ORDER-2017-151 : An Appropriation from account 6100-319000 (Water Retained Earnings) in the amount of $331,386 to account 6100-33001 (Water Reserve of Retained Earnings).

Transcript (~22 min @ 2:32:08)

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▶ 2:32:04 Peter D. Mortimer: President Kahn has made a motion to act concurrently with this order just read in order 2017-151. It is an appropriation from account 6100-319000 water retained earnings in the amount of $331,386 We'll count 6100-33001 water reserve of retained earnings. The joint orders are before you. Is there a motion, question, or comments? President Kahn, please.

▶ 2:32:43 Speaker 4: Yeah, Mr. De La Russo, can you tell us what the balances that were certified are in the fall on the two reserve funds, please?

▶ 2:32:56 Speaker 2: Thank you.

▶ 2:33:17 Speaker 8: well i may share to all the cons question um this is the information transmitted to this to the city from the department of revenue dated 10 27 2016 and they indicate what's before you um the first is the water free cash 331 386 and to the right the SOAR 383034 so that was certified by the Department of Revenue Division of Local Services sir so what we would be transferring now is

▶ 2:33:53 Speaker 4: the free cash that was certified last fall that that's correct but then this

▶ 2:34:05 Speaker 4: fiscal year so it's always the year behind and what do we anticipate that we're going to have for free cash in these two accounts for the fiscal year

▶ 2:34:14 Speaker 8: that we're in. In other words, will we going to end up this year? Yeah. What's your projection

▶ 2:34:16 Speaker 4: as to what's going to be certified in October of 17? I can't make a determination at this point

▶ 2:34:29 Speaker 8: because a couple of things. One is that it's a little bit early per se, only because we still have two billing periods plus that haven't been received or in transit. And secondly is that I can't, it's not the same as it was the year before, because we have a whole new system. We started in October now, so we lost three months. I can't do apples to apples. I can better probably forecast that next year. But the objective this year is, again, is not to have a deficit in either fund, and hopefully to end up with a small surplus if possible. But we'll know better as we go through, I can-

▶ 2:35:08 Speaker 4: How are our numbers running right now in the two funds?

▶ 2:35:11 Speaker 8: There should be a report for 531, I don't know if you have that, John, for the end of May.

▶ 2:35:30 Speaker 9: Thank you.

▶ 2:35:46 Speaker 8: As of 531, in short, the soil revenue is a negative 183,349, and the water is a positive $13,550 as of 5-31-17. And this chart, which the board obviously can see, talks about consumption being up about 2.3% from the prior year. But that's where we stand as of the end of May, Alderman.

▶ 2:36:14 Speaker 4: Okay, so if these two waters pass tonight, we're going to have $735,000 in change in our water reserve. and 887 000 in our sewer reserve that's correct and then presumably we're going to have additional monies for this year that will be certified in october and we'll add to these two totals

▶ 2:36:37 Speaker 8: that would be a a great expectation and a hope of mine too yeah and i mean since 2013 we've had

▶ 2:36:50 Speaker 4: a surf we've had a surplus in every year so it it looks like we could have potentially a million million dollar reserve in each of these funds by next fall.

▶ 2:37:00 Speaker 4: All right, well Mr. Chairman, not to be a horse that died last year, but.

▶ 2:37:09 Speaker 4: You know, this was my concern. I wanted to use the reserve funds to hold rates down and to fund the budgets. The board in its wisdom disagreed with me. I understand that you have to have reserves I don't think we need to have a million dollars reserves in each of these accounts and that was the basis of my thinking last year I haven't changed my mind this year but I will listen to

▶ 2:37:44 Peter D. Mortimer: the discussion of my colleagues thank you very much president Kahn aldermen's work oh please followed by Alderman Tramontozzi thank you mr. chairman I want

▶ 2:37:50 Michael P. Zwirko: build off of what alderman khan just stated and uh help me here a little bit mr del russo if you don't mind so this variance essentially uh if if we approve the free cash allocation that's proposed the adjusted balances will actually be over 10 the 10 goal in water by 123 538 dollars 88 cents and over the 10 goal in sewer by 16 427 dollars and 23 cents is that correct that's correct so why don't we then appropriate what hits our target of 10% which would then give us about a hundred and forty thousand dollars in total variances in both accounts for expenditure elsewhere I mean why are we going over the goal a

▶ 2:38:34 Speaker 8: couple things one is we're trying to make it a multi-year program because if you if you allow that to happen it's going to reduce the chance you're going to have to raise any reserves in fiscal 19 so that wouldn't have to be raised in 19 secondly is that it should you decide only to appropriate the 10% which is totally in your purview then the remainder would flow at the end of the year to pool cash for both water 123 538 would go to water pooled cash and saw a pooled cast 16 427 23 and in a portion may translate into free cash for the next year in the fall so you're just pushing it forward the year so it's up it's up to the boards obviously and uh again uh uh we have met the ten percent and it's the

▶ 2:39:28 Speaker 4: board's purview those are all the questions i had at this time thank you very much alderman

▶ 2:39:29 John N. Tramontozzi: Zwirko alderman Tramontozzi please thank you mr chairman um just so i understand it if we don't if we do not approve this order what happens to these funds

▶ 2:39:46 Speaker 8: Through the Chair, the Alderman, what happened is that the amount that you have in reserves right now, 404.07768, 493.763.93 is what you would have, period, at the end of June 30th. The free cash that's sitting there would flow into pool cash and go towards next year's free cash determination.

▶ 2:40:10 John N. Tramontozzi: is it so it does is this in the enterprise fund or is this in the general funds oh all enterprises

▶ 2:40:16 Speaker 8: they're always segregated totally segregated enterprise it can only be used water and so all dollars come in here strictly for water or so a period can't be used for general fund so what

▶ 2:40:28 John N. Tramontozzi: can those funds then be used for reducing rates and other things well again um once they're

▶ 2:40:32 Speaker 8: certified because they would have to get recertified in the fall and um quite often you don't get dollar for dollar because sometimes there's offsets if you know what i mean um but then once it's recertified then you can use it for other purposes in the fall

▶ 2:40:53 Speaker 8: such as uh repairs if they become necessary absolutely absolutely in fact you have right until the next june 30 that you do that if you'd like you have a whole year all right thank you

▶ 2:41:07 Peter D. Mortimer: Thank you, thank you very much Alderman Tramontozzi, Alderman Medeiros please.

▶ 2:41:12 Monica C. Medeiros: Thank you, and I've had lots of discussions over many years about reserves. And I definitely have had concerns about taking so much money just to sit in a fund where it could be used to either reduce the rates or just not collect it from people who sometimes don't even live here anymore and ended up paying to to raise this money but that being said I just want to point out that the number that we're using and it took me a minute to figure it but just so everybody here is kind of aware too that the number that we're using for the FY 2018 budget amount is not the amount that we see in our FY 18 budgets but it's really in fact the amount that we're looking at from the the items including the indirect funds and everything they'll match up to those numbers from what mr. de la Rousseau had handed out to us so you know I I just want to make sure that when we were I think when we were first discussing way back when going to a 10% reserve of the budget I shouldn't speak for other aldermen but I think that the consensus at the time was thinking that we were talking off the budgeted numbers so this is in fact not just 10% of the budgets themselves but also 10 you know this this calculation that we're seeing that has the variances in a you know abundance above the ten percent of one hundred and twenty three thousand five hundred thirty eight dollars in water and sixteen thousand four hundred twenty seven dollars in sewer is actually based on the budgets plus the indirect cost for the overall water sewer thank you

▶ 2:43:02 Peter D. Mortimer: thank you Alderman Medeiros Alderman Forbes please Thank You mr. chairman so

▶ 2:43:05 Scott M. Forbes: So we got $140,000 in surplus money, give or take, right? Correct. We'll call it surplus money. Now, what I want to go back to is what you indicated in the first part of your conversation. Because you said as of 5-31, water was at negative 183,349?

▶ 2:43:25 Speaker 8: It was negative of 180, that's correct.

▶ 2:43:28 Scott M. Forbes: All right, and then sewer was a positive 13-5. So if you combine both of those together, as of 5-31, we're at negative 170,000 if I just round it is your indication of putting these surplus funds here to offset that negative number if all things remain

▶ 2:43:48 Speaker 8: equal moving forward no the you talk about the variance yeah yeah no yeah my position is simply that if we put it in the fund now then it's been dedicated to reserve fund it eliminates um two things one is it it's not a direct science 10 is a target it could be 11 could be 12 it could be nine it could be eight but the target of the board was 10 and if you put this additional funds in there you're helping 19 and perhaps 18 in some sense in a different way depending on what happens internally um to have always that 10 goal so to reduce what what you have to raise in fiscal 19 if you don't have to touch anything it's less money you have to raise there because you already raised it here that excess that's what I'm that's the point but it's up to the boy the boy can do

▶ 2:44:39 Scott M. Forbes: whatever they like I mean I know previous consults the two consultants that I've had the experience in chatting with they said they wanted 20 to 25 percent in reserves in which I think is a very unrealistic number in today's budget process so I know we agreed on 10 we've hit the goal on 10 based upon fy 18 if there is a hundred and forty thousand I mean you sprinkle that amongst eighty four hundred accounts I mean how is what would that be if I mean if we were to say choose the option of maybe trying to give the ratepayers back that hundred and forty thousand that that's a minimal you're not going to see

▶ 2:45:22 Speaker 8: a big difference in a water bill are you no and in fact I'm not exactly sure I'm not sure technically how that could be done at this point to begin with.

▶ 2:45:28 Scott M. Forbes: Yeah. I guess my one concern is we agreed on 10%, we hit 10% and now we're asking for a little bit more. Which I don't know, I guess I'm on the fence about that a little bit, but thank you, Mr. Chairman.

▶ 2:45:41 Peter D. Mortimer: Thank you, Alderman Forbes.

▶ 2:45:43 Speaker 4: Make a motion to amend the order.

▶ 2:45:45 Peter D. Mortimer: Alderman Zwirko is making a motion to amend the joined orders. Correct. and what would be the uh full substance of your amendment i'm gonna i'm gonna subtract the

▶ 2:46:00 Michael P. Zwirko: variance from the free cash allocations in both the water and sewer therefore the water retained earnings amount would be amended from 331 386 dollars to 207 847 dollars 80 cents and the sewer retained earnings would move from I apologize would move from

▶ 2:46:29 Michael P. Zwirko: three three hundred eighty three thousand thirty four dollars zero cents to three hundred sixty six thousand six hundred six dollars and 77 cents thus clearing out the variances and hitting the target of ten percent second the

▶ 2:46:45 Peter D. Mortimer: motion I think alderman MacMaster my goal is up beat autumn Alderman Forbes by a hair this was alderman medeiros this time did i you second or two didn't you all of them yeah i think she got it i think she got it okay but you definitely got cut off um did you catch those figures uh madam clerk of committees all right so we have a motion to amend this order made by alderman's worko to reduce the amounts that would be put into the reserve accounts um Said motion was made by Alderman's Worker and duly seconded by Alderman McAteer-Margolis. Is there any further discussion on the motion to amend? Alderman Inferno, please.

▶ 2:47:29 Gail Infurna: Thank you very much. I have a question, I guess, for Mr. De La Russo. If we did not amend this and did it as you have here, and as President Kahn alluded to, that would give us a million dollars for next year, I guess I'm a little confused thinking we've already set the water rates.

▶ 2:47:54 Gail Infurna: why not go with this have the million in surplus for next year and then use that money to reduce water rates maybe for next year that's just my little simple mind of mathematics no no I think I would prefer to leave leave it as it is here we've already done the water rates which we know we did not raise and get us up to that good surplus that is over the 10 percent and then just work at that and give it food for thought for next year when we're talking about water rates to reduce then the water rates for next year in that through the chair in

▶ 2:48:27 Speaker 8: essence that's what the expectation would be my own expectation because your budget for 19 will not be what it is for 18 it's going to be higher the 10% figure will be higher you're already helping to reach that goal by having that money in the reserve fund now so you don't have to raise it in 19 you already have it that's I that was my position on that but what again whatever the board wants

▶ 2:48:58 Peter D. Mortimer: is is the board thank Thank You alderman for honors is that the list of your questions yes questions thank you very much alderman's work up next in queue withdraw and alderman Tramontozzi then alderman MacMaster my goals withdrawn uh thank you very much uh alderman Zwirko yields the floor are you yielding oh alderman so you're telling me that we can we can use the reserve funds to reduce the rate through the chair you are in fact when you

▶ 2:49:23 Speaker 8: don't raise the rate to raise reserves that's exactly what you're doing well we've never used

▶ 2:49:29 John N. Tramontozzi: the reserve funds to reduce the water and sewer rates have we we have but but your rates have gone

▶ 2:49:33 Speaker 8: up because you were using the rate to build the reserve now that you didn't like this you don't have to use you don't have to build the reserve so your rate's not going to go up let's say it was a nickel for the sake of discussion it's not going to have to rub that nickel because you already have you already met your target for the year so for 18 you're all set you don't have to worry about raising the water store rate to to bring that money in it's already there

▶ 2:50:03 Speaker 8: i actually maybe have to do the cheer to all of them they were having this discussion about reserve because i remember years ago we didn't have anything to talk about so i mean it's a

▶ 2:50:16 Peter D. Mortimer: pleasurable conversation believe me that's fine thank you alderman Tramontozzi alderman

▶ 2:50:22 Mary Beth McAteer-Margolis: macatay margolis please so if this order were to pass as amended and we have 140 000 that we are not going to put into the reserve account would we be using that 140 000 to offset this coming fiscal year's rates no no no what are we going to do with it it would go into next year

▶ 2:50:40 Speaker 8: when they do the determination of free cash this little pocket of money will flow into that calculation that's all then they'll make a determination free cash etc so it would just

▶ 2:50:54 Speaker 8: go into that the pool as you call it the water pool and the sewer pool that's exactly what it's

▶ 2:50:58 Mary Beth McAteer-Margolis: called this pool cash it would just sit it would just sit for the year yeah it would close out to

▶ 2:51:00 Speaker 8: that fund both funds and then uh it belongs to both funds uh dollar for dollar and at that point

▶ 2:51:13 Mary Beth McAteer-Margolis: next year we could we would have that once they certify it to begin looking towards the rates

▶ 2:51:16 Speaker 8: for setting them for next year absolutely and the dor will tell us how much uh free cash we have in both funds and this would go towards that absolutely okay thank you thank you alderman

▶ 2:51:26 Peter D. Mortimer: McAteer-Margolis Alderman Sorko please I apologize for withdrawing and then

▶ 2:51:29 Michael P. Zwirko: asking to comment so I just want to make a clarification statement here so the reason I amended the order if we put the funds as proposed not by myself originally proposed prior to the amendment into the reserves the fear is that we don't touch the reserves okay so then by removing the excess the variance the 140 000 that is going to go into next year's available fund hopefully to reduce outside of the reserves so it can be used to hopefully i guarantee i appreciate alderman Forbes comment it's a drop in the bucket when you're looking at a 15 million dollar bill on the water and sewer rates however it's there and it's not locked up in the reserves because as mr Tramontozzi said although apparently we have used the reserves in the past to lower the rates it's getting them out of the lock box the alleged lockbox just wanted to clarify that that's the difference thank

▶ 2:52:27 John N. Tramontozzi: you all the much work oh well all the ventriloquist but if we don't even put it into that lockbox we would have it available to do do with what we will on

▶ 2:52:41 John N. Tramontozzi: the rates so if we don't even put any money into the lockbox don't even put any additional funds into the reserve that those monies would go back to in the free cash into the pool and we can use that money to when we discuss rate setting once they certify two things once

▶ 2:52:56 Speaker 8: they certify it in the fall like they certified this time you know they certified it what did i say uh october 27th once they certify it this you know how much is available then you could have those conversations correct again though point of information it's not necessarily that you get dollar for dollar this is a point of information every year is different every year has their own little intricacies and that's something that i i i live by right thank you thank you alderman

▶ 2:53:26 Peter D. Mortimer: chair matosi so we have a motion on the floor to amend this order by the numbers previously stated by alderman Zwirko duly seconded by alderman makatia margolis all in favor please say aye aye aye any opposed opposed um so the motion passes one opposed move for passage of the orders

▶ 2:53:54 Peter D. Mortimer: as amended mr chairman president khan has moved for passage of the orders as amended duly seconded by alderman forbes on discussion seeing none all in favor of passage of the orders as amended please say aye aye any opposed hearing none the amended orders okay two opposed um so we have the order does pass two opposed and the orders as amended will be recommended to the full board for passage the next order we have before us is ordering 2017-142 it is the water enterprise operating budget for fiscal year 2018 in the amount of $5,204,163.34.