Water Resources Municipal Property Corporation

MINUTES OF THE BOARD OF DIRECTORS OF THE TOWN OF GILBERT, ARIZONA WATER RESOURCES MUNICIPAL PROPERTY CORPORATION MEETING, MONDAY, FEBRUARY 10, 2025 AT 2:00 P.M., IN-PERSON/VIRTUAL MEETING, GILBERT, ARIZONA BOARD MEMBERS PRESENT: President Shane Cook Vice President James Graham Secretary-Treasurer Kevin Boudreau - Online Director John Dalen Wilcock Director Nicholas Macaluso BOARD MEMBERS ABSENT: None COUNCIL LIAISON PRESENT: Vice Mayor Bobbi Buchli TOWN STAFF PRESENT: Kelly Pfost, Management and Budget Director Sarah Rogowski, CIP Project Supervisor Emily Harmon, FM Services Accountant Supervisor Anthony St. George, FM Services Accounting Manager 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 2:01 p.m. OATHS OF OFFICE Not necessary as there are no new members in 2025. ROLL CALL Management and Budget Specialist Rachel Shaver called roll and declared a quorum was present. COMMUNICATIONS FROM CITIZENS None received. AGENDA ITEMS 1. ELECTION – Consider nomination and election of officers for 2025.  Town of Gilbert AZ Water Resources MPC February 10, 2025 Page 2 of 7 President Shane Cook proposed that those eligible to keep their current office do so. Shane Cook has already held the position of President for two years. Kevin Boudreau has also already held the position of Secretary-Treasurer for two years. Per the suggestion of Shane Cook, Nick Macaluso agreed to volunteer as President. James Graham volunteered to continue as Vice President and Shane Cook volunteered as Secretary- Treasurer. A MOTION was made by Secretary-Treasurer Kevin Boudreau, seconded by Director Nick Macaluso for the above nominations. Motion carried 5 – 0 2. MINUTES – Consider approval of the minutes of the meeting of February 12, 2024. A MOTION was made by Secretary-Treasurer Shane Cook, seconded by President Nick Macaluso to approve the minutes of the meeting held on February 12, 2024 as written. Motion carried 5 - 0 3. CAPITAL PROJECTS – Status Report CIP Project Supervisor, Sarah Rogowski, gave an update on the North Water Treatment Plant (NWTP WA1589). She explained that the project team honors the importance of meeting the community’s need for safe, reliable, resilient water, fiscally responsible project management, and proactive communication. She then highlighted key takeaways of the presentation: 1. Gilbert’s North Water Treatment Plant was unable to meet system needs and it was identified that substantial investment was required to continue to treat Gilbert water. 2. Time is of the essence as any delay risks system shortage as well as system compliance. Ms. Rogowski then went on to discuss the NWTP Facility Background, talking the group through a map showing the Town of Gilbert Water System by Pressure Zones. Service Area was discussed, noting that the water treatment plant in north Gilbert has a capacity of 45 million gallons per day and currently serves 144,000 residents, with a plan to serve 250,000 at buildout. She then touched on Water Production, which functions as the backbone of the sustainable water supply, with projected demands of over 55 million gallons per day. She also explained that the Town has some very important customers that the treatment plant serves, including the NW Redevelopment District, Heritage District, Gateway Employment Corridor, and the Banner Gateway Medical Center Campus. Ms. Rogowski moved on to give the group a quick background on what brought about this project. She summarized that we face water quality challenges as the plant treats water from the Salt and Verde Rivers, whose watershed has changed dramatically over the past 10 years due to all of the fires in that area. Sometimes the plant receives as little as 24 hours’ notice from SRP that the water quality is changing, and the current conventional water treatment plant doesn’t have the ability to make adjustments that quickly. It also treats water from SRP wells, whose water is very clean, which actually makes it more difficult to treat. The new treatment technology will actually be able to meet the ever-changing quality needs that are encountered with SRP. Other challenges include significant population growth, the need to fully utilize renewable water resources, and the structural challenges at the current facility.  Town of Gilbert AZ Water Resources MPC February 10, 2025 Page 3 of 7 Ms. Rogowski then gave an overview of the current Program Status. She explained that the future NWTP will be able to provide 70% of Gilbert’s water supply, will add 50+ years of service life due to the upgrades and expansion, will have the capacity to serve 250,000 residents, and will have a daily capacity of 60 million gallons. She also explained the scope, schedule, and budget which are broken down into five GMPs. GMP is construction language for phases of the project. GMP-1 Dewatering Facilities Site Preparation Field Offices/Laydown Areas GMP Value: $23.82M Final Completion Achieved GMP-2 Long-Lead Procurement Initial Site Demolition Equipment Design Support GMP Value: $15.8M Final Completion Achieved GMP-3 Primary Treatment Facilities New Facility Access GMP Value: $337M NTP – June 2023 Substantial – June 2026 GMP-4 Granulated Activated Carbon and Disinfection System GMP Value: $160M NTP – Dec 2023 Substantial – Dec 2026 (although expected to be completed sooner, possibly June 2026) GMP-5 60% Design Phase: Site Demolition & Restoration Pre-Sedimentation Basins Existing Bldg Rehab & Modifications 60% Cost Model: $113M NTP – Mid 2026 Substantial – Late 2028 Ms. Rogowski also highlighted the volatility of challenging market conditions which consist of international markets, supply chain delay, materials gap, labor shortages, local factor impact, and general price pressures.  Town of Gilbert AZ Water Resources MPC February 10, 2025 Page 4 of 7 Management and Budget Director Kelly Pfost asked a question regarding the impact the 25% tariffs on steel and aluminum have on the final cost. Ms. Rogowski replied that the biggest chunk of the final phase will be the presedimentation basins, which are all concrete and will require steel, however the contractor is carrying escalation and will factor any increases in. As they refine the design to 90%, the allowances they carry get smaller and smaller and the risk gets lower and lower. She does not plan on the project costs going over budget and is working to keep them as low as possible, but as soon as numbers are available, they will be brought to the team. Ms. Rogowski also walked the group through an image depicting color coded project phasing at the new North Water Treatment Plant. She also shared photos of the construction site and provided details regarding current construction. She also highlighted their project focus of safety and craftsmanship. Approximately 796,000 hours have been worked on site and it has been 838 days since the last recordable safety incident (which requires a worker to lose a day of work) which is a huge accomplishment. Ms. Rogowski also added that this summer the project will hit 300 craft workers on site, not including staff and project managers. She also shared that 30,000 cubic yards of concrete have been poured onsite, equal to 80 miles of sidewalk. She went on to show the group a fly over of the NWTP and explained the different portions of the plant shown. Ms. Rogowski asked for questions, to which the board stated they had none. 4. ANNUAL REPORT – Consider approval of the annual financial report. Finance and Management Services Accounting Supervisor, Emily Harmon introduced herself and clarified that the first two financial statements are combined statements and the second two have them broken out for water and wastewater. It is currently broken down as Water MPC and Wastewater MPC, but it really is just one MPC. Ms. Harmon explained that she would be reviewing the annual financial report dated June 30, 2024 and the interim report dated December 31, 2024. Ms. Harmon began with the annual financial report (dated June 30, 2024) Statement of Net Position. She outlined four highlights from the Statement (broken up between two slides): 1. Unspent bond processed decreased due to increased expenses at the NWTP and all remaining 2016 bond funds were spent in Fiscal Year 2024. 2. Property, plant, and equipment increased due to increased activity on the NWTP reconstruction project. 3. Accounts payable increased due to increased activity on the NWTP reconstruction project. 4. Bonds payable decreased due to payment of Fiscal Year 2024 bond principal. Ms. Harmon moved on to the Statement of Revenues, Expenses, and Changes in Net Position – 1 Year Comparison, explaining four highlights from the Statement.  Town of Gilbert AZ Water Resources MPC February 10, 2025 Page 5 of 7 1. Revenues associated with lease payments increased in accordance with increase in interest and principal payments due to the 2022 bond issuance. These bonds were issued in late Fiscal Year 2022, and no principal payments were due until Fiscal Year 2024. 2. Change in fair market value of investments increased due to an overall increase in the market from prior year. 3. Interest expense increased due to the 2022 bond interest coming due. 4. Overall Net position increased which is projected to continue to increase as debt is repaid. She then moved on to Future Debt Payments consisting of the remaining payment interest and principal payments for the Series 2016, Series 2022, and Series 2018 funding bonds. Series 2022 is shown on two pages as it goes through year 2048. Ms. Harmon continued on to the Interim Financial Report dated December 31, 2024 and explained that it represents activity from July 1, 2024 through December 31, 2024. It is primarily the interest payments that were made as of mid-year. She explained three highlights from the Interim Financial Summary. 1. As of this presentation, interest payments have been made for each bond. 2. Interest expense has been offset by funding transfers from the Water Operating, Water Replacement, Water SDF, and Water Resources SDF. 3. Next significant activity will be the 7/1/2025 Principal and Interest payments. Secretary-Treasurer Shane Cook asked how the 50 million compares to what it was expected to be. Director Pfost explained that it is within budget, but she isn’t sure what the cash flow expectation was. Director Kevin Boudreau clarified that the 50 million is for a 6 month period of time, so it is tough to tell. Director Pfost stated that we are watching the outflows and what is needed when we finish these bond proceeds, which leads into the next presentation. A MOTION was made by Secretary-Treasurer Shane Cook, seconded by Director Kevin Boudreau to approve the annual financial report as written. Motion carried 5 – 0. 5. FUTURE BONDS NEEDS DISCUSSION – Status Report Management and Budget Director, Kelly Pfost, shared a presentation regarding future WRMPC bonds needs. As most are aware, all bonds need to be approved by Council before coming to the WRMPC, so this is just an early look at what is on the horizon. She explained the current debt and that there are currently four bonds series outstanding. The Series 2016 bonds paid for the Santan Water Treatment plant expansion and other projects, Series 2018 paid for the Greenfield Wastewater Treatment Plan expansion no. 3, and Series 2022 is paying for the water projects already discussed. The bonds equal about $500 million total with $350 million remaining at the beginning of the year and about $50 million spent so far this year. These are being watched carefully so that we can get the next bond issuance ready or have the cash on hand. The final phase of the NWTP will likely need an additional infusion of bonds to finish out that project, which will likely be in Spring 2027. The repayments sources for these bonds will likely include the Water Repair and Replacement and Water SDF. Ms. Pfost went on to explain that the next group of potential bonds are Wastewater SDF projects, with the need for Greenfield Wastewater Treatment Plant Expansion Phase 4 and other Wastewater  Town of Gilbert AZ Water Resources MPC February 10, 2025 Page 6 of 7 Projects. Potential bond timing would be Spring 2027 with a likely repayment source of Wastewater SDFs. Ms. Pfost then addressed the third group, being Wastewater projects. There will be a need to Bond finance Wastewater and Wastewater R&R projects, depending on Council decision for WW Rates. Potential bond timing would be Spring 2027 with repayment sources likely to include Wastewater Operating and Wastewater R&R. She noted that 2027 would likely be a very busy year, with a possible additional MPC meeting that year. Director Dalen Wilcock asked if this would all be one big bond. Director Kelly Pfost explained that it would likely be structured as one bond with multiple funding sources as that saves us on cost of issuance. Director Dalen Wilcock also asked if SDFs could cover these projects. Ms. Pfost explained that the cash flow in them isn’t enough because all of the households that will be served by the wastewater treatment plant haven’t moved in yet. If they did, we wouldn’t have the plant ready to provide them service, so we have to build ahead of the growth and then it gets paid back as they build over the next ten years. Director Kevin Boudreau asked at what point in time the SDF rates get reevaluated. Ms. Pfost explained that they have to be reevaluated every five years, which happened recently, with new rates going into place in July of 2024. It was a pretty substantial increase across the board. FUTURE AGENDA ITEMS/MEETINGS: President 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. Vice Mayor Buchli thanked the members of the board and the time they devote to the WRMPC. From STAFF on current events.  Town of Gilbert AZ Water Resources MPC February 10, 2025 Page 7 of 7 ADJOURN President adjourned the meeting. The meeting was adjourned at 2:43 p.m. ATTEST: ___________________________ ________________________________ Nick Macaluso, President Shane Cook, 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 10th day of February 2025. I further certify that the meeting was duly called and held and that a quorum was present. Dated this __ day of _____________, ______. ___________________________________ Shane Cook, Secretary-Treasurer