Water Resources Municipal Property Corporation

MINUTES OF THE BOARD OF DIRECTORS OF THE TOWN OF GILBERT, ARIZONA WATER RESOURCES MUNICIPAL PROPERTY CORPORATION MEETING, WEDNESDAY, FEBRUARY 12, 2024 AT 2:00 P.M., IN-PERSON/VIRTUAL MEETING, GILBERT, ARIZONA BOARD MEMBERS PRESENT: President Shane Cook Vice President Nicholas Macaluso Secretary-Treasurer Kevin Boudreau Director John Dalen Wilcock Director James Graham BOARD MEMBERS ABSENT: None COUNCIL LIAISON PRESENT: Vice Mayor Scott Anderson TOWN STAFF PRESENT: Kelly Pfost, Management and Budget Director Susanna Struble, Town Engineer Jeanne Jensen, Capital Improvement Projects (CIP) Project Supervisor Emily Harmon, FM Services Accountant Supervisor Anthony St. George, FM Services Accounting Manager Tanya Wright, Financial Services Officer Rachel Shaver, Management and Budget Specialist Chris Payne, Town Attorney OTHERS PRESENT: None CALL TO ORDER President Shane Cook called the meeting to order at 2:00p.m. OATHS OF OFFICE Vice Mayor Scott Anderson gave the Oath of Office to returning board members, James Graham and Nick Macaluso. ROLL CALL Management and Budget Specialist Rachel Shaver called roll and declared a quorum was present. COMMUNICATIONS FROM CITIZENS None received. AGENDA ITEMS  Town of Gilbert AZ Water Resources MPC February 12, 2024 Page 2 of 7 1. WELCOME AND INTRODUCTION TO MUNICIPAL PROPERTY CORPORATION (MPC) The board of directors unanimously decided that an introduction was not needed as there were no new members added this year. 2. ELECTION – Consider nomination and election of officers for 2024. President Shane Cook proposed that those eligible to keep their current office do so. Nick Macaluso was not eligible as he has already held the position of Vice President for two years. Shane Cook agreed to continue as President and Kevin Boudreau agreed to continue as Secretary Treasurer. Shane Cook Nominated James Graham as Vice President with a second by Nick Macaluso. A MOTION was made by President Shane Cook and seconded by Director James Graham for the above nominations. Motion carried 5 - 0 3. MINUTES – Consider approval of the minutes of the meeting of February 9, 2023. A MOTION was made by Vice President James Graham and seconded by Director Nick Macaluso to approve the minutes of the meeting held on February 9, 2023 as written. Motion carried 5 - 0 4. CAPITAL PROJECTS – Status Report CIP Project Supervisor, Jeanne Jensen, gave an update on the North Water Treatment Plant (NWTP). Ms. Jensen explained that this project has been underway since 2018 when background efforts were completed around master planning efforts as required by state law every 5 years. In August of 2020, a stakeholder development effort was completed to agree on the project’s core values. The core values are summarized as the responsibility to deliver safe, reliable, resilient water, fiscally responsible project management, and proactive communication. Ms. Jensen explained the Key Takeaways regarding the irrespective need for these updates to the NWTP as outlined on presentation page 3. She then gave an overview of the Facility Background regarding Service Area, Water Production, and Economic Driver. A color-coded map was provided to show the Town of Gilbert Water System. Town Engineer Susanna Struble joined the meeting at 2:11pm. Ms. Jensen moved on to discuss/explain the Project Background information, beginning with an explanation of Nichols Park and how it has been modified as construction use for the duration of the project. Storing and processing dirt on site reduces the project costs by around $20m. Ms. Jensen then highlighted Division Efforts as described on presentation page 6 with an emphasis on the Integrated Water Resources Master Plan (2017/2018), Water Quality Master Plan (2018/2019), NWTP Condition Assessment (2018/2019), In-House Pilot Testing (2017-2021), and facility operational improvements (enhanced coagulation, filter underdrain replacements, TTHM aeration equipment installed in Reservoir, etc.) Ms. Jensen moved on  Town of Gilbert AZ Water Resources MPC February 12, 2024 Page 3 of 7 to give an overview of the Business Case in which regulation, water quality, water resources, and site condition were discussed. A stakeholder team comprised of individuals from several departments worked together to define the scope of the project and concluded that a substantial investment was required. Heat maps of the affected area from 2018 and 2025 projected were provided on presentation page 10 as a visual of what future operations would look like should the plant continue unaltered. Director Dalen Wilcock asked a question regarding the meaning of TTHM. Ms. Jensen explained that TTHM is another term for a disinfection byproduct. Disinfection byproducts cover various things, TTHM specifically is total trihalomethanes which is the only disinfection byproduct compound that we struggle to maintain compliance with. Director Wilcock asked if we would have more of this issue going forward? Ms. Jensen answered that the new plant will give us the tools to manage TTHM more easily. Director Nick Macaluso asked for clarification on the maps asking if the 2025 map should show more green. Ms. Jensen clarified that the 2025 heat map was a projection of what future operations would look like if the plant had remained unaltered. Director Macaluso then asked what the heat map would look like upon completion of the new NWTP. Ms. Jensen answered that we do not currently have that in the form of a heat map, but could possibly obtain and distribute that if needed. Management and Budget Director Kelly Pfost asked if the new plant will solve this issue so that the future operations are more green. Ms. Jensen answered yes, since the update changes the water in a couple of ways including optimizing where Ozone is fed and how different areas of the plant are operated. Director Macaluso asked if the assumptions over the seven-year period are based on population density. Ms. Jensen answered that the heat map is an indication of water quality compliance and how close we are to the 80% that we are trying to stay below. Director Macaluso states that the map would look alarming to a resident and Ms. Jensen explained that it would if we were not making this investment. In recent updates, aeration systems have also been added at the North facility that help strip those compounds out of the water, which are not reflected on the heat maps. Director Wilcock asked how much groundwater we are using. Ms. Jensen explained she would have to follow up with a specific number, but that it is in the 30-40% range, where we would like to be around 10%. Secretary-Treasurer Kevin Boudreau asked if there are any federal fines that could take place for not being in compliance. Ms. Jensen answered that the EPA has yet to use their ability to create a consent decree for this particular compound. The larger concern is the lack of public trust as we would have to send out notices on a consistent basis in that case. President Shane Cook asked if we have an idea of what the future operation heat map will look like with the new NWTP. Ms. Jensen explained that it will look more green, meaning lower TTHM levels. We also have different wells going into the system that can be used more  Town of Gilbert AZ Water Resources MPC February 12, 2024 Page 4 of 7 strategically as well as system improvement regarding unidirectional flushing. Ways to reduce and restrict the compound are continually being identified and evaluated. Director Wilcock asked about the difference between the South and North Water Treatment Plants. Ms. Jensen explained that the South plant treats water from the Colorado River and the North plant treats water from the Salt River and Verde River. The processing needs are different due to the nature of the chemistry of the water provided from each river. Water provided to the South plant is naturally less reactive and not in need of the same filtering process as the North plant. President Cook clarified that the new system will handle the turnover from the Salt River to the Verde River with no problem. Ms. Jensen answered that it should, especially with the installation of presedimentation basins. Ms. Jensen then moved to an overview of the Program Status and Rates Impact of WA1589 NWTP Reconstruction. The timeline and cost explanation of the project are provided on presentation pages 16 and 17. Ms. Jensen also highlights Construction Escalation, Volatility, Availability, and Escalation of the project. Ms. Jensen gave details on each GMP: GMP 1 is completely finished and GMP 2 addresses long lead material procurement and came in $3m under projection. GMP 3 went before Council in June 2023 and included a 90-day design pause which eliminated $30m dollars in design work. GMP 3 is under construction and at 100% design. GMP 4 (Granulated Active Carbon Facility) was approved by Council in December 2023 and is currently underway with 90% design. GMP 5 is at 30% design and will not be priced until the design is complete. Director Macaluso asked about Council approval for GMP 3 and GMP 4. Ms. Jensen answered that both have already been approved. Ms. Jensen continued to discuss construction details including Earth Work, Safety and Craftsmanship, Night Work, and Teamwork. There are currently 140 individuals working on the project at any given time and the project is currently at 440 days without a recordable injury. Night Work continually takes place due to the availability and reduced cost of concrete during those times. Ms. Jensen then talked through a flyover of the facility included in the presentation to explain how the project will look at completion. Director Wilcock inquired regarding the large concrete block in the middle of Nichols Park. Ms. Jensen explained that those are electrical vaults that are for pulling all of the conduit and wire for the future plant. Director Wilcock clarified that there is a Granulated Active Carbon (GAC) facility for regeneration in Gila Bend. Ms. Jensen answered that there is a regeneration facility there and we are looking into pricing regarding that source. Vice President James Graham clarified that we currently use a Distribution System Management for compliance, which will change when the plant comes back online creating a savings. Ms. Jensen agreed that this is the case.  Town of Gilbert AZ Water Resources MPC February 12, 2024 Page 5 of 7 Director Wilcock clarified that the existing plant is still running. Ms. Jensen answered that yes, it is still running and needs to be kept online until the new plant is complete. President Cook asked if the other board members had any questions before moving on to the Annual Financial Report. 5. ANNUAL REPORT – Approval of the annual financial report. Finance and Management Services Accounting Supervisor, Emily Harmon briefly reviewed the annual financial report dated June 30, 2023 and the interim report dated December 31, 2023. Ms. Harmon explained that on the Interim Financial Summary, the numbers are shown as a year-to-year comparison as well as per bond issuance. The Statement of Net Position is the year-to-year comparison that represents the fund’s financial health and shows the assets and liabilities. The assets are primarily composed of cash and investments which are broken out by unspent bond proceeds and restricted for debt service. Assets less the liabilities gives us the Net Position, or bottom-line number. There has been little change since last year as we issued in 2022, but not in 2023. Ms. Harmon then moved on to the Statement of Revenues and Expenses which is more of an income statement and shows revenues and expenses as well as changes in Net Position. Revenues are labeled as lease payments from the Town, which are transfers in designed to pay off debt service. Investment income had a substantial increase compared to 2022. Since the bonds were issued in 2022, funds were available to invest, which explains the large increase shown. The expenses shown are the debt service bond interest expenses which reflect the payments made. Fiscal and other charges include banking charges that are required to be paid with these funds. Ms. Harmon went on to review the Statement of Net Position for Water MPC and Wastewater MPC, which is broken out by each issuance. Shown in this statement is what is left in unspent bond proceeds per issuance as well as what is restricted for debt service. Ms. Harmon pointed out that you will not see accumulated depreciation on the 2022 issuance right now. There are assets there, but we won’t take depreciation until those assets are placed into service. Further down, the liabilities are shown broken out per issuance. Ms. Harmon highlighted the next page which included a similar breakdown of the revenue and expenses per issuance. Secretary-Treasurer Boudreau asked about the change in fair market value as interest rates have risen. What are the maturities in general or how fast will the $10m be brought to $0. Accounting Manager Anthony St. George responded that those funds are pooled with our Town investments and the current investment policy is 0-5 years. We don’t have specific investment earmarked to this issuance, but the duration overall is 0-5 years. Secretary- Treasurer Boudreau explained that he would expect that this issuance would be spent within two years but acknowledges that the cash will always be available in the whole Town investment portfolio. Accounting Manager St. George confirmed this to be correct and clarified that the cash is used to pay bills as they come due, which is the benefit of combining the investments. Ms. Harmon then introduced the interim financial statement which covers July 1, 2023 through December 31, 2023. Ms. Harmon explained the Interim Financial Summary for Water, which shows the 2016 and 2022 issuances. Restricted cash and revenues that are  Town of Gilbert AZ Water Resources MPC February 12, 2024 Page 6 of 7 coming in are shown as well as the lease payments, which are the transfers in from the Town that are designed to pay our debt service as it comes due. The expenses show what those debt service payments are, including the 2022 and 2016 payments and interest payments. Note A shows the upcoming principal and interest payments that will be due in July 2024. Constructions costs that are expensed due to these issuances are shown below Note A. Ms. Harmon explained that the CIP Book Pages for each project mentioned are included in the packet if the board is interested in additional information. Ms. Harmon then moved to the Interim Financial Summary for Wastewater, which shows items similar to the Water Financial Summary. Shown are restricted cash and investments, lease payments, and 2018 interest expense. One thing listed that is not listed on the Water statement is the arbitrage calculation fee, which is due to the arbitrage calculations (which ensures we don’t get too much interest on our proceeds) required by the state every five years. This will not be seen again on the issuance for another five years. President Cook asked if there was too much return on our proceeds and Ms. Harmon explained that there are interest caps we can earn on our proceeds. President Cook and Director Pfost thanked Ms. Harmon for the presentation. A MOTION was made by Secretary-Treasurer Kevin Boudreau to approve the annual financial report as written. The MOTION was seconded by Director Nick Macaluso. Motion carried 5 – 0. FUTURE AGENDA ITEMS/MEETINGS: President Cook stated there were no future agenda items to discuss. COMMUNICATIONS From the PRESIDENT on current events. None. From the BOARDMEMBERS on current events. None. From the COUNCIL LIAISON on current events. None From STAFF on current events. Management and Budget Director Kelly Pfost noted that we are not planning to issue any WRMPC bonds this year. As part of the new water rates, it was discussed that when these bond proceeds run out around 2027, additional bonds may be issued to cover future projects that will take place.  Town of Gilbert AZ Water Resources MPC February 12, 2024 Page 7 of 7 ADJOURN President Shane Cook thanked the board and adjourned the meeting. The meeting was adjourned at 3:14 p.m. ATTEST: ___________________________ ________________________________ Shane Cook, President Kevin Boudreau, 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 12th day of February 2024. I further certify that the meeting was duly called and held and that a quorum was present. Dated this __ day of _____________, ______. ___________________________________ Kevin Boudreau, Secretary-Treasurer