Water Resources Municipal Property Corporation

MINUTES OF THE BOARD OF DIRECTORS OF THE TOWN OF GILBERT, ARIZONA WATER RESOURCES MUNICIPAL PROPERTY CORPORATION BOND MEETING, MONDAY, FEBRUARY 23, 2021 at 4:30 P.M., CONFERENCE ROOM 233, GILBERT MUNICIPAL CENTER, 50 EAST CIVIC CENTER DRIVE, GILBERT, ARIZONA BOARD MEMBERS PRESENT: Secretary-Treasurer John Dalen Wilcock, Director James Graham, Director Lisa Horne, Director Nicholas Macaluso BOARD MEMBERS ABSENT: President Kevin Boudreau COUNCIL LIAISON PRESENT: Councilmember Scott Anderson STAFF PRESENT: Dawn Price, Assistant Town Manager Kelly Pfost, Management and Budget Director Christopher Scott, Budget Analyst Carlos Lamkin, Budget Analyst Heidy Comish, Budget Analyst Patti Hageman, Management and Budget Specialist Tanya Wright, Accounting Manager Nicholas Baldelli, Accounting Supervisor Jessica Marlow, Public Works (PW) Director Jeanne Jensen, CIP Supervisor Andrew Jackson, Water Manager Ken Snow, Wastewater Manager John Baird, Deputy Town Attorney Monica D’Ortenzio, Council Aide OTHERS PRESENT: None CALL TO ORDER Secretary-Treasurer Dalen Wilcock called the meeting to order at 4:32 p.m. OATH OF OFFICE. Council Member Scott Anderson gave the Oath of Office to new board members, James Graham, Lisa Horne and Nicholas Macaluso. ROLL CALL Management and Budget Specialist Patti Hageman called roll and declared a quorum was present. COMMUNICATIONS FROM CITIZENS None received. AGENDA ITEMS  Town of Gilbert AZ Water Resources MPC February 23, 2021 Page 2 of 7 1. OVERVIEW OF WRMPC - President Wilcock welcomed the new board members and provided an overview of the primary purpose/function of the WRMPC. The board was created at a time when Gilbert was changing from an agricultural community to a commercial and residential community, and there was a need to have water and wastewater infrastructure in place to serve the community. There was a limitation on the amount of funding that the Town could provide to itself from the general fund, so the WRMPC was set up as a way for the Town to borrow money. The borrowed funds, via bonds, are usually paid back from System Development Fees (SDF). Once a bond is paid in full, the ownership of the asset transfers to the Town. 2. ELECTION – Nomination and election of officers for 2021. Dalen Wilcock was nominated as President, Nicholas Macaluso was the nominated as Vice President and Lisa Horne was nominated as the Secretary-Treasurer. A MOTION was made by Secretary-Treasurer Dalen Wilcock and seconded by Director Lisa Horne for the above nominations. Motion carried 4 - 0 3. MINUTES – Consider approval of the minutes of the meetings of February 24, 2020 and February 27, 2020. A MOTION was made by President Wilcock and seconded by Director Graham to approve the minutes of the meetings of February 24, 2020 and February 27, 2020. Motion carried 4-0. 4. CAPITAL PROJECTS – Status report on capital projects. CIP Supervisor Jeanne Jensen introduced herself and started by stating she would not be giving much of an update on the Santan Vista Water Treatment Plant (WA0700) except to say that it is done, and the facility has been successfully running since the middle of 2018. The project was completed on schedule and under budget. The Greenfield Water Reclamation Plant (GWRP) is jointly owned by the Town of Gilbert, Queen Creek and the City of Mesa, with Mesa acting as lead agent and operator of facility. CIP Supervisor Jensen explained that the purpose of the current expansion project at GWRP was to increase capacity from 16mgd to 30mgd. CIP Supervisor Jensen stated that the expansion at the plant is basically two projects with two funding sources. Gilbert’s share of the cost is right around $71M. WW1140 was funded primarily through Wastewater Replacement Funds, while WW0750 was funded via WRMPC Bonds. The project is fundamentally complete and is in final close out with contractor. Gilbert is under budget on the project and the City of Mesa is looking for appropriate uses for any unused funds that may be reinvested into another need at the plant. At the end of Phase III, Gilbert has gone from 8mgd to 12mgd with their ownership going from 50% to 40%. Mesa has increased from 4mgd to 14mgd with their ownership going from 25% to 46.7%. Queen  Town of Gilbert AZ Water Resources MPC February 23, 2021 Page 3 of 7 Creek opted out of the Phase III expansion, so they remain at 4mgd with a 13.3% ownership. CIP Supervisor Jensen invited board members to take a tour of the facility. Staff will arrange date and time for a tour. 5. NORTH WATER TREATMENT PLANT – Discussion of condition and future needs PW Director Jessica Marlow introduced herself and began the presentation on the North Water Treatment Plant (NWTP) Replacement Project. She explained that the Water Division has exhausted the toolbox of operational and facility optimization strategies at the NWTP to achieve compliance with drinking water standards and Safe-Yield requirements. She detailed the Town’s responsibility to residents and the importance of investing in the facility for the future. PW Director Marlow talked about the facility background by touching on the service area, water production projections and economic drivers. She noted that the water at the NWTP comes from SRP, while the water at the Santan Vista Water Plant is from CAP. She explained that one of the issues at the NWTP is water quality and displayed a timeline detailing the EPA water quality regulations that have impacted the facility; the creation of the Water Resources and Water Quality Master Plans and NWTP Condition Assessment; and future population and compliance demands on the system. PW Director Marlow showed a water quality heat map and provided data on future groundwater operations. She talked about how the NWTP gets its source water from SRP, which is problematic and needs additional treatments to remove organics to be complaint with EPA requirements. Currently this is achieved by pumping large amounts of ground water, which has low disinfection byproducts, and blending it with SRP water. PW Director Marlow provided a graph showing the water quality sites redistribution to demonstrate where the problem areas are. She discussed safe-yield and assured water supply, stating that the Town is not using the full allocation of surface water due to water quality challenges and overusing groundwater to meet demand. She also stated that water system demand has outpaced projections which is another reason for needing additional capacity. Lastly, PW Director Marlow discussed the condition of the facility, the downside of low bid construction methods and current facility inadequacies. She showed pictures to illustrate the deterioration of the facility and the need for rehabilitation. She provided information on Council touchpoints regarding the recommendation for reconstruction and to demonstrate the years of efforts to investigate appropriate investments of staff and resources. President Wilcock asked if there is currently $70M needed for maintenance on the NWTP. PW Director Marlow confirmed that the condition assessment said it is needed. However, she added the amount does not address the water quality issue or the needed capacity expansion. It only addresses identified structural failures and deficiencies. CIP Supervisor Jensen then provided an update on the project progress and the various players in the process. Following Council direction in April 2020 and because of the unique issues with the project, a technical advisor, design engineer and CM@R were hired to help design the project. CIP Supervisor Jensen outlined stakeholder engagement, design  Town of Gilbert AZ Water Resources MPC February 23, 2021 Page 4 of 7 achievements and reuse of some of the facility and structures. She explained how design optimization would lower the cost of chemical use and future operation costs at the plant from $7.3M per year to $3.1M per year. She talked about the cost evolution and the evolvement of the project while keeping long term benefits of the community in mind. Providing information on cost development and robust cost modeling, CIP Supervisor Jensen said replacement of existing R&R, facility expansion, water quality enhancements and site improvements would cost $422M. Budget Director Pfost said the Town is not able to cash fund this project so that is the reason the WRMPC is being approached to issue bonds. She said issuance would be set for Spring of 2022 and would cash flow NWTP, Water Repair and Replacement, Water SDF and Water Resource SDF projects. The Town feels that issuance of bonds is better suited to the project rather than putting it on the ballot and having it impact property taxes because repayment of the bonds with SDF and water rates would be by those who are using the system. To accommodate this, she said that Town is looking at updating water rates and conducting a Water SDF Study in 2021 for implementation in 2022. CIP Supervisor Jensen finished the presentation by showing a project timeline for the next five years and beyond regarding the project. Director Graham asked if expenses associated with R&R in current plan bridges the gap until the new facility comes on line. CIP Supervisor Jensen said a couple of identified projects are moving forward that either presented a substantial risk to the plant or a resulting failure would be catastrophic to the facility. Director Graham asked if $422M included R&R expenses to keep the plant running during construction. CIP Supervisor Jensen said that emergency R&R expenses are not included in the $422M. Director Graham asked if operating costs are expected to be less once the new facility is up and running. CIP Supervisor Jensen said not necessarily less than they are currently, but less than they would be otherwise (because it will be a larger plant treating more water). Not a reduced cost per say, but an avoided cost. President Wilcock asked how current the current facility will continue to operate during the project. CIP Supervisor Jensen said CM@R helps to identify how to keep things running while meeting construction targets. President Wilcock asked about cost of SRP water compared to CAP water. PW Director Marlow said cost of SRP water is one of the least costly water sources so maximizing SRP water is of extreme importance regarding cost and the ability to limit use of groundwater. President Wilcock asked Budget Director Pfost about the water rights acquisition that she referenced earlier. Budget Director Pfost said it was regarding NIA reallocation, which is about 1,800-acre feet a year into Gilbert’s water portfolio of which payment will be made from Water SDF. PW Director Marlow said it is essentially CAP water.  Town of Gilbert AZ Water Resources MPC February 23, 2021 Page 5 of 7 Vice President Macaluso asked what type of rate assumptions were made when growth was determined. PW Director Marlow said she would have to look back at Water Resources Master Plan, but she does know that it was underestimated on the growth curve. She said demand projections would be part of new SDF Study, and there would be mini update to Water Resources Master Plan. Vice President Macaluso asked what the ultimate capacity will be for facility moving forward and would this expansion put facility at compacity. PW Director Marlow said really need 55mgd to meet projection for 2030 but building to 60mgd. CIP Supervisor Jensen said current model does not show that another expansion will be needed, but if it is necessary, the facility would be designed to allow for another expansion. Vice President Macaluso asked how $422M figure was calculated. CIP Supervisor Jensen said cost was derived at by the CM@R model which is intended to be in the Town’s best interest. Construction packages would be bid to the market and are part of Town’s fiduciary clause. Vice President Macaluso then asked about CM@R’s credentials. CIP Supervisor Jensen relayed their credentials by detailing projects they are working on throughout the country. Secretary-Treasurer Horne asked how residents will be impacted financially by issuance of bonds and would these impacts be permanent or temporary. Budget Director Pfost said that a portion would come from SDF that new residents and businesses would pay, and PW Director Marlow said a portion would be paid on the water utility billing side. Budget Director Pfost said bonds would go for 20 years as would the utility rates associated with bonds. She stated SDFs are revisited every five years according to state statute. President Wilcock asked if 2022 bonds issuance would be for $422M. Budget Director Pfost said it would be closer to $500M as it would include NWTP, the water rights acquisition and a couple of the R&R projects. Director Graham asked about size of bond historically. Budget Director Pfost said it is one of the larger bonds and reviewed past issuances. President Wilcock thanked staff for their presentations. 6. ANNUAL REPORT – Consider approval of the annual financial report. Accounting Supervisor Nicholas Baldelli reviewed highlights from the Annual Financial Statement dated June 30, 2020. He made note that restricted cash and investments went down very little mainly due to paying down of principal and interest as scheduled. He also stated that once Greenfield WRP Phase III project is wrapped up will see a depreciation expense on next year’s annual report. Next, he reviewed the Interim Financial Summary dated December 31, 2020. President Wilcock asked if there were any questions. There were none. President Wilcock thanked Accounting Supervisor Nicholas Baldelli.  Town of Gilbert AZ Water Resources MPC February 23, 2021 Page 6 of 7 A MOTION was made by President Wilcock and seconded by Vice President Macaluso to approve the Annual Report. Motion carried 4-0. 7. FUTURE AGENDA ITEMS/MEETINGS: Identify future agenda items None at this time. 8. COMMUNICATIONS From the PRESIDENT on current events. President Wilcock reminded staff about the required open meeting law and conflict of interest training. Members will be contacted by the Clerk’s office to complete the necessary training. From the BOARDMEMBERS on current events. None. From the COUNCIL LIAISON on current events. Council Member Anderson took a moment to thank and congratulate the new board members. He said that while the board may only meet once or twice a year, what is talked about is critically important to the Town’s City of the Future initiative as infrastructure supports the prosperity of the community. From STAFF on current events. Budget Director Pfost said next WRMPC meeting should be the annual meeting in February with a bond issuance meeting in Spring of 2022. 9. ADJOURN A MOTION was made by Director Graham and seconded by Vice President Macaluso to adjourn the meeting. Motion carried 4-0. The meeting was adjourned at 6:38 p.m.  Town of Gilbert AZ Water Resources MPC February 23, 2021 Page 7 of 7 ATTEST: ___________________________ ________________________________ John Dalen Wilcock, President Lisa Horne, Secretary-Treasurer CERTIFICATION I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the Annual Meeting of the Town of Gilbert Arizona Water Resources Municipal Property Corporation was held on the 23rd day of February 2021. I further certify that the meeting was duly called and held and that a quorum was present. Dated this __ day of _____________, 2021. ___________________________________ Lisa Horne, Secretary-Treasurer