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Philadelphia Water Department Presentation Rate Board HearingFebruary 22, 2016

(215) 504-4622STREHLOW & ASSOCIATES, INC.

CITY OF PHILADELPHIAPHILADELPHIA WATER DEPARTMENT PRESENTATION RATE BOARD HEARING Monday, February 22, 2016 MINUTES of FORMAL HEARING

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LOCATION: 1515 Arch Street, 18th Floor Philadelphia, Pennsylvania

REPORTED BY: ANGELA M. KING, RPR Registered Professional Reporter

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HELD BEFORE:

NANCY BROCKWAY - HEARING OFFICER BERNARD BRUNWASSER - CHAIR FOLASADE A. OLANIPEKUN-LEWIS, BOARD MEMBER SONNY POPOWSKY, BOARD MEMBER MICHAEL CHAPMAN, BOARD MEMBER LEE HUANG, BOARD MEMBER

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1 - - -2 HEARING OFFICER BROCKWAY: Good morning.3 My name is Nancy Brockway, Hearing Officer for4 the Hearing Board. This is, as you know, a5 presentation by the company -- excuse me, by the6 Department of its quest for rate increase. And7 primarily, an opportunity for the Board to ask,8 inquire about things which may not be clear from9 what they read or from what is said.

10 And after the Board has had it's11 opportunity, the active participants will also12 have their opportunity. We are going to go until13 5:00. I will be here until 5:00. I'm not sure14 that everybody has to be here until 5:00. I15 think the first thing we might want to do is just16 go around the room, go around the table, anyway17 and have folks just say who they are and where18 they are from.19 MS. BECKLEY: I'm Frances Beckley. I20 work for the City of Philadelphia Law Department.21 And I'm counsel to the Board.22 MR. BAKARE: My name is Ade Bakare. I'm23 a lawyer working in Harrisburg. I represent the24 Philadelphia Large Users Group of Industrial

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1 Customers and the Large Department Service2 Territory.3 MS. OLANIPEKUN-LEWIS: I'm Folasade4 Olanipekun-Lewis, Board Member.5 MR. POPOWSKY: I'm Sonny Popowsky. I'm6 a Member of the Board.7 MR. CHAPMAN: Michael Chapman.8 MR. BRUNWASSER: Bernie Brunwasser,9 Member of the Board, former Water Commission.

10 HEARING OFFICER BROCKWAY: Chairman of11 the Board.12 MR. BRUNWASSER: Chairman.13 MR. HUANG: Lee Huang, Econsult14 Solutions.15 MS. PICKENS: Good morning, everyone.16 I'm Josie Pickens. I'm an attorney with17 Community Legal Services here on behalf of the18 Public Advocate.19 MR. GOULD: George Gould, also Community20 Legal Services, Public Advocate.21 MS. TRAN: Good morning. Thu Tran, CLS,22 the Public Advocate.23 MR. BALLENGER: Good morning. Robert24 Ballenger, CLS for the Public Advocate.

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1 MS. KUMAR: I'm Prabha Kumar from Black2 & Veatch.3 MR. JAGT: Dave Jagt with Black and4 Veatch.5 MS. McCARTY: Debra McCarty, Water6 Commissioner.7 MS. BUI: Ann Bui, Black & Veatch.8 MR. DASENT: Andre Dasent, outside9 counsel Philadelphia Water Department.

10 MS. ALLEN: Valarie Allen from Ballard11 Spahr.12 HEARING OFFICER BROCKWAY: Can everybody13 speak up a little bit?14 MR. HARVEY: Mark Harvey, Director of15 Operations for the Revenue Bureau.16 MS. BETHEL: Michelle Bethel, Deputy17 Revenue Commissioner for the Water Revenue.18 MS. CROSBY: Susan Crosby, Law19 Department, counsel to the Water Revenue20 Department.21 MS. LABUDA: Melissa LaBuda, Deputy22 Water Commissioner.23 MR. SCHWARZ: Scott Schwarz, Law24 Department. Counsel for the Water Department.

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1 MS. DAHME: I'm Joanne Dahme, Public2 Affairs Manager, Water.3 (Dan from PECO/Exelon also present. Couldn't4 hear full name.)5 MS. CLUPPER: Kathy Clupper, Public6 Financial Management.7 HEARING OFFICER BROCKWAY: I think it8 would be helpful for people who are going to9 talk, even ask questions, would give their

10 business card or write out that information for11 our court reporter.12 Anybody else want to --13 MR. HELBING: Mike Helbing. I represent14 PennFuture.15 MR. DAVIS: Jon Davis with Raftelis16 Financial Consultants working with the Water17 Department.18 MS. LOCKLEAR: Henrietta Locklear, also19 with Raftelis.20 MR. KREPS: Bart Kreps with Raftelis.21 MR. MARKUS: Ed Markus, Amawalk22 Consultant.23 MR. PALLADIN: James Palladin.24 HEARING OFFICER BROCKWAY: Anybody else?

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1 You don't have to.2 (No further introductions made.)3 HEARING OFFICER BROCKWAY: Thank you.4 The Water Rate Board Ordinance provides5 for this day to consist of an opportunity for the6 Department to present its case in general terms7 and to respond to questions. The way we are8 going to do this is we're going to let the9 Department start off. I have already told

10 Mr. Dasent that the Board is going to be -- feel11 free and do feel free to say wait, please, can12 you go over that again or here is this question I13 have related to that. So what might have been an14 hour or so of the presentation is going to go on15 somewhat longer. But my own view is that if you16 try remember what your question was from 4517 minutes ago, you have forgotten it.18 So, we will try that and see how it19 goes, but the Board should feel free. This is --20 at this point which is the presentation by the21 Department and the chance for the Board to ask22 questions. We are going to have a break in the23 morning. We're going to have a lunch break and a24 break in the afternoon. If anybody needs any

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1 other consideration, please let me know.2 So I think we are ready. Without3 further ado, Mr. Dasent, would you present your4 Department.5 MR. DASENT: Thank you, Madam Hearing6 Officer. We have a PowerPoint presentation here7 today. It we will lead with Commissioner8 McCarty. We will present various segments of our9 presentation by different members of our team.

10 HEARING OFFICER BROCKWAY: You should11 talk directly to the Board.12 MR. DASENT: As a consequence -- I'm13 sorry.14 HEARING OFFICER BROCKWAY: That's okay.15 Pay no attention to the Hearing Officer.16 (Laughter)17 MR. DASENT: Just so you're aware, we18 have various participants on the panel. We will19 at various sections switch the panel so that in20 our limited seating arrangement, we might make21 the best presentation for you.22 Debra McCarty will start our23 conversation today with a slide concerning our24 mission.

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1 HEARING OFFICER BROCKWAY: Do we need to2 turn down the lights?3 MR. BALLENGER: Let me see if I can4 figure that out.5 HEARING OFFICER BROCKWAY: Rob is our6 technical consultant.7 (Lights dimmed as presentation begins.)8 MS. McCARTY: Good morning. Again, my9 name is Debra McCarty. And want to tell you a

10 little bit about the Department.11 So stepping right in, who we are, going12 over our mission, core services, regulatory13 requirements. And am I supposed to be switching14 this? Sorry.15 (Referring to slides)16 Cost of service, some of the building17 blocks for the rate setting, overview of our rate18 concepts. Study results, some of our key19 assumptions, objectives, cost of service results,20 and then the proposed rates and the bills. And21 then our proposed rates, so the impact on the22 bills, rate comparison, customer assistance.23 So who are we?24 We provide the City with integrated

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1 water and wastewater services. We are the2 City's -- one of the City's ten operating3 departments. And we serve under a dedicated4 water fund established pursuant to the City5 Charter. We operate, maintain, repair and6 improve the water and wastewater systems7 throughout the City. We are fully funded by our8 customers, again, as per charter and not any9 taxes. Our rates are fixed by a Rate Board, you

10 all. As you know, we are funded by the Mayor and11 City Council.12 So what does Philadelphia Water do?13 As I mentioned, we are integrated water,14 stormwater and wastewater system. And we treat15 and deliver, collect and treat. And there is16 some storage and management throughout the City.17 So who do we serve?18 Predominantly, the City of Philadelphia.19 Then we do have some wholesale customers outside20 of the City. The drinking water, our retail is21 1.6 million people, and then we have one22 wholesale customer.23 HEARING OFFICER BROCKWAY: May I --24 sorry to interrupt. When you say people, I

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1 always get confused. Do you mean meters or2 individual customers with bills?3 MS. McCARTY: People4 MR. BRUNWASSER: Population.5 MS. McCARTY: The total population of6 Philadelphia is about 1.6 million people.7 HEARING OFFICER BROCKWAY: Okay. Thank8 you.9 MS. McCARTY: It's people.

10 HEARING OFFICER BROCKWAY: Thank you.11 MS. McCARTY: Wastewater, again, it's12 1.6 million people. But we also have ten13 wholesale customers.14 So the drinking water, 58 percent of the15 water comes from the Delaware River; and the16 balance, 42 percent, is supplied by the17 Schuylkill River. We have about 3,000 miles of18 water mains, a lot of pumping stations, valves,19 25,000 fire hydrants. And we have three large20 drinking water plants. You can see them on the21 map there. Some of our larger facilities,22 pumping stations, storage is also by the dots.23 So we supply in Fiscal 15, 236 million24 gallons per day to our customers. The wastewater

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1 side, we have 3,700 miles of sewers that deliver2 the wastewater to our treatment plants. We also3 have a centralized biosolids recycling center4 also known as Sludge. And we have three large5 wastewater treatment plants. Again, they are on6 this map. You can see the drainage sheds for7 those facilities. The average daily wastewater8 treated was 397 million gallons per day in Fiscal9 15.

10 We do have award winning facilities11 drinking water. We are very proud of the fact12 that we have 15 Year Directors Award for the13 Partnership for Safe Water. We have received the14 Governor's Award for Environmental Excellence.15 And our drinking water quality which is why --16 one of our -- top notch. We need or do better17 than the Safe Drinking Water Act requires us to18 do.19 On the wastewater side, again, we are20 award winning. And we have received the NACWA,21 National Association for Clean Water Agencies22 peak performance awards. Two of our facilities23 we received platinum awards, meaning that five24 years or greater they've achieved 100 percent

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1 compliance with their discharge permits. The2 Gold Award is 100 percent compliance. And3 actually, this coming year for 2015 we will be4 receiving five platinum awards. So, each5 facility will receive a platinum award. We are6 very proud of that. Of course, we comply with7 local and state and federal standards. So, that8 we believe is a big achievement.9 Regulatory compliance, we are subject to

10 the Clean Water Act and have a consent Water11 Agreement for our combined overflows, the Clean12 Water Air Act and the Safe Drinking Water Act.13 And we can't do that without skilled workforce,14 advanced technologies and effective programs and15 financial plans.16 And I will turn it over to --17 MS. BUI: Thank you. Good morning,18 Members of the Board, visitors going through.19 What I would like to do --20 HEARING OFFICER BROCKWAY: Excuse me,21 I'm sorry. For those of us who are not familiar,22 could you repeat your names before you start?23 MS. BUI: Sure. My name is Ann Bui,24 that's B-u-i. I am the Managing Director for the

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1 Water Industry. We are the rate consultants for2 the Department. What we have always found, as3 you can tell from Debra's presentation, is that4 the Department manages a very, very complex5 systems, both the water and wastewater. What I6 am going to present now is an overview of how we7 use that information to conduct a cost of8 service.9 If we can go to the next slide, basic

10 building blocks of when you conduct such a study11 consist of three elements. We want to start from12 the bottom and move our ways up to the top. The13 first part is essentially financial planning.14 That's where we take a look at our revenue15 requirements. So, that composes -- consists of16 your operating costs, your capital costs, your17 reserve costs. In addition to, on the other side18 as you've got expenses, is our rate revenues.19 Where does our revenue come from and20 miscellaneous revenues.21 I like to think of that bottom element22 kind of like balancing your budget at home. I23 have income coming in. I have expenses going24 out. We have got to balance that. That's the

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1 purpose of that bottom element.2 HEARING OFFICER BROCKWAY: May I3 interrupt you again? I'm sorry. This an issue4 that may come up. I'm not shy about5 interrupting.6 MS. BUI: Yes.7 HEARING OFFICER BROCKWAY: Can you8 explain to us the financial planning arrangement?9 I see that here, who drafts the plan?

10 Who looks at the plan? What is the effect of the11 plan?12 MS. BUI: Yeah. What ends up happening13 is that we sit down with everybody. And what you14 are looking at are all the expenses that15 utilities has to look at.16 HEARING OFFICER BROCKWAY: I'm not17 actually asking that question.18 MS. BUI: For Philadelphia it would be19 the Finance Department.20 HEARING OFFICER BROCKWAY: I'm sorry to21 interrupt, but I'm not being very clear about my22 question. The finance plans lays out a plan.23 MS. BUI: Correct.24 HEARING OFFICER BROCKWAY: Who approves

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1 that in the City, if anybody? And what effect2 does it have on the obligations of the3 Department?4 MS. BUI: That I will refer to --5 MS. LABUDA: What it is --6 HEARING OFFICER BROCKWAY: Sorry, we7 can't hear you.8 MS. LABUDA: Melissa LaBuda, I'm with9 the City of Philadelphia. So, it depends which

10 plan you are speaking to. As you know, most of11 our assumptions came from the City of12 Philadelphia's -- City of Philadelphia's Five13 Year Plan which we submit to PICA, which is a14 state-approved plan. That was the basis of many15 of our assumptions.16 From there, we then had to look at what17 additional items or expenses might not be18 captured in that plan. Which would be debt19 service, what is our borrowing plans, how much do20 we have to borrow to fund our infrastructure,21 regulatory requirements and any additional hiring22 that we might have to do.23 HEARING OFFICER BROCKWAY: May I inquire24 on the debt service? I'm trying to get a -- I

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1 have a vague picture of various components, but2 I'm trying to get it all clear in my mind.3 So to get an estimate for debt service,4 you not only take care -- you not only look at5 what bonds and the other encumbrances you have6 outstanding, but you project the capital7 requirements?8 MS. LABUDA: Well, I'm not sure. When I9 speak to debt service, I don't speak of an

10 encumbrance. I speak of actual, physically11 issued debt, actually that 1.9 million of debt12 outstanding predominantly issued under our water13 and wastewater bond ordinance.14 Then you add to that PENNVEST. That's15 our actual debt service to date. Then from there16 you are going to add projected debt service,17 which is additional borrowing we would need to18 fund renewal and replacement and ongoing19 improvements to the system, the water and20 wastewater system.21 HEARING OFFICER BROCKWAY: So, you would22 do that kind of planning of capital investment23 and use the results of that to inform the amount24 of debt service you are going to have to make?

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1 MS. LABUDA: Correct. In the financial2 planning, the various tables in the proceeding3 you will see existing debt service, which is from4 our currently outstanding 1.9 million of debt5 plus projected issuance over the planning period.6 HEARING OFFICER BROCKWAY: And for7 that -- for the things that drive the costs of8 those, that debt service and projected debt9 service, do you have a plan or a budget for those

10 items? And if you do, does anybody approve it11 besides -- within the Department?12 MS. LABUDA: So, of course there is a13 capital plan which our chief engineer in the room14 Steve Bertoc, which is submitted every year and15 is approved and is presented to City Council,16 approved by City Council. So yes, it is approved17 outside of the Department.18 HEARING OFFICER BROCKWAY: In other19 words, by outside do you mean the City Council20 approves it?21 MS. LABUDA: Correct.22 MR. BRUNWASSER: Also, the City Planning23 Commission.24 HEARING OFFICER BROCKWAY: Are you bound

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1 by that? In other words, this is your plan and2 you've got to stick to it?3 MS. LABUDA: There is probably4 incredible risks if we don't do what we said we'd5 do to repair our infrastructure or renew our6 infrastructure. It is a plan that is based on7 engineering studies and needs of the system. So,8 I would think there would be risks to the system9 if we don't improve and renew the system, of

10 course.11 HEARING OFFICER BROCKWAY: Thank you12 very much.13 MR. BALLENGER: Madam Hearing Officer, I14 just heard from folks on the phone that they're15 having really hard time hearing? Are these16 microphones decorative or --17 MS. LABUDA: This is my mistake. If18 everyone -- while there is a green button, you19 actually have to hit to be heard. Again, I'm20 sorry about that.21 MR. BALLENGER: Going forward it -- it22 would be helpful. I know we have three or four23 people on the phone with us today.24 MS. LABUDA: I think the other part of

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1 the financial plan, we touched on expenses2 predominantly driven by PICA, the City's Five3 Year Plan. We have talked about debt service.4 Of course, the other part of the plan is, you5 know, how are we going to use our reserves? And6 if you look at the proceeding, you will see that7 we are using reserves to bridge FY16 without a8 rate increase and to mitigate rate increases in9 '17 and '18.

10 Also, the other part of it is the11 expense projection, revenue projection, debt12 services projection and also how we are utilizing13 current reserves to limit the impact in '17 and14 '18 and, of course, the fact that we didn't have15 a rate increase in '16.16 HEARING OFFICER BROCKWAY: Thank you. I17 apologize for the interruption. We probably will18 come back to that topic later.19 MS. LABUDA: I'm happy to answer20 questions.21 MS. BUI: So after we established our22 revenue requirements, what we want to do is take23 a look at cost of service, which is the second24 element. Oftentimes, the way I look at that is

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1 what does it cost to provide service to our2 different customers? That's the way we want to3 take a look at it whether they are wholesale or4 retail. And we typically look at testers. We5 are going to go into more detail for that later6 on.7 But simply put, if you want to take a8 look at one year at a time to determine what does9 your cost of service look like. How are your

10 costs that are incurred by the Department11 allocated out, okay? From there we go into rate12 design. And that is, as you all know, is how13 exactly are we going to recover those costs from14 our customers. You know, what mechanism are we15 going to use? And that simply put is the rate16 setting process.17 It is something of an industry standard18 that we use going forward. Let's talk a little19 bit about what those industry standards are. Our20 guidance documents out there which pretty much21 every rate consultant follows. The American22 Water Association, that is the predominant one.23 It's called the M1 Manual. You will hear that24 many, many a time. Then on the wastewater side,

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1 we have the Water Environmental Federation, WEF.2 They also have a guideline for that. And then3 finally, there is new one that's out with respect4 to guidelines on stormwater and how you want to5 allocate those costs and design rates and some of6 those rates and policies. Those are some of the7 predominant standards we use within the industry.8 Our next slide here goes a little bit9 more into financial planning, which I'm not sure

10 exactly that we need to spend a lot of time on11 because we answered some of those questions.12 Fundamentally, anybody doing a cost of service13 study, when we take a look at financial planning,14 what you are trying to do here is based upon15 reasonable assumptions, take a year, look at a16 multi-year plan, okay?17 So, you want to build financial18 solvency. You need financial stability.19 Everybody I think would agree with that. Even20 personally financial stability will be great. We21 need to be able to provide the bond capacity.22 You have a very, very large system here. It's23 very complex. It needs to be worked upon. There24 needs to be investments made to make sure it's

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1 going to renewal as well as additional capital2 investment. In order to do that, we need to take3 a look at potentially issuing debt to meet that.4 When you borrow money, as we all know,5 there are requirements that are placed upon that.6 Those are known as the bond and insurance7 covenants. We have to meet those requirements.8 That's not an if. We must meet those9 requirements because it does affect the credit

10 rating of the City.11 And then finally --12 HEARING OFFICER BROCKWAY: May I13 interrupt you here?14 MS. BUI: Yes.15 HEARING OFFICER BROCKWAY: Credit rating16 of the City. In other words, the credit rating17 of the Department has an impact on the credit18 rating of the City?19 MS. BUI: Yes.20 MR. BRUNWASSER: And vice versa.21 HEARING OFFICER BROCKWAY: Thank you.22 MS. BUI: You're very welcome. And then23 the other thing we want to take a look at is we24 want to make sure that if we need to have revenue

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1 adjustments, that we try to levelize those out.2 And I think all of us can understand that. When3 you're looking at your own bills at home, the4 last thing you want are bills going up and down5 in pricing. You want to be able to mitigate6 that. That is really important for our7 customers.8 So having gone through that, let's take9 a look at those particular elements in a little

10 bit more detail. What we have done for the11 Department is a six-year studies period. And12 this -- what this flow chart does is it shows13 what the different elements are that we take a14 look at, the operation and the maintenance15 expense, the capital expenditures, our debt16 service.17 And from those three large elements, we18 come up with what our total revenue requirements19 are.20 HEARING OFFICER BROCKWAY: What are the21 six years we are looking at in this case?22 MS. BUI: It starts from Fiscal 15, I23 believe.24 MR. JAGT: We have to project for FY15

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1 because we don't have end-of-year data. We have2 to go through 15/16 all the way through 20/21.3 HEARING OFFICER BROCKWAY: Thank you.4 MS. BUI: And the reason why we do that5 for a number of variety of reasons, one of which6 is you don't -- for utilities or for agencies for7 companies, you want to take a look at what that8 overall plan is so that you can make adjustments9 also to make sure that if revenue adjustments are

10 needed, they are not going up and down. You can11 levelize things. If you take a very short view,12 it's very difficult then to make sure that you13 can mitigate that impact to your customers.14 Questions?15 Okay. Very good.16 MR. BALLENGER: I heard, Mr. Jagt say17 that you --18 HEARING OFFICER BROCKWAY: I'm sorry.19 We are going to hold questions from anybody but20 the Board.21 MR. BALLENGER: Oh, I'm sorry. My22 apologies.23 MS. BUI: The requirements on -- we know24 what we need from an expense side. Our total

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1 Revenue Department side, right? We sort of know2 what our revenues are already because we have3 revenues under our current rate plus we have some4 miscellaneous revenues that the Department can5 generate. We know what our money is coming in6 the door. That gives us year-by-year what our7 financial planning is going to be.8 Now on top of that, once you established9 that, you still have to take into consideration

10 those other requirements that I mentioned before:11 The general bond ordinance, the insurance12 covenants, and the Rate Board requirements. So,13 that's the final element going through.14 Now, we always get this question. What15 exactly is the cost of service?16 Cost of service is what you are trying17 to do here is take the total system revenue18 requirements and allocate them to the users of19 the system in proportion to how they -- the20 services they receive, okay? That's a very21 simple way of putting it, but it's a lot of work22 that goes into that.23 So, what kind of costs do you allocate?24 Well, the costs or -- let me put it this way.

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1 Why do we want to allocate those costs?2 First off, different customers have3 different characteristics. They use the system4 in a different fashion. If you think about it, a5 residential customer uses water and wastewater in6 one way compared to a commercial customer or an7 industrial customer. There is different usage8 patterns there and characteristics, and that's9 what we try to reflect. There needs to be a

10 reasonable nexus between the fee that you charge11 and the cost or the service that's being12 provided. It needs to make sense. It needs to13 be fair.14 We have to meet our regulatory15 requirements. And when I say that, it's like,16 for example, there are federal grants that the17 Department has been very lucky to receive. But18 there's also requirements on those grants that we19 must comply with that, as well. Again, what you20 try to do is establish fair and reasonable basis21 so that you can defend your rates.22 This particular graph or picture23 illustrates how we go about allocating the costs24 of developing the actual cost of service, okay?

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1 We start with our revenue requirements and we2 take it one year at a time. We start with our3 revenue requirements. And for the Department, we4 have water system costs and we have wastewater5 system costs, all right? You have to separate6 them out because they serve different customers7 at times, but they also have different cost8 drivers. And then within those two categories9 you also have your retail and your wholesale

10 again. Both sides.11 Then what you do on the water side is12 you look at the different customer types. You13 allocate those various costs out to the different14 customer types after you've established the15 different functional components, and then you16 drive the user rate charges.17 HEARING OFFICER BROCKWAY: I looked18 ahead to see if you had more on this.19 MS. BUI: You're not supposed to do20 that. Yes.21 HEARING OFFICER BROCKWAY: As you know,22 rate design -- cost allocation and rate design23 are, some people call it an art rather than24 science. It's driven by assumptions made about

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1 what's the fair way of allocated rates.2 How does the Department do it? I get3 the feeling that you use historic costs or4 embedded costs. In other words, you don't look5 to see what the incremental costs would be in the6 future. You take a picture of what the costs7 have been or are today, and you figure out what8 those costs are used for and that's how you9 allocate. You allocate the costs to those who

10 use it for the purpose that is used -- that is.11 MS. BUI: That is why you need to12 allocate the way you do. We are looking at13 future years as a basis for the projection of14 those costs and patterns. Certain things it is15 adjusted.16 HEARING OFFICER BROCKWAY: It's an17 adjusted --18 MS. BUI: This is forward looking.19 HEARING OFFICER BROCKWAY: How far20 forward do you go for this one year?21 MS. BUI: Well, it's each year. So, we22 had to make estimates for Fiscal 15. As Dave23 pointed out, it's not final yet. So, there are24 estimates involved in there. And then you

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1 project to the ensuing years.2 MR. JAGT: Just to clarify. We have the3 preliminary audited numbers for FY15. And we4 have used the Department's financial statements,5 the unaudited financial statements for developing6 FY15. There will be significant adjustments from7 that for the audit, but until the audit's8 complete, we won't really know. But they are9 like 99 percent.

10 HEARING OFFICER BROCKWAY: Looking11 through, I'm not seeing that you come back to12 this. Am I correct that this is our discussion13 of cost allocation?14 MS. BUI: No, no, no, no. There will be15 more.16 MS. LABUDA: Can I just make a17 clarifying statement? Just so you know, the City18 has not released it's Fiscal 15 certified19 financial report. We are one tax ID. We are one20 entity. We are called the City of Philadelphia.21 Our component unit or our Department will release22 its set of statements when the City releases. We23 don't have the audit yet. We anticipate the24 statements will be released. All the numbers

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1 utilized by Black & Veatch represent unaudited2 numbers because the audit is not yet complete.3 MS. BECKLEY: I'm sorry. Didn't4 understand. Sounded to me, you said -- sounded5 to me like the numbers are 99 percent but they6 are going to change significantly. I'm trying to7 understand. Are we close or we not close?8 MS. LABUDA: It's not -- what we are9 speaking of is Black & Veatch sets -- the Water

10 Department's rates and charges are set on a11 budgetary or legal basis. Those statements were12 released in some time in October. The City also13 released it's Quarterly City Manager's Report14 last week which also had budgetary or the legal15 statements in those. Those numbers are on the16 PICA website and Director of Finance's website.17 The statements that are currently under18 audit and the audits not received are the GAAP19 financial statements. We do not set rates and20 charges on the GAAP basis. Our bond works on a21 cash basis.22 HEARING OFFICER BROCKWAY: Generally23 Accepted Accounting Principles.24 MS. LABUDA: Thank you. I'm sorry. Not

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1 trying to speak in code.2 I do not anticipate material shifts.3 But until we have an audit letter, I can't opine4 in either direction if there will or will not be5 changes between my sitting in the room at this6 table and Wednesday when they release. But on a7 budgetary basis, on a cash basis, those8 statements were released in October for an audit.9 And they are 99 percent complete.

10 MR. HUANG: I had a few questions about11 the reserves that Ms. LaBuda mentioned. Where12 does that -- you mentioned that the existence of13 the reserves allowed the Water Department to not14 increase rates in '16 and to minimize the15 increase imposed in '17. Series of questions16 about the reserves.17 Where do they come from? And what is18 the purpose of their existence besides what --19 besides that use, or is that the only purpose?20 MS. LABUDA: We will touch on this later21 in the presentation. But the reserves are a flow22 of funds or the accounts that we have are very23 clearly defined in our General Bond Ordinance.24 So oftentimes, I advise most individuals to

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1 figure out our flow of accounts through our2 General Bond Ordinance because there are a very3 specific set of accounts that we have. The two4 reserves that our General Bond Ordinance allows5 us to have are the Rate Stabilization Fund and6 the Residual Fund.7 It's the Rate Stabilization Fund that8 allow us to withdraw revenues from this account9 to bridge any deficiencies between expenses and

10 revenues. The Residual Fund is the bond and11 bucket. It's the last place monies go. And we12 cannot use anything in that account to bridge a13 structural deficit. We can make a payment out of14 it, but we can't use those funds to meet one of15 our coverage or compliance matters.16 MR. HUANG: Is it fair to call them a17 buffer in a sense then?18 MS. LABUDA: Absolutely. The Rate19 Stabilization Fund is really the key fund to how20 we can -- how we can have funds set aside for21 unforeseen or unexpected emergencies that aren't22 covered by rates and charges.23 MR. HUANG: Do industry standards give24 you some guidance on how much the reserves should

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1 be held back versus essentially giving back to2 the rate --3 MS. LABUDA: The rating agencie -- and I4 know Kathy Clupper from PFM will also speak to5 this. I don't want to misstep here.6 But yes, of course. The rating agency7 provides significance guidance on the days cash8 on hand, the amounts of cash we should have to9 help balance the budget or mitigate or manage

10 unforeseen emergencies. That numbers, most of11 our peers are anywhere from -- please, I am going12 to have to fact check on this -- 250 days to 40013 days cash on hand.14 MR. HUANG: Last question. Does that --15 the size of that buffer, can that be smaller if16 this rate process happens more often?17 MS. LABUDA: If you look through the18 proceeding, we are talking about taking our rate19 stabilization fund down to $110 million. I don't20 believe the Department could manage with anything21 less than that. And that is due to the level of22 our budget that rates and charges cover.23 MR. HUANG: Thank you.24 MR. POPOWSKY: Excuse me. Are you going

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1 to address the questions that we ask to be2 forwarded or --3 MR. DASENT: The plan was to answer as4 much as we can today as a part of the5 presentation. We have written responses are also6 possible. The Board directs us, we will --7 MR. POPOWSKY: I'm just not sure. I8 just can't tell if you are going to specifically9 answer those questions.

10 MR. DASENT: Yes, we are.11 MR. POPOWSKY: For example, I think we12 asked about the Rate Stabilization -- the Rate13 Stabilization Fund grew, didn't it, over the last14 few years?15 MS. LABUDA: The Department made16 deposits into the Rate Stabilization Fund. Based17 on the last rate proceeding, we managed a very18 specific metric when revenues differed from the19 financial plan as submitted at the last rate20 proceeding, it drove deposits to be made to the21 Rate Stabilization Fund in FY14 and FY15.22 However, if you were to step into what the City's23 projections are, the Black & Veatch projections,24 you will see that we are taking money out in

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1 FY16.2 And just to answer your question, the3 presentation does address most of the questions.4 It might be helpful if we maybe reference the5 page numbers as we're stepping through them and6 which question it addresses.7 MR. POPOWSKY: Thank you.8 MR. DASENT: At the end, those questions9 that are not directly addressed can be captured

10 in our Q and A at the end.11 MS. BECKLEY: But I would remind the12 Board that this presentation really is for you.13 So to the extent that there's anything that you14 want -- you should not hesitate to interrupt and15 to ask questions. Because the whole point of16 this is for the five of you to get what you need17 as a basis for going forward in the proceeding.18 HEARING OFFICER BROCKWAY: Before --19 excuse me. Mr. Popowsky, I'm not clear what you20 were looking for. Is the transcript of today21 sufficient, or are you saying any time there's a22 question from the Board they ought to take it23 down and they ought to memorialize the answer?24 MR. POPOWSKY: No. I just wanted -- we

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1 gave a list of questions. I didn't know if they2 were all going to be covered in this. I don't3 want to interrupt every five minutes if you are4 going to get to it.5 MR. BRUNWASSER: I think what you are6 showing here are very summary documents and7 graphs. And obviously, there's a tremendous8 amount of detail behind them. And I'm sure you9 will clarify much of this as you go along.

10 MS. BUI: After my section, which is11 pretty much the end of the sort of overview and12 the general principles. Because I believe that13 you are fairly knowledgeable already about the14 cost of service studies, in general, but there15 are others who are not including those in the16 public. That is really the purpose of this.17 And then we are going to go into a18 little bit more detail with respect to study19 results, the assumptions that are used which I20 believe will also address a number of the21 questions that the Board provided.22 MR. POPOWSKY: Thank you.23 MS. OLANIPEKUN-LEWIS: In what instances24 would you have the ability to draw down the

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1 residual fund?2 MS. LABUDA: There is -- I'm going to3 just have to read the very explicit provisions.4 The Residual Fund is to maintain revenues after5 all items have been paid through the water. What6 technically goes through Residual Fund is we pay7 the City the interest earnings on our Debt8 Service Reserve Fund. It's called the Scoop.9 It's capped at $4.9 million.

10 At the end of the year, there is11 evaluation done on the Debt Services Reserve12 Fund. It moves of the Debt Service Reserve Fund,13 flows to residual, then comes out of residual and14 goes to the City Con Cash Account.15 Another amount of monies that will flow16 through, through the terms of the General Bond17 Ordinance through the residual account will be18 the additional payments we make to our capital19 trust. There is two components of the capital20 trust. There is the bond proceeds account and21 then there is a self-generated capital. We have22 a required transfer and discretionary transfer.23 Discretionary transfer per the terms of24 the General Bond Ordinance will flow from Water

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1 Revenue Account to the Residual from the Residual2 back up to the Capital Trust.3 The other use of the Residual Fund was4 related to something that predates me, so I will5 which have to double check myself on all of the6 specifics. There was an ordinance passed7 sometime in 2007 or 2008 that set up a subaccount8 of the residual account called a special9 infrastructure. It was to do improvement at the

10 Naval Yard. It was to pay for capital rate of11 expenditures at the Naval Yard.12 MS. OLANIPEKUN-LEWIS: Thank you.13 MR. BRUNWASSER: There was -- there is14 one other thing that historically, obviously,15 predates Ms. LaBuda. The Water Department gave16 fees of approximately $20 million of old debt,17 picked off the high coupons and we fees out the18 20 million with the Residual Fund. And that was19 approved by bond counsel Ballard Spahr.20 MS. BUI: If we move to the next slide,21 which is the last slide on my section, it is the22 purpose of rate design. Really, I think it's23 important here that we look at what we're trying24 to do is, again, recover the cost providing

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1 service to our different customers in that2 fashion. And that's how we design our rates.3 Thank you very much.4 Now before we move onto our next session5 which is going to address a number of the6 questions that the Board has sent us, the study7 results, we are going to make a change out in8 personnel so we can bring speakers for those9 particular sections up here.

10 HEARING OFFICER BROCKWAY: Go off the11 record.12 - - -13 (At this time, a brief break was taken.)14 - - -15 HEARING OFFICER BROCKWAY: We will go16 back. And now additional people are going to17 present?18 MR. DASENT: Yes. David Jagt from Black19 & Veatch will be our next presenter.20 MR. JAGT: At this point, after having21 an overview of the cost of service in the22 financial plan and the process that we followed23 in doing such, we are going to go over some of24 the study results of the cost to service

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1 analysis. And we will do a quick review of the2 objectives, a review of the key assumptions for3 the financial plan, and a brief review of the4 cost of service results.5 So, this question's been brought up a6 number of times. We will go through it very7 briefly on Slide 21. One of the big assumptions8 you have to make is what is our study period for9 the study?

10 The main focus of the study was the11 first two years that we looked at the rates for12 which were FY 2017 and 2018 for which we are13 making the rate requests. However, as we know14 based on Ann's discussion, we need to do a15 projection of the longer term impact of the16 financial plan and look at the impact of the17 rates and the longer term outlook for the18 utility. You don't want to make an assumption of19 very low revenue increases now only to have rate20 shock on the customers later on. So, it's a good21 practice and the best practice in the industry to22 do a longer term outlook. And that's why we did23 the six-year financial plan, which corresponds to24 the time frame for the Capital Improvement

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1 Program Budget.2 (Continues to refer to slides)3 Take a brief look at the Study4 Objectives. One of the key objectives is to5 continue to provide safe and service to the6 customers. Want to be able to continue to7 provide safe drinking water and wastewater8 services to our customers. And we also want to9 make sure we cover -- meet the financial

10 investment or the bond holder's requirements. We11 want to meet the Rate Board's requirements and12 also the utility in general, what the revenue13 requirements of the utilities are.14 We have a complete list of the15 requirements off to the right, but the main ones16 I want to point out for today is we go ahead and17 identify what the General Bond Ordinance minimum18 requirements are in this slide where we identify19 that senior debt service coverage per the bond20 ordinance needs to be at least 1.2. And the21 total debt service coverage needs to be 1.0.22 HEARING OFFICER BROCKWAY: I'm sorry to23 interrupt. But can you very, very briefly24 discuss how you calculate the coverage ratio?

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1 MR. JAGT: Okay. For the coverage ratio2 for the bonds, we look at the projection of3 revenues. And that's all the incoming revenues4 into the fund that's identified acceptable in the5 general ordinance as acceptable project revenues.6 We net from that the operating, the O&M expense7 to come up with the net project revenues.8 Net project revenues are compared to the9 senior debt service to develop the senior debt

10 coverage. You want to make sure that you have11 enough -- after -- the revenues that come in the12 door in the year after adjusting for rate13 stabilization as well, you want to make sure you14 have at least 1.2 times the debt service. And15 you have to otherwise you are in technical16 default and a big issue with the financial17 agencies and the bonds.18 You also need to make sure you meet a19 1.0 coverage on the total revenue requirement, so20 that means that your net revenues, your revenues21 coming in plus rate stabilization minus O&M has22 to be enough money to cover all your revenue23 requirements going out. So, that has to meet24 your O&M and your capital account deposit. That

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1 has to be at 1.0.2 We also have some requirements that were3 in the ordinance that created the Rate Board. We4 will cover those, as well. The key ordinance,5 the key requirement we looked at was that total6 revenues can't exceed total appropriations.7 Do you have any questions? Want to make8 sure before we go on.9 MR. POPOWSKY: The Rate Stabilization

10 Fund is included in the numerator in both of the11 coverages; is that right?12 MR. JAGT: It is included in the13 numerator in both of the coverages because14 revenues have to -- you can adjust the revenues15 by what you put in or take out of the rate16 stabilization form. And that money can be used17 towards coverage again. Revenues can only be18 used one time and the rate stabilization is a19 rainy day fund or a fund that if money is put20 aside in the rate stabilization, it was not used21 for coverage. But when it's strong back in, it22 can be used for coverage in that year.23 Another key principle of the General24 Bond Ordinance is the fact that when we do our

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1 analysis, we have to do the analysis in terms of2 receipts as -- revenues as receipts. Revenues3 are not reflected as bills going out the door,4 but as revenues that we receive and collect from5 the customers.6 HEARING OFFICER BROCKWAY: You're not on7 a cash basis, though?8 MR. JAGT: We are on a cash basis.9 That's correct. And it's based on revenues that

10 we receive are collected from our customers.11 MR. BRUNWASSER: Mr. Jagt, isn't there12 another requirement on the Rate Stabilization13 Fund as far as the maximum that could be pulled14 out?15 MR. JAGT: That's right. We do cover16 that later in the presentation. But I will go17 ahead and cover this now.18 In addition to the General Board19 Ordinance[sic], throughout the years the Water20 Department had established or provided insurance21 on some of the bonds. And with the insurance22 companies, we have an agreement or a covenant23 that the water fund will meet 90 percent of debt24 service from current revenues. So basically,

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1 this rule or the insurance covenant puts a limit2 on how much money we can withdraw from the Rate3 Stabilization Fund in a specific year. So, we4 can't suppress rates so low that we have to pull5 more than -- we are not recovering 90 percent of6 revenue or debt service from the current7 revenues.8 On the next slide, there is a brief9 review of all the water fund accounts in the

10 funds. We went over this briefly. Missy went11 through the funds, the key funds. The Revenue12 Fund is the main driver for the utility. The13 revenues come into the Revenue Fund. And debt,14 O&M debt services paid out of -- funds are --15 payments are made to other funds out of the16 Revenue Fund.17 The Rate Stabilization represents a fund18 off to the side. It's a reserve or a rainy day19 fund. That any year if we determine or the water20 fund determines that it can defer some of its21 revenue in that year to a future year, or it22 requires a withdrawal from the Rate Stabilization23 to meet its annual requirements, it can do so.24 The Construction Fund is where all our

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1 capital costs are met. It's where the bond2 proceeds are put and capital costs are funded3 from. The Debt Service Fund covers the debt4 service. And there's also the debt service5 reserve that provides for one-year maximum6 principal and interest to make sure we have7 reserve to meet debt service payment if we ever8 have to.9 We also have the residual fund which is

10 the -- after making all the payments to the other11 funds, the net revenues comes out into the12 residual fund. And the residual fund can be used13 to make deposits into debt service reserve or14 meet capital requirements. This reviews the15 requirements or the possible uses of the residual16 fund.17 Take a brief look at our financial plan.18 Basically, this slide is presenting the fact that19 in order to meet the projected revenue20 requirements for the utility, we have to do a mix21 of withdrawals from rate stabilization and22 revenue increases. These are our planned revenue23 increases in the bulleted list or cumulative24 revenue increases that we projected through the

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1 financial plan from FY 2017 to 2021 to meet the2 revenue requirements of the system. During our3 rate period and in the initial year for FY17, we4 projected a 34.7 million increase in revenues.5 And in FY18 from the increases in '17 and '18, we6 are proposing to increase revenues by 70.97 million.8 HEARING OFFICER BROCKWAY: First, you9 said cumulative. And now it sounds like these

10 are year-to-year increases.11 MR. JAGT: It's cumulative. So what12 we've present as FY18 is the result of the13 increased revenues as proposed in '17 and '18.14 HEARING OFFICER BROCKWAY: Okay. So15 Fiscal 17, 34.7 million.16 MR. JAGT: Correct.17 HEARING OFFICER BROCKWAY: And then I18 can't do the math, but --19 MR. JAGT: A portion of the 70.9 is an20 increase from the FY17 increase.21 HEARING OFFICER BROCKWAY: Okay. So the22 other -- you can figure out what the increase in23 2018 is by subtracting 34.7 from 70.9?24 MR. JAGT: Yeah. Because there is some

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1 other impacts involved with the projection and2 the changes.3 HEARING OFFICER BROCKWAY: But in that4 sense, these are cumulative. You don't add -- in5 other words, the 179.6 -- is 179.6 relative to6 the base that you started with?7 MR. JAGT: Right. The best way to look8 at that line item is the amount over -- it's the9 additional revenues above the revenues under

10 existing rates. We do a projection of revenues11 under existing rates or FY16 rates. And these12 are the additional revenues we need above the13 FY16 revenues.14 MR. BALLENGER: Annual?15 MR. JAGT: Correct. Along with these16 planned increases from rates they are from the17 revenues, we also have planned withdrawals from18 the rate stabilization to help meet the projected19 revenue department. We will review this in20 detail in some of the graphs coming up.21 As Ann reviewed, in Slide 17 you will22 recall we did -- our approach is we are going to23 take a projection of the revenue under existing24 rates and then we are going to look to compare

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1 that to the projection of revenue requirements2 with the -- and we developed the revenue3 requirements based on the components that were4 outlined in Slide 17. Each of these slides that5 we go through, we are going to review some of the6 key assumptions that we used in those steps as we7 work through the process presented in Slide 17.8 So the first step we are going to look9 at is the projection of revenue requirements or

10 revenues. The main source for the projection of11 revenues is the historical billing data we do.12 We have to look at the record of historical13 billing data which we got from the new reports14 that were developed from RFC which provide us15 with the projected number of accounts or the16 historical number of accounts and historical17 water sales volumes and sewer billed revenue as18 well as the stormwater we got from the stormwater19 database.20 HEARING OFFICER BROCKWAY: Can you -- I21 apologize. Can you sound out what RFC stands22 for.23 MR. JAGT: Raftelis Financial24 Consultants.

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1 HEARING OFFICER BROCKWAY: Thanks.2 MR. JAGT: We do a projection of3 revenues under existing rates for FY 2016 through4 2021. Again, the revenues are projected based on5 receipts as per the General Bond Ordinance, so6 reflects the amount of the revenues -- basically,7 the collections from the customer. As the8 customers pay the bill, we recognize them as9 receipts or revenues in the door.

10 For each year in order to do that, we11 have an assumed collection factor or a series of12 collection factors. The cumulative effect of13 collection factors are that in each fiscal year,14 we will receive 96 percent of the billings. For15 the City, we assume we are going to collect 10016 percent of the billings. The City billings17 reflects the general serve of the water, sewer18 and stormwater service provided to the general19 fund which includes all the City Departments as20 well as the Aviation Fund.21 MS. OLANIPEKUN-LEWIS: I have a22 question. When you said 96 percent of using the23 total retail, is that based on all the billings24 on the -- those that you assume are collectibles?

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1 I know that when you're looking at2 accounts receivable, the assumptions are you're3 going to get a hundred percent, but the percent4 is pretty solid. That 96 percent of that amount5 you receive to be collectible or the total6 billing that you get?7 MR. JAGT: It's 96 percent of the total8 billings. So, it reflects a 4 percent is9 uncollected.

10 MS. OLANIPEKUN-LEWIS: Okay.11 MR. JAGT: This addresses some of the12 questions we had from Council or the Board the13 next few bulleted items. In our projections we14 have an assumption there is reduction to water15 revenues from the wholesale customers.16 In the recent year 2015 Bucks County had17 provided notice that they were no longer18 continuing their water rate contract or water19 service contract with the Department. We are20 not -- you know, I know the Board's question21 asked in detail what the drivers were.22 Unfortunately, we -- not being on Bucks County23 Board or not really knowing the -- what their key24 drivers were, but we know that they just desired

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1 to terminate the contract with the City, and we2 had to reflect that in the financial plan.3 MR. POPOWSKY: Do you know where they4 went?5 MR. HARVEY: They built their own6 transmission system. (Rest of response trails7 off.)8 MS. BROCKWAY: He's saying they built9 their own water transmission system. I think

10 it's out of the Chalfont.11 MS. OLANIPEKUN-LEWIS: What's that12 revenue loss?13 MR. JAGT: That's 7 or 8 million per14 year.15 HEARING OFFICER BROCKWAY: Did you have16 something else?17 Did the Department try to negotiate with18 Bucks County to keep them?19 MS. McCARTY: Bucks County essentially20 gave us notice. And given the relationship that21 really wasn't -- we would have wanted to keep22 them, of course, because they helped us in the23 fixed costs. They were pretty definitive.24 Certain that they just wanted to stop using our

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1 water. We still believe that we are the best2 deal and provide excellent quality. By the way,3 the rates have gone up in Bucks County.4 HEARING OFFICER BROCKWAY: Thank you5 very much.6 MR. JAGT: Then in addition to the7 reductions from Bucks County, we also reflect a8 recent reduction from Aqua PA. We also think9 Aqua PA has been cutting back -- their initial

10 contract was set up for drought use, and they11 continued to use the water that way. And they12 have cut back their recent demands to a lower13 level. And we reflect the lower level in the14 financial plan.15 Our projection also reflects a reduction16 to the retail cost projections. The annual17 decrease of 0.6 percent per year is reflected in18 the projected volumes for retail. That's19 primarily driven by the reduction in the demand20 from the 5/8" customers. That's an industry wide21 issue that other utilities have seen and, you22 know, water utilities are dealing with23 nationally.24 HEARING OFFICER BROCKWAY: You don't

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1 have water efficiency programs? You don't try to2 encourage your customers to cut down?3 MS. McCARTY: We have conservation4 programs for low income. But you know without --5 but yeah.6 HEARING OFFICER BROCKWAY: I'm not7 trying to make a point. I am just trying to8 clarify.9 MS. McCARTY: You know, it's the -- you

10 see this over the years because of low flow11 fixtures of the toilets, low flow shower heads,12 things like that. You see this reduction through13 the years. As Dave said, the industry's fixing14 this.15 MR. JAGT: Done with that slide.16 MR. DASENT: Jon Davis will speak next17 on the new --18 MR. JAGT: Jon is going to give details19 later on in the presentation. We are going to go20 ahead and at this point just give a brief21 overview in the cost and the revenue requirement22 impact to the new affordability program.23 The Affordability Program was mandated24 by Council. And the Water Department has

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1 investigated setting up the Affordability Program2 in accordance with the bill that was passed by3 Council. And these are the revenue and revenue4 requirement impacts associated with this. It's5 supported from Jon's analysis of the setting up6 and establishing what the program and costs are7 involved.8 Again, we are following the slide or9 review as per Slide 17. We will look at the

10 revenue requirement or the revenues first. When11 we project that based on the level of discounts12 provided in our customer base, we are going to13 provide a projected amount of discounts14 equivalent to 16.1 million to 18.6 million from15 FY 2018 at the introduction of the program to FY16 2021. So, that's 16.1 in FY18 and 18.6 in FY17 2021.18 That revenue impact will be offset by19 the discontinuation of the WRAP Program which20 will decrease -- we will see a decrease in grant21 costs of 2.7 million per year. The net revenue22 impact for FY18 is 13.4 million. In addition to23 the revenue impact for the projection of24 discounts, we also have the increased costs for

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1 the support and implementation of the program2 which includes personnel costs, which will3 increase from 1.6 to 2.4 million. And that's4 driven by the need for additional -- the addition5 of 22 staffing positions to manage and implement6 the program. That's a 9 percent overall increase7 to the Water Revenue Bureau staffing. And it8 includes the pension-to-pension obligations and9 the benefits associated with that.

10 We also have some services costs11 associated with it. And that includes the12 improvements to basis2 or of the billing system13 that handled the program, and also the office14 space to support the additional staffing. And15 that 1.3 million increase in FY 2017 as we16 prepare for the startup of the program. And an17 additional 0.7 to 0.8 beginning for FY18 to 2021.18 Moving onto other key assumptions within19 the program or the projected financial plan. For20 O&M, we have looked at the key driver, the21 Department organizer or the fund has their22 program, the cost by personnel services, power23 and chemicals and transfers to other departments.24 The personnel costs are presented on Slide 27.

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1 And we have a projection of the additional2 staffing as we need for the increase to programs3 and to meet the regulatory requirements. There4 is a projection of additional staffing of 215 staff between FY17 and FY 2021.6 HEARING OFFICER BROCKWAY: So this -- I7 apologize. This is in addition to the additional8 22 from the Affordability Program?9 MR. JAGT: Yes, it is. This reflects

10 the additional staff in the Water Department11 itself.12 HEARING OFFICER BROCKWAY: And is --13 MS. McCARTY: Water Revenue. The14 affordability staffing increases -- the15 affordability staffing increases are under Water16 Revenue.17 HEARING OFFICER BROCKWAY: This is for18 some --19 MS. McCARTY: This is within the Water20 Department.21 HEARING OFFICER BROCKWAY: It's for some22 of the bills?23 MS. McCARTY: Right.24 MR. JAGT: The additional -- again, it

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1 includes any increase to staffing. We have to2 reflect the increase to pension, pension3 obligation and benefits. It increases as well4 there. We have the annual increase of salary of5 3 percent, and also the average increase of6 fringes and benefits increase 3 percent per year.7 Again, the primary driver for the8 increase in the fringes and the benefits were9 from the City's Five Year Plan which was

10 recognized by PICA and approved.11 HEARING OFFICER BROCKWAY: Was12 recognized by what?13 MR. JAGT: The PICA. They are submitted14 to the State.15 The projected financial plan also16 reflects additional cost for services or Class17 200 in the budget. The additional funding is18 driven by regulatory compliance. We have the19 increase in the grant programs of 3.5 million per20 year, and that's for the Smith and Guard programs21 for stormwater. And the regulatory compliance22 for O&M were 0.6 million to 1.12 million for FY1723 to FY 2021.24 There is also some additional support

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1 for an increased infrastructure renewal, the mark2 out of the utilities out in the field that will3 drift increase costs from 0.6 million to 0.74 million per year from FY17 to FY 2021.5 Another key assumption or driver for the6 Water Department is the power and chemicals. The7 power costs with the purchases that the8 Department has planned, advanced power purchases9 it makes through its like energy plan. We were

10 able to not have any increase for power cost in11 FY17. However, we need to recognize the fact12 that that can't continue to go on based on longer13 term experience. We anticipate a 5 percent14 annual increase in '18.15 Chemical costs are projected based on16 3.3 percent annual increase.17 HEARING OFFICER BROCKWAY: Is that18 inflation and chemical costs or -- go ahead.19 MR. HUANG: That's my question. The20 power costs and the chemical costs, how much of21 that is inflation and how much of that is volume?22 MR. JAGT: It reflects the overall23 increase for the Department's cost over the past24 several years. So it would increase -- it would

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1 reflect the changes in volume as well as the2 annual purchase cost, so inflation and the3 volume.4 MR. HUANG: That was my other question.5 It is anticipated that volume will increase?6 MR. JAGT: Well, actually the volume is7 decreasing. It's a slight decrease over time, so8 0.6.9 MR. HUANG: Okay.

10 MR. POPOWSKY: Do you have contracts for11 purchasing electricity? I mean, 5 percent seems12 pretty high.13 MS. LABUDA: So, we are part of the14 City. And we utilize the Office of15 Sustainability for our energy purchases. For16 FY17, the answer is yes. Approximately,17 80 percent of our power costs have been purchased18 forward where the price has been looked in. The19 remaining 20 percent in laymens term how you pay20 your electrician.21 The FY18 purchases have not yet22 occurred, but I can't speak to the timing of when23 the City will enter into the market and hedge our24 FY18 power purchases. So, this is an

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1 inflationary assumption at this point.2 (Barking heard over the phone connection.)3 HEARING OFFICER BROCKWAY: Sounds like4 there is somebody on the phone trying to make a5 comment.6 (Laughter)7 MR. JAGT: Continuing on with Slide 28.8 The department also has in the budget transfers9 to other departments, they're interfund

10 transfers. And then they -- basically, it's11 services provided by other departments that's12 paid for by transfers in the finance and admin13 portion of the budget. And that's projected to14 increase from Fiscal -- it also includes in the15 projection an increase that's going to -- that's16 in the projection reflects some additional17 upfront payments that have to be made to the18 general fund to reimburse them for the19 construction of a combined sewer outflow.20 So the projection includes 1.8 million21 in FY 2017 and 3.5 million in FY 2018. The22 portion of the projection of interfund transfers23 that reflects the services provided by other City24 Departments reflects the annual increase or

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1 inflationary increase of 3 percent per year.2 Again, that reflects the services provided from3 other departments. And they're primarily driven4 by City personnel costs.5 MR. CHAPMAN: Just a question. On page6 27, the 21 additional staff members, you told us7 on 26 what it was for the 22 and the8 Affordability Program. But you didn't detail out9 what it was going to be -- increased costs was

10 going to be in operations and maintenance.11 MR. JAGT: I can -- we can pull that out12 and provide that -- I don't happen to have it13 right on my sheet right here. I can provide an14 answer to that in a response.15 MR. BRUNWASSER: Ms. LaBuda, would that16 be in the operation budget for -- well, that's17 right. It's year end flex.18 MS. LABUDA: Right. We haven't yet --19 the City hasn't released it's Fiscal 17 operating20 budget yet. The specific details that would show21 where the positions would occur that we are22 hiring FY17 hasn't yet been released. The 2223 positions that Dave is speaking of are over the24 planning horizon and not just in year Fiscal 17.

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1 I think -- I am working from memory2 here, so please forgive me if I'm wrong. Very3 few of those are in Fiscal 17.4 MR. JAGT: That's correct.5 MS. LABUDA: We will get back to you6 with that amount.7 MR. JAGT: Just to go over, what we8 presented is an overview. Within the documents9 for the rate filing, you had within the

10 supplemental papers to the B&V's testimony, I11 think it's PWD Statement 9B, there is an12 assumptions document that includes in more detail13 or a lot more detail for each of the assumptions14 presented. And there is a table, Figure 615 provides a projection of the additional staffing16 costs by department and gives the overall or more17 details as far as the backup for those numbers.18 MR. CHAPMAN: Thank you.19 MR. JAGT: It's within PWD's Statement20 9B, which is the Black & Veatch supplemental21 testimony. The BV-S1 is the supplemental22 document one after the testimony. Has all the23 assumptions for financial planning.24 Following again Slide 17, we have

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1 completed a review of the O&M requirements. And2 going to shift over to the capital requirements3 in the system.4 This graph is a presentation of the5 projected capital budget costs for the program.6 And it also presents the funding plan of how7 those revenue require the capital programs being8 met. Now for each year, there is a green bar of9 how -- or green and grey bar. And the blue bar

10 represents the projected expenses.11 The green and grey bar represent how12 those expenditures are being met from the funding13 plan or the mix of bond issuance and cash funded14 capital. The grey represents cash funded15 capital. And the green represents projected bond16 issues.17 Now that FY16 looks a little funny18 because it has all expenses and very little on19 the funding side. The reason why that is, is20 because in FY15 we had a bond issue that is21 providing the funding to make it through FY16 in22 the capital fund. So, all the revenue23 requirements presented in '16 are being met from24 the bond issuance plus the cash funding that's

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1 being provided from the residual and the capital2 account deposit.3 So the plan, as you can see, it4 increases the grey bar or the cash funded capital5 over the planning period as we increase from 206 to 25 percent to try and increase the amount of7 cash funding that we are doing in the -- for the8 water fund. And that's to move the water fund to9 best, you know, improve the position of the

10 utility and improve liquidity in the system and11 meet the industry-wide best practices.12 I think this addresses one of the13 questions from the Board of how the residual fund14 is used. It's reflected in the transfers and the15 funding of the capital spending there. As we16 stated, the other -- within the financial plan we17 reflect the O&M, the capital requirements which18 includes fund transfers. The cash funded19 capital, which we are already mentioned, were20 moving from 20 to 25 percent to increase the cash21 funding in the department to improve liquidity22 which will happen in a long period of time. To23 move them, the Department needs to make to24 improve its position and improve it's bond

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1 ratings.2 The additional transfer from residual3 fund to construction fund is necessary to achieve4 that goal. It also includes -- there is two5 portions of the capital fund transfer, capital6 fund. One is the required capital account7 deposit. The General Bond Ordinance in addition8 to the bond coverages that we've already reviewed9 in the required debt service coverage, it

10 requires a transfer of 1 percent of net asset11 value or original cost less depreciation of the12 system's assets be transferred from the residual13 fund to the capital account each year. So, 114 percent of the net value of assets is transferred15 there, and that's required by the bond ordinance.16 In addition to that, the Department17 makes an elective amount of funding from the18 residual fund. So, it's the combined cash19 funding of the capital account deposit plus the20 residual fund transfer that represents the cash21 funded capital from the capital.22 MS. OLANIPEKUN-LEWIS: What drives the23 elected contributions from the residual account?24 MR. JAGT: It's basically the amount

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1 available to meet the 20 to 25 percent. But we2 basically been the financial plan presented, we3 presented a minimum balance that we wanted to4 maintain in the fund of 15 million a year. And5 we transferred as much out as we could based on6 the projected financial plan maintaining that7 15 million per year. And it did meet the target8 of moving it from 20 to 25 percent over the9 five-year period.

10 As we spoke before several times, three11 is also the rate stabilization transfer. That12 provides additional funding necessary. We will13 review that in a slide coming up of how it helps14 meet the revenue requirements for each of the15 fiscal years projected.16 Again, as we presented in Slide 17, we17 do a projection of revenues and revenue18 requirements. And we look at the additional19 needs of the system. And this graph, it presents20 that projection of flow of funds that we looked21 at. So on the left side with the blue and the22 greys, this is your revenue into the system --23 that's your revenue requirements into the system24 reflecting O&M, the debt service and the capital

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1 account deposits and the transfers. On the right2 side, we have the projection of the revenues3 including the service revenues, the miscellaneous4 revenues and the withdrawals from the rate5 stabilization.6 So, this graph answers the question from7 the Board of how are you planning to use the rate8 stabilization fund. You can see that with our9 projection of revenue increases in addition to

10 the increased revenues that we have requested, we11 also need to draw from the rate stabilization to12 meet the annual revenue requirements in the13 system. And that's 19 million is drawn in FY1714 in addition to the revenue increase requested.15 And 39 million is withdrawn in FY18 in addition16 to the revenue increase that's been requested.17 MR. HUANG: What will the balance be at18 the end of '18?19 MR. JAGT: The balance at that point at20 end of '18 will be 111 million, which is the21 targeted 110 million minimum balance for the22 fund.23 One key thing to point out here is this24 projection reflects our projection of cost on the

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1 system. So, O&M reflects our projection of2 actuals. During the process or each annual3 budget review, the Department also has to be able4 to meet the coverage and projections based on5 actual spending, which is why we need -- we would6 need even more money from rate stabilization.7 And that's one of the reasons or the drivers for8 having the 110 million in the Rate Stabilization9 Fund, sorry. Needed to take a breath.

10 Because the revenue requirement side11 would be higher based on 100 percent of budget,12 so we would have to increase the revenue side to13 meet that which comes from available balances for14 budgeting purposes in the Rate Stabilization15 Fund.16 Continuing a projection for FY19 through17 '21, we already cheated and jumped ahead. At FY18 2018 we are at minimum of 111 million or just19 above the 110 million, so we can't continue to20 withdraw from the Rate Stabilization Fund. Here21 the revenues are increased to meet the revenue22 requirements in each year and provide the23 deposit-to-rate stabilization to rebuild the fund24 or maintain the minimum balance.

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1 On Slide 33, we have got a projection2 which we've already reviewed of the rate3 stabilization and the residual fund balances.4 This addresses the Board's question which was how5 we are utilizing the funds and the projected6 balances as a result of the proposed plan. As we7 have already reviewed, that with the planned8 increases from the rate increased, proposed rate9 increases. We are going to be at a drawdown

10 to -- from the beginning balance of FY14 at11 185 million.12 During FY15, we project we are going to13 see an increase to 206 million, but then14 subsequently be drawn down in '16, '17 and '1815 down to 111 million. Which is just of the --16 MS. OLANIPEKUN-LEWIS: This is with no17 action taken?18 MR. JAGT: This is with action taken.19 MS. OLANIPEKUN-LEWIS: With action?20 MR. JAGT: Yes, ma'am.21 MS. LABUDA: Dave, can I step in?22 MR. JAGT: Yes.23 MS. LABUDA: That's an excellent24 question. Really based on review of the General

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1 Bond Ordinance, of course these withdrawals all2 factor in revenue increase. Without the revenue3 increase we requested, the withdrawals are much4 higher which would lower the balance.5 MS. OLANIPEKUN-LEWIS: Sure.6 MR. POPOWSKY: Excuse me. I'm sorry.7 The 110 million self-imposed target or is that8 one of the mandatory --9 MS. LABUDA: Well, there is two parts.

10 The General Bond Ordinance was written in 198911 and took effect in 1993. And in that document12 was a required amount in the RSF to cover any13 unforeseen emergencies. And that General Bond14 Ordinance provides for $45 million.15 Here we are in 2016. I have nearly an16 $800 million operating budget, $45 million is17 woefully light. We don't separate charges to18 cover a hundred percent of the budget. So when19 you think of rates don't cover budget and the20 minimum balance, the 110 is both trying to21 balance our original budget and to cover any22 unforeseen emergencies plus meet the minimum23 requirement.24 MR. JAGT: The projection on the graph

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1 on the table with the combined Residual Fund and2 the Rate Stabilization Fund essentially reflects3 the operating reserves of the utility.4 Moving on, sort of the what's the net5 impact? One of the weighs of measuring or6 definitely the financial -- the financial7 industry looks at our projection and seeing how8 we meet our performance. And one of the drivers9 is meeting the bond ordinance requirements. So,

10 we will look at the projected debt service11 coverage senior and total debt service coverage12 final from the financial plan.13 You will see the plan as proposed by the14 policies of the Department increases the senior15 debt service coverage from 1.24 in '16 to 1.25 in16 '17, 1.26 in '18 and 1.35 coverage from there17 after and 2019 and beyond. And the overall total18 debt service coverage ranges from 1.13 and19 increases to 1.22 over the period.20 MS. OLANIPEKUN-LEWIS: Why did they jump21 in coverage between '18 and '19?22 MS. LABUDA: Really, the only way we can23 begin to de-leverage the utility, if you read our24 financial statements, we have 1.9 billion of debt

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1 and the value of our assets after depreciation is2 2 billion. We are nearly a hundred percent3 leveraged. The only way we can begin to4 de-leverage the utility and reduce the debt5 burden on the account per customer is by growing6 coverage and beginning to do more pay-as-you-go7 capital, which would be inline with best industry8 industry practices with our peers but it also9 benefit our base.

10 MR. JAGT: As Board Member Bernie11 Brunwasser pointed out, there is also insurance12 covenant requirement, which is that 90 percent of13 the debt service is funded from current revenues.14 So, that is where we are providing the insurance15 coverage test. And you can see each year -- the16 closest year where we have the largest draw from17 rate stabilization, we are at 107 percent of debt18 service. And the rest of the years we are19 improved coverage from above that. We are20 meeting the insurance covenant requirement.21 Rate Board Ordinance included a coverage22 requirement that the revenues not exceed total23 appropriations of the Water Fund. And we did a24 projection based on our financial plan. And we

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1 see that based on the proposed financial plan2 with the proposed rate increases, that we3 continued to meet the Board Ordinance4 requirement.5 So far, we reviewed the projected6 assumptions and the financial plan results. At7 this point, we are going to shift our review from8 the review of the financial plan to the results9 of the cost of service study.

10 So as Ann pointed out in her review, we11 go through numerous allocations of the costs to12 the total Water Department or water fund costs13 from total water fund to to the costs of14 providing water service. Wastewater service15 included the total combined total of sanitary and16 stormwater service.17 Those costs are allocated through the18 industry accepted principles from AWWA for the19 water utility. Then the net result of the cost20 distribution is the residential customer classes21 being allocated 156 million of revenue22 requirement. The non-residential class being23 allocated 83 million. The PHA stands for the24 Philadelphia Housing Authority. Allocated 6.3

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1 million. City services, water services provided2 to the City is 8 million. And total fire3 including private fire and public fire protection4 is 10.9 million. Total of 264.2 million for5 FY17.6 HEARING OFFICER BROCKWAY: Do you7 provide in your filing the same type of breakout8 for earlier and later fiscal years?9 MR. JAGT: Yeah. Within our department

10 and within our filing, we do provide the11 distribution of the existing revenues by class,12 so you can compare the distribution under the13 existing rate and what the resulting distribution14 of service or the proposed rates are.15 HEARING OFFICER BROCKWAY: Is this, the16 Fiscal 17, maybe it doesn't make any difference.17 Are you going -- are you assuming -- you can18 assume anything with respect to the breakout for19 Fiscal '18 and '19?20 MR. JAGT: We only did a projection for21 FY17 and '18. And the work papers provide the22 distribution for FY17.23 Next slide we do a presentation of the24 wastewater cost of service allocation between the

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1 sanitary, sewer and the stormwater cost to2 service. It's the same breakdown between3 residential and non-residential of Philadelphia4 Housing Authority, the City services, so services5 provided to the general fund and the aviation6 fund. And the fire includes fire and public7 fires. So that's -- there is no public fire in8 the sewer because that's all under the water9 service.

10 Total wastewater distribution cost is11 216.2 million for FY17. The distribution is12 presented between customer classes. And the13 rates are subsequently designed to cover these14 costs. Stormwater is projected to be15 157.2 million. Again, the primary breakdown, the16 distribution is between residential and17 non-residential or residential picks up18 46 percent of stormwater. And non-residential19 picks up 46 in equal part. The City picking up20 7 percent and 1 percent for PHA.21 Just a brief review of the cost drivers.22 That the key components that were driving the23 cost increases for the Department. Some of the24 challenges we had were including the declining

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1 water usage. As we said, we lost Bucks County.2 And we are also seeing in the projection base of3 the water fund, a decrease in sales to 5/8"4 meters. And as presented in the assumptions,5 that reflects a 0.6 percent decrease in the water6 sales over the steady period.7 HEARING OFFICER BROCKWAY: Before we8 move on from this, do you project that there is a9 point at which the extent of the deficiency

10 implemented by customers levels off, or do you11 project -- what do you project going forward as12 far as the change, if any, in water?13 MR. JAGT: Within the projection period14 that we have, we project that the decrease to15 continued through the study period. We have --16 with each update we have done this. And for a17 longer term projection, we do show a trailing off18 or not continuing. But for the five-year or19 six-year projected outlook, we continue to20 reflect a reduction.21 HEARING OFFICER BROCKWAY: Does the22 filing include details on the derivation of the23 assumptions with regard to impact of various24 features like this on the consumption?

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1 MR. JAGT: Not a breakdown at this2 level. It mean, it gives the basis of what3 the -- what the decrease was for the 5/8". It4 does give a projection by class of the5 consumption for each customer type.6 HEARING OFFICER BROCKWAY: Do you have7 that information handy, or is that something you8 have to do a study for?9 MR. JAGT: No. We can pull it up and

10 put a summary together. I will give you work11 paper references where we can find that.12 HEARING OFFICER BROCKWAY: Yeah. That13 would be great.14 MR. JAGT: I know for sure it's in the15 customer portion of the financial plan, but I16 have to look up and see what page number it would17 be.18 HEARING OFFICER BROCKWAY: Thank you.19 MR. JAGT: We pointed this out before,20 but the declining usage is projected as customer21 basis uses more efficient appliances and22 fixtures, and also conservation awareness and23 ongoing efforts to decrease the water demand in24 the system.

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1 MR. POPOWSKY: Excuse me. What about2 the number of customers? Isn't the City growing3 again, I guess?4 MR. JAGT: Over the recent three years,5 we haven't seen very -- a strong enough increase6 in the accounts to suggest continuing to increase7 the number of accounts. In fact, it's relatively8 stable. The one difficult thing is in one of the9 test years or in three years ago at the

10 introduction of stormwater, some of the increase11 in the accounts is believed to be the12 introduction of the stormwater only accounts and13 conversion to that. So, the tracking of the14 accounts is believed that it's remained stable.15 But the increase in the accounts is actually the16 reflect the increase in accounts for stormwater17 only.18 Some of the other cost drivers we have19 is the increasing efforts for the Department to20 address the aging infrastructure needs with21 increasing the capital reinvestment in the22 system. Customer assistance programs are23 continuing to be expanded to provide services or24 continued excellent service to the customers for

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1 the discounts and grants programs that we2 currently have in place and the introduction of3 the new Affordability Program to meet the4 mandates of the bill recently passed by City5 Council. You also have the environmental -- the6 environmental regulations put on utility by the7 safe -- by the State and Federal requirements8 such as the Safe Drinking Water Act, the Clean9 Air Act and the Clean Water Act.

10 We also have the driving policy or the11 increase in personnel calls which, in addition to12 being the inflationary increases that we have,13 it's the new positions required to meet all the14 other bulleted items on this list. In order to15 meet the regulatory requirements and provide the16 increase in customer service and meet the17 requirements of aging infrastructure, we have to18 increase the staff costs.19 Again, this slide addresses one of the20 Board's questions about the key drivers for the21 cost increases.22 MR. HUANG: I have a question. I am23 surprised you didn't include some of the things24 that were stated earlier about making sure that

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1 the utility is fiscally sound. Can someone talk2 about how close we are to a downgrade per these3 ratios and what would the costs be of the4 downgrade?5 MS. CLUPPER: What was the question6 again?7 MR. HUANG: We were looking at some8 ratios on page 34, and we were trying to have9 them go in the right direction. So if they go in

10 the wrong direction, at some point the rating11 agencies punish you. So, what does that look12 like? And what is the cost consequence in terms13 of cost of capital.14 MS. CLUPPER: My name is Kathy Clupper15 from Public Financial Management. There is not a16 real specific actual answer. You understand that17 there is trends. So currently, if you look at18 the credit spreads between A, AA and BBB the19 current Water Department is in the main category.20 Between just looking in recent -- I have to make21 my presentation on the slide and see my22 information.23 If you want to compare the AA rate at24 20-year revenue spread to the A rated, it's about

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1 35 basis points. If you look between -- that's2 if you look between the AA and BBB, it's about 403 basis points. And this, of course, changes when4 credit spreads change. A year or so ago between5 the A and AA, it was 44 basis points. There is a6 cost.7 In addition, there is also a cost to the8 Department would like to do their bonds or have9 other types of structure, the cost to the

10 liquidity facility also significantly increases11 as the ratings go down.12 MR. HUANG: And 35 basis points off13 of -- what's the -- what am I multiplying that14 to?15 MS. LABUDA: Sure. Kathy is speaking16 to --17 MS. CLUPPER: Sorry. 0.35 percent.18 MR. HUANG: Right.19 MR. CHAPMAN: Off of what base?20 MS. LABUDA: We issue tax exempt debt.21 And so, it would not be the U.S. Treasury curve.22 It would be the U.S. Treasury curve less some23 factor, 0.6/0.7. It's called the municipal24 market index, MMD. And I'm not sure. When Kathy

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1 gives her presentation -- I can't recall where 302 year MMD is right now.3 HEARING OFFICER BROCKWAY: I don't think4 that's the question.5 MR. HUANG: Yeah. How much of the debt6 becomes more expensive?7 MS. CLUPPER: Oh. Any new money that8 you issue -- if you are issuing 250 million a9 year, you can either issue that at cost of

10 capital of 4 percent or 4.5 percent depending on11 where rates are.12 HEARING OFFICER BROCKWAY: So, you go13 through this in your testimony in the filing of14 what the different bond issuances are and what15 rates they're at and projected issuances?16 MS. CLUPPER: I mean, the discussion of17 ratings is more than just the cost of capital.18 It's also the ratings are a reflection of the19 financial stability of the system which allows20 you to do a lot more. If you want to have a21 created debt structure, if you want to create22 subordinate debt, if you want to have a CIP23 program, if you want to really tightly manage the24 cost of your debt, you need to be at higher rate

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1 than credit and you need to have certain amount2 of liquidity and financial stability within your3 system. So, it's more than just if I issue this4 bond and A rating versus a AA I will save 1, 2,5 3 million dollars a year. It's a bigger issue.6 And it also, I mean, ratings reflect the7 underlying financial strength of the system. You8 want to have a higher rating because you want to9 be a strong system. It's not a discreet

10 discussion.11 MR. HUANG: Thank you.12 HEARING OFFICER BROCKWAY: Are you going13 onto -- let's go off the record.14 - - -15 (At this time, a discussion was held off the16 record.)17 - - -18 HEARING OFFICER BROCKWAY: On the19 record. We will take a break until 11:00.20 - - -21 (At this time, a break was taken.)22 - - -23 HEARING OFFICER BROCKWAY: We are back24 on the record.

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1 What are your next presentations,2 Mr. Dasent?3 MR. DASENT: Black & Veatch continues,4 so Dave and --5 HEARING OFFICER BROCKWAY: Do we have up6 here at the desk everybody who is going to be7 answering the questions?8 MR. DASENT: Yes.9 HEARING OFFICER BROCKWAY: Please

10 proceed.11 MS. KUMAR: Good morning, again. We are12 now going to go to the kind of the last part of13 this discussion this morning that we've been14 having.15 HEARING OFFICER BROCKWAY: Your name16 again?17 MS. KUMAR: I'm Prabha Kumar from Black18 & Veatch.19 Dave here, my colleague, talked about20 really the building, two building -- the first21 two building blocks which are financial plan and22 cost of service. He talked about the financial23 plan projections of the revenue, the revenue24 requirements and all the obligations that they

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1 daily have to meet in terms of not only it's2 operation and capital program but also general3 bond coverages, the insurance coverage and rate4 requirement later the plan, the six-year plan.5 And then from there we went more specifically6 into the two years, which was the rate being7 requested which is the FY17 and FY18 where they8 talked about the cost of service analysis, how9 you take the revenue requirement and then you

10 break it down into service time between retail11 and wholesale. And within retail, how you break12 it down within service type.13 Why do you do that? Because based on14 that, you really set the rates. If you look at15 Philadelphia rate structure, it really has16 primarily on the water side it has the fixed17 charges which are based on meter side and then18 you have the volume rate. Those rates are19 defined based on the detail cost of service20 analysis. And intention with that, Philadelphia21 also has on the retail side stormwater rates.22 The stormwater rates are also defined based on23 the detail cost of service that Dave kind of24 talked about.

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1 That brings the logical question, what2 is the impact of all these rates on the customer.3 In this section, we are going to talk about what4 are the impact on bills. And when we talk impact5 on bills, we typically talk about residential6 customers because they are more of a homogenous7 group. We are going to talk about that.8 And then also the question is that how9 does Philadelphia compare with other

10 municipalities, other utilities. We will get a11 glimpse of that, as well. When we talk about12 rate and rate impact, a logical question also is13 can something be done for customers who are in14 need? We will talk about the customer assistance15 program.16 What is the impact of the rate increase17 if you're talking specifically in FY17? That is18 a snapshot here. The current year, which is '16,19 there was no rate increase. Currently, if you20 tape a typical residential customer. When we use21 the word typical in this context, we are really22 talking about a residential customer that uses 623 ccf or 600 cubic feet of water and 5/8" customer.24 That's the predominant customer base in

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1 Philadelphia.2 When you look at that group of 5/8"3 meters with 600 cubic feet of water usage, which4 is what we call typical, the monthly bill5 currently the customer is paying for water and6 sewer and stormwater included is $67.40. Now,7 with the proposed rate increase that has been8 filed, the additional monthly charge expected is9 $4.20. The charge would go up to $71.60 for a

10 customer who does not have any discount like a11 senior discount. If it's a senior citizen, it12 will go from $50.60 to $53.07 in '17.13 Then in '18 there is additional rate14 requested that is being asked for. With that15 there will be an additional increase of $3.19 if16 you look at from our monthly standpoint. The17 bill is expected t go to $75.50. These numbers18 are rounded to the nearest 10-cents. This is19 what is expected for a typical residential20 customer in Philadelphia with the rate increases21 that have been filed.22 How does this compare when you look at23 it from a national --24 HEARING OFFICER BROCKWAY: Sorry to

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1 interrupt. Does the rate filing have a bill2 frequency analysis?3 MS. KUMAR: Mean different levels of4 usage?5 HEARING OFFICER BROCKWAY: Yes.6 MS. KUMAR: Yes, it does.7 How does this compare when you compare8 Philadelphia nationally in terms of water, sewer9 and stormwater? How does that compare?

10 The chart actually shows utilities from11 highest to the lowest in this group that we are12 presenting here. And you can see Philadelphia is13 more on the lower end of the spectrum. All the14 utilities presented here, their rates are FY1615 charge. It's not FY17. So what we have done for16 Philadelphia, we are showing the FY16. And here17 it is not the rounded number. Here it is the18 actual, which is $63.43. We are also showing at19 '17 where it will be. You really get both view20 in the same one bar for Philadelphia.21 One thing to point out here, when we22 talk about comparing Philadelphia with other23 utilities of any benchmark that we talk about,24 it's not really apples to apples on risk. Why is

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1 that? It's because there are significant2 differences on utilities as to where they draw3 their water. If you take water utility, for4 example, where do they draw their water? Is it5 surface water? Do they use a combination of6 surface and well waters? What kind of frequent7 processes they have? Do they have frequent8 process, or do they use more chlorination? There9 are differences like that. And the level of the

10 aging infrastructure, not all of the11 municipalities, even though some of them are12 large like municipalities like Philadelphia, not13 all of them have the same level of aging14 infrastructure.15 And also, if you look at how they have16 historically funded their capital program, how17 leveraged they are, what kind of bond and18 insurance requirements they have and even what19 their rates setting processes are, they are20 significantly different. All of those factors go21 into water utility and how they recover those22 costs and ultimately what their bills look like.23 That's why we say it's not always apples to24 apples. However, it just gives you a high level

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1 guidance of where does Philadelphia fall.2 So while we can't interpret too much3 from this in terms of operational performance or4 cost efficiencies, it just gives you a broader5 look at where Philadelphia stands.6 Now, how does Philadelphia compare7 regionally? We also took a much closer look at8 Philadelphia and the neighboring utilities. In9 this, we also looked at utilities of Pennsylvania

10 American and Aqua Pennsylvania and New Jersey11 American. And here again Philadelphia, compares12 very favorably both in terms of the current rates13 in '16 and the '17 proposed bill when you look at14 the typical bill.15 MS. LABUDA: We can pause. I believe we16 need to redial them.17 HEARING OFFICER BROCKWAY: We are off18 the record.19 - - -20 (At this time, a discussion was held off the21 record to dial back in people on the phone.)22 - - -23 HEARING OFFICER BROCKWAY: We will go24 back on the record. We are having some telephone

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1 issues that are now corrected.2 MS. KUMAR: We also took a look at how3 do the proposed residential bills compare when4 looking at from regional perspective. It still5 compares very favorably. And especially you can6 see on the sewer side Philadelphia, even the7 current rate, we are actually the lowest. So8 something to, again, keep in mind when we are9 looking at these proposed request for rate

10 increases.11 On the stormwater side, the reason we12 had to pull stormwater out into separate analysis13 is because not many municipalities have14 stormwater fees. We took a look at some of the15 large utilities that do have stormwater fees.16 There again, Philadelphia's stormwater charges,17 even the current and the proposed are extremely18 favorable despite the large program we have for19 long term plan and other programs.20 When we talk about the financial plan21 and the cost of service and the rates and the22 impact, so while we have emphasized importance of23 the revenue requirement and the utility meeting24 all of its obligations, the obligations also

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1 include the customer side. We really have two2 sides of the coin, the utility side and also the3 customer side. That is why we need to take a4 balanced approach when we are trying to establish5 both the financial plan and the cost of service6 rate. One of the ways to establish is not only7 trying to maintain the financial solvency of the8 utility, but also is there anything that can be9 done to protect customers from a perspective of

10 affordability.11 The Water Department actually has a12 number of programs as you can see here from13 senior citizens discount to some discounts from14 charitable organizations to the Assistance15 Program and Home Emergency Loan Program. There16 are different types of program and the17 Conservation Assistance Program, so there are18 different types of program that are already in19 place to help low income customers. When you20 look at these programs in aggregate and in FY15,21 the Water Department provided over $24 million of22 assistance just for these programs.23 Now on top of these programs that Dave24 alluded to, there is going to be new

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1 Affordability Program as passed by the counsel.2 That Affordability Program and its needs are3 coming on top of this assistance that's already4 being provided. And the Affordability Program5 Jon Davis from Raftelis is instrumental in6 helping the City work through the program. He7 will talk about that.8 MR. POPOWSKY: Just before you do that.9 The senior citizen discount, is that for low

10 income senior citizens? It's not for all?11 MS. KUMAR: It's income tested, that is12 correct. It's income tested.13 MR. BRUNWASSER: The assumption is that14 the new program -- I mean, the new requirements15 passed by City Council will not be -- the16 25 percent discount for eligible seniors will17 continue over and above the new program?18 MS. KUMAR: That is correct. That is19 the assumption.20 MR. BRUNWASSER: Right. Right. That21 program went into effect over 30 years ago.22 Every senior was grandfathered in regardless of23 income at that time. So, I doubt there's too24 many left that don't meet the requirements.

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1 MS. OLANIPEKUN-LEWIS: I just wanted to2 be clear. The new program accounts recently3 enacted would be on top of the senior citizens4 program?5 MS. KUMAR: On top of all these6 different assistance programs that you are seeing7 on the screen.8 MS. OLANIPEKUN-LEWIS: Okay.9 HEARING OFFICER BROCKWAY: But it may

10 not result in a different rate because depending11 on the design of the program, this is what's12 called a burden-based program. You try to get13 the rate to meet to determine percentage of the14 customer's income. And there's a whole lot of15 options there about how you define income and how16 you define what the percentage is and how you17 define what the usage is. But putting all of18 those things aside, you end up with a target bill19 for the customer.20 MS. OLANIPEKUN-LEWIS: Would the new21 program result in additional discounts, i.e.,22 less revenues to the Water Department I guess is23 where I'm trying to go?24 MS. KUMAR: This is a good time to

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1 transition to Jon Davis. He was instrumental in2 helping the City with the program. He's going to3 provide details on the program.4 MS. OLANIPEKUN-LEWIS: Even though I was5 a councilperson, I didn't help the council who6 put this together, for the record. I was not7 part of the drafting of this program, so you'll8 be informing me.9 MS. LABUDA: If I may go on the record

10 with just a clarifying comment, I apologize for11 not stepping in earlier. But in terms of senior12 citizens, they will have the option to either13 stay in the 25 percent discount or apply for the14 new program. There is not a scenario I foresee15 where they would get both the discount an --16 MS. OLANIPEKUN-LEWIS: That's what I was17 trying to understand.18 MS. LABUDA: -- and the new19 Affordability Program. I apologize for not20 jumping in there.21 MR. DAVIS: Good morning. My name is22 Jon Davis. I'm with Raftelis Financial23 Consultants. We had the opportunity over the24 past several months to work with the Water

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1 Department, the Water Revenue Bureau and the City2 Council to help draft a new customer3 Affordability Program that better meets the needs4 of economically disadvantaged customers within5 the system.6 The general structure of the program is7 captured in the existing city ordinance which we8 alluded to. A lot of the details, the9 implementation details of the program, have yet

10 to be fully thought through and established. In11 fact, a lot of the details of the program rely12 pretty heavily on the outcome of this rate13 filing. So over the next few months, we will be14 working on this.15 However, we do have some of the program16 details, and we'd like to share some of those17 with you here today. For instance, the program18 is going to be divided into three income tiers as19 we see here on the slide. That is based on20 federal poverty level. And it's available for21 customers at or below 150 percent of the federal22 poverty level.23 Within each of the income tiers, we have24 usage levels which try to capture customers that

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1 are existing in different level of consumption2 currently. We have a low, medium and high usage.3 And you see the development of those here. This4 program is consistent with the EPA guidelines on5 the development of affordability. It's also6 consistent with industry practice in this regard,7 so that's kind of in the basis of some of that8 discussion.9 MS. OLANIPEKUN-LEWIS: With each tier

10 you have a utilization analysis. Is that what11 you're saying?12 You have three income tiers. Within13 each tier, then, you would look at consumption14 utilization?15 MR. DAVIS: That's correct. First,16 you'd be placed in tiers. Then you look at17 historical consumption to place you in.18 Like to look at kind of the scope of the19 program as we're -- as we analyzed it. The20 potential is here for us at 56,000 PWD accounts21 for about 13 percent of the residential22 population that fall within this program with23 respect to the income tiers that have been set24 up. Additional assistance above the discount

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1 tiers that we set up. We have additional2 assistance for payment plans for other qualifying3 customers, so it's just not limited to 1504 percent or below of the federal poverty level.5 And finally, the implementation of the6 program as we mentioned, the details of it depend7 on the outcome of this rate filing.8 The table here at the bottom of the9 slide shows some of the ways that the tiers and

10 the usage levels are divided up. And then the11 resulting -- the resulting discounts that12 customers would receive if they fall into these13 tiers and usage levels. You see some pretty14 significant discounts here. We also, if the15 discounted bill falls below the minimum bill that16 we have in the far right-hand corner, the17 customer would receive a minimum bill. So, we do18 have that.19 So based on the result of the rate20 filing, based on some of the technical issues21 that are inherent in a program of this complexity22 and the size, we will be working through a lot of23 the implementation issues going forward. I know24 the -- there were some questions from the Rate

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1 Board regarding the details of implementation.2 And we will be working through those over the3 coming months.4 MS. OLANIPEKUN-LEWIS: In no instance5 would a customer pay 0. They will pay at least6 $12?7 MR. DAVIS: Yes. There is a minimum8 bill concept.9 MR. POPOWSKY: Earlier slide you were

10 projecting a revenue decrease of 16.1 to 18.611 million. I assume, first of all, that is when12 the program is fully in effect.13 When is that? Is that 2018 or --14 MR. DAVIS: Yes. 2018 is the15 implementation.16 MR. POPOWSKY: You wouldn't see that in17 2017?18 MR. DAVIS: Correct. You would see some19 ramp up in costs resulting in the additional20 personnel that you saw discussed in the costs of21 service earlier. You also have some22 implementation with respect to system design.23 MR. POPOWSKY: What's -- what percentage24 of customers, eligible customers, what's the

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1 assumption as to what percentage of the customers2 will take you up on it.3 MR. DAVIS: That was one of the major4 questions in developing the cost that we showed5 earlier. This is a real -- really a unique6 program. There are certainly instances of7 customer affordability programs both within the8 water and wastewater industry and within other9 utility industries. But every one is unique in

10 that once it's put in place, there is no11 certainty with respect to what's subscription12 rate or the number of customers who qualify will13 actually apply.14 So, we made some assumptions from that.15 We have used benchmarks from other utilities,16 other regional utilities. We have tried to make17 sure that the risk to PWD and to the City are18 manageable risks. Those assumptions would be19 fine tuning subsequent rate cases once the20 program is in place.21 MR. POPOWSKY: That was my question.22 What is the assumption basic? To get to 16 to23 18 million, you must have made an assumption.24 MR. DAVIS: We have some assumptions

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1 there. I can refer you to how exactly they are2 handled within the work papers. What we wanted3 to do is create a situation where 80 percent of4 the time, the loss revenues would fall at or5 below a certain market. That's how we came to6 the numbers side of it.7 MR. POPOWSKY: That's why I still don't8 understand. That was the simulation you did so9 that 80 percent of the time you'd cover your

10 cost. I still don't know what percentage of11 customers you expect to participate.12 MR. DAVIS: I would have to walk through13 those details with you. It's consistent with14 what other regional utilities are doing.15 MR. HUANG: Isn't income eligibility16 based on eligibility for gas?17 MR. DAVIS: For this --18 MR. HUANG: Or is it separately19 determined?20 MR. DAVIS: It's separately determined.21 MR. HUANG: Okay.22 MR. DAVIS: But they use similar23 criteria.24 HEARING OFFICER BROCKWAY: Did you have

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1 a question?2 MS. OLANIPEKUN-LEWIS: I was just3 feeling Sonny's frustration here. Of the 56,0004 accounts, you are making some assumption as to5 who is participating. I think that's what you're6 trying to get at. Is it 70, 50, 30 percent?7 What is that number?8 MR. DAVIS: It depends on the income9 level. We see different subscription rates at

10 different income levels. Basically, if I have a11 lower income and I'm eligible for a larger12 discount, I am more likely to apply. So roughly13 speaking, I would put it between 50 and14 75 percent subscription.15 HEARING OFFICER BROCKWAY: If it's16 acceptable to the Board, I would think we might17 be helped if we invite Mr. Ballenger to ask18 questions if he has them right now about this. I19 expect their witness Mr. Holden will be putting20 on some testimony regarding, or we could wait.21 It's up to you, Mr. Ballenger.22 MR. BALLENGER: I might refer to23 Ms. Pickens, as well. Yeah. I guess we can have24 a couple of -- maybe just a couple of quick

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1 questions.2 Just for purposes of determining the3 percentage discounts on page 46, Mr. Davis, we4 have spoken before. I am just guessing, is this5 based on the mid point of each tier again?6 MR. DAVIS: Yes. It's based on the7 middle -- the median income within the tier and8 the median consumptions within the usage.9 MR. BALLENGER: Okay. Is it also based

10 on a hypothetical family size of 2.5 persons or11 thereabout that I think we dealt with in the12 past?13 MR. DAVIS: Under those circumstances,14 the family size wouldn't play into that.15 HEARING OFFICER BROCKWAY: How could it16 not?17 MR. BALLENGER: You have to determine18 the amount of the actual household income.19 MR. DAVIS: I'm sorry. I misunderstood20 your question.21 MR. BALLENGER: Okay.22 MR. DAVIS: It is based on the average23 household size for the City of Philadelphia.24 MR. BALLENGER: Okay. Just in

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1 calculating those discounts. Okay. As2 Ms. Brockway mentioned, this is a burden-based3 piece of legislation. What were the burdens used4 that underlie these particular tier calculations5 as a percentage of household income?6 Do you happen to know what those were?7 MR. DAVIS: I'm sorry. Are you talking8 about the thresholds?9 MR. BALLENGER: Yeah. Sort of the

10 affordability targets. We use different language11 for them. I think Ms. Brockway referred to them12 as burdens. We have talked about them in13 different ways in the past.14 Do you happen to know what those are?15 MR. DAVIS: Generally, I think the16 target is set by counsel for tier one is17 2 percent of income; for tier 2 it was 3 percent18 of income; and for tier 3 it was 4 percent of19 income.20 MS. BECKLEY: Clarify, the final version21 of the bill I believe council left that to the22 Rate Board. There was an earlier version of the23 bill that included some of these.24 MR. BALLENGER: But for purposes of the

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1 proposal, those were the tiers. I just wanted2 to -- I don't want to go into too many details3 because this can, as you know, take on a life of4 its own.5 MS. PICKENS: Wasn't anticipated that in6 years after the implementation year, that the7 discounts will remain where they are on your8 chart?9 MR. DAVIS: I don't think we made

10 specific assumptions as to how that would be11 handled. It seems like that would be reviewed12 periodically to make sure those are still within13 the intent of the original.14 HEARING OFFICER BROCKWAY: I don't mean15 to say that you need to ask questions all now or16 all today, I just wanted to make sure that the17 Board was brought up to speed on any issues18 hanging out there that would be important to look19 at as we look at the program.20 MR. BALLENGER: Yeah. I think those21 were sort of some of the bigger issues that we22 touched upon is what sort of -- behind the scenes23 here, what are we looking at what is affordable24 is one thing we wanted to get at. What Josie was

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1 getting at is that the percentage of it remains2 the same forever, wouldn't necessarily meet the3 objective. We are going to do some more4 discovery and have some more conversations about5 this I think as we go on. I will leave it at6 that.7 MR. BAKARE: My name is Ade Bakare,8 Counsel for the Philadelphia At Large Interest9 Group. Mr. Popowsky asked about the revenue in

10 the assistance program. It wasn't clear to me if11 the figure that was given in the 16 to12 18 million-dollar figure, is that you have same13 customer option out of the senior citizens14 discount program. Is that just on the cost side15 of the new program?16 MS. KUMAR: Just a minute. Let me go17 back to that slide so that we can answer that18 question.19 HEARING OFFICER BROCKWAY: What's the20 number of that?21 MR. HUANG: Slide 26.22 MS. KUMAR: Slide 26. This is Ms. Kumar23 from Black & Veatch. Slide 26 we kind of touched24 upon the revenue. So, we mentioned the decrease

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1 of 16 to 18 million. But if you look at2 specifically at 18, because there is an3 assumption that the City grants portion of the4 WRAP Program will be eliminated, therefore, the5 net revenue decrease in '18 is 13.4 million. So6 to your question, yes. Some of the other offsets7 were looked into before driving the net revenue8 decrease.9 MR. BAKARE: Then just as a follow up

10 then, is there an isolated number that shows just11 the cost of the new assistance program aside from12 City's overall revenue decrease?13 MS. BROCKWAY: I'm not sure I understand14 the question.15 MR. BAKARE: I'm wondering if the new16 assistance program, I'm wondering what the cost17 of that program itself is aside from just the18 wholistic revenue decrease the Department will19 experience at FY18. I think the Board would20 benefit from isolating the cost of that specific21 program just to get an idea of what the -- what22 that line item impact is for the Department.23 HEARING OFFICER BROCKWAY: By cost, if I24 can just clarify, I think you mean revenues

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1 foregone plus net additional administrative2 costs.3 MR. BAKARE: Correct.4 HEARING OFFICER BROCKWAY: And I say net5 because there may be some savings. I don't know6 whether that's going to be argued. But some have7 argued there are administrative savings because8 you make bills affordable.9 But actually, did you look into that

10 question whether or not there was any11 administrative savings from making bills12 affordable?13 MR. DAVIS: We did not make any14 assumptions as to that in 2018 because we wanted15 to see how the program would be implemented.16 Keep in mind that a lot of the development of17 this was -- was done while the discussions were18 going on. The City can also -- details being19 finalized. So, we do not have assumptions with20 respect to any savings on that area.21 The cost of the -- the cost in lost22 revenue associated specifically with the customer23 Affordability Program are captured on this slide.24 The increase in costs and the assumptions for

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1 lost revenue were used in the cost of service.2 MS. KUMAR: The revenue portion shows3 the revenue decrease, but then the personnel and4 citizen shows the cost increase the cost of5 administering the program. So, those are the6 personnel costs and the services cost.7 MR. BAKARE: Okay. I guess that what I8 hear is that at this point in time, that isolated9 cost of this program doesn't -- isn't available

10 at this point in time.11 MS. KUMAR: That is the -- the personnel12 costs and the services cost are the cost of the13 program when you're talking about isolated cost.14 That 22 staff positions with the cost of 1.6 or15 2.4 million projected for the study period and16 the additional 1.3 million just in '17 for the17 basis2 billing system to get it up and running to18 accommodate this program and the 0.7 to19 0.8 million in '18 through '21 to again support20 this program. Those are the isolated costs from21 the cost side of the fence.22 So that is in addition to the revenue23 decrease of 13.4 million they are showing in '18.24 MR. BAKARE: Yup. That makes sense.

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1 Thank you.2 HEARING OFFICER BROCKWAY: I do have one3 more question. What assumption is made about4 outreach and intake for the program?5 How are customers advised that the6 program exists? Who does the intake?7 MR. DAVIS: With respect to the cost of8 that, we did look at those costs. And the9 assumption would --

10 HEARING OFFICER BROCKWAY: Pardon me.11 I'm not looking at costs.12 MR. DAVIS: You're just looking at13 implementation?14 HEARING OFFICER BROCKWAY: Yeah. How15 that was done. What assumption was made about16 how it was done?17 MS. BETHEL: Hi, I'm Michelle Bethel.18 I'm the Deputy Revenue Commissioner for Water19 Revenue.20 Specific assumptions for how we're going21 to do outreach, we are actually waiting to put22 the whole implementation plan together. So, we23 don't have specific numbers on actually how we24 would roll that out at this time.

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1 MS. OLANIPEKUN-LEWIS: You would at2 least do it a year out before sometime.3 MS. BETHEL: Oh, yes. Yes. I think a4 lot of this comes when we have a final decision5 from the Board. We will be able to move forward6 on what we are actually going to be pushing out7 to our customers.8 MR. HUANG: If my math is right, the9 FY17 outlay is 1.6 million plus 1.3 million. The

10 first number is for personnel and the second11 number is for the IT. And that's in the year12 prior to the roll out of the actual discount.13 MS. LABUDA: Correct. So in our '1714 budget submission that we're currently working on15 that aren't yet public, you are absolutely16 correct that the Water Revenue Bureau's budget17 does contemplate the additional hiring of the18 full-time staff during FY17. It does also -- the19 Water Revenue Budget as well as the Water20 Department Budget also capture the additional21 incremental cost related to basis2 changes as22 well as additional support measures that we need.23 MR. BRUNWASSER: Is it a safe bet even24 now to say that at a very low minimum, this would

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1 be actually printed on the bill these -- this2 program could be -- the alert could be printed on3 the bill and also billing inserts which would not4 cost the Water Department or the Revenue Bureau5 any extra postage as they would insert that into6 the bill? I mean, that I think we can probably7 assert now.8 MS. BETHEL: Yes. That's an accurate9 assumption. You said the billing inserts and

10 putting the messages on the bill, that's11 something that we have control of right now.12 That it's not going to be an additional cost.13 MR. BRUNWASSER: Correct.14 MS. BETHEL: For the bill messaging.15 MR. MARKUS: Is the Department looking16 to outsource --(trails off.)17 HEARING OFFICER BROCKWAY: This is Ed18 Markus, a financial consultant. The question is,19 has the Department looked at whether to outsource20 the intake of customers?21 MS. BETHEL: We have not settled on22 exactly how we will do that. We are open to23 taking that into consideration to outsource that24 process.

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1 HEARING OFFICER BROCKWAY: If I could2 follow up on that, my assumption is that at this3 point, the Department of Revenue personnel would4 take payments and receive applications and5 determine who would be eligible.6 MS. BETHEL: If I'm understanding your7 question, the personnel that take payments are8 not the personnel that will be taking the9 applications. Payment processing, which is

10 within Revenue on the tax side, handle all of our11 payments. They do not handle or process the WRAP12 current applications.13 HEARING OFFICER BROCKWAY: So that --14 MS. BETHEL: It's a different group of15 personnel.16 HEARING OFFICER BROCKWAY: Still under17 Revenue.18 MS. BETHEL: Still under Revenue, yes.19 HEARING OFFICER BROCKWAY: Just to alert20 you that some of the things that I think would be21 useful to get into before the Board makes a22 decision will be to what extent somebody is23 deemed eligible by virtue of their receipt of24 some other means tested benefit. And.

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1 MR. MARKUS: Do the 22 positions reflect2 the assumption that the review is done in-house?3 MS. BETHEL: Yes.4 MR. MARKUS: No decision has been made5 yet.6 MS. BETHEL: Has not. But we would be7 prepared that it if were handled in-house, that's8 how we would -- as I said, we are up for thinking9 differently for processing of those additional

10 pieces of paper that would come in through the11 program.12 HEARING OFFICER BROCKWAY: Does the13 Board want to pursue this further at this time?14 (No further questions from the Board.)15 HEARING OFFICER BROCKWAY: You will have16 more on this. At this point --17 MR. DAVIS: That's all I have.18 HEARING OFFICER BROCKWAY: Let's go off19 the record.20 - - -21 (At this time, a discussion was held off the22 record.)23 - - -24 HEARING OFFICER BROCKWAY: Back on the

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1 record.2 MS. McCARTY: Now we're at the Rate3 Board questions that we received. Those were4 numbered. Hopefully, you can follow along.5 Questions 1 through 6, we believe we6 addressed in sections of this presentation, 17 through 3 in the cost of service presentations.8 Question 7, which is describe the major factors9 effecting the order of bond ratings. That will

10 be addressed in Kathy Cuppler's presentation from11 PFM.12 And Question 10 is -- we believe, again,13 is addressed in the cost of service14 presentations, section four. And that's the15 proposal to implement the low income payment,16 excuse me, the low income program.17 So Question 9 and 11, I will try to18 address right now. So Question 9, for those of19 you who don't have the question, I will read it20 first.21 "Why is the Department switching from22 automatic meter reading, AMR, to advance meter23 reading infrastructure, AMI? What are the24 anticipated quantifiable costs and benefits of

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1 that decision and when is it supposed to be2 implemented?"3 This is no longer a part of our rate4 filing. But I wanted to note that moving to AMI5 will provide our customers with better service,6 will allow the Department to address service7 issues in a more timely manner, should streamline8 the shutoff process. And that it will -- we're9 eventually going to have to replace the ERTs, the

10 encoded radio transmitters because they are11 coming to the end of their useful life.12 This contract will need to be approved13 by City Council. The final contract for AMI will14 need to go before City Council. It's a long term15 contract and it will need to be approved by them.16 So going on to -- if there is no -- yes?17 MS. OLANIPEKUN-LEWIS: I'm dating18 myself. I was actually working for the Finance19 Director when the first AMIs were installed. I20 was detailed to Board of Water Revenue Bureau.21 The big issue was, I did a subcommittee on theft22 of services.23 Can you talk a little bit about how the24 new AMI is going to, I guess, better detect theft

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1 of services relative to the current AMRs?2 MS. McCARTY: So currently, we get a3 reading once a month when the Itron truck, if you4 will, that had PW on it as well drives by and5 picks up the reads from the various groups that6 it does on a monthly basis. And so, it's7 basically every 30 days plus or minus you get a8 reading. AMI will provide the data, you know,9 pretty much instantaneously. We will be able to

10 see what's going on.11 The goal is the technology is evolving12 as we speak even. The goal is to be able to13 detect if the meter is taken offline. We will14 know, for instance, if we shut off a delinquent15 customer, if they start using water again, that16 means -- and they are not supposed to, they17 illegally restored themselves, we will get that18 the next day once we start seeing consumption19 again. A shut off customer should be zero20 consumption. We will see that pretty much21 instantaneously.22 MS. OLANIPEKUN-LEWIS: You are not using23 a radio signal anymore? What type of technology24 do you use to capture that data?

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1 MS. MCCARTY: It --2 MS. OLANIPEKUN-LEWIS: Let me rephrase3 it. Under the AMR it's a radio frequency.4 MS. McCARTY: Right. The truck has to5 drive by.6 MS. OLANIPEKUN-LEWIS: What technology7 will you use under AMIs?8 MS. McCARTY: We are looking at fixed9 network where you'll have receivers placed

10 throughout the City. Depends upon the vendor.11 Some need more, some need less. Again, we're in12 the preliminary stages of figuring all of this13 out. But fixed network will be -- you know,14 there will always be contact with that. That's15 the goal.16 MR. POPOWSKY: Do you know, are there17 Pennsylvania water utilities using AMI? Aqua PA?18 Pennsylvania American that are going to AMI?19 MS. McCARTY: Off the top of my head,20 couldn't tell you. I think Aqua is moving toward21 it. I can't tell you off the top of my head.22 MR. POPOWSKY: Do you know how much it's23 going to cost? 10 million? 50 million? A24 hundred million?

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1 MR. BRUNWASSER: Yes.2 (Laughter)3 MS. McCARTY: Right now we don't have4 a -- I mean, it's hard to say. Again, this is5 out of the rate filing period. But for the, you6 know, 17/18. But it will cost something, I can7 assure you. What that is, you know, we haven't8 even begun to -- we have an idea, but it's9 difficult to say until we know exactly what we

10 want. We are still in the preliminary stages of11 figuring that out, looking at what's out there,12 working with vendors, figuring it all out.13 I really can't give a good answer to14 that right now.15 MR. POPOWSKY: I think PECO got a16 200 million-dollar grant from the Federal17 Government to just pay part of their switch to18 AMI for electric. So I just -- before you spend19 this money, I was just hoping to get some sense20 of how much this will cost. I mean, what are21 the -- the question is what are the quantitative22 benefits -- I realize it's no longer part of this23 case. I certainly hope at some point we will24 find out what the quantitative costs and the

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1 quantitative benefits are. I understand the2 benefits of automated meter reading for water3 utility.4 MR. BRUNWASSER: I think moving to AMR5 back in 1996, it meant the elimination of up to6 130 meter readers from the Water Revenue Bureau.7 And at the time, they were successful in reading8 a meter perhaps only once every three times. And9 they tried to read on a quarterly basis. So, the

10 typical house was read once a year leading to11 lots of disputes, lots of phone conversations12 between the customer and the Revenue Bureau.13 So, there was a tremendous savings. And14 of course, the savings of employees' continues.15 All of those people were phased out. They were16 not laid off.17 HEARING OFFICER BROCKWAY: Can I ask the18 question this way. Do you yet have even a draft19 business case for the investment? By which I20 mean, what the Member Popowsky was talking about,21 there is all the anticipated cost. Here is all22 the anticipated savings.23 What's the relationship between cost and24 savings?

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1 MS. LABUDA: There has been some2 preliminary work done. It would be disingenuous3 to say there wasn't some work done. We are4 coming fast upon the end of the contract of our5 current technology. We have no choice but to do6 something different. And I don't want to get the7 year wrong on the record. I don't know if it's8 '19. But there are preliminary analyses. And I9 think that's why we are pausing on this.

10 We are not trying to hold something11 back. I think it's just all very preliminary,12 and we are still reviewing it. I respect your13 request to come back at some point and talk about14 this further. But I think today it's very15 preliminary.16 MR. POPOWSKY: That's fine. I was17 hoping at some point before you spent hundreds of18 millions of dollars --19 MS. LABUDA: I think it's a very fair20 and valid request. I just -- I think we need --21 I am looking at our legal counsel and our CEO. I22 think we need a little more time to really do our23 homework and do a more formal presentation.24 HEARING OFFICER BROCKWAY: One of the

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1 reasons that I ask is because you already got2 the -- as Chair Brunwasser says, the labor3 savings. In addition to new meters, my4 understanding of AMI is that you need this new5 two-way communication system. And you need a new6 back office system for meter reading management.7 Both of those are part of the big cost drivers8 for electric and gas when they go to AMI.9 MS. McCARTY: Well, what I can tell you

10 is that we have looked at our meters and then11 done extensive testing. And believe that we will12 not need to replace the meters as part of this.13 So, that's a substantial savings to our14 customers.15 HEARING OFFICER BROCKWAY: If you16 don't -- that's interesting. If you don't need17 to replace the meters, the contract is coming to18 an end. Would it not be possible to extend the19 contract, there is then an alternative that you20 are looking for?21 MS. McCARTY: There are two one-year22 options to renew on an existing contract. We are23 anticipating being able to, you know, do the roll24 out in conjunction with taking those two things,

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1 two one-year options to renew. Those two2 extensions. The -- the contract we have is an3 excellent contract. Our lawyers served us well.4 And we would have to renegotiate costs with the5 current vendor and do not expect to get as6 attractive rates as we currently have. And in7 fact, we pretty much been told good luck with8 that.9 HEARING OFFICER BROCKWAY: Right. And

10 so, that would go into any temporary hypothetical11 or preliminary business case as I was using.12 MS. McCARTY: Right. As I think I13 mentioned, we do need to replace the ERT. Their14 additional life is coming to an end. We have to15 do something.16 HEARING OFFICER BROCKWAY: The ERTs17 meaning the module on the meter.18 MS. McCARTY: Exactly. There are three19 components of what I could consider a meter.20 There is the meter, measuring the flow, then21 there's a register recording that consumption,22 and then register is sending a signal to the ERT.23 The ERT is what sends the signal to the trucks24 that drives by.

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1 HEARING OFFICER BROCKWAY: I don't want2 to take time now. Sounds as if you're not there3 yet in your study of this. But just to raise the4 issue of -- I don't want an answer now, but just5 to raise the question. Will there be a6 difference in the cyber security of Department7 functions if you go to AMI as opposed to8 extending ERT?9 MS. McCARTY: Well, security is one of

10 the issues that we are concerned about of course.11 HEARING OFFICER BROCKWAY: Any more12 questions on the AMI at this point?13 (No questions from the Board at this time.)14 MS. McCARTY: Moving to Question 11:15 "Please briefly discuss the Department's efforts16 to ensure the safety of the City's water supply17 particularly with respect to the level of lead in18 the drinking water."19 If you haven't figured out already from20 what I said previously, we take our commitment to21 provide safe drinking water to our customers22 very, very seriously. As such 24/7, 365 days a23 year, our employers are working to ensure we live24 up to that commitment. The two plants utilized

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1 best available technology to treat the river2 waters while still controlling costs. Treatment3 of water is, I like to tell folks, is a4 chemical/physical process. You add some5 chemicals and things physically happen. You6 remove things. The pollutants basically is what7 we are hoping to remove. And, you know, so8 physically through sedimentation and filtration.9 We have monitors throughout our

10 distribution system or conveyance system. And11 that allows us to monitor and maintain quality to12 each of our customers to their tap. Speaking13 specifically to the lead issue, as part of the14 treatment process to control corrosion in the15 conveyance system, we add safe orthophosphate.16 This practice creates a thin coating17 inside the pipe. The coating prevents water from18 coming in contact with the lead solder or the19 lead pipe. It's important to note that the Water20 Department does not have any lead pipes.21 Remember, that our customers own from the22 connection to the water main up to and including,23 you know, to the meter. And then, of course,24 inside. The remainder of the inside plumbing.

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1 The meter is already inside.2 So, the idea is that that coating when3 your water was sitting in there, doesn't -- keeps4 the water from coming in contact with the lead5 solder and the lead pipe. Water is universal6 solvent, so you don't want it dissolving -- the7 lead dissolving in our water. And we estimate8 about 50 to 60,000 properties do have lead pipes9 or lead solder.

10 MR. BRUNWASSER: And the water that we11 get, the water that leaves the pre-water12 treatment plants is lead-free?13 MS. McCARTY: Yes.14 MR. DASENT: I believe we have one final15 question on the regulatory compliance.16 MS. McCARTY: Scott Schwarz will handle17 that question.18 MR. SCHWARZ: I'm Scott Schwarz, general19 counsel for the Water Department. The question20 was as follows: "the federally mandated unfunded21 long term control plan seems to be the major22 challenge for the Department both now and in the23 future. Are there new and more stringent federal24 or state rules on the horizon which may impact

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1 future revenue requirements?"2 The answer is yes. We have talked3 already about the three major acts. Let me give4 you some examples under each act.5 First act would be the Clean Water Act.6 And under that act, there presently on the7 horizon some new water quality standards for both8 Wissahickon Creek and the Delaware River. EPA9 proposed new standards for Wissahickon Creek in

10 May of 2015 that would control the total amount11 of the phosphorous entering the watershed.12 That kind of rule is called a total13 maximum daily load or TMDL. It would set limits14 on phosphorous entering the Wissahickon Creek15 Watershed from both wastewater treatment plants,16 stormwater and other sources. That document is17 still in draft form and we don't know when it's18 going to be finalized.19 On the Delaware, the Delaware River20 Basin Commission recently mentioned strengthening21 the dissolved oxygen standard in the Delaware.22 And that may be revised to better protect fish in23 the Delaware. Again, that's very preliminary.24 And we don't have a good date on when that may

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1 happen.2 Also under the Clean Water Act, there3 are some other ways that more stringent4 requirements go into a place. One is through our5 permits. All of our permits have expired, so we6 are operating under automatic renewals. And we7 have some drafts of the new requirements. There8 are some new requirements in the draft permits.9 For example, the stormwater draft permit for a

10 stormwater system would require us to do11 additional monitoring and take certain remedial12 actions that would monitor for certain results.13 There is a lot of new requirements at14 our treatment plant. Draft permits. Just to15 give you an example, the new draft permit for our16 Northeast Plant requires us to do a study of17 trash in the Tacony-Frankford Creek. If it turns18 out that our system is contributing to the trash,19 take certain remedial actions. Those permits are20 not finalized yet, but they are on the horizon.21 And finally, under the Clean Water Act,22 there is EPA guidance and policy interpreted23 continuously under our consent order or24 agreement. We just got a letter from EPA a month

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1 ago that asked for a new analysis of alternatives2 for providing for overflow controls. That's due3 January 2017. We also have a major filing under4 the current consent order due in October. It's5 called -- well, there are various things6 required. But the major filing is called an7 Evaluation Adaptation Plan. And the consent8 order provides that we will make changes to the9 long term control plan if necessary based on

10 that.11 Those are the Clean Water Act changes.12 It's both a water quality standard permit13 requirements and EPA interpretation of the policy14 and guidance. Under the Clean Air Act, the big15 issue following, it's been in the news lately, is16 the EPA's plan for reducing greenhouse gas17 emissions from electric generation units. City18 is actually a party in that case. It's been19 appealed in the DC Circuit by about 200 parties.20 There's tons of parties involved.21 The Supreme Court states that rule a few22 weeks ago, five to four vote. The rules stayed.23 But the rule is now being created for DC Circuit.24 All the first briefs were filed on Friday,

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1 briefings done in April. The outcome of that2 case may have some long term impact on energy3 crisis. It's not a direct impact to us, but it4 could have a direct impact.5 And finally, under the Safe Drinking6 Water Act, we already mentioned lead and copper.7 There is a number of rules under the Safe8 Drinking Water Act that may be revised and are on9 the horizon for revision. One is the Unregulated

10 Contamination Modicum Rule. That rule was11 proposed by EPA in December for comment. The12 comment period closed February 9, and that rule13 required us to monitor for 30 unregulated14 contaminants beginning in 2017.15 Another rule, drinking water rule, is16 the Revised Total Pollen Form Rule. EPA17 published that rule some time ago and requires us18 to monitor for pollen-formed bacteria. Takes19 effect April 2016. There's a parallel effort in20 the state to do a state rule that would be more21 stringent. And that was proposed October 3 of22 2015 and is currently being reviewed at the state23 for implementation in 2017.24 And if accepted, briefly mentioned lead

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1 and copper. It's entirely possible we will have2 not only a new rule for lead and copper but some3 new guidance on how to monitor for lead and4 copper.5 That is kind of an overview. I don't6 think I covered everything on the horizon. But7 those are the ones that potentially could impact8 over the next couple of years or beyond that in9 the long term horizon.

10 MS. McCARTY: If I may add to the lead11 and copper, we test every three years as per the12 regulation. Next year in 2017, which is FY18, we13 will sample in the warmer weather, spring and14 summer. Will be -- if those regulations change,15 it will likely impact that sample and/or the16 guidelines.17 MR. BRUNWASSER: Are you done with the18 questions so far?19 MS. McCARTY: Right.20 MR. BRUNWASSER: I have one. I think I21 mentioned it in the written portion. Clearly,22 the Department has lowered its revenue23 requirements somewhat by refinancing old debt24 which is with lower interest than has effected

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1 the Fed service to the benefit of lowering the2 revenue requirement. But there are other things3 that the Department has done. I think the solids4 handling was a major factor in the Department.5 The City wastewater side does created a6 tremendous amount of solids each and every day,7 24/7.8 I'd kind of like to get an update on9 that improvement and what that has resulted in,

10 in lowering of revenue requirements over the past11 few years and how that's going today.12 MS. McCARTY: I apologize. I don't have13 those numbers off the top of my head. We can14 provide that.15 I can tell you that it continues to be16 very successful. And is -- does save us a lot of17 money every year. It's been a good partnership18 with the vendors. We can get you those numbers.19 MR. BRUNWASSER: Yeah, that would be20 great. That would also address the clean air21 problem.22 MS. McCARTY: Yes.23 MR. BRUNWASSER: Near the Southwest24 Plant or near the airport for those of you used

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1 to experience those odors.2 HEARING OFFICER BROCKWAY: I was3 thinking it as a procedural matter that if you4 have questions that you have taken, that5 Mr. Dasent can put them in the form of discovery.6 Call it the record reflects, whatever you want.7 Answer them that way and then the answers will be8 posted in due course on the website.9 MS. LABUDA: I believe there was one

10 more question from the Board that we haven't yet11 answered if I may address it. The question12 related to why is -- I apologize.13 "Please describe and quantify any14 expected payments to be made from the Department15 to the City's general fund during FY17 and 18."16 Earlier in the presentation I described17 the interest earnings on the Debt Service Reserve18 Fund. We're required to transfer those from the19 Debt Service Reserve Fund to the Residual Fund20 and from the Residual Fund to go to the City's21 Con Cash. Outside of that, we make payments to22 the general fund for services that they provide.23 In the filing, the projection for the general24 fund, our payment for services I believe in FY17

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1 was approximately 8.5. And in '18 it's 10.4.2 But inclusive in those numbers, and I'm sure our3 consultants will double check me on this, are our4 portions of the payment for the construction of a5 combined sewer outflow. That is why there is6 slightly higher than prior years.7 MS. MCCARTY: If there are no more8 questions.9 HEARING OFFICER BROCKWAY: There any

10 more questions from the Board?11 MR. BRUNWASSER: I also had a question12 about, you know, obviously the Department and the13 City Treasurer met with bond rating agencies when14 the question of a Rate Board came up. And15 changing the rate making policy of the Water16 Department, you know, which have been in effect17 about 65 years. I was wondering -- I read the18 two reports by Fitch and Moody's.19 I was wondering what they may have said20 verbally to the Department and the City regarding21 the Board itself?22 MS. LABUDA: Kathy Clupper and I will23 address that question.24 MR. BRUNWASSER: Oh, that's fine.

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1 MS. CLUPPER: As you know, historically2 the rating agencies have given the City a pass or3 it's been a credit positive that the Commissioner4 can ultimately set the rate. So the City has5 historically set the rates close to 1.2 and has6 used the rate stabilization fund to maintain7 coverages. Which I will talk about in my8 presentation. That's on the low side of kind of9 utility 1.2 and 1.21 coverage. The City kind of

10 has gotten a pass.11 The new Rate Hearing Board which was12 presented during the last rating presentations,13 we did an outline, what was the new rule, we gave14 them the legislation. We basically said this was15 a new construct. I think we articulated it was16 an opportunity to kind of have a long kind of17 ongoing relationship with the Rate Hearing Board18 which is typical in other municipalities who had19 independent Rate Boards. It's very much of here20 is a presentation. Here is information. And21 then they deliberate and they, you know, either22 improve or whatever.23 So, that's how it was presented. It was24 an opportunity. They understand what the rules

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1 are, what was in legislation or the ordinance.2 Fitch in particular did raise it as a credit3 concern because it's an unknown. Anything that's4 an unknown in the world of rating agencies is5 credit negative because they always default to6 the worst possible scenarios.7 So in this case, I think they're -- and8 investors are anticipating what's going to9 happen. They are going to see what comes back.

10 It's also a trend. I think it's a "to be11 determined" whether it's ultimately a credit12 positive or credit negative.13 MS. LABUDA: I think on the other side,14 though, to address your question is that during15 the financial crisis, there was something called16 Dodd-Frank Act. Rating agencies in their reports17 and in our discussions paralleled their concerns.18 The discussions in the room were paralleled in19 the rating presentations. It's not as if there's20 some offset discussion that wasn't captured in21 those reports. If you read the reports, you can22 highlight the concern, the uncertainty on many23 fronts on rising capital program. And, of24 course, the uncertainty with the Department's

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1 ability to achieve requested rate increases.2 MS. CLUPPER: The public conversion, if3 you refer to the last official statement, does4 outline what's in the rate for this Board. And I5 did go back after because of the question and6 looked at the rating presentation. There was a7 couple slides that basically just outlined what8 was in there and kind of what's going to happen.9 That was really the extent of the conversation.

10 Nobody knows what's going to happen, so11 that's basically it.12 MR. BRUNWASSER: Thank you.13 HEARING OFFICER BROCKWAY: Go off the14 record.15 - - -16 (At this time, a discussion was held off the17 record.)18 - - -19 HEARING OFFICER BROCKWAY: Go back on20 the record.21 MS. MCCARTY: The Department believes22 that the proposed plan and rate request will23 sustain us and our mission of providing24 integrated water, wastewater, stormwater services

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1 to our customer. So, it provides the financial2 sufficiencies, the stability that a large utility3 such as us, ourselves, require, supports4 equitable cost recovery, provides customer5 assistance as responsible utilities should do,6 and meets our General Bond Ordinance and7 insurance covenants.8 So, all those requirements are met in9 our request. And then I am actually done.

10 HEARING OFFICER BROCKWAY: We will go11 off the record.12 - - -13 (At this time, a discussion was held off the14 record.)15 - - -16 HEARING OFFICER BROCKWAY: Let's go back17 on the record. We are going to push through18 until 1:00 a.m -- 1:00 p.m.19 (Laughter)20 MS. CLUPPER: Thank you very much. I21 was asked to provide a presentation on credit22 ratings, some of the impact on the hearing on the23 Water Department's credit rating. So, what I24 would like to do is just to go through this

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1 presentation. And please feel free to interrupt2 me.3 So starting on page 2, I thought it4 might be a good idea just to kind of talk about5 what the credit rating agencies, what they view6 their role is, what they are and what they7 aren't. As Missy alluded to, Dodd-Frank has8 changed kind of a lot of their approaches. They9 are much more uptight about their presentations

10 and information flow.11 So what they are, credit ratings are12 opinions about essentially credit risks. They13 are supposed to be forward-looking opinions.14 They express opinions about the ability and the15 willingness of an insurer to meet its financial16 obligations in full and on time. They are not a17 recommendation or prognosis, but are intended to18 provide market participants with information19 about relative credit lists.20 They express relative opinions about21 credit worthiness related to debt from the22 strongest to the weakest and with the universe --23 within the universe of credit risk. They also24 take a global view, too, as well just in

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1 comparing credits within the United States. They2 do not constitute investment advice. Credit3 ratings are not indications of market liquidity4 in the debt security or its price in the5 secondary market. They are not guarantees of6 credit quality or future credit risk.7 Feel like I'm a commercial.8 They are not absolute measures of9 default probability, but they are at the end of

10 the day to speak about the likelihood of default.11 So when they do the analysis, the credit analysts12 are generally sector specific. There are some13 credit analysts that also rate the City, but14 generally there is at least one credit analyst15 that is specific to the utility sector.16 They look at the sources of funding,17 security, revenue diversity and stability. They18 are going to look at financial flexibility, the19 ability to meet obligations, strength in the20 operations for maintenance, you know, when they21 deliver the product, liquidity investments and22 cash flow, debt structure. They are going to23 look and see how much fixed rate you have, how24 much variable rate you have, do you have

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1 derivatives.2 The strength of the management team is3 an important quality. That is something the City4 has generally rated very high on both in the City5 general funds as well as water. They are going6 to look at historic performance current year and7 look at future. They look at trends. If you8 change something this year that might be a credit9 positive, but it's not necessarily going to

10 translate into an upgrade. They are going to11 want to see a trend in later years.12 The rating agencies provide a lot of13 written material on kind of their view of14 different sectors. That material was connected15 to my or part of my testimony, so I would16 encourage you to read it. It's very informative.17 I think it's very interesting.18 So when you look at the sector credit on19 utilities, there is just a couple things that20 they have a concern about. Economic climate. I21 mean, the water utility sector provides a central22 service. That's a credit positive. Everybody23 needs to have sewer water. That's a good thing.24 The economic cycle has been a big

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1 conversation over the last several years. There2 is a more positive growth in the economy, but3 they don't really necessarily think that the4 current expansion is just going to have a5 marginally positive impact on operation, which is6 interesting. It's not a boom kind of scenario.7 Cost recovery remains a challenge.8 Total cost recovery is a challenge because most9 of the utility rely on consumer usage to fund

10 fixed costs. So you have when consumer usage is11 down, obviously, you have less revenue. That is12 a problem when a part of your expenses are fixed13 debt service, potential liability and other14 things. That's a concern.15 Changes in the environmental16 regulations, of course, is a concern that's going17 to lead to increased operating and capital costs.18 And I think there's going to be wastewater19 utilities faced individual pressures from20 enhanced discharge requirements.21 Another theme is the delayed capital22 spending. This is a theme not just in water23 utilities, but all over municipal sector. Long24 term capital spending remains moving either

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1 unchanged or slightly lower despite aging2 infrastructure. It takes a while for3 municipalities to gear up and give the4 constituency buy in, political buy in. At the5 end of the day, increased capital requires6 increased revenue.7 Those are some of the things that are8 indicated in some of the sector writeups. The9 next page talks a little bit about the key rating

10 drivers. When we are advising our clients on11 what to do as far as rating agencies, we spend a12 lot of time going through these computations to13 help our clients provide their information in a14 way that's going to be beneficial to outcome.15 Moody's has recently in '14 released a16 scorecard to try to make the process a bit more17 transparent. The scorecard scores certain18 metrics, the system characteristics which would19 include asset conditions, service area, system20 size, financial strength. Some of the key ratios21 are debt service coverage, cash on hand and debt22 to operating revenue. Management is an important23 component. And then legal provisions, which24 would include the rate covenant and some of the

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1 debt service reserves fund requirement.2 This is all put into an Excel3 spreadsheet. It spits out a scorecard which is4 then qualitatively changed or adjusted depending5 on, you know, certain factors. So they -- it6 only assists in the analysis and provide kind of7 a point of conversation. So if you have a8 scorecard that shows you have a rating of A and9 you end up getting a rating of A-minus, then you

10 have a point of contention to talk to the rating11 agency about.12 S&P more recently in January of 201613 finally released their analytical framework which14 is a similar attempt to try to make the process15 more transparent. There's is a little more16 complicated. They take enterprise risk profile17 and financial risk profile, and then they apply18 overlapping factors and rating caps. So, rating19 cap might be the rating of the underlying20 municipality. So, they take what could be a very21 simple framework and made it more complicated.22 At least it gives a lot of really more detailed23 guidance.24 They will, for instance, look at the

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1 economic fundamentals, look at the underlying2 economic conditions, industry risk, external3 factors of the sector, market position,4 operational management. And then the financial5 risk profiles look at these different areas, some6 of the key ratios. And there's obviously a theme7 with all the rating agencies on the ratios,8 liquidity ratios or these cash on hand, debt to9 capitalization, which is your long term debt --

10 short/long term debt over your debt position,11 debt service coverage and then sort of12 contingency liabilities over long term debt.13 These are key ratios that they look at.14 And then Fitch has not really come up with a15 scorecard yet. They're writeup is much more16 qualitative. I think there's really, if you have17 a chance to read it, there's a lot of written18 material and best practices. They have their ten19 C's of analytical framework.20 They do actually do a good job in21 writeup. Talking about attributes for strong22 systems, medium and weaker system. It's a really23 good kind of guideline, you know, to see where24 you fit in. Because these are all -- even though

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1 there is a scorecard which makes it easier, you2 do need to look at peer comparisons.3 At the end of the day, you put all this4 information in and you need a point of reference.5 So page 6 just gives you an idea of larger6 systems. There was a question about some of7 the -- that I received about why certain peers8 were selected.9 You know, what we do and we do this with

10 Missy. We spend a lot of time talking about what11 are good peers. You obviously want to look at an12 urban area, larger area. You want to look at a13 peer that's maybe on the east coast because14 they're going to have the same kind of water15 issues and combined sewer overflow issues versus16 the west coast, which is lack of water.17 And, you know, you want to pick some18 peers such as DC Wasser, which is best practice19 kind of peer. They do a lot of cutting edge.20 They do the first green bond and they do year21 century bonds. They do a lot of interesting22 things. That is sort of what we think about when23 we think about peers. It really needs to be a24 dynamic process. You know, we look at the rating

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1 presentations or the rating writeups of different2 peers. Because maybe some one peer might be3 changing their debt structure, so it throws off4 the ratio. It's important to see this as a5 dynamic process, but it's also your requirements6 in the ordinance that you do consider peer7 comparisons. We want to make sure we gave you8 this information.9 So, you can see in this page 6, that

10 overall most water utilities and large systems11 are in the AA category. And that is, you know,12 pretty typical. I mean, it's just all three13 rating systems, most of them are AA credits.14 It's essential service. Most of them have a15 degree of liquidity and coverage that allows them16 to fall in the AA category.17 HEARING OFFICER BROCKWAY: Just a18 clarification. The ratings that you have in the19 column, there are three different ratings.20 Typically, those are the three different ratings.21 Can you just share which is which?22 MS. CLUPPER: The first one typically is23 Moody's. You will know Moody's ratings because24 it's an A with a small letter or B with a small

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1 letter. The middle one is Standard & Poor's.2 And then Fitch is usually last. And when there's3 just two ratings, typically it's Moody's and4 Standard & Poor's.5 So for instance, Baltimore does not have6 Fitch. It's also important to note that once you7 are rated by a rating agency that a debt is8 outstanding, they will continue to hold that9 rating until the rating no longer exists. You

10 can't -- it's not as easy to pick and choose11 rating agencies once your debt is rated with a12 Moody's A. Even if you didn't call them up with13 the next issue, that issue will always have a14 Moody's A rating. The investors know that. It's15 not as easy to kind of go shopping.16 On page 7 shows where the Water17 Department ratings are. Just for point of18 reference, Water Department are the highest rated19 credit in the suite of Philadelphia's ratings.20 That would include general obligation credit21 rating, airport and PGW. It is probably22 considered -- it is considered the strongest of23 the four rating categories. So, that's good24 news. I think there was a question a little bit

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1 about what's the relationship between the2 underlying City rating and the water rating?3 There is a relationship. It's one of those caps4 or factors that they add to it.5 For instance, if the City's rating --6 and it does reflect the underlying, you know,7 wealth or poverty of the household income -- if8 that's on the low side, that would be a credit9 negative. The pension, unfunded pension

10 liability is a huge issue for the City of11 Philadelphia. Philadelphia Water Department has12 a, you know -- is a percent of that unfunded13 liability, so they carry their own unfunded14 liability.15 They also have to pay a percentage about16 45 million. I think it would be minimum MMO that17 the City pays. They also pay another $26 million18 of debt service for the pension fund. There is a19 connection there. It is a City Department.20 There is a connection. It's not to say that the21 Water Department if they all the sudden had 1.522 times coverage over a period of years when they23 get through their increases, but there is a24 connection there.

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1 On page 8, we try to outline sort of2 these are key facts or quotes from the most3 recent rating reports in 2015. Just in general,4 not to read them through, but there are some5 themes there. Credit positives are, you know,6 there's a large -- you serve a large and diverse7 service area. Management has always been cited8 as a credit positive. You have ample water9 supply, which is important.

10 Some of the challenges would include the11 legal covenants, the fact that you don't have to12 have 1.2 times coverage without using the Rate13 Stabilization Fund would be a weaker real14 covenant. There is zero debt service coverage15 levels. The weak demographics, as I said, does16 present a challenge, obviously.17 Then sort of the -- in past writeups,18 the last writeup, we did have days cash on hand19 because you had just gone through the rate20 increase. You did not have additional revenue21 that was, you know, available. And the rating22 agencies in the past, they start to now include23 the Rate Stabilization Fund in their calculation24 of these cash on hand which we think is

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1 appropriate. Not all due. That sort of, you2 know, something that the Department's been3 encouraging kind of over a period of years.4 There is another concern, of course, is5 the large capital improvement budget. I think6 these are pretty much consistent across the7 Board. What the rate agency will look for this8 time will be continued increasing debt service9 coverage. We spent a lot of time talking to them

10 in the past several years about trying to move11 from that 1.2 to a higher debt service coverage.12 We're going to look at, you know, days cash on13 hand. They are going to, frankly, look at the14 result of Rate Hearing Board. They are going to15 continue to look at trends.16 They are also going to look at the17 City's unfunded pension. You know, how is the18 City addressing that? That is an important19 issue. You know, I think that they will be20 interested in what happens here.21 What we have done, I'm hope I'm not22 talking too fast. Everybody is hungry, I know.23 On page 9, what we did was we tried to24 identify some key rating metrics. And I mean, I

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1 think it's also important to know that these can2 change. I mean, we spend lot of time with the3 Water Department financial staff thinking about4 what we should include, you know, read this. You5 know, it's a work -- work in process. I want to6 point out a couple sort of themes that are7 critical. This is mentioned before. That's the8 debt ratio, which is your debt to assets.9 You are highly leveraged system. You do

10 have for your assets of 2 billion an outstanding11 debt of 1.8 billion. It would be better if that12 was -- your debt was a lot lower than your13 assets. That means you funded your projects.14 So, that's a ratio that we kind of looked at.15 Debt service coverage is another one, and then16 days cash on hand. Those are three really17 critical ratios.18 What we talked about in the past is sort19 of honing down on those and creating an ongoing20 Philadelphia Water Department scorecard. I21 think -- those would be three things that we22 would harp on or continue to raise.23 Just to talk a little bit about why --24 what my -- you know, my recommendation is when I

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1 submitted my testimony, spent some time2 discussing Pay Go. If you increase the Pay Go, I3 know that the Department is looking at 20. I4 think 40 percent Pay Go would be a great goal to5 have. If you do that, if you start to fund your6 capital with a higher percentage of current7 revenues, these other ratios will fall in line.8 You will have debt service coverage. You will9 have the liquidity that you need. You will then

10 be stronger and more financially stable system11 because you're not -- every capital project is12 not funded by debt.13 And while now, you know, we are just14 looking -- what we do is we look at more than15 five years. You need to look, 10, 20 years and16 you can have an idea that you are going to be17 borrowing 200 to 250 a year pretty much. I mean,18 you have a significant capital plan. And if you19 do that and take that out over a period of years20 at 20 percent Pay Go or 40 percent Pay Go, it's a21 significant difference. And it allows the system22 to have a financial flexibility to address, you23 know -- I think on the next page 10, which is the24 graph that I alluded to, illustrates this very

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1 well.2 I mean, it allows the Department to3 address those things and habit which are economic4 crisis, increase the cost of materials. So, what5 this chart is, it's just the revenue spread to6 the AAA. MMD is an industry -- it's a basket of7 rates that are set. Our industry uses that to8 price transactions off of the MMD. It's a yield9 curve. There's an MMD rate for every year 1

10 through 40. This looks to 20 years and the11 revenue MMD. And it's spread to the AAA.12 So AAA MMD is like the gold standard.13 And then it's A rated. And if you are AA rated14 credit throughout this crisis, you had consistent15 spreads. I mean, it went up after '08, but it16 didn't spike. If you were an A-rated credit17 after '08, you see the, you know, space between18 the spread is, you know, significantly higher in19 '08 and it's starting to come down. And of20 course if you're a BBB rated credit, it really21 spiked.22 I think what this table tries to23 illustrate is so that rating -- credit ratings24 are not just about the next bond issue. They

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1 certainly are. They help buy down the cost of2 credit. They are also a reflection of your3 ability to maintain financial stability during4 different periods of the economy. So, it does5 lower your cost to borrow to have a higher credit6 rate. It also helps on certain other products7 that you can do liquidity facilities, bank8 facility. It allows you, as I mentioned before,9 to create different structures within your debt

10 structure, commercial paper.11 So, subordinate debt structure would12 allow you to issue bonds on a subordinate basis13 with a debt service fund that allows you to14 borrow more money. You know, you don't have to15 fund 10 percent or debt to service fund. That's16 positive. You are able to have a more complex17 debt structure if you're in the higher rating18 category.19 So, that is my spiel for having 4020 percent Pay Go. I think the Department seems to21 be going in the right direction. And we support22 the financial plan, you know, moving higher debt23 service coverage, more Pay Go, and more cash on24 hand, as well.

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1 MR. HUANG: Roughly, what is the AAA MMD2 rate right now?3 MS. CLUPPER: The AAA MMD rate for GO,4 this is like being the State of Maryland, 30 year5 right now is 2.78 percent. The 10-year average,6 I knew you would ask this question, so I looked7 it up -- that's 4 percent. That's 10-year8 average for the AAA MMD. The Water Department9 prices when they do a bond issue now and they

10 rate in their level is about -- can be between11 70 -- you add another 70 basis point, 7 percent12 to 80 or 90. That does get you when you're doing13 projections up to 5 percent, 5 and a half because14 you have to be conservative projecting out.15 Just as a point of interest, the credit16 spread for the Department has decreased in the17 last couple years from 2013 for the longer end.18 It was like 90 -- 0.9 percent. The last19 transaction was 0.7 percent. You do get a20 benefit from kind of the increase. The ratings21 didn't change necessarily, but there was better22 coverage. And you know, there's a lot of23 reasons.24 The credit spread is a dynamic

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1 situation. When we're asked what interest rate2 we should use to project, we usually default to3 5 percent. I mean, another little interesting4 fact that I looked up, the MMD in the 30 year has5 been lower than where it is now less than6 1 percent since 1986. I mean, we are at7 incredibly low rates. It's just so unusual. And8 so, I think when you're doing future projections,9 you have to be mindful of the fact --

10 MR. HUANG: It's only going to go up.11 MS. CLUPPER: Yeah.12 MR. MARKUS: Can you explain, they talk13 about why the Department is not historically in14 use.15 MS. CLUPPER: When you create a16 subordinate structure, we did look at this a17 couple years ago. You have your senior lien.18 Like say, for instance, just City of Baltimore19 for example.20 In their documents, right, a senior lien21 of 1.4 percent. And then their subordinate lien22 would be 1.15 percent. Well, if you have a23 1.2 percent coverage, you don't have any room to24 create a subordinate debt. That's what I'm

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1 talking about when you create and have a higher2 coverage level, obviously, then you are able to3 create different structures within your debt4 structure. At this point the Water Department5 doesn't have the coverage history to create a6 subordinate lien.7 MR. MARKUS: Also, behind why not more8 variable rate?9 MS. CLUPPER: Yes. I think the

10 Department has a pretty good debt structure.11 There's not a lot of variable rate.12 MS. LABUDA: From a classical theory,13 given the level of interest rates over the past14 five years, we are best poised to enter into long15 term fixed rate debt because it's natural. When16 does variable rate debt make sense?17 Variable rate debt will make sense is a18 rising interest rate environment. So, I think we19 have taken a classical approach. We've issued20 our most recent financing, we went long. And I21 think as market conditions changed and the22 ratings improve, we will look to add more23 variable rate. Right now for the interest rate24 environment we are in, given what we are in, when

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1 we issued the 2015 A deal, the best practice was2 to issue long day to debt to lock in low interest3 rates. And that was to the benefit.4 MS. CLUPPER: I also want to mention5 that Standard & Poor's is really concerned about6 variable rate debt because they are totally7 concerned about liquidity facilities. When you8 have a lot of variable rate debt, you not only9 have interest rate risk as a municipality, you

10 now have bank risk and corporate risk. You can11 see that in 2008, those issuers that were in the12 BBB and A category, including the City of13 Philadelphia, had difficulty replacing their14 letter of credits because there were banks who15 just didn't want to do that anymore.16 That's a really critical risk that you17 don't want to take unless you are pretty sure you18 are cream of the crop in the rating category.19 MS. LABUDA: It might make sense when20 you issue variable rate debt, you have to have21 the ability the bond can be put back and given22 back to you at any point in time. What Kathy is23 talking about liquidity facility, you take a step24 back. It's almost like the price we pay to

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1 maintain somebody to provide the ability for the2 Department to absorb or buy back, take back all3 of its bonds at some point in time because the4 rates ten to reset at some frequent period,5 weekly, daily, quarterly. You have to have the6 capacity at any point in time to be able to buy7 all of those bonds back. And there is a price to8 pay for that flexibility because we do not have9 enough cash to do that ourselves.

10 MR. MARKUS: In the CIP, there's a very11 small amount for PENNVEST in the next five years12 or so. Curious as to why not more?13 MS. LABUDA: I mean, PENNVEST actually14 creates rate pressures. Let's be honest here.15 PENNVEST has a very short useful life. You16 amortize it over 20 years. I have no control or17 no ability to set the pattern of my principal18 with the pattern of my infrastructures, so I'm19 putting a new water main in and it has a useful20 life of 50 years. PENNVEST says that doesn't21 matter. Your useful life, you have to amortize22 the debt over 20 years. That fact pattern puts23 pressure on current rate payers today.24 The other problem with PENNVEST in this

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1 five-year planning period is also that we have a2 Debt Service Reserve Fund requirement. PENNVEST3 is on parody with all other debt. I do not have4 a tool or a means via this debt structure to pay5 for my reserve fund requirement. And what has6 happened with prior PENNVEST loans is I have had7 to take it out of the operating side and fund my8 debts service reserve fund.9 So in this rate period, PENNVEST would

10 only increase our rate request through the11 issuance pattern, very short useful life, how you12 have to pay for the Debt Service Reserve Fund.13 It just doesn't -- from that very simple14 financial perspective, it doesn't make sense.15 Now five years out, we can talk about it16 again. But in the next two years, three years, I17 just don't see that making sense unless we're18 going to raise our rate.19 HEARING OFFICER BROCKWAY: So, does the20 Board have any more questions on this topic?21 Let's go off the record.22 - - -23 (At this time, a discussion was held off the24 record.)

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1 - - -2 HEARING OFFICER BROCKWAY: I have got3 about 12:40. We will come back at 1:45 and pick4 up with questions from the active participants.5 - - -6 (At this time, a break was taken.)7 - - -8 HEARING OFFICER BROCKWAY: We have9 discussed off the record the order of questioning

10 by active participants. We would like to bring11 up first Mr. Tim Carney who is a tenants' rights12 specialist from the Tenant Unit Representative13 Network.14 MR. CARNEY: Thank you, Madam Chair15 person and Members of the Board. My name is Tim16 Carney. I'm a staff worker at the Tenant Unit17 Representative Network, TURN. I'm here today18 because I have two major concerns that I wanted19 to question about this rating increase --20 proposed rate increase.21 The first concern is that so much of22 Philadelphia is poor and I don't see them paying23 the rate increase. And the second concern is in24 the area of customer service. Whereas, on a

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1 weekly basis as an advocate for tenants which is2 47 percent of the households in the City of3 Philadelphia, I'm constantly bumping heads with4 the Staff of the Water Department or the Water5 Revenue Bureau with respect to USTRA.6 HEARING OFFICER BROCKWAY: With respect7 to what?8 MR. CARNEY: USTRa, Utility Services9 Tenant Rights Act, which is a state law to

10 protect rate payers from being shut off when it's11 not their fault, it's the landlord's fault.12 We're an organization -- a tenant advocacy13 organization. We deal with tenants but14 overwhelmingly we deal with low income tenants on15 a daily basis. Being able to pay rent and16 utilities is a constant difficulty for so large a17 section of the population.18 Although, I applaud City Council's19 Affordable Rate Program, I'm not sure it's20 enough. So my first question is that, is that I21 would ask that the rate increase be tailored in22 such a way that the income of the households is23 very specifically taken into effect before they24 could be issued the rate increase. Because

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1 despite the WRAP program and the new City Council2 Custom Affordability Program, though I saw the3 discounts were incredible in some of the4 percentages of poverty, they weren't extended5 above 150 percent of poverty. In some families6 they are still needed.7 Two, as I learned in my long work in8 social services, that an overwhelmingly large9 percentage of people when you have to apply for

10 the program never apply for the program,11 therefore, don't guess use of it. While you may12 have wanted to keep the 16 million as a low13 figure, I certainly stood and sat in the back and14 wanted it to be an extremely high figure.15 Because I would have hoped that every single16 eligible person would apply for it and cost you a17 lot more than what you're projecting in your18 16 million or 13 million.19 My first question is, please don't20 extend the rate increase unless you are going to21 monitor people's ability to pay carefully, which22 means you may have to restructure very23 considerably.24 And the second question I have is, how

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1 are you going to use any of the money that you2 have now or you would get in a rate increase to3 improve customer service? Because on a weekly4 basis, myself and my coworkers on behalf of5 Philadelphia tenants are battling your staff.6 And we're all paid for by the City. We are all7 on the same team. And yet, it seems like8 sometimes we run into staff people at the Water9 Department who think that USTRA was never passed

10 or doesn't exist.11 And you ask to talk to supervisors. You12 ask to talk to folks. And the hurdles and the13 burdens that are put in front of tenants just14 keep piling up higher and higher even though the15 water shut off came from the Water Department,16 it's the Water Department that broke the law.17 And yet, the staff people tend to make the poor18 and low income tenants as though they're the19 thieves of water.20 My question is, how are you going to21 improve customer service so that people who apply22 for USTRa can be treated fairly and very, very23 quickly because we can waste four hours and in24 some cases days, fourteen days trying to get

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1 somebody's water reconnected when insurmountable2 hurdles are put in somebody, like, when demand a3 lease when this part of the City has verbal4 leases and people don't have lease. Yet, that's5 the only thing you'll take.6 People are beaten down and they're not7 getting the service we need. We need somebody in8 the Water Department that we can call up who9 understands USTRA and is going to effectively

10 administer on behalf of our citizens.11 My question is, and I will stop, how are12 we going to improve the customer service13 specifically around USTRA so a agency like ours14 who is advocating for tenants every single day15 can have somebody you can talk to get this done,16 especially when the water is being metered and,17 therefore, the water companies knows they are18 never going to lose a pay.19 MR. DASENT: If I might, Madam Hearing20 Officer, authority to pay issues that are raised21 by Mr. Carney are very important to us and are22 addressed in the filing. We are happy to address23 those. Customer service issues, although very24 important to us, related to USTRA or other

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1 issues, probably fall outside of the purview of2 this proceeding but nonetheless must be3 addressed. We will have someone at WRB interact4 with Mr. Carney and make sure between the Law5 Department and our people at other personnel at6 WRB that we address this issue and hear his7 concern.8 HEARING OFFICER BROCKWAY: Why do the9 customer service issues fall outside the

10 proceeding in our view?11 MR. DASENT: Because the statute12 establishing the report deals specifically with13 rate issues as opposed to customer service and14 other related issues that would remain under the15 public utility code and not specifically16 addressed in Water Rate Boards.17 HEARING OFFICER BROCKWAY: So, let's18 not -- let me see if I can break this down.19 With respect to the 150 percent, my20 understanding from the discussion this morning21 was that the Department is not fixed on that as22 an upper limit but has chosen that as the basis23 for the planning?24 MR. DASENT: The ordinance also

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1 addresses the various thresholds, so we need look2 too much further than Bill No. 140607 creating3 the program to see that the various tiers,4 various thresholds we must address.5 HEARING OFFICER BROCKWAY: You must6 address those. Doesn't say you're not allowed to7 address others is my understanding. But anyway,8 that whole question is going to be taken up.9 What I would do is I would treat

10 Mr. Carney's question as a statement request.11 And we'll make sure to get at that question when12 we get further into those details.13 MR. BALLENGER: Madam Hearing Officer, I14 was just taking some notes. I don't have a15 microphone. I will try to use my outside voice.16 HEARING OFFICER BROCKWAY: Is this on17 the 150 percent?18 MR. BALLENGER: No, ma'am.19 HEARING OFFICER BROCKWAY: Because I had20 more to say.21 MR. BALLENGER: I was taking some notes22 when Mr. Carney was speaking. I thought I heard23 him ask was how will you improve customer service24 with these new rates, which to me seems to be

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1 relevant to rates and charges. I just, you know,2 in all fairness to Mr. Careny, his issues as well3 as others issues, are in some ways relative to4 rates and charges.5 HEARING OFFICER BROCKWAY: If you had6 not interrupted me, that's what I would have7 said. I don't see that it's off limits to talk8 about those. How exactly that's going to come9 up, I don't know. I also understand the

10 Department is not prepared today to answer that11 question.12 MR. DASENT: Yes. That's certainly13 true. I was taking it a step further because of14 the limited time that we do have before the Rate15 Board that we would devote it to issues that are16 specifically, according to the Rate Board17 Ordinance, in your purview so that we accomplish18 those things that we need to accomplish.19 HEARING OFFICER BROCKWAY: Well, I would20 say to that is absolutely. But as I manage the21 hearing process, I'm on the lookout for where are22 their disputes. Probably 90 percent of the23 filing is not in dispute. And so we don't need24 to spend much time on it. What we are looking

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1 for is where are those areas where people2 disagree and might have an impact on the outcome.3 I'm not prepared to say we don't have time to get4 into this. I would urge the Department to be5 thinking along the lines of what is their budget6 for customer service and what is their7 relationship to those who actually give it8 service. If there is time, we will definitely9 get into it.

10 Anything else from the Board on this?11 (No Board response.)12 HEARING OFFICER BROCKWAY: With that, we13 can't answer your questions today, but we have14 taken them down. And the first one is definitely15 going to be addressed. Second one sounds like16 there is disagreement about how far we can get17 into it. We will -- I think if you want to talk18 to Mr. Ballenger, he is leading the charge for19 customers. And you can talk to him about the20 extent to which you need.21 Is that all right?22 MR. CARNEY: (Nods head.)23 HEARING OFFICER BROCKWAY: Thank you24 very much, Mr. Carney.

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1 Mr. Bakare.2 MR. BAKARE: Yes. Thank you. First, my3 name is Adeolu Bakare. I'm counsel for the4 Philadelphia Law Coalition for ad hoc customers5 in the Law Department Service. As in the initial6 segue, I have a very similar customer service7 issue, so just to frame my perspective on that.8 The Water Department's filing itself9 discusses the customer's service structure in the

10 Department utilizes with the Water Revenue Board11 being responsible for dealing with customer12 payment issues and the Water Department itself13 not performing those functions. So as I14 understand from a general utility standpoint, a15 customer service issue in a rate case context is16 individual service issue. A customer may not be17 able to come here and say, hey, you didn't fix18 the leak in my house last Tuesday. But a19 structural customer service issue that effects20 the Department on the whole is, from in my21 understanding, a rate related issue because that22 is a wholistic customer service issue that23 relates the way the customers paid for service.24 That's how I would frame those customer service

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1 issues from my perspective.2 So the issue that I would like to raise3 to ask the Department is for large industrial4 customers whose services are more complex than5 other smaller customers, when they call the water6 Revenue Board to raise issues in terms of rate7 complaints, bill inaccuracies and other bill8 disputes, there is often a lot of confusion with9 the Water Revenue Board because they're not

10 intimately familiar with these customers'11 facilities and services as a Water Department12 would be, especially with the new stormwater13 rates coming in and have been coming in over the14 past few years.15 To that end, would the Department16 consider instituting a new position where you17 would have someone on the Department side that's18 sort of an industrial customer service19 representative to field those complaints? That's20 an interesting standard other water utilities,21 even municipal utilities, generally implement.22 Water Department historically does not.23 MR. DASENT: Mr. Bakare, you should be24 aware of the fact that the Water Department has a

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1 team of people who are directly related to2 stormwater management or larger customers to3 communicate with directly and deal with those4 particular issues that you've highlighted in your5 comment. Historically, we have had other folks6 in the Department that are designated to receive7 calls for larger customers also, so there is not8 a sort of bureaucratic runaround.9 MR. BAKARE: That's correct. And I will

10 clarify that a little bit because my members have11 reported the Water Department is actually very12 good and very responsive to the stormwater13 mitigation measures and the operational side of14 stormwater program. The problem is with billing15 disputes related to stormwater issues and sewer16 rates and water rates. As I mentioned, those17 issues are handled by the Water Revenue Board.18 So the customers between a rock and hard19 place. They have the billing dispute to call the20 Revenue Board and say that there is something21 wrong here. The Revenue Board really does not22 have the knowledge of their systems and their23 individual facilities to address the issues that24 generate those rate and billing disputes.

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1 MS. McCARTY: Are you talking about --2 for the stormwater that is online is the, you3 know, the manual for and it goes through how you4 can appeal, et cetera. As Mr. Dasent mentioned,5 there is a whole team that will review those if6 there are any disputes with the stormwater.7 Are you talking for, you know, like the8 surcharge customers?9 MR. BAKARE: Not just that. Even if the

10 customer is able to reach the Department and11 express stormwater safe credit not properly12 calculated, the Department will look at that.13 But the Revenue Board at the same time isn't part14 of that process. They still want the payment15 even though the billing dispute is being16 addressed on the Department side, the Revenue17 Board is not necessarily involved in that18 process. They are still demanding payment.19 MS. McCARTY: You're saying that the20 account isn't being put in dispute. And Water21 Revenue Bureau is acting on the delinquency? Is22 that what you're saying?23 MR. BAKARE: Yes. I'm saying there24 could be better communication between the

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1 Department and the Water Revenue Board. I think2 the solution would be for large industrial3 customers to have not just stormwater personnel4 within the Department, but actually transfer5 billing dispute responsibility for large6 industrial customers from the Revenue Board to7 the Department.8 MS. WILLIAMS: Erin Williams,9 Philadelphia Water Department. Just to address

10 the stormwater related issues. Similar to water11 and billing sewer water disputes, for stormwater12 you are correct the staff handling the customers13 service issues are housed as Water Department as14 opposed to Water Revenue Bureau. We do follow15 similar procedures that customer service16 representatives at the WRB follow. We do raise a17 call and we document the dispute in the basis218 billing system and follow then customer service19 interaction. That's online that Commissioner20 McCarty mentioned earlier.21 We do make sure we have adequate22 communication with WRB so that when our customers23 call WRB to bring up stormwater billing issues,24 it's documented in a database that's accessible

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1 to both WRB and PWD.2 MR. BAKARE: That's a helpful3 explanation. We don't have to address this. I4 will just make the point that that -- I think5 considering how seeing sort of centralizing the6 responsibility for all industrial customers,7 something the Department should consider whereas8 a further centralizing beyond what the present9 structure offers.

10 MS. DAHME: Joanne Dahme. We have been11 working on a call center initiative for about two12 years now. We are with Revenue Michelle Bethel.13 The goal of that is to cross transfer. Now we14 have two different call centers. Customer call15 when center for one type of thing. They call the16 Water Revenue Bureau for the other issues.17 We are looking to cross train18 representatives so that both of our reps will19 have knowledge on both sides of the business. I20 think that will help address some of that. We21 are looking to more formalize some of the22 training regiment so higher so higher levels of23 information about operations and services and24 that type of thing. We are hoping to launch that

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1 some time in the spring as sort of like a pilot.2 But our ultimate goal is really to make sure no3 matter what number a customer calls, they will4 get a representative who can address billing and5 service issues and be able to answer all those6 question.7 I think there will always be something8 to bump up. I understand there is a need and who9 would you bump that up to? That is also

10 something we are looking at.11 MR. BAKARE: Specifically, although I12 understand all customers are important, regarding13 industrial customers because they are so few of14 them and their issues are so specialized, some15 particular consideration for that customer16 service pipeline could be advisable.17 MS. McCARTY: Again, if it's the18 surcharge customers, you know they have a19 pipeline to our industrial waste unit who is20 responsible for that program.21 MR. BAKARE: When you say surcharge22 customers, I'm not --23 MS. McCARTY: Customers that get billed24 on basically the strength of the wastewater they

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1 discharge to our system.2 MR. BAKARE: Right. Okay.3 MS. McCARTY: Like a Pepsi or Coca-Cola.4 MR. BAKARE: I did mention stormwater,5 but this issue isn't limited to stormwater6 issues. It's really a billing issue across the7 board for sanitary stormwater and wastewater.8 MS. McCARTY: I mean, offline if you9 have a specific customer, I'm happy to speak to

10 you, as well.11 MR. BAKARE: Thank you.12 I think earlier in the presentation we13 mentioned importance of cost of service. The14 question that I had is the Water Department, as I15 read the filing, doesn't separately allocate it's16 unaccounted or nonrevenue water costs as you17 calculate this system-wide range. That18 percentage is not applied across the Board to all19 customer classes; is that correct?20 MR. DASENT: Going to ask Black & Veatch21 to field that question.22 MR. JAGT: Just to clarify, it's true23 that we don't have -- there's not a difference in24 the collection factor for customer type, but

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1 there is by customer service because that's --2 that's where one of the fundamental differences3 about whether the bill gets paid is reflected.4 Because stormwater only customers, PWD has5 limited from less -- they can't shut off water6 and get -- and have more response to paying a7 bill as the water and sewer customer.8 As such, we reflect a lower collection9 factor for stormwater only customers. And that's

10 stormwater only, city and water and sewer general11 serve retail billing are the only three factors12 that we reflect.13 MR. BAKARE: So for water customers,14 strictly water, every water customer pays the15 same rate -- I'm sorry, not unaccounted for16 water. I apologize -- for non-revenue water in17 terms of the billing standpoint? Customer18 rearages, those no-revenue percentages for19 non-payment, late payment, all customers pay the20 same non-revenue percentage?21 MR. JAGT: Now in the fact that it's a22 collection of factors, so we're projecting23 collections or revenues from the customers and24 we're not actually projecting the expense of the

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1 non-payment. So, it's reflected in our financial2 plan in that we only reflect the revenues coming3 in and receipts on that basis. But it's not like4 you'll see a revenue requirement for the5 non-payment.6 MR. BAKARE: You don't project a certain7 percentage of unpaid pills in your projection.8 MR. JAGT: To clarify, we do. I'm just9 pointing out the fact that it would be in the

10 fact that it's not in our receipts. And that's11 how we reflect it as like -- in the bottom line,12 it ends up as like a requirement. But it's not13 like you can go down the revenue requirements and14 see uncollected as a revenue requirement. It's a15 cost.16 MR. BAKARE: Then my question is, has17 the Department ever considered looking at the18 uncollectibles on a customer class in either size19 basis and allocating that across different20 customer classes of either size?21 MR. JAGT: Over the years, it's been22 considered and it's been looked at. There's23 never been -- the variation between it has never24 been considered enough to show the difference

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1 between customer classes. And there are some2 policy issues that go along with that to drive.3 For one thing, we don't track the reps and rate4 stabilization is system wide. It's not like we5 do a detailed, true up by customer class to see6 how much rate stabilization is associated with7 each class.8 Another factor is the fact that we use9 the same -- currently under the current rate

10 structure, all of the meters, there is the same11 charge for all customer classes by meter size.12 And as such, to introduce a new factor that would13 vary across customer classes, we would almost14 have to consider introducing another or rate15 structure to address the cost recovery difference16 among the customer types.17 MR. BAKARE: Okay.18 MR. JAGT: The level of difference, I19 don't know what that would be. It's rather de20 minimus compared to the total revenue.21 MR. BAKARE: That may actually address22 my next question, too, which is I was wondering23 how the Department would allocate the cost of the24 new Affordability Program?

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1 Would that be also sort of across the2 Board, or would that be tilted more towards3 residential less than non-residential?4 MR. JAGT: At this point, it's across5 the board. That's consistent with EPA standards6 for affordable low income programs.7 MR. BAKARE: I think I was promised 158 minutes of fame here. I will try to wrap this9 up.

10 MR. JAGT: One point, this approach to11 do it across the board is also consistent with12 how we currently recover the discount programs13 that we have in place right now. So, the14 non-residential discounts and the senior citizen15 discounts that are -- well, PHA, the discounts16 for non-residential for charitable customers and17 the discounts for senior citizens -- the18 non-residentials also includes schools. They're19 all recovered across the entire customer base.20 MR. BAKARE: Thank you.21 One question that I had -- again, I22 don't want to go too far down into this issue.23 But there was a discussion on the switch from24 automatic meters to AMI. The question that got

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1 raised for me -- is something for the Department2 to just hear and keep in mind in the future. The3 issue that I saw in that discussion was the fact4 that if you discuss the installing AMI at City5 Council and there's a City Council mandate to6 move forward before the rate considerations have7 been addressed, that rate could put customers in8 a situation where it's sort of -- you're moving9 ahead before we really discuss what the rate

10 impact begins.11 What mr. Popowsky hinted at earlier, I12 would wonder how will the Department interact13 with City Council for establishing the cost basis14 for the AMI program?15 Remember, I said this is not -- we don't16 have to go into the details now.17 MS. McCARTY: It is in the future. Of18 course, whatever we would take before City19 Council and the Rate Board, of course, we would20 have our numbers. We just don't right now have21 what those numbers are. As I mentioned, we have22 looked at if we had to replace the meters. And23 at this point, we don't believe we do from our24 testing. So that will save a lot of money for

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1 our rate payers. But what it will look like with2 AMI in terms of vendors that have been provided,3 we don't have that right now. But we are working4 on it. And it will be part of probably the next5 rate case.6 MR. BAKARE: Thank you.7 And I think my final question relates8 back to the 5 percent annual increase in purchase9 power costs. And the question there is the

10 Department would have a very different electric11 file than other City buildings and accounts, so12 this is sort of two part question.13 The first part is, does anybody here14 know whether the City really separately looks at15 the Department in terms of how -- going to16 rephrase.17 Has the Department ever looked at buying18 power on its own apart from the city and weighed19 those costs and benefits of going on the market20 or undergoing and then buying power as opposed21 just going in the City? I would wonder if the22 Department specific load profile would lead to23 more beneficial power contract than being lumped24 in with other City accounts with very, very

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1 different low profiles.2 MR. SCHWARZ: Scott Schwarz again.3 The energy buying policy is set on4 citywide level. Three separate prices the city5 charges the Department. One price for airport,6 one for water and one for general fund. We do7 believe that what you are suggests has been taken8 into account.9 MR. BAKARE: We can move onto

10 Mr. Ballenger.11 HEARING OFFICER BROCKWAY: Okay. Thank12 you very much. Okay. Mr. Ballenger.13 MR. BALLENGER: Thank you. To start14 with, I'd like to again apologize for the15 interruption earlier, Madam Hearing Officer. I16 wasn't being impolite. I'm sorry for it.17 Just sort of a preliminary comment, I18 just -- I'm appreciating seeing how attentive and19 interested everyone is here today, particularly20 the Board Members and appreciated all of your21 questions. I hope that as this process moves22 forward, we will not be in the same position to23 have witnesses here to answer your questions24 directly. I'm hopeful that we can hear from you

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1 in other ways. Maybe you can attend technical2 hearings, follow-up questions as this case moves3 forward. But we appreciate the opportunity to4 ask some questions here today of the Department5 as we really get underway.6 I guess the first question as the7 Department's focused, we have had a lot of8 discussion on the bonds. And I'm not a bond9 buyer. But I just -- as the matter of curiosity

10 wanted to know when the last downgrade was of the11 Water Department's bonds if anyone recalls?12 MR. BRUNWASSER: I can answer that.13 Water Department didn't -- just slight14 background.15 The Water Department up until 1974 was16 dependent on the City's general obligation debt17 to fund its capital program. The Water18 Department, of course, was the one that paid the19 debt service on its share of the GO Debt at the20 time. What happened beginning in 1974, the Water21 Department was allowed under state -- under22 change in state law to issue revenue bonds for23 the first time, backed up by the full, of the24 rates and revenues of the Department and not the

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1 general pledge of the city.2 From 1974 to 1990, the bonds were rated3 A, single A. In 1990, the City had some major4 dropping off of revenue. And the result was the5 downgrading of all City credit by all three bond6 rating agencies at the time. And those were7 single digit numbers like D or C or whatever they8 were, but it was certainly way below investment9 grade.

10 In 1991, Water Department was the first11 City credit to go out into the marketplace again.12 The way it was done -- by the way, at the same13 time we were doing this, the state was beginning14 to organize PICA, the Pennsylvania15 Intergovernmental Cooperation Agency. It's still16 here today because there's probably still some17 PICA debt out there.18 PICA was designed to raise capital for19 the City which it could not go into the capital20 markets. But the Water Department was able to go21 into the capital markets in June of '91 and22 receive BBB or BBB minus. I forget right now.23 Low investment rate level. And we sold and24 issued roughly $300 million from which the

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1 proceeds of we paid off consolidated cash of the2 City, got ourselves out of consolidated cash for3 the City, which is one of the requirements. And4 also, we paid back the capital fund of the City5 the con cash, consolidated cash accounts of the6 City. So, we actually had some infusion of money7 into the city which we owed the City because8 everybody was riding on -- I think the Airport9 capital fund at that time.

10 Anyway, in order to sell these bonds,11 the rating agencies had to be convinced that the12 City could not dip their hands into any Water13 Department funds. And later on the Airport did14 the same thing in order to be able to access the15 capital markets. In order to sell the bonds, we16 had to go on a tour of institutional investors in17 cities like Boston, Chicago, San Francisco,18 Philadelphia and New York to explain why people19 could invest in Philadelphia bonds.20 What we discovered was the further out21 from Philadelphia we were, the more marketable22 the bonds were. But in any event, it was a big23 success and it was very important to the City24 because a little later on the City came within $5

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1 billion of blowing payroll. So, the City had to2 issue script since 1929 but we were almost there.3 But that was the last downgrade. And it4 was a slow but steady improvement to get to the5 ratings that we have today, which are actually6 the highest ratings the Department's ever had.7 MR. BALLENGER: Thank you. That was my8 recollection from the financial statements was9 the ratings have definitely come up.

10 I wanted to ask a little bit about the11 rate methodology. I think Dave and Prabha maybe12 can help me out a little bit here. I just wanted13 to see if you would note any -- from a very high14 level, any changes to the models since the last15 rate case in terms of how -- this is the first16 time we have seen the, you know, the model17 itself. But it seems as though the presentations18 style has changed. We have Table C1 instead of19 Table 11 for, example.20 But are there any changes sort of in how21 you construct the model now as compared to how it22 was constructed three and a half years ago?23 MR. DASENT: Let me interject one24 thought. If you'll remember, the rate model was

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1 proprietary model provided to you by2 confidentiality agreement. I'm not sure on the3 public record if there is best way to vet that4 concern as opposed to ask them offline the very5 same questions. You have signed the6 confidentiality agreement and no one else has.7 MR. BALLENGER: I wasn't talking about8 the manner in which it works. I meant in terms9 of meeting the City's needs.

10 MR. DASENT: Just trying to protect11 Black & Veatch any way I can.12 HEARING OFFICER BROCKWAY: Seems to me13 if the answer is yes or no, that that would not14 violate the confidentiality agreement. I agree15 going beyond that, we start getting into details.16 MS. KUMAR: Technically, the model is17 not different. It's following the same industry18 guidelines and principles. The naming of the19 tables is a little more granular breaking it20 between water tables, wastewaters tables,21 wholesale tables and stormwater tables. One22 continues in numbers that used to be there23 before.24 MR. BALLENGER: Okay. Thank you. What

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1 I was looking for.2 I don't have everything in front of me,3 so I may be slightly wrong about the numbers. I4 trust you'll all correct me. I believe in 20125 when the last three cases settled, there was an6 expectation that the combined rate stabilization7 Residual Fund balances will be maintained at8 approximately the hundred million dollar level as9 of the end of Fiscal 15.

10 MR. DASENT: The settlement agreement on11 that point will speak for itself subject to12 check. Mr. Jagt can answer it.13 MR. JAGT: Subject to check 115.14 MR. BALLENGER: I knew it was ballpark.15 Okay. And I just -- we're now looking at the16 FY15 numbers and we're saying about double that17 in the combined balances, right?18 MR. JAGT: Uh-huh.19 MR. BALLENGER: You talked a little bit20 about the use of those various funds before. And21 my understanding was that rate stabilization and22 Residual Fund and even construction fund, all of23 those are available as a source of borrowing to24 meet operating expenses. Subject to check, it

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1 says that in the official statements.2 MR. DASENT: If that's a legal3 conclusion I'm not sure.4 MS. LABUDA: I would call up Ballard5 Spahr.6 MR. DASENT: Valarie Allen from Ballard7 Spahr is here. That will give authoritative8 source.9 MR. BALLENGER: Sure.

10 HEARING OFFICER BROCKWAY: Off the11 record.12 - - -13 (At this time, a discussion was held off the14 record.)15 - - -16 HEARING OFFICER BROCKWAY: While we've17 been off the record, I had a question on the side18 as to what is the evidentiary weight to be given19 to the statements here?20 Just to remind everybody, there will be21 no oaths taken at any point in the proceeding so22 you're all on Scout's honor to tell the truth.23 But we definitely do expect that you are telling24 the truth. So anybody -- anything that you say

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1 now somebody else could rely upon with the usual,2 oh, I made a mistake or I had to clarify, yadda,3 yadda, yadda. But we don't have oaths and we4 don't have certainly speaking evidence, but we do5 have information. And I appreciate the6 forthcoming and honesty of everybody involved.7 MS. ALLEN: Is it working? I've been8 watching everybody do this all morning. Still9 good. Okay. Great. My name is Valarie Allen

10 I'm a lawyer at Ballard Spahr hear in11 Philadelphia. We are counsel to the Water12 Department.13 I'm sorry. Can you repeat the full14 question?15 MR. BALLENGER: I just wanted -- and16 this is sort of the least consequential part of17 the question. I wanted to confirm that rate18 stabilization Residual Funds and construction19 fund balances are available for borrowing to20 cover expenses if necessary?21 MS. ALLEN: Yes. Rate stabilization is22 available to transfer to the revenue fund, and23 then can be used for operating expenses.24 Physical fund monies can be transferred and used

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1 for operating expenses directly. Construction2 fund money is not available for operating3 expenses.4 MR. BALLENGER: Well, I don't have it in5 front of me, but I believed -- subject to check,6 I believe it was available at least for borrowing7 to cover expenses.8 MS. ALLEN: For borrowing, but it would9 have to be reimbursed.

10 MR. BALLENGER: Sure.11 MS. ALLEN: Just to reiterate from this12 morning, there is limitation on the amount of13 money that can be used from the --14 MR. BALLENGER: For coverage purpose,15 yes. In the past there's been a sort of16 historical practice to borrow on an annual basis,17 a fairly substantial amount from the Rate18 Stabilization Fund. I believe it was19 $45 million.20 Has that process continued to date or is21 that discontinued?22 MS. LABUDA: I think what you're23 referring to is the procedural practice where the24 RSF makes a loan to water operating to cover any

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1 deficiencies. As you might be aware, December is2 a pretty tough month for the Water Department.3 We make our pension payment in December as well4 as pay our largest debt service payment. So,5 that loan between RSF and water operating is6 booked and rebooked at the start of every fiscal7 year.8 MR. BALLENGER: There is still a9 45 million a year loan?

10 MS. LABUDA: The 206 loan includes the11 45 million loan. It's not added into.12 MR. BALLENGER: No.13 MS. LABUDA: Just so we're clear.14 MR. BALLENGER: I didn't believe it was.15 I just wanted to sort of track where the money is16 moving to from time to time. I think we're going17 to have more to explore about that later.18 I wanted to ask, in a lot of public19 utility rate cases, and this has been the case20 also in the past with the Department, we have21 looked at certain expenses and seen a statement22 from the Department as to whether those projected23 expenses were non-recurring or continuing. Seems24 like there's a few in this case. And I don't

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1 have, you know, again, the whole file here.2 Think there's a start up costs associated with3 new loan income program, for example. Think it4 was $1.3 million.5 Would the Department consider that it6 would be fair to amortizing that cost as opposed7 to including it in year one?8 MS. LABUDA: I don't mean to go back to9 the bond ordinance, but how would we amortize an

10 expense that would occur in FY17? Our bond11 ordinance is on a cash basis. The cash for the12 obligation or expense in occurs in year. I don't13 have the ability to amortize expense. That's not14 how General Bond Ordinance works. That's on cash15 basis.16 MR. BALLENGER: But coverage or --17 MS. LABUDA: Coverage in --18 MR. BALLENGER: You move money out of19 rate stabilization fund to make sure you20 maintain. We have talked about managing to the21 1.2, 1.21, 1.22. These are costs that customers22 would be asked to pay $1.3 million in rates in23 perpetuity for a program that gets billed only24 once. It's built into the rates.

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1 HEARING OFFICER BROCKWAY: Before you2 answer the question, what 1.3 million in3 perpetuity? Is that every year?4 MR. BALLENGER: It's built into the5 rates is all I'm saying.6 MR. DASENT: Please note this isn't an7 objection, but it's very close. In perpetuity8 assumes the Board will never act on it, and9 that's just not --

10 MR. BALLENGER: For a period of two11 years when it only gets spent in the first.12 HEARING OFFICER BROCKWAY: If the13 Department could break this up into we absolute14 can't do it legally or we can do it, but it's a15 stupid idea.16 MS. ALLEN: I just wanted to make sure I17 understood your point about the fact that the18 Department makes transfers from rate19 stabilization but then it pays itself back. That20 all happens within one fiscal year. That is not21 something that once that loan is made, they don't22 have the ability under the ordinance to amortize23 that over --24 MR. BALLENGER: I understand.

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1 MS. ALLEN: If that is the analogy you2 are drawing, I'm not quite sure what you're3 asking them to do.4 MR. BALLENGER: I'm just asking whether5 it would be fair to amortize the non-recurring6 expenses for purposes of accounting for those7 costs.8 MS. ALLEN: Unfortunately, they would be9 able to -- for ordinance purposes, there is no

10 way to do that. There is no mechanism to do11 that. They have to recognize expense as it12 occurs to see what is available to pay debt13 service in the given year.14 HEARING OFFICER BROCKWAY: Let me back15 up, if I might, to see if this helps. I actually16 had a question about why the 1.3 million or all17 of it was an expense item as opposed to a capital18 item because I don't know what it's being used19 for. But my guess is that some of it for20 benefits that will extend beyond the year.21 MS. LABUDA: You have to read City's22 capital guidelines. The question is, is it23 greater than the limited amount to meet capital24 eligible? Yes. But does it meet the definition

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1 of capital? I don't believe they do because they2 are really on the operating level. So, it3 doesn't feel to me as it would be with -- those4 expenses would meet the terms of capital5 guidelines as provided by the City of6 Philadelphia.7 HEARING OFFICER BROCKWAY: Go ahead.8 MS. KUMAR: Chairman, if I may answer,9 just for clarity, the 1.3 million that is being

10 referred, it's really the basis2 system modeling11 cost and the office business associated with12 that. But the primary cast is basis2 in the13 1.3 million. It's not recording cost. It's only14 incurred in '17 not in '18. Just for clarity.15 HEARING OFFICER BROCKWAY: But doesn't16 that -- that to me suggests because it's going to17 be used for many years after. That's why it's18 strange to me that's capital cost and not an19 expense -- an expense, not a capital costs.20 MS. LABUDA: It would have to -- I don't21 have the guidelines in front of me. I will say22 to fact check. If that lasts greater than '1723 year, hard to know if this one-time24 implementation will extend the life of the

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1 system. Does not meet capital guidelines as per2 the standards.3 MR. BALLENGER: Sort of skipping around.4 Sorry. We talked a little bit about usage5 reduction sort of on a population basis and that6 being one of the drivers of this case. I was7 looking at the numbers of residential customers8 since 2010. It seemed to me there had also been9 a fairly significant decline in the number of

10 residential customers over the last five years.11 I mean, does the Department have an idea12 as to why that would be the case? I believe it's13 about 30,000 or so. I don't know which table,14 I'm sorry.15 MS. LABUDA: I think we may have to16 follow up on this one because I do not have total17 recall, nor do I have the privilege of work for18 the City in 2010 to attempt to answer that. May19 we get back to you?20 MR. BALLENGER: Absolutely. Thank you.21 I just wonder if there is portion of -- one22 question we had about the usage and we talked23 about that. I think the Board at its last24 meeting and even today, I think, is aware that

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1 Philadelphia is really in a lot of ways coming2 up. And it was a concern of ours that I would3 like it if you follow up.4 MS. LABUDA: Can I just repeat the5 question back.6 MR. BALLENGER: Sure.7 MS. LABUDA: The question is, can we8 articulate the shifts in customer accounts since9 2010, specifically the drop, the decrease in

10 residential accounts.11 MR. BALLENGER: Yeah. Not the numbers,12 just the reason why there's been a decline.13 MS. LABUDA: Thank you.14 MR. JAGT: Is that in reference to15 usage?16 MR. BALLENGER: I'm not talking about17 usage. Talking about number of residential18 accounts. I think it started, don't quote me,19 440. It's now down to 410 or thereabouts20 ballpark.21 One other thing, and I'm going back a22 little bit to the conference call that we had23 back in December. I'm probably -- my memory is24 suspect a little bit, but I'm starting from one

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1 of the pages in the presentation.2 MR. DASENT: This the workshop3 presentation?4 MR. BALLENGER: That's where the5 question originated from. I want to make sure we6 were clear. On page 25 of the cost of service7 presentation, it says that fiscal year cash8 receipts reflect 96 percent of fiscal year9 billings. And I just wasn't quite sure how that

10 correlated with the collection factor that was11 designated in the December filing? I think we12 were looking at 84 and change percent of current13 year collections.14 Is this the sum of all.15 MR. DASENT: Are you talking about a16 rolling twelve months or collection factor?17 MR. BRUNWASSER: That's a current18 collection factor.19 MR. BALLENGER: Yeah.20 HEARING OFFICER BROCKWAY: I'm sorry,21 folks. One at a time.22 MR. BRUNWASSER: By definition that's23 what's billed beginning July 1, the beginning of24 a fiscal year and what's collected in that year

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1 by June 30. And of course, a lot of the bills2 that were sent out in June are not due. The due3 date falls beyond the fiscal year. So roughly,4 you collect historically approximately 85 to5 86 percent of current billings. Historically, 76 to 9 percent of the immediate prior year7 billings, and historically, 2 to 3 percent of all8 prior year to that. All prior to that. And the9 end you, you've collected roughly 96 percent on

10 average.11 MR. BALLENGER: Is that more or less?12 MR. JAGT: Correct. The details of all13 the specific collection factors for the three14 years -- the current year, first year prior and15 second year prior -- and also the breakdown16 between the collection factor for water and sewer17 and stormwater only are provided in the18 assumptions document. And while it's being19 presented is the effective collection -- total20 collections for retail for that fiscal year.21 MS. KUMAR: It's 96.3 percent per the22 document.23 MR. BALLENGER: Okay. Thank you. I24 thought it was probably just a rounding issue.

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1 MS. KUMAR: Yes.2 MR. BALLENGER: This may be more for3 Water Revenue, but I will let anyone answer it4 who is so inclined.5 As we talked about during that December6 call, the 84 and change is down a little bit from7 where we were three years ago with about 85.58 being the collection amount. Are there -- does9 the Department set sort of performance goals at

10 the beginning of the year as to our goal is to11 collect 86 percent or next year we want to go to12 87 percent?13 Does the Department do that kind of14 planning from year to year? If so, how? And how15 would it measure its performance if it did?16 MS. BETHEL: Michelle Bethel again.17 Our goal is always to collect every18 penny that we bill. But as we stated19 historically, what we collect during the fiscal20 year is, it is what it is. Of course, we always21 want to collect more. But historically, that is22 what we have been able to collect.23 MR. BALLENGER: Okay. I think I've gone24 through questions that I had in my mind. I'm

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1 looking to my team to see if there's anything --2 HEARING OFFICER BROCKWAY: Let's go off3 the record.4 - - -5 (At this time, a discussion was held off the6 record.)7 - - -8 MS. PICKENS: Hi, everyone. Josie9 Pickens again. I have a general question about

10 the new staffing and what factors went into the11 calculation in the numbers of people you need12 both for the WRAP and for the new Water13 Department positions?14 MS. BETHEL: For the 22 positions that15 we were projecting for WRB, it's going with16 amounts of pieces of paper that we would17 anticipate perhaps receiving based on what we get18 right now. So right now that unit deals in like19 12,000 pieces of paper. If we went with that20 assumption of 50,000 and, of course, if it's not21 a hundred percent adoption, we still have to --22 just for -- in a perfect scenario, if we got all23 that, then we did the calculations based on that.24 So, that's what got us to our staffing.

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1 With the IT, same thing they did. They2 knew how long, projected how long this project3 would take. And they broke it out how many4 people they would need for that many of hours.5 MS. LABUDA: For the Water Department6 positions, I will give you an example. I will7 speak about the Finance Division. We looked at8 current projects we needed to complete in house.9 We look at civil service regulations. Identified

10 positions, identified the salary, figured out11 what the job specs would be based on the work we12 needed to get done. That's how it -- that would13 be the formula for most of the -- all of the14 Water Department positions.15 Just looking back to the document, human16 resources that we provided as part of the filing17 and also as part of the proceeding, each division18 it talks about the position with human resource19 and admin and how many people, what they were20 going to do and the estimate of the salary. It's21 same type of formula. What's the work that needs22 to be done? What's the civil service code it23 correlates to. What's the salary. Of course, in24 addition to salaries paid for pension.

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1 MS. MCCARTY: If I may, you know there2 is 21 positions for the Water Department. You3 know, they are scattered around for compliance4 purposes like a concept order agreement. But5 some of those positions are related to inspection6 of our sewer connections, connection to the sewer7 system which is protection of our infrastructure.8 We find plumbers maybe don't do the best job. We9 are going to be changing some things around so

10 there is better inspection of them. And our goal11 is for the Water Department to perform those12 inspections. Sewer system integrity is prolonged13 either further. That's an example.14 MS. PICKENS: You mentioned new15 initiatives. Are there things that you haven't16 covered in the presentation that you anticipate17 would be contemplated by that?18 MS. MCCARTY: What I -- what I just19 mentioned is a new initiative.20 MS. LABUDA: That's really it. When I21 speak about finance, I think of things like just22 reconciliations.23 MS. PICKENS: Thank you.24 MR. BALLENGER: I think at this point I

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1 would like to ask if they are on the phone with2 us, if anyone from Exeter or otherwise would like3 to have any questions. If so, they would chime4 in on.5 MR. MIERZWA: I'm good right now.6 MR. MORGAN: This is Lafayette Morgan.7 I have a couple of questions. One deals with --8 can you hear me okay?9 MR. BALLENGER: Yes.

10 MR. MORGAN: One deals with electric11 power. And I realize someone just asked a12 question on this, but the audio was bad so I13 couldn't quite get the full gist of the question.14 First question is, I'm trying to see if15 I can find out from whom does the Department get16 it's electric power?17 HEARING OFFICER BROCKWAY: It's what?18 MR. BALLENGER: Electric power.19 MR. SCHWARZ: This is Scott Schwarz20 again. The Department does not by power21 directly. The City buys power. The Department22 is not a separate legal entity. We cannot enter23 into contracts. The City's buys power through a24 low service provider directly off the grid.

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1 We're a member of PJM. And there's procedure2 City Council set up for buying power directly off3 the grid.4 MR. BALLENGER: Did you hear him?5 MR. MORGAN: Yes. Yes. In other words,6 not a specific rate schedule that it uses to get7 power if I'm understanding correctly?8 MR. SCHWARZ: That's correct. We are9 required to get three quotations. And usually

10 the purchase is executed within a few minutes.11 HEARING OFFICER BROCKWAY: The "we" as I12 understand it in that sentence was the City, not13 the Department?14 MR. SCHWARZ: That's correct. All power15 is purchase by the City of Philadelphia through16 the Procurement Department. From that, there is17 separate account for the airport, water and the18 general fund. They each charged a separate rate19 by the City.20 MR. MORGAN: How does the power get a21 apportioned to the Department? It's some metered22 or?23 MR. SCHWARZ: We don't have meters for24 all our facilities. But there is a load profile.

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1 The Water Department is not involved in that.2 It's a different office. But there's an energy3 consultant these quarterly meetings. The load4 profiles are examined, and the prices are set5 based on load profiles.6 MR. MORGAN: Okay. The other area I had7 input intentions. And my understanding is that8 the Department, the employees of the Department9 participate in the City's pension plan; is that

10 correct?11 MS. LABUDA: Yes, that is correct.12 We're a part of the City of Philadelphia's13 pension plan.14 MR. MORGAN: Can you help me understand15 again how those costs are apportioned to the16 Department?17 MS. LABUDA: Again, I'm going to cite my18 favorite phrase today, I think, which is fact19 check. I'm speaking from memory, and I don't20 want to misstate something on the record.21 The Department is charged its pension22 cost based on the Department's allocable share of23 pension which is really the number of Department24 or Water Fund employees over total City

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1 employees. It also looks at our retirees versus2 city retires. That table, those metrics, are3 best displayed in the most recent city general4 obligation offering in the back of the document.5 There's a table that just shows the calculation6 of Water Department or Water Fund employees7 versus overall city employees.8 MR. MORGAN: Okay. That's all I have.9 MR. BALLENGER: Thank you, Lafayette.

10 With that, I believe the Public Advocate will11 turn it over to anyone else who has questions.12 HEARING OFFICER BROCKWAY: As far as I13 know, no one else has questions, but we will give14 people one last shot. Yes. Do come on up.15 Good.16 MR. HELBING: Good afternoon. Promise17 to keep this short. My name is Mike Helbing for18 PennFuture. One of the participants in this19 case. PennFuture is an environmental20 organization, our focus on this case is slightly21 different than some of the other groups. We are22 focused primarily on -- we are very supportive of23 the Water Department's Green City Clean Waters24 program. That is where a lot of our focus is. I

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1 just had two specific questions about some things2 that came up in the last rate case that I saw3 also in some of the document here, but I just4 wasn't sure. I didn't see a lot of analysis.5 The first is the credit program. This6 is in statement 9B from the Black & Veatch. It7 talks about on page 13 it allows for credit of --8 depending on the circumstances, 80 percent,9 90 percent IAGA credit. And at the bottom says

10 credit program -- no changes are proposed to this11 current credit program.12 My question is, was there any further13 analysis done on in this rate case versus any14 data gathered in the interim since the last rate15 case? Or was it just carried forward for these.16 MS. KUMAR: In terms of the percentages17 which are regulation, these are in the18 regulations. And so, these were all vetted19 during the last rate case proceedings. So, these20 percentages were not changed. Because one of the21 things that also came in the last citizens22 advisory committee during the last rate case, one23 of the questions raised was what is the guarantee24 that we are doing this current program and what

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1 is the guarantee this credit program will be2 there next time? And the Department wanted to3 honor that. This was all decided on doing that4 last rate case. It's only fair to retain that5 for a period of time.6 So with that in mind, this was reviewed7 by the percentages. And decide these will still8 be valid for these rate proceedings.9 MR. HELBING: You said the numbers were

10 reviewed. Is that in the documents made11 available? Is that part of the formal notice the12 review?13 MS. KUMAR: They are there in the14 regulation, as well.15 MR. HELBING: Okay. Similar question16 about enhanced program. In the document it say17 it's basically being carried forward as in the18 last rate case. Was that being reevaluated based19 on data gathered since the last rate filing?20 MS. KUMAR: That is true. The enhanced21 capital program, it's in the statistics there in22 the testimony itself.23 HEARING OFFICER BROCKWAY: Can you slow24 down just a tad.

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1 MS. KUMAR: Statistic is there in the2 testimony, but there is also additional responses3 given in the interrogatory questions that were4 raised in terms of pattern. The program is5 officially closed, was closed in September of6 2013 to the normal new enrollees. The existing7 enrollees will continue to be in the program as8 long as they meet the eligibility requirements.9 MR. HELBING: Okay. Thank you. That's

10 all I have.11 HEARING OFFICER BROCKWAY: Okay.12 Anybody else?13 Seeing none, I want to thank the14 Department very much for subjecting yourself to15 all these questions and to the participants for16 asking questions. And I want to thank the17 Members. Feels cheeky to do that.18 This is adjourned and this Presentation19 day is closed.20 (Presentation adjourned at 3:00 p.m.)21222324

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123 C E R T I F I C A T I O N45 I, hereby certify that the6 proceedings and evidence noted are7 contained fully and accurately in the8 stenographic notes taken by me in the9 foregoing matter, and that this is a

10 correct transcript of the same.111213 -----------------------------

ANGELA M. KING, RPR14 Court Reporter - Notary Public151617 (The foregoing certification of18 this transcript does not apply to any19 reproduction of the same by any means,20 unless under the direct control and/or21 supervision of the certifying reporter.)222324





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achieve 66:3138:1

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act 11:1712:10,12,1280:8,9,9128:4,5,5,6129:2,21130:11,14131:6,8137:16164:9 198:8

acting 175:21

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active 2:11163:4,10

acts 128:3actual 16:10

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actuals 69:2ad 172:4Adaptation

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112:22113:12115:9124:14129:11151:20215:2

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addressed35:9 116:6116:10,13167:22168:3,16171:15175:16184:7

addresses35:6 51:1165:12 70:480:19 169:1

addressing152:18

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Affairs 5:2affect 22:9affordability

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aggregate93:20

aging 79:2080:17 90:1090:13 144:1

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allocable211:22

allocate 21:525:18,2326:1 27:1328:9,9,12179:15182:23

allocated20:11 28:174:17,21,2374:24

allocating26:23181:19

allocation27:22 29:1375:24

allocations74:11

allow 32:8117:6156:12

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AMIs 117:19119:7

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amount 16:2336:8 37:1548:8 50:651:4 55:1363:6 65:666:17,2471:12 84:1104:18128:10133:6161:11195:12,17199:23205:8

amounts 33:8206:16

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119:3 121:4AMRs 118:1analogy

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122:8analysis 40:1

44:1,1 55:586:8,20



Page 2

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analytical145:13146:19

analyzed98:19

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attend 187:1attention

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2:22 107:7107:7 108:9108:15109:3 110:7110:24172:1,2,3173:23174:9 175:9175:23177:2178:11,21179:2,4,11180:13181:6,16182:17,21183:7,20185:6 186:9

balance 10:1613:24 33:967:3 68:1768:19,2169:24 70:1071:4,20,21

balanced93:4

balances69:13 70:370:6 192:7192:17194:19

balancing

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ballpark192:14202:20

Baltimore149:5158:18

bank 156:7160:10

banks 160:14bar 64:8,9,9

64:11 65:489:20

Barking 61:2Bart 5:20



Page 3

base 48:655:12 73:977:2 82:1987:24183:19

based 18:621:14 34:1640:14 44:949:3 50:450:23 55:1159:12,1567:5 69:469:11 70:2473:24 74:186:13,17,1986:22 97:1999:19,20102:16104:5,6,9104:22130:9206:17,23207:11211:5,22214:18

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basket 155:6battling

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beaten 167:6Beckley 2:19

2:19 30:335:11105:20

beginning56:17 70:1073:6 131:14187:20188:13203:23,23205:10

begins 8:7184:10

begun 120:8behalf 3:17

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benefits 56:958:3,6,8116:24120:22121:1,2185:19199:20

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Bernie 3:873:10

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big 12:8 40:742:16117:21123:7130:14142:24189:22

bigger 84:5106:21

bill 50:8 55:280:4 88:488:17 89:191:13,1495:18 99:1599:15,17100:8105:21,23113:1,3,6113:10,14169:2 173:7173:7 180:3180:7205:18

billed 49:17178:23197:23203:23

billing 49:1149:13 51:656:12110:17113:3,9174:14,19174:24175:15176:5,11,18176:23178:4 179:6180:11,17

billings 50:1450:16,16,2351:8 203:9204:5,7

billion 72:24

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bills 8:20,2210:2 23:3,444:3 57:2287:4,590:22 92:3109:8,11204:1

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blocks 8:1713:10 85:21

blowing190:1

blue 64:967:21

board 1:2,131:13,14,142:4,7,10,213:4,6,9,116:4,10,196:21 7:119:9 12:1824:20 25:1234:6 35:1235:22 36:2139:6 43:344:18 51:1251:23 65:1368:7 73:10

73:21 74:3100:1103:16105:22106:17108:19112:5114:21115:13,14116:3117:20125:13134:10135:10,14135:21136:11,17138:4 152:7152:14162:20163:15170:15,16171:10,11172:10173:6,9174:17,20174:21175:13,17176:1,6179:7,18183:2,5,11184:19186:20198:8201:23

Board's41:11 51:2070:4 80:20

Boards136:19168:16

bond 16:1321:21 22:625:11 30:2031:23 32:232:4,1037:16,20,2438:19 41:1041:17,1943:24 46:150:5 64:1364:15,20,2465:24 66:766:8,15

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bonds 16:542:2,1744:21 82:8147:21156:12161:3,7187:8,11,22188:2189:10,15189:19,22

booked 196:6boom 143:6borrow 15:20

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borrowing15:19 16:17154:17192:23194:19195:6,8

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bottom 13:1213:21 14:199:8 181:11213:9

bound 17:24break 6:22,23

6:24 39:1384:19,2186:10,11163:6168:18198:13

breakdown76:2,1578:1 204:15

breaking191:19

breakout75:7,18

breath 69:9bridge 19:7

32:9,12brief 39:13

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briefings131:1

briefly 40:741:23 45:10125:15131:24

briefs 130:24bring 39:8

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brings 87:1broader 91:4Brockway

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Page 4

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budget 13:2217:9 33:933:22 41:158:17 61:861:13 62:1662:20 64:569:3,1171:16,18,1971:21112:14,16112:19,20152:5 171:5

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call 27:2332:16 88:4134:6149:12167:8 173:5174:19176:17,23177:11,14177:14,15193:4202:22205:6

called 20:2329:20 37:838:8 82:2395:12128:12130:5,6137:15

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card 5:10care 16:4carefully

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cases 101:19166:24192:5196:19

cash 30:2131:7 33:7,833:13 37:1444:7,864:13,14,2465:4,7,1865:20 66:1866:20134:21141:22144:21146:8151:18,24152:12153:16156:23161:9 189:1189:2,5,5197:11,11197:14203:7

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ccf 87:23center 11:3

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century147:21

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certification216:17

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216:21cetera 175:4Chair 1:12

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challenge127:22143:7,8151:16

challenges76:24151:10

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charitable93:14183:16

chart 23:1289:10 106:8155:5

charter 9:5,8cheated 69:17check 33:12

38:5 135:3



Page 5

192:12,13192:24195:5200:22211:19

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class 58:1674:22 75:1178:4 181:18182:5,7

classes 74:2076:12179:19181:20182:1,11,13

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clean 11:2112:10,1180:8,9128:5 129:2129:21130:11,14133:20212:23

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closer 91:7closest 73:16CLS 3:21,24Clupper 5:5,5

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coast 147:13147:16

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coin 93:2colleague

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commitment125:20,24

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communicate174:3

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comparing89:22 141:1

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comparisons147:2 148:7

complaints173:7,19

complete 29:830:2 31:941:14 207:8

completed64:1

complex 13:421:23156:16173:4

complexity99:21

compliance12:1,2,932:15 58:1858:21127:15208:3

complicated145:16,21

comply 12:626:19

component29:21144:23

components16:1 27:1537:19 49:376:22124:19

composes13:15

computations144:12

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concept 100:8208:4

concepts 8:18concern

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conditions144:19146:2159:21

conduct 13:713:10

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consideration7:1 25:9



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conversations107:4121:11

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Cooperation188:15

copper 131:6132:1,2,4132:11

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corresponds40:23

corrosion126:14

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costs 13:1613:16,1717:7 20:1020:13 21:525:23,2426:1,2327:4,5,1328:3,4,5,6,828:9,1446:1,252:23 55:655:21,2456:2,10,2459:3,7,1559:18,20,2060:17 62:462:9 63:1664:5 74:1174:12,13,1776:14 80:1881:3 90:22100:19,20109:2,24110:6,12,20111:8,11116:24120:24124:4 126:2

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couple 103:24103:24132:8 138:7142:19153:6157:17158:17209:7

coupons38:17

course 12:617:12 18:1019:4,1433:6 52:2271:1 82:3121:14125:10126:23134:8

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covenants22:7 25:12139:7151:11

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creates126:16161:14

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Page 7

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148:13160:14

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crisis 131:3137:15155:4,14

criteria102:23

critical 153:7153:17160:16

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data 24:149:11,13118:8,24213:14214:19

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date 16:15128:24195:20204:3

dating 117:17Dave 4:3

28:22 54:1362:23 70:2185:4,1986:23 93:23190:11

David 39:18Davis 5:15,15

54:16 94:596:1,21,2298:15 100:7100:14,18101:3,24

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day 6:5 10:2411:8 43:1945:18118:18133:6141:10144:5 147:3160:2167:14215:19

days 33:7,1233:13 118:7125:22151:18152:12153:16166:24,24

DC 130:19,23147:18

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deals 168:12206:18209:7,10

dealt 104:11Debra 4:5

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112:4114:22115:4 117:1

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delayed143:21

deliberate136:21

delinquency175:21

delinquent118:14

deliver 9:1511:1 141:21

demand53:19 78:23167:2

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department1:1 2:6,203:1 4:9,194:20,24,245:17 6:6,96:21 7:48:10 13:2,414:19 15:317:11,1720:10 22:1723:11 25:125:4 26:1727:3 28:229:21 31:1333:20 34:1538:15 44:2048:19 51:1952:17 54:2456:21 57:1057:20 59:659:8 61:863:16 65:2165:23 66:1669:3 72:1474:12 75:976:23 79:19



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Page 9

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replacement16:18

replacing160:13

report 29:1930:13168:12

reported 1:6174:11

reporter 1:75:11 216:14216:21

reports 49:13135:18137:16,21137:21151:3

represent

2:23 5:1330:1 64:11

representat...163:12,17173:19178:4

representat...176:16177:18

represents45:17 64:1064:14,1566:20

reproduction216:19

reps 177:18182:3

request 92:9122:13,20138:22139:9162:10169:10

requested68:10,14,1671:3 86:788:14 138:1

requests40:13

require 64:7129:10139:3

required37:22 66:666:9,1571:12 80:13130:6131:13134:18210:9

requirement42:19 43:544:12 54:2155:4,1069:10 71:2373:12,20,2274:4,2286:4,992:23 133:2145:1 162:2162:5 181:4181:12,14

requirements

8:13 13:1515:21 16:719:22 22:522:7,923:18 24:2325:10,12,1826:15,1827:1,341:10,11,1341:15,1842:23 43:245:23 46:1446:15,2047:2 49:1,349:9 57:364:1,2,2365:17 67:1467:18,2368:12 69:2272:9 80:780:15,1785:24 90:1894:14,24128:1 129:4129:7,8,13130:13132:23133:10139:8143:20148:5181:13189:3 215:8

requires11:17 45:2266:10129:16131:17144:5

reserve 13:1737:8,11,1245:18 46:546:7,13134:17,19162:2,5,8162:12

reserves 19:519:7,1331:11,13,1631:21 32:432:24 72:3145:1

reset 161:4

residential26:5 74:2076:3,16,1787:5,20,2288:19 92:398:21 183:3201:7,10202:10,17

residual 32:632:10 37:137:4,6,1337:13,1738:1,1,3,838:18 46:946:12,12,1565:1,1366:2,12,1866:20,2370:3 72:1134:19,20192:7,22194:18

resource207:18

resources207:16

respect 21:336:18 75:1898:23100:22101:11109:20111:7122:12125:17164:5,6168:19

respond 6:7response 52:6

62:14171:11180:6

responses34:5 215:2

responsibility176:5 177:6

responsible139:5172:11178:20

responsive174:12

rest 52:6

73:18restored

118:17restructure

165:22result 47:12

70:6 74:1995:10,2199:19152:14188:4

resulted133:9

resulting75:13 99:1199:11100:19

results 8:188:19 16:2336:19 39:739:24 40:474:6,8129:12

retail 9:2020:4 27:950:23 53:1653:18 86:1086:11,21180:11204:20

retain 214:4retirees 212:1retires 212:2revenue 4:15

4:17,17,1913:14,1919:11,2222:24 23:1824:9 25:125:17 27:127:3 38:140:19 41:1242:19,2245:6,11,1345:16,2146:19,22,2246:24 47:248:19,2349:1,2,9,1752:12 54:2155:3,3,1055:18,21,2356:7 57:13

57:16 64:764:22 67:1467:17,22,2368:9,12,1468:16 69:1069:12,2171:2,274:21 81:2485:23,2386:9 92:2397:1 100:10107:9,24108:5,7,12108:18109:22110:1,2,3110:22111:18,19112:16,19113:4 114:3114:10,17114:18117:20121:6,12128:1132:22133:2,10141:17143:11144:6,22151:20155:5,11164:5172:10173:6,9174:17,20174:21175:13,16175:21176:1,6,14177:12,16181:4,13,14182:20187:22188:4194:22205:3

revenues13:18,2025:2,3,432:8,1034:18 37:442:3,3,5,7,8

42:11,20,2043:6,14,1443:17 44:244:2,4,9,2445:7,1346:11 47:447:6,1348:9,9,1048:12,13,1749:10,1150:3,4,6,951:15 55:1067:17 68:268:3,4,1069:21 73:1373:22 75:1195:22 102:4108:24154:7180:23181:2187:24

review 40:1,240:3 45:948:19 49:555:9 64:167:13 69:370:24 74:774:8,1076:21 115:2175:5214:12

reviewed48:21 66:870:2,7 74:5106:11131:22214:6,10

reviewing122:12

reviews 46:14revised

128:22131:8,16

revision131:9

RFC 49:1449:21

riding 189:8right 8:11

25:1 27:541:15 43:1144:15 48:7



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right-hand99:16

rights 163:11164:9

rising 137:23159:18

risk 89:24101:17140:23141:6145:16,17146:2,5160:9,10,10160:16

risks 18:4,8101:18140:12

river 10:1510:17 126:1128:8,19

Rob 8:5Robert 3:23rock 174:18role 140:6roll 111:24

112:12123:23

rolling203:16

room 2:1617:13 31:5137:18158:23

roughly103:12157:1188:24204:3,9

rounded88:18 89:17

rounding204:24

RPR 1:6216:13

RSF 71:12195:24196:5

rule 45:1128:12130:21,23131:10,10131:12,15131:15,16131:17,20132:2136:13

rules 127:24130:22131:7136:24

run 166:8runaround

174:8running

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SS&P 145:12safe 11:13,17

12:12 41:541:7 80:7,8112:23125:21126:15131:5,7175:11

safety 125:16salaries

207:24salary 58:4

207:10,20

207:23sales 49:17

77:3,6sample

132:13,15San 189:17sanitary

74:15 76:1179:7

sat 165:13save 84:4

133:16184:24

savings 109:5109:7,11,20121:13,14121:22,24123:3,13

saw 100:20165:2 184:3213:2

saying 35:2152:8 98:11175:19,22175:23192:16198:5

says 123:2161:20193:1 203:7213:9

scattered208:3

scenario96:14 143:6206:22

scenarios137:6

scenes 106:22schedule

210:6schools

183:18Schuylkill

10:17Schwarz 4:23

4:23 127:16127:18,18186:2,2209:19,19210:8,14,23

science 27:24Scoop 37:8

scope 98:18scorecard

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scores 144:17Scott 4:23

127:16,18186:2209:19

Scout's193:22

screen 95:7script 190:2seating 7:20second 19:23

112:10163:23165:24171:15204:15

secondary141:5

section 36:1038:21 87:3116:14164:17

sections 7:1939:9 116:6

sector 141:12141:15142:18,21143:23144:8 146:3

sectors142:14

security125:6,9141:4,17

sedimentati...126:8

see 6:18 8:310:20 11:614:9 17:319:6 27:1828:5 34:2454:10,1255:20 65:368:8 70:1372:13 73:1574:1 78:16

81:21 89:1292:6 93:1297:19 98:399:13100:16,18103:9109:15118:10,20137:9141:23142:11146:23148:4,9155:17160:11162:17163:22168:18169:3 170:7181:4,14182:5190:13199:12,15206:1209:14213:4

seeing 29:1172:7 77:295:6 118:18177:5186:18215:13

seen 53:2179:5 190:16196:21

segments 7:8segue 172:6selected

147:8self-generat...

37:21self-imposed

71:7sell 189:10,15sending

124:22sends 124:23senior 41:19

42:9,972:11,1488:11,1193:13 94:994:10,22

95:3 96:11107:13158:17,20183:14,17

seniors 94:16sense 26:12

32:17 48:4110:24120:19159:16,17160:19162:14,17

sent 39:6204:2

sentence210:12

separate 27:571:17 92:12186:4209:22210:17,18

separately102:18,20179:15185:14

September215:5

series 31:1550:11

seriously125:22

serve 9:3,1727:6 50:17151:6180:11

served 124:3service 3:1

8:16,1913:8 15:1915:24 16:316:9,15,1616:24 17:317:8,9 19:319:23 20:120:9 21:1223:16 25:1525:16 26:1126:24 36:1437:8,1239:1,21,2440:4 41:541:19,2142:9,14

44:24 45:646:3,4,4,746:13 50:1851:19 66:967:24 68:372:10,11,1572:18 73:1373:18 74:974:14,14,1675:14,2476:2,979:24 80:1685:22 86:886:10,12,1986:23 92:2193:5 100:21110:1 116:7116:13117:5,6133:1134:17,19142:22143:13144:19,21145:1146:11148:14150:18151:7,14152:8,11153:15154:8156:13,15156:23162:2,8,12163:24166:3,21167:7,12,23168:9,13169:23171:6,8172:5,6,9172:15,16172:19,22172:23,24173:18176:13,15176:18178:5,16179:13180:1187:19196:4

199:13203:6 207:9207:22209:24

services 3:173:20 8:129:1 19:1225:20 37:1141:8 45:1456:10,2258:16 61:1161:23 62:275:1,1 76:476:4 79:23110:6,12117:22118:1134:22,24138:24164:8 165:8173:4,11177:23

session 39:4set 29:22

30:10,1932:3,2038:7 53:1086:14 98:2399:1 105:16128:13136:4,5155:7161:17186:3 205:9210:2 211:4

sets 30:9setting 8:17

20:16 55:155:5 90:19

settled 113:21192:5

settlement192:10

sewer 49:1750:17 61:1976:1,8 88:689:8 92:6135:5142:23147:15174:15176:11180:7,10



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sheds 11:6sheet 62:13shift 64:2

74:7shifts 31:2

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shot 212:14show 62:20

77:17181:24

showed 101:4shower 54:11showing 36:6

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shows 23:1289:10 99:9108:10110:2,4145:8149:16212:5

shut 118:14118:19164:10166:15180:5

shutoff 117:8shy 14:4side 11:1,19

13:17 20:2424:24 25:127:11 45:1864:19 67:2168:2 69:1069:12 86:1686:17,21

92:6,1193:1,2,3102:6107:14110:21114:10133:5 136:8137:13150:8 162:7173:17174:13175:16193:17

sides 27:1093:2 177:19

signal 118:23124:22,23

signed 191:5significance

33:7significant

29:6 90:199:14154:18,21201:9

significantly30:6 82:1090:20155:18

similar102:22145:14172:6176:10,15214:15

simple 25:21145:21162:13

simply 20:720:15

simulation102:8

single 165:15167:14188:3,7

sit 14:13sitting 31:5

127:3situation

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six 23:21six-year

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size 33:1599:22104:10,14104:23144:20181:18,20182:11

skilled 12:13skipping

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13:9 21:838:20,2140:7 41:1845:8 46:1848:21 49:449:7 54:1555:8,956:24 61:763:24 67:1367:16 70:175:23 80:1981:21 97:1999:9 100:9107:17,21107:22,23109:23

slides 8:1541:2 49:4138:7

slight 60:7187:13

slightly 135:6144:1 192:3212:20

slow 190:4214:23

Sludge 11:4small 148:24

148:24161:11

smaller 33:15173:5

Smith 58:20snapshot

87:18social 165:8sold 188:23solder 126:18

127:5,9solid 51:4

solids 133:3,6solution

176:2Solutions

3:14solvency

21:18 93:7solvent 127:6somebody

61:4 114:22161:1 167:2167:7,15194:1

somebody's167:1

somewhat6:15 132:23

Sonny 1:133:5

Sonny's103:3

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sort 25:136:11 72:4105:9106:21,22146:11147:22151:1,17152:1 153:6153:18173:18174:8 177:5178:1 183:1184:8185:12186:17190:20

194:16195:15196:15201:3,5205:9

sound 49:2181:1

sounded 30:430:4

sounds 47:961:3 125:2171:15

source 49:10192:23193:8

sources128:16141:16

Southwest133:23

space 56:14155:17

Spahr 4:1138:19 193:5193:7194:10

speak 4:1316:9,9,1031:1 33:454:16 60:22118:12141:10179:9192:11207:7208:21

speakers 39:8speaking

15:10 30:962:23 82:15103:13126:12169:22194:4211:19

special 38:8specialist

163:12specialized

178:14specific 32:3

34:18 45:362:20 81:16

106:10108:20111:20,23141:12,15179:9185:22204:13210:6 213:1

specifically34:8 86:587:17 108:2109:22126:13164:23167:13168:12,15170:16178:11202:9

specifics 38:6specs 207:11spectrum

89:13speed 106:17spend 21:10

120:18144:11147:10153:2170:24

spending65:15 69:5143:22,24

spent 122:17152:9 154:1198:11

spiel 156:19spike 155:16spiked 155:21spits 145:3spoke 67:10spoken 104:4spread 81:24

155:5,11,18157:16,24

spreads 81:1882:4 155:15

spreadsheet145:3

spring 132:13178:1

stability21:18,20

83:19 84:2139:2141:17156:3

stabilization32:5,7,1933:19 34:1234:13,16,2142:13,2143:9,16,1843:20 44:1245:3,17,2246:21 48:1867:11 68:568:8,1169:6,8,1469:20,2370:3 72:273:17 136:6151:13,23182:4,6192:6,21194:18,21195:18197:19198:19

stable 79:8,14154:10

staff 57:5,1062:6 80:18110:14112:18153:3163:16164:4 166:5166:8,17176:12

staffing 56:556:7,1457:2,4,1457:15 58:163:15206:10,24

stages 119:12120:10

standard20:17128:21130:12149:1,4155:12160:5173:20

standards12:7 20:1921:7 32:23128:7,9183:5 201:2

standpoint88:16172:14180:17

stands 49:2174:23 91:5

start 6:9 7:2212:22 13:1127:1,2118:15,18151:22154:5186:13191:15196:6 197:2

started 48:6202:18

starting140:3155:19202:24

starts 23:22startup 56:16state 12:7

58:14 80:7127:24131:20,20131:22157:4 164:9187:21,22188:13

state-appro...15:14

stated 65:1680:24205:18

statement29:17 63:1163:19 138:3169:10196:21213:6

statements29:4,5,2229:24 30:1130:15,17,1931:8 72:24190:8 193:1



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141:1stations 10:18

10:22Statistic

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190:4stenographic

216:8step 34:22

49:8 70:21160:23170:13

stepping 8:1135:5 96:11

steps 49:6Steve 17:14stick 18:2stood 165:13stop 52:24

167:11storage 9:16

10:22stormwater

9:14 21:449:18,1850:18 58:2174:16 76:176:14,1879:10,12,1686:21,2288:6 89:992:11,12,1492:15,16128:16129:9,10138:24173:12174:2,12,14174:15175:2,6,11176:3,10,11176:23179:4,5,7180:4,9,10

191:21204:17

strange200:18

streamline117:7

Street 1:5strength 84:7

141:19142:2144:20178:24

strengtheni...128:20

strictly180:14

stringent127:23129:3131:21

strong 43:2179:5 84:9146:21

stronger154:10

strongest140:22149:22

structural32:13172:19

structure82:9 83:2186:15 97:6141:22148:3156:10,11156:17158:16159:4,10162:4 172:9177:9182:10,15

structures156:9 159:3

studies 18:723:11 36:14

study 8:1813:10 21:1336:18 39:639:24 40:840:9,1041:3 74:9

77:15 78:8110:15125:3129:16

stupid 198:15style 190:18subaccount

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117:21subject 12:9

192:11,13192:24195:5

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submission112:14

submit 15:13submitted

17:14 34:1958:13 154:1

subordinate83:22156:11,12158:16,21158:24159:6

subscription101:11103:9,14

subsequent101:19

subsequently70:14 76:13

substantial123:13195:17

subtracting47:23

success189:23

successful121:7133:16

sudden150:21

sufficiencies139:2

sufficient35:21

suggest 79:6suggests

186:7200:16

suite 149:19sum 203:14summary

36:6 78:10summer

132:14supervision

216:21supervisors

166:11supplemental

63:10,20,21supplied

10:16supply 10:23

125:16151:9

support 56:156:14 58:24110:19112:22156:21

supported55:5

supportive212:22

supports139:3

supposed8:13 27:19117:1118:16140:13

suppress 45:4Supreme

130:21surcharge

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sure 2:1312:23 16:821:9,2422:24 24:924:12 34:736:8 41:942:10,13,1843:8 46:671:5 78:1480:24 82:1582:24101:17

106:12,16108:13135:2 148:7160:17164:19168:4169:11176:21178:2 191:2193:3,9195:10197:19198:16199:2 202:6203:5,9213:4

surface 90:590:6

surprised80:23

Susan 4:18suspect

202:24sustain

138:23Sustainabili...

60:15switch 7:19

120:17183:23

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system 9:1416:19,2018:7,8,921:22 25:1725:19 26:327:4,5 47:252:6,956:12 64:365:10 67:1967:22,2368:13 69:178:24 79:2283:19 84:384:7,9 97:5100:22110:17123:5,6126:10,10126:15129:10,18144:18,19

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system's66:12

system-wide179:17

systems 9:613:5 146:22147:6148:10,13174:22

Tt 88:17 216:3

216:3table 2:16

31:6 63:1472:1 99:8155:22190:18,19201:13212:2,5

tables 17:2191:19,20191:20,21191:21

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tad 214:24tailored

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taken 39:1370:17,1884:21118:13134:4159:19163:6164:23169:8171:14186:7193:21216:8

takes 131:18144:2

talk 5:9 7:1120:18 81:187:3,4,5,787:11,1489:22,2392:20 94:7117:23122:13136:7 140:4145:10153:23158:12162:15166:11,12167:15170:7171:17,19

talked 19:385:19,2286:8,24105:12128:2153:18192:19197:20201:4,22205:5

talking 33:1887:17,22

105:7110:13121:20146:21147:10152:9,22159:1160:23175:1,7191:7202:16,17203:15

talks 144:9207:18213:7

tap 126:12tape 87:20target 67:7

71:7 95:18105:16

targeted68:21

targets105:10

tax 29:1982:20114:10

taxes 9:9team 7:9

142:2 166:7174:1 175:5206:1

technical 8:642:15 99:20187:1

technically37:6 191:16

technologies12:14

technology118:11,23119:6 122:5126:1

telephone91:24

tell 8:9 13:334:8 119:20119:21123:9 126:3133:15193:22

telling 193:23temporary



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tenant 163:12163:16164:9,12

tenants 164:1164:13,14166:5,13,18167:14

tenants'163:11

tend 166:17term 40:15

40:17,2259:13 60:1977:17 92:19117:14127:21130:9 131:2132:9143:24146:9,10,12159:15

terminate52:1

terms 6:637:16,2344:1 81:1286:1 89:891:3,1296:11 173:6180:17185:2,15190:15191:8 200:4213:16215:4

Territory 3:2test 73:15

79:9 132:11tested 94:11

94:12114:24

testers 20:4testimony

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215:2testing

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thank 6:3 7:510:7,1012:17 18:1119:16 22:2124:3 30:2433:23 35:736:22 38:1239:3 53:463:18 78:1884:11 111:1138:12139:20163:14171:23172:2179:11183:20185:6186:11,13190:7191:24201:20202:13204:23208:23212:9 215:9215:13,16

Thanks 50:1theft 117:21

117:24theme 143:21

143:22146:6

themes 151:5153:6

theory 159:12thereabout

104:11thereabouts

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22:23 23:438:14 68:2379:8 89:21106:24142:23

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things 2:817:7 24:1128:14 54:1280:23 95:18114:20123:24126:5,6130:5 133:2142:19143:14144:7147:22153:21155:3170:18208:9,15,21213:1,21

think 2:155:7 7:213:21 18:818:24 21:1923:2 26:434:11 36:538:22 52:953:8 63:163:11 65:1271:19 83:3103:5,16104:11105:11,15106:9,20107:5108:19,24112:3 113:6114:20119:20120:15121:4 122:9122:11,14122:19,20122:22124:12132:6,20133:3136:15137:7,10,13142:17

143:3,18146:16147:22,23149:24150:16151:24152:5,19153:1,21154:4,23155:22156:20158:8 159:9159:18,21166:9171:17176:1 177:4177:20178:7179:12183:7 185:7189:8190:11195:22196:16197:2,3201:15,23201:24202:18203:11205:23208:21,24211:18

thinking115:8 134:3153:3 171:5

thought97:10 140:3169:22190:24204:24

three 10:1911:4 13:1118:22 23:1767:10 79:479:9 97:1898:12 121:8124:18128:3132:11148:12,19148:20153:16,21162:16

180:11186:4 188:5190:22192:5204:13205:7 210:9

thresholds105:8 169:1169:4

throws 148:3Thu 3:21tier 98:9,13

104:5,7105:4,16,17105:18

tiers 97:18,2398:12,16,2399:1,9,13106:1 169:3

tightly 83:23tilted 183:2Tim 163:11

163:15time 18:15

20:8,2421:10 27:230:12 35:2139:13 40:2443:18 60:765:22 84:1584:21 86:1091:20 94:2395:24 102:4102:9 110:8110:10111:24115:13,21121:7122:22125:2,13131:17138:16139:13140:16144:12147:10152:8,9153:2 154:1160:22161:3,6162:23163:6170:14,24

171:3,8175:13178:1187:20,23188:6,13189:9190:16193:13196:16,16203:21206:5 214:2214:5

timely 117:7times 27:7

40:6 42:1467:10 121:8150:22151:12

timing 60:22TMDL

128:13today 7:7,23

18:23 28:734:4 35:2041:16 97:17106:16122:14133:11161:23163:17170:10171:13186:19187:4188:16190:5201:24211:18

toilets 54:11told 6:9 62:6

124:7tons 130:20tool 162:4top 11:16

13:12 25:893:23 94:395:3,5119:19,21133:13

topic 19:18162:20

total 10:523:18 24:24

25:17 41:2142:19 43:543:6 50:2351:5,772:11,1773:22 74:1274:13,15,1575:2,476:10128:10,12131:16143:8182:20201:16204:19211:24

totally 160:6touch 31:20touched 19:1

106:22107:23

tough 196:2tour 189:16track 182:3

196:15tracking

79:13trailing 77:17trails 52:6

113:16train 177:17training

177:22Tran 3:21,21transaction

157:19transactions

155:8transcript

35:20216:10,18

transfer37:22,22,2366:2,5,1066:20 67:11134:18176:4177:13194:22

transferred66:12,1467:5 194:24

transfers

56:23 61:861:10,12,2265:14,1868:1 198:18

transition96:1

translate142:10

transmission52:6,9

transmitters117:10

transparent144:17145:15

trash 129:17129:18

Treasurer135:13

Treasury82:21,22

treat 9:14,15126:1 169:9

treated 11:8166:22

treatment11:2,5126:2,14127:12128:15129:14

tremendous36:7 121:13133:6

trend 137:10142:11

trends 81:17142:7152:15

tried 101:16121:9152:23

tries 155:22truck 118:3

119:4trucks 124:23true 170:13

179:22182:5214:20

trust 37:1937:20 38:2192:4



Page 27

truth 193:22193:24

try 6:16,1823:1 26:926:20 52:1754:1 65:695:12 97:24116:17144:16145:14151:1169:15183:8

trying 15:2416:2 21:1425:16 30:631:1 38:2354:7,7 61:471:20 81:893:4,795:23 96:17103:6122:10152:10166:24191:10209:14

Tuesday172:18

tuning101:19

turn 8:212:16163:17212:11

turns 129:17twelve 203:16two 11:22

27:8 32:337:19 40:1166:4 71:985:20,2186:6 93:1123:21,24124:1,1125:24135:18149:3162:16163:18165:7177:11,14185:12

198:10213:1

two-way123:5

type 75:778:5 86:12118:23177:15,24179:24207:21

types 27:1227:14 82:993:16,18182:16

typical 87:2087:21 88:488:19 91:14121:10136:18148:12

typically 20:487:5 148:20148:22149:3

UU.S 82:21,22Uh-huh

192:18ultimate

178:2ultimately

90:22 136:4137:11

unaccounted179:16180:15

unaudited29:5 30:1

uncertainty137:22,24

unchanged144:1

uncollected51:9 181:14

uncollectibles181:18

undergoing185:20

underlie105:4

underlying84:7 145:19146:1 150:2

150:6understand

23:2 30:4,781:16 96:17102:8108:13121:1136:24170:9172:14178:8,12198:24210:12211:14

understand...114:6 123:4168:20169:7172:21192:21210:7 211:7

understands167:9

understood198:17

underway187:5

unexpected32:21

unforeseen32:21 33:1071:13,22

Unfortunat...51:22 199:8

unfunded127:20150:9,12,13152:17

unique 101:5101:9

unit 29:21163:12,16178:19206:18

United 141:1units 130:17universal

127:5universe

140:22,23unknown

137:3,4unpaid 181:7

unregulated131:9,13

unusual158:7

update 77:16133:8

upfront 61:17upgrade

142:10upper 168:22uptight 140:9urban 147:12urge 171:4usage 26:7

77:1 78:2088:3 89:495:17 97:2498:2 99:1099:13 104:8143:9,10201:4,22202:15,17

use 13:716:23 19:520:15,1821:7 26:328:3,1031:19 32:1232:14 38:353:10,1168:7 87:2090:5,8102:22105:10118:24119:7 158:2158:14165:11166:1169:15182:8192:20

useful 114:21117:11161:15,19161:21162:11

user 27:16users 2:24

25:18uses 26:5

46:15 78:2187:22 155:7

210:6USTRa 164:5

164:8 166:9166:22167:9,13,24

usual 194:1usually 149:2

158:2 210:9utilities 14:15

24:6 41:1353:21,2259:2 87:1089:10,14,2390:2 91:8,992:15101:15,16102:14119:17139:5142:19143:19,23148:10164:16173:20,21

utility 40:1841:12 45:1246:20 65:1072:3,2373:4 74:1980:6 81:190:3,2192:23 93:293:8 101:9121:3 136:9139:2141:15142:21143:9 164:8168:15172:14196:19

utilization98:10,14

utilize 60:14utilized 30:1

125:24utilizes

172:10utilizing

19:12 70:5

Vvague 16:1Valarie 4:10

193:6 194:9valid 122:20

214:8value 66:11

66:14 73:1valves 10:18variable

141:24159:8,11,16159:17,23160:6,8,20

variation181:23

variety 24:5various 7:8

7:18,1916:1 17:227:13 77:23118:5 130:5169:1,3,4192:20

vary 182:13Veatch 4:2,4

4:7 30:1,934:23 39:1963:20 85:385:18107:23179:20191:11213:6

vendor119:10124:5

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verbal 167:3verbally

135:20versa 22:20version

105:20,22versus 33:1

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vet 191:3vetted 213:18vice 22:20view 6:15

24:11 89:19

140:5,24142:13168:10

violate191:14

virtue 114:23visitors 12:18voice 169:15volume 59:21

60:1,3,5,686:18

volumes49:17 53:18

vote 130:22

Wwait 6:11

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5:12 8:913:11 19:2220:2,7 21:421:17 22:2322:24 23:423:5 24:726:1 33:535:14 36:340:18 41:641:8,11,1642:10,1343:7 81:2383:20,21,2283:23 84:884:8 106:2115:13120:10122:6 125:1125:4 127:6134:6142:11147:11,12147:17148:7 153:5160:4,15,17171:17175:14183:22203:5205:11,21211:20215:13,16

wanted 35:2452:21,2467:3 95:1102:2 106:1106:16,24109:14117:4163:18165:12,14187:10190:10,12194:15,17196:15,18198:16214:2

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waste 166:23178:19

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wastewaters191:20

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water 1:1 3:94:5,9,17,194:22,24 5:25:16 6:4 9:1



Page 28

9:4,6,12,139:20 10:1410:15,18,2011:11,13,1511:17,2112:10,10,1212:12 13:113:5 16:1216:19 20:2221:1 26:527:4,1130:9 31:1337:5,2438:15 41:744:19,2345:9,1949:17 50:1751:14,18,1852:9 53:153:11,2254:1,2456:7 57:1057:13,15,1959:6 65:8,873:23 74:1274:12,13,1474:19 75:176:8 77:1,377:5,1278:23 80:880:9 81:1986:16 87:2388:3,5 89:890:3,3,4,590:21 93:1193:21 95:2296:24 97:1101:8111:18112:16,19112:19113:4117:20118:15119:17121:2,6125:16,18125:21126:3,17,19126:22127:3,4,5,7127:10,11127:19

128:5,7129:2,21130:11,12131:6,8,15135:15138:24139:23142:5,21,23143:22147:14,16148:10149:16,18150:2,11,21151:8 153:3153:20157:8 159:4161:19164:4,4166:8,15,15166:16,19167:1,8,16167:17168:16172:8,10,12173:5,9,11173:20,22173:24174:11,16174:17175:20176:1,9,10176:11,13176:14177:16179:14,16180:5,7,10180:13,14180:14,16180:16186:6187:11,13187:15,17187:20188:10,20189:12191:20194:11195:24196:2,5204:16205:3206:12207:5,14

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191:8197:14

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year-by-year25:6

year-to-year47:10

years 11:24

23:21 28:1329:1 34:1440:11 44:1954:10,1359:24 67:1573:18 75:879:4,9,986:6 94:21106:6 132:8132:11133:11135:6,17142:11143:1150:22152:3,10154:15,15154:19155:10157:17158:17159:14161:11,16161:20,22162:15,16162:16173:14177:12181:21190:22198:11200:17201:10204:14205:7

yield 155:8York 189:18Yup 110:24

Zzero 118:19

151:14

00 100:50.35 82:170.6 53:17

58:22 59:360:8 77:5

0.6/0.7 82:230.7 56:17

59:3 110:18157:19

0.8 56:17



Page 29

110:190.9 157:1808 155:15,17

155:19

11 66:10,13

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1.0 41:2142:19 43:1

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17 19:9,1331:15 47:547:13,1548:21 49:449:7 55:962:19,2463:3,2467:16 70:1472:16 75:1688:12 89:1991:13110:16112:13200:14,22

17/18 120:6179.6 48:5,518 19:9,14

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18.6 55:14,16100:10

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2

2 73:2 84:4105:17,17140:3153:10204:7

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20-year 81:2420/21 24:2200 58:17

120:16130:19154:17

2007 38:72008 38:7

160:112010 201:8

201:18202:9

2012 192:42013 157:17

215:62015 12:3

51:16128:10131:22151:3 160:1

2016 1:2 50:371:15131:19145:12

2017 40:1247:1 56:1561:21100:17130:3131:14,23132:12

2018 40:1247:23 55:1561:21 69:18100:13,14109:14

2019 72:172021 47:1

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206 70:13196:10

21 40:7 57:462:6 69:17110:19208:2

216.2 76:1122 1:2 56:5

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