Thank you, Council Member Strauss.

Brian Goodnight.

No worries at all.

Thank you very much.

So I don't have any comments for today.

I was going to just talk a little bit about timeline, but I think General Manager Lee covered that, so...

We'll be coming back on July 10th at the next meeting.

The CRP chairs will have a chance to present.

I'll present a memo at that time as well with possible issues and things.

And I'll be asking questions in the meantime as well.

So if you have those and you want to send them my way, I can help coordinate them.

If not, obviously feel free to reach out directly.

And then the plan will be if the committee still feels comfortable for it to come back at the August 14th meeting for a possible vote and any amendments if council members are interested.

Thank you.

Thank you.

Thank you.

Council Member Kettle.

Thank you, Chair.

And I appreciate the briefing and these numbers.

Both Chair Hollingsworth and I sit on the Regional Water Quality Committee with Chair Belducci, Claudia Belducci.

And there we see some of these same challenges and the cumulative effect.

So I appreciate the efforts on the rates.

But I'm also, I did not know about the side sewer project because a separate concern is like, particularly in these older neighborhoods, you know, try to get a new roof, try to get your house painted, try to do X, Y, and Z.

You know, you need a new water line because it's galvanized steel from 100 years ago.

And it's awkward in terms of, you know, how to get in and so forth to the points that you're meeting.

So the site sewer program, I think is a fantastic addition.

So thank you for adding that.

So again, thank you for the team.

Thank you to Mr. Goodnight for joining us.

And also thank you to Mr. Hennessey who's out there.

I understand that chair that he may be your, Bob Hennessey may be your favorite Hennessey, but that begs the question is, who's your favorite Bob?

Chair, don't answer that.

I won't.

So thank you.

Yeah.

Thank you.

Well, you're my favorite Bob council member, and then I have a favorite Hennessy.

So come on.

Council member Rivera.

Thank you, Chair.

You know, I just wanted to really extend gratitude to the department for the work that they do.

We do have aging infrastructure as we do across the country.

We do also in Seattle.

And I very much appreciate your thoughtfulness and the work that is going behind ensuring that as we're doing the work and we are doing more development in the city, that our infrastructure doesn't give out and that things I know are getting updated as new things are being developed.

And I know that's part of the plan too, which we didn't really talk about today, but I know that you are doing, we've talked at other points.

and Council Member Kettle, you just raised today.

And I know how hard that work is and I really appreciate the intentionality and the focus that you all bring to ensuring that these, you know, we don't have fails in the system as we move forward.

And I know that is very challenging.

So I appreciate that.

I appreciate the work that you do to keep rate payer rates, you know, as low as they possibly can because costs increase over time, are keeping, are continuing to increase, particularly post-pandemic.

It seems to have really, the cost of everything has just really ballooned after the pandemic.

And so I'm really sensitive to the fact that rate payers are you know, they have a lot of financial challenges.

And I've always been a big fan and continue to be of the discount utility program, because I know that there are folks, you know, including seniors who really benefit from that program.

And so I really appreciate, in addition to all our low-income residents, et cetera.

I really appreciate the focus that goes into that particular program.

I think is one of the best that I've ever seen across the cities that I've looked at.

And so I really appreciate you talking about that today, flagging it and the work that goes into that.

So thank you.

Yeah.

When Councilmember Strauss was talking, it reminded me about how a lot of people do take advantage of the program, and Councilmember Rivera alluded to it.

And then also the raising of the...

I guess, what do you call it?

The threshold.

The one thing that I hear a lot about is that people that are, you know, who don't qualify for, they're like right in the middle, that they are feeling it tremendously, right?

The rising property taxes in our city and all the investments and just affordability is like key.

And just the people that are right there in that middle are feeling it really, really, it's tough.

And they're on fixed income and, you know, a whole bunch of things.

And I know often you all get...

rated on trash pickup and rates.

Those are like the two thing everyone talks about.

Are my rates going up?

Does my trash get picked up on time?

So really appreciate the level of service you all do and getting back to people, but definitely gonna work on the affordability piece for folks and some of those relief programs and creative ways in which potentially some of our middle-class folks can be able to find some programs that can potentially help because they are getting squeezed in our city.

So- Thank you all.

Do you all have any closing comments or any of my colleagues have any questions?

Closing comments at all?

No, just thank you for your time and we'll look forward to the next few meetings.

Awesome, we're looking forward to it too.

And colleagues, if you have any questions, send them to Good Night, my favorite Good Night.

And, oh.

I just wanted to flag the online didn't have this, but I wanted for anyone watching, That will get updated.

The slide deck that was most recently that you went through is not online for people to see.

So I wanted to flag that.

That will get updated.

Yes, we will put the updated, thank you, the updated presentation down.

Okay, well, if there's no further questions, our meeting, we're gonna start coming to a close.

Thank you, everyone, today.

And do any of my colleagues have any other items of business for the committee?

Seeing none, this concludes June 26th, 2024 meeting of Parks, Public Utilities and Technology.

Our next meeting is scheduled Wednesday, July 10th.

That will be at 2 p.m.

If there's no further business, this meeting is adjourned.

And the time is 3, 3, 3, 333. Go play the lotto because that's our lucky numbers.

Adjourned.

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