And today the council is meeting in a special environmental quality committee of the whole. And we have one topic on our agenda, which is the Sanitary Sewer Consent Decree Implementation Ten-Year Financial Model Remedial Measures Capital Improvement Plan. If you can say that ten times fast, you're on. In just a minute we'll hear from Charlie Martin from the Division of Water Quality and from Ryan Barrow from Budgeting, but I understand Mayor Gray is here and would like to speak for three minutes or five minutes. Which limit would you like? I'll try to do it within that, Madam Vice Mayor. Thank you, ma'am. Greetings, council members. Shortly you're going to hear from Charlie, and I just wanted to share with you all that we've had some meetings. I've had meetings just as recently as yesterday with Charlie, with Cheryl, about this issue, about the current condition of the estimates of the budgets of the project. And I think it's important to put in context where we are today with this project. First, as we dial back several years ago when the EPA consent decree was negotiated, that was really a different time, a different period, a different financial world, and a different world altogether. Today, in my view, representing our citizens responsibly means that we must challenge, we must challenge especially the numbers that are presented, estimates that are presented, to ensure that we're getting the best deal for our citizens. So what you're going to hear from Charlie, and I think you already have some numbers related to the estimate by Hazen and Sawyers, the engineering firm, for the project that we once estimated to be or considered to be $300 million. And Charlie's going to say, which I understand, we all understand because we were here, said, you know, this is just a guess in as much as a guess perhaps three years ago. Nobody likes surprises. Our citizens don't like surprises. But what I know from five years now in government is that there are always alternatives to engineered solutions. And those alternatives involve costs. And it is our responsibility to engage aggressively the alternatives. Our outcomes for our citizens should be responsible outcomes as it relates to our infrastructure, our sanitary, and our storm sewers. What I've asked Charlie and Cheryl to do is to challenge, challenge the numbers, challenge the schedules, challenge how we're going to get the best solutions, not just for sanitary but for our storm sewer problems. Council Member Blues, you and I have talked several times about the distillery district as an example. I feel vigorously and I feel strongly that on that project it was a good demonstration of what we can do to save money. Yes, the schedule was adjusted. But in adjusting the schedule, we got a contract. Instead of one that would rise to $664,000, we have a lump sum contract not to exceed of $418,000. That reflects the responsible execution of our responsibilities as stewards of the public money, the public funds. So as we listen to today's presentation, I just want to encourage you to know that as far as the administration is concerned, we'll vigorously fight for the best deal for our taxpayers. And I know that we can count on that from our council members as well. Thank you all very much. Thank you, Mayor, very much. And with that, Charlie Martin will let you take over the podium and walk us through this presentation. Council members, the packet says 11 to 12. I think that is a technical error. It's 11 to 1, just so you know, ahead of time, in case we need the time. In case we need the time. Thank you, Vice Mayor. Thank you, council members, for allowing me to come and visit with you today. I was apprehensive about this presentation to start with, and now following the mayor, I'm probably more apprehensive than I was before. Because, you know, we've been asked to provide estimates in the past, and we're providing another estimate today. I need to couch that, is that we're trying to project 10 years in advance on what are still not clearly defined projects. In 2008, when we entered the consent decree, we were asked to project a cost with zero data. And so that was the number that we came up with based on zero data. We have a lot better data than what we had before, and so we feel like our estimates are getting refined. But again, as the mayor said, we will challenge these as we go along. But we do know where the problems are at, and we're in the process of developing this first remedial measures plan, which is due in October. That's why we're here today. A little background for the folks who are not on the Environmental Quality Committee. The consent decree requires the elimination of sanitary sewer overflows from within 11 to 13 years, starting from January 3rd of this year. There are 111 priority sanitary sewer overflows listed in the consent decree in the appendix. And so those are specifically targeted priority SSOs. The next two bullets are fairly obvious, is that failure to meet the criteria is going to result in significant reoccurring and cumulative penalties. The way the consent decree is written is you have a whole penalty section, is that if you fail to do something within a particular time frame is you get a dollar amount per day of penalty. And that accumulates, and once you go by 30 days, then they up it. And they make it hurt more and more the later that you are. In addition to the financial penalties is the likelihood of further legal action. Essentially the consent decree is a document that was entered by a federal judge. And so we at the division obviously take that very seriously as far as meeting the conditions that are in there. Revisiting the previous presentations that we've had to the Environmental Quality Committee, we had four different meetings starting back in January trying to bring the committee up to speed about these remedial measures plan. This is the consent decree's fancy way of saying the Sanitary Sewer Capital Rehabilitation Program, but in the consent decree it calls remedial measures. We spent a lot of time explaining that to the committee. There are three separate plans that are due for EPA approval. And I emphasized EPA approval. They have to approve these plans, and then they become an enforceable component of the consent decree. And those plans have schedules. They have an order. The whole plan is supposed to be based on how perceived SSO problems are. So you've got three different groups, the first group being where most of the problems are, group two being lesser ones, and then group three being the fewer of them. But they're going to be very conscious of that, is that they want to drive these things to where it has the maximum benefit of public health as far as eliminating SSOs. So there you see the groups, how they're broken up, and then the plan dates that are associated with all three of those groups. And as you can see is that group one is less than 60 days out for us. And so that's why we have been so anxious as far as coming to the committee to talk about this. The remedial measure plan, all three of them, have to recommend a design storm, which becomes the basis for sizing the infrastructure, the pipes, the pump stations, any storage tanks that we may want to have, and ultimately the treatment plant. The consent decree did not specify a design storm. Instead it says using best engineering judgment. And so that left it somewhat arguable as far as what best engineering judgment or best engineering practice is. But this group one plan that's due in less than 60 days essentially is going to draw the line under or set the milestone for whatever design storm that we do for the subsequent plans. Again, that's the reason for the urgency as far as why we've been coming to the committee. Back in June we came and I came towards the end of it. John Steinmetz with Hayes & Sawyer gave the bulk of the presentation. But essentially what we told the committee was is that because this report is due in October, we need to start writing it in June. We could not wait until the last minute to start writing a plan. So what we said is that we are going to proceed with a two-year, 24-hour design storm as the basis for remedial measures plans. And we said that because we believe that this was the smallest storm that EPA would consider and it was also the lowest cost alternative. And we'll have a slide in here as far as where those costs came from. This is a modified slide from those April 21st and June 21st presentations. This is capital cost estimates. During the course of presenting the information on the remedial measures, we've been out and met with stakeholders. We had one public meeting in all three of the watersheds that were in Group 1. We've met with Commerce Lexington. We've met with Fayette County Schools. We've met with the Neighborhood Council. We pretty much met with anybody who was willing to host us. And one of the questions that kept coming out is that, well, if you want me to consider the difference in these storms, I need to know really what you're talking about as far as the amount of rainfall and how much difference in cost there is between these different choices. And as you can see here is that we came up with, based on work that was done by Hazen and Sawyer, that for about 3.2 inches of rain in a 24-hour period, it was $540 million in capital costs. And as you see it escalates up there. To go to the five-year plan for a half an inch of rain more, it's nearly $178 million. That's a pretty good chunk of change for another half an inch of rain. The rate impacts by 2024 due to capital. Essentially people were trying to get this, you know, what's the delta between how much I might pay a month to choose level A of insurance versus level B or level C of insurance. And so we did a very, very rudimentary calculation based on the estimated capital cost divided equally between 106,000 service connections, and then we applied it as a borrowed money over 20 years at 3% annually. And that's where we came up with, as far as what we, armchair level, decided what the monthly impact would be to rate payers by the time that we get to 2024, which is the end of the consent decree. So again, during that 21st of June meeting, we reemphasized that the two-year 24-hour storm we felt was the most cost effective recommendation for inclusion in this remedial measure plan, first of which is due in October. The Environmental Quality Committee then requested of us is like, well, Charlie, you know, your armchair calculation is all great and fine, but we need a financial model that includes other costs, personnel costs, operating costs, existing proposed debt. We need more than just that level of the armchair estimates as far as the difference in cost for this capital program. And so that's what we did, is that we sat down with Commissioner Driscoll and Ryan Barrow, their team, as far as to go through and develop a financial model to try to put a better projection of costs. When we started into this exercise this summer, we recognized very quickly, again, there are a lot of assumptions into this. You're trying to project into what something's going to be in 2014 is very, very difficult, a lot of assumptions. For me, first of all, and this has been a challenge from the very beginning as my opening comments, EPA hasn't approved anything yet. They've just put stuff in the consent decree. So they haven't approved the plans or the schedules that are going into those. And so how you drive your cash flow model is all going to be predicated on how those schedules are approved by EPA. The submittals are ongoing and will be going on through 2012, as you saw from a previous slide. The specific projects and costs associated with the construction is uncertain until they have finally approved it. If we're going to rebuild the trunk sewer or the sanitary sewer from Tate's Creek Road all the way to the treatment plant, when are we going to do that? But also, what's the estimated versus the actual bid cost associated with that? So all the estimates that we're providing here are really for planning purposes. When I get to my last slide, and I'll just say it here earlier, we weren't asking you to make a rate decision today, and we haven't been asking for that all along. What we've been asking for is guidance from the committee. Now the committee of the whole is, what do we put in this remedial measures plan? Do we do the two-year storm, the five-year storm, or ten-year storm? And all of the financial model exercise is for you to get a handle on the difference in cost as far as committing to one or the other. Some other assumptions that went into this, there's an estimated small increase in personnel cost to manage the expanded obligations. There's also estimated annual increases for operating based on historical trends and anticipated costs for implementing all of the aspects of the consent decree related to sanitary sewers. As an example, last week I think you guys were in here hearing about streetlights and increased regulation on the electrical and electric companies, and they'll end up passing that along to us, and we consume a lot of electricity at those treatment plants and pump stations. The CMOM we really haven't talked about very much. That is the management part of the consent decree. It is fairly low cost compared to the capital program. I mean, when we're talking about 540 million for a capital program, CMOM isn't even in that conversation. So that's one of the reasons why we really haven't been talking to the committee a lot about it. It's a very insignificant cost compared to that 540. And I think you'll see that in some of Ryan's slides. As I said before, we don't have the schedules approved yet by EPA as far as how that $540 million would be expended over a period of time. So I just assumed a bell curve to where we would start out very slowly as far as the capital investments. We would peak in the middle of the consent decree period and then ramp back down again. And, again, that was a broad assumption on our part, but it seemed like it made sense. And in talking to some of my other colleagues in other communities, that's kind of the way things had played out for them. So you're going to see more maximum annual costs on capital expenditures between FY16 and FY22, based on the model that we're presenting today. At this point in time, I'm going to turn it over to Ryan. He's going to carry you through how he developed the model and other information about that, and I'll be back up. As Charlie said, I guess welcome to round two associated with the finance team, long-term financial analysis associated with a specific fund. Essentially the charge was the 10-year forecasting model that could produce the 10-year pro forma. We actually, I think just to compare and contrast the two analysis, I consider this to be a lot more robust in nature. There's a lot more variables that go into this than the urban service analysis. There's specific things that we would draw your attention to in terms of what are pertinent for decision making. And, again, I don't think the power or the due diligence is necessarily going to shine through. I mean, in terms of the iterations, we now have a forecasting tool that will facilitate policy decisions. So when questions of customer growth are asked and questions of what happens to exclusions and those type of things, we have a forecasting tool that's tried and tested. We back-tested it several years. They're going to facilitate and be able for us, the finance team, to produce those. I think there's almost 40 tables, and it's a very large file that we're not going to be able to go into, and it would be a separate discussion if we would go table by table and work through those assumptions. We're more predicated on what are the inputs and what are the outputs. We also ask consideration for extra credit because the remedial measures plan goes outside that 10-year original ask. So we tried to caveat it, and the model goes more or less through 2025 where the balance of the remedial measures plan would be implemented. I think in terms of budgeting, and I think Council articulated this through our previous cycle, we address revenue first, and then we talked about the expenditure side through the cycle we just went through. I think this is a little bit different. What's really going to drive a lot of these costs, we have discretion on a lot, but in terms of this, it's more or less going to be building blocks. We're going to really have to focus on the cost side. There's certain costs for which we don't have a choice. Then we can look at the revenue side. So when I first got out of grad school, I worked as a rate consultant, and my boss gave me this presentation. I think it's really important to go through essentially the methodology 101. I think in terms of the building blocks, it's three distinct building blocks. We're going to look at the personnel, the operating, and the capital side. Now, we focused heavily on the capital side. There is some growth in personnel, as Charlie just mentioned, but the capital side is really what's going to drive this next block. So essentially this block is going to have to fit on top of these, and it's going to have to fit and be right sized to fund these three particular things. The next step, which we're not going to focus on today, is that block. How big does that revenue block need to be? The next step is designing it out. What customer classes, rate design, those kind of things, that's not essentially what the model. We're still in the bottom blocks, how big, the capital, how they're going to grow, and then how we're going to grow the revenue side to be able to fund those expenses. I'm getting a little ahead of myself here. There's a flag. There we go. So I touched on a little bit about what we produced. The financing team in aggregate, it was really a very collaborative process. I think it was almost 15 meetings, and there was numerous hours and hours just in data to get data in order to put this thing together. But the end result is we have this financial forecasting tool. It's predicated on a number of assumptions that I want to talk about in a little bit, but it does factor in all the components. The revenue, the capital, the debt, the operations, and the personnel through the study period are factored in, whereas the slide, as Charlie mentioned before, was more capital driven. That's clearly the driver here, but there are other costs and considerations that need to be funded over the long term. When we talked about the urban service analysis, we said the crux of the math was really predicated on assumptions and allocations and how we allocated money among the purposes. This is a little different. The drivers here, and we've all talked about one assumption and one large driver, is the two-year design storm, that large capital expenditure for which we will have to put capital towards over the next couple of years. But these are some other ones. In terms of tables, we made various assumptions in customer growth. We made various assumptions in customer usage based on educated guesses for which the data that we had. So we wanted to draw your attention. Clearly, a combination of these or one, such as the size of the remedial measures plan, is essentially going to change all the forecasting models substantially. We have the tool to calculate it, but all these assumptions are drivers. So, again, when I typically, when we quote rates, interest rates on bond deals or we quote sewer user fees, I really hate to get locked down in a specific number, such as 300 million or 500. There is a right number which we'll get to, but that's why we slapped that crystal ball up there, because essentially when you go through a 10-year study, 13-year study, with all these drivers, these things are going to change. This is one of the 40 or so tables. Essentially it goes out, as you can see off the right, I wanted it not to be an eye chart. I think it's important to distinguish the remedial measures plan, which is at the bottom. That basically was allocated among the period of time based on historical spending patterns and what the operations side believed they could execute effectively and put additional things in place to remediate some of the overflows. On top of that, there are additional capital expenditures, and a lot of those are called out there in terms of pump station. There's additional I&I costs. We, in my experience, we have a high I&I, inflow and infiltration, into our pipes. So there is additional capital that's going to go to mitigate some of that additional I&I. And some other things that are facilitated over time, in addition to the remedial measures plan. So we probably have a $540 million, we do in the model, have a $540 million remedial measures estimate assumption based on the two-year design. And then there's just under another $100 million in capital over the same period of time for which we need to fund. So again, focused on kind of the inputs and some of the background, now I'd like to kind of talk to what some of this, the forecasting tool is telling us. One of the things being I wanted to, we wanted to specifically draw your attention to is the debt side. Clearly, pieces of the debt is going to be cash financed, but the majority of it is going to be debt financed. So in the bottom, the actual colored blocks are the existing debt. So in terms of size of scope, it's less than about $10 million. We have about a $45 million fund. The debt service payment, the mortgage payment is less than $10 million. In order to generate the cash to fund all these capital projects, you can see we have a very steep slope. And we're essentially projecting in 2025 almost $55 million in debt service payments. Put that in perspective, the fund today is only about $45 million. So our mortgage payment in 13 years and 10 years is going to be the size of the fund if we fund this large capital expenditure, the numbers that we receive from the operations. To me, that was something that I thought was very, very important to articulate. So let's switch gears from the debt. Clearly, the debt is the driver. And now let's look at the building blocks that I said are in the forecasting tool. In the very bottom in that bluish color is that personnel. Now, we looked at, we collapsed all the various accounting lines and reached out to various divisions. We made assumptions for what insurance is going to do over the study period. What fuel, what gas, what repairs and maintenance. And all those have various inflation factors associated with them. And they do correlate, too, because obviously we're putting on some additional pieces of equipment and assets and stuff. So we have to add that we specifically called out the additional personnel. That's about $1.6 million that was given to us from the operations individuals in order to support. I mean, this is a lot of engineering projects and a lot of construction that would have to go in and be put in place to facilitate and mitigate the overflows. So there's an additional personnel, in addition to the bottom line, which would be normal inflationary pressures. There are going to be a ramp up, and it's maybe about 10 percent of the personnel. In addition, along with some inflationary pressures on that, such as health care and some other things, that will go out through the study period. Operating piece, we did the exact same thing. We collapsed all the account numbers into various groupings and made inflationary assumptions over the period of time. Insurance was another one we specifically talked to law in order to forecast out over the period of time. The top two are kind of the balancing act. We have a lot of documents, unlike GEO, where you can have $1 and that can go to debt service. When you do revenue debt, which the sewer fund is, it's basically a pledge of revenue. The general fund issues general obligation, which is the full faith in credit. This issues revenue debt. A number of years ago, we set a 125 coverage. It's a debt service coverage ratio. So obviously, if you have to have that extra cash each year, you're going to have additional monies that you can put in the fund balance and then put for cash funded debt service the following year. So that essentially is the CIP, the cash funded piece, is that additional surplus monies that we have to have for our bond documents that we can reinvest and actually pay some cash. The top is purely all capital markets transition. You have to have two bonds in order to fund that. And those are the debt service payments as they balloon. The previous slide, those additional debt service payments are what you see in that top gray category. So we're going to take this fund in order to fund all these components. The fund is going to go from essentially a $45 million fund and it's going to go at the end of the study period in excess of $100 million. Well, clearly what the driver is is the debt service with other caveats such as inflation and additional personnel that need to be put into place in order to fund this, this large capital need. So in terms of translating into what Charlie was saying, in terms of what is the average cost, well, the pro forma, in order to generate this revenue, that second block that I talked about, in order to generate the revenue, we're essentially talking about the average cost. We're talking about, based on the numbers, a 5 to 10% annual rate increase in order to fund this capital. And we then overlaid what would be the average bill or essentially the impact to the customer base. So we talked the fund going from $45 million to over $100 million. Essentially it's no surprise that the rates are going to do about the same thing, $30 on average a month and going essentially to $71. Now, again, this is all predicated on the two-year design storm. So I articulated the assumptions and all the assumptions are key to driving to the end result. So we specifically called out the one that we've all vetted and talked about a lot and ran the model for the three different scenarios. The two-year design storm is what we just went through and it is the assumption that the operations are going to move forward with and the plans are going to be submitted to the EPA based on. But the five-year and the 10-year have also been discussed, so we tried to put the similar costing numbers to that. So essentially if we look at the two-year design storm, rates being increased over the study period from $30 to $71. And again, that's every year, that's not just one year in particular they gradually grow. We tried to overlay what the five-year and the 10-year would cost. So essentially you're going to be paying $10 more a month if the policy decision is to go with the five-year design storm. It is a lot more capital intensive, so obviously that second block, the revenue, needs to grow proportionately. And then where we're almost at $86 for that 10-year design storm, again, based on all the assumptions that are in the model. And this is where I finish this up. I want to take you back, though, real quick to this was surprising to me. This puts greater clarity of what the impact of rates will be at the end. But if you notice the difference between the two and the five-year storm as compared to the information we gave you guys back in June, information I gave you in June showed it was going to be about $9.50 difference. This is 10. This is $5 on that armchair calculation than I did. It's about $5 right there. So I don't know if that was an anomaly. I think what that told me is the capital is driving this train. You're seeing higher numbers here than what we had because obviously he has more information about the costs associated with issuing debt, but the differences are being the same as far as the increased cost for making one decision versus another decision versus another. We've stuck this slide in here. This is a modification of what we had in June as well. This shows many of our other peer cities who are in the midst of consent decrees. The ones that you see in blue are basically what their current rates are. The ones that you see that have in red are based on published information as far as what they're projecting their rates to be. And we included ours based on today's discussion. The folks that don't have a red block, we didn't make contact with them in order to figure out what their projections are. But you notice here is that here we are and here's where we're projecting in that somewhere above $60 range, and then you can see where Louisville is projecting themselves to be at roughly that same time frame. SD1, which is all the three counties in northern Kentucky, they're already there based on their projections in 2016. You saw in a previous slide, I know a slide from June, that Birmingham had chose or recommended a 10-year storm. The information I have is Birmingham is now filing for bankruptcy. I think that that is a key consideration about making the decision about having a high design storm. I know that's kind of frightening, but when you think about it, is that, you know, how much are you going to invest in having that difference of rain? Everybody wants to have a high level of protection, but there is a supreme cost to that. As of today, they're paying more than $80 a month for sewer bills. Okay. Wrapping this up, I wanted to again repeat really what we're asking today is the decision about what we're going to do as far as a remedial measures plan. I know this sounds kind of harsh the way I worded this, because, I mean, we've told the group we need to move forward. It's not because we're trying to be pushy about it, but that report is due in 60 days. So if it's the will of the council for us to reverse course, then we'll have to do that. It will be difficult to do to pull back at this time, but we've always said that we will if we have to, as long as we're up against the deadline. But it's the department's recommendation is that we choose that two-year, 24-hour storm. Add that caveat, Brian mentioned that we're increasing the amount that we're investing in I&I removal as part of that financial model. Because I've said it here four or five times, we don't have a capacity problem as much as we've got a problem with too much water is in the system. And we've got to get the water out of the system in order to make this two-year, 24-hour investment work more for us even beyond that 3.2 inches of rain. We have been studying and collecting data on the system for nearly three years now through the sanitary sewer assessments. In many of your districts, the smoke testing, the televising, all that. What we're finding from the smoke testing through two complete studies so far is that about 50% of the smoke defects are on public property, and the other 50% are on private property. Smoke defects being is that if smoke can escape from there, that means that water can get in there when the ground is saturated and all that. So we need to, I think, in order to be able to make these plans work well for us, that we do need to continue to pursue an aggressive remediation for private property as well. Okay. So the decision is that should we reverse course and not do a two-year storm? Again, what the decision we're not asking for today is on an immediate rate increase. Based on the analysis that finance did is that we're still good with what we've committed to. We're able to be able to finance with our existing debt service, and until those remedial measures plans are sent to EPA and we get a response from them, we're still in good shape as far as rates are sent. I want to thank you, Mr. Charlie Martin and Mr. Ryan Barrow for our presentation, and we do have several council members with questions. First up is Council Member Martin. Because the rate will be implemented over, I guess, 10 years, so it won't start all at once, the chart on page 7 really is understated, because you either have to have the rates be higher later, or you have to spread the payments out longer than 20 years. Because that chart on page 7 was an estimate of the rate that was going to start all at once. It was an estimate of what it would cost to amortize that in full if we borrowed it on day one. This was the rate impacts by 2024 on a monthly basis just due to the capital. What it came from was the very first public meeting that we had at the Fayette County Extension. One guy asked, he said, what's the difference, how much is it going to cost me more to have one or the other? He wanted to, and it was a good question, how much more do I have to invest to have the platinum plan versus the gold plan? But the two years, the $28, we're not really going to do that over 20 years. It either has to be higher because we're going to scale it up, or it has to be longer. Isn't that right, Ryan? If I were to work on one that was caveated with just capital, if I may, right here, I think this would be a better articulation as to what happens. Essentially 5 to 10 each year. That's a $45 increase. And you can see how the average bill has that bell curve, steep slope, and it's really driven by debt service. $28 was incremental, so if we're at $30, Charlie said the capital would cost essentially another $30, so I'd take it to $60. Well, the reason this says $71 is because there's additional operating and other capital that was included in this. This is an analysis that was done with more data. So I would move away from that slide that was said in June, and I would more migrate on this slide that we just got together recently. Can you send us a chart that shows us projected rate increases over the next 30 years? Based on this? I mean, we have that information. It's a little premature given some of the assumptions that are out there, and I'd hate to get fixated on numbers because assumptions drive that. But yes, we have that. We can send it to you. The second thing is, Charlie, back in June or whenever we met before, we talked about having some historical information on the rate increases from the sewer fees. Because a lot of folks said, well, I heard, I thought we had, that's what the 2008 sewer increases were. And so I thought we were going to see today some information about the historical increases in the sewer fees. I didn't have that in my notes, so we didn't prepare that. It was all around what the projection was going to be. I'm going to go on record, and I've gone on this record before, and if we could go back and play the tape from that. That last rate increase was to get us through the first four years. That's all it was for. Well, not having been on the council at that time, it's helpful for me as sort of coming in in the middle of this to understand the history of it. I came in in 2009, and I've had questions from constituents about, well, what were the previous? I thought we already paid for that. So this is obviously a whole new ballgame. The last thing is, Charlie, the chart that you brought in the last meeting of the Environmental Committee was great. And I have a slide of that. It's showing the scope of the project. Is this still accurate that it's incremental? I think I know which one you mean here. Let me see if I can bring that one up. You want to switch over to Charlie's presentation? It's helpful for council members who may not be on that committee to see. I know which one you're talking about. Let's see if we can find that slide. The two-year plan is one set of increase, and I guess we're looking at the West Hickman. Can you walk us through these three slides, the two and the five and the ten on this? This is the table you're talking about? But the pictures that show that the five builds on the two and the ten builds on the five. We'll do that in just a second. One of my questions was, as we make these choices, are we prevented from doing the five if we choose the two? Do we have to go back and redo it all again? The five actually builds on the infrastructure we already have in the two-year plan, and the ten-year already built on what was in the five. If you could walk us through that, I think that's helpful. These maps are somewhat hard to see. What we had done is that we were trying to illustrate what the actual impact would be on the ground for a particular level of storm. And so Councilman Martin had references to these. This is the Wolf Run Sewer Shed here. This is Versailles Road running right through the middle of it. The existing Wolf Run Pump Station located right down here. This purple line represents something that we're already doing through current rates, building new pump station and new line. This is a two-year, 24-hour storm. So essentially, basically the whole system all the way up to around south, I guess, yeah, that south and drive area here, the railroad tracks essentially runs right here. And here's Nicholasville Road. So essentially the whole system. And so we're essentially replacing basically the whole system out there as well, putting in the infrastructure out here that's part of Expansion Area 3A that's always been there. You look at this two-year storm, this was a sobering thing for the neighborhood meeting in July. 12 million gallons of storage out at Cold Stream in order to be able to make a two-year, 24-hour storm work. Town Branch, good news is, is that it's not as extensive as it is in others. Right here is the downtown area. Here is the pipe here that's going over across Eastern State Hospital. And this is what we refer to as the U.K. trunk. Because large parts of Town Branch, the downstream, Masterson Station, all that is so fairly new, not a lot of extensive needs out there. South Elkhorn, really nothing to do. We've already rebuilt the pump station to a tune of about $18 million, and the storms that we had back in April, it did not overflow. So that tells me it worked. Looks like the South Elkhorn is basically resolved. North Elkhorn, this is a system that we're currently working on right now as well, using current rates along with leverage with a KIA grant. This would build a new pump station here at the end of Polo Club Estates and Winchester Road. Some other minor upgrades that need to go on, but you see that we need storage in that area as well. East Hickman, there's Overbrook Farm. That's expansion area one. That has always been part of the plan. We would also be redoing East Hickman Pump Station and have an equalization tank there as well. You see the new 21.3 million gallon a day pump station. This is the one I think that you felt like that was the most graphic. Most of our investment is going to be in the West Hickman Sewer Shed. Nearly half of those reoccurring SSOs that I mentioned at the beginning of my presentation are actually located here in the West Hickman area. So here's the treatment plan in Jesmond County on the downstream side of Veterans Park. The idea when it was developed here is that we would increase the peak flow to 100 million gallons a day. Current peak flow is 72 million gallons a day, and when we get 72 for a sustained period of time, the wheels are falling off down there. They've got just about every tank they've got in service, and they're trying to plug the dike. But even to go from 72 to 100, you still need 20 million gallons of storage at West Hickman in order to be able to handle that. But that's the two-year storm. If we do a five-year storm, the actual increase in the amount of pipe that's added, the blue would still have to be upsized incrementally, but it would have to be, the cost associated with that is not as great as having to add new pipe. But when you expand out into the lighter yellow areas, these are the additional pipes that would have to be touched in the two-year storm that would not have to be touched in the two-year storm. Here's the cost driver, though. You go from 20 million gallons of storage to 31 million gallons of storage. You get out to the 10-year storm, now you see a different amount of yellow. You've got the blue and the yellow, but now you have some additional red. You've got some additional pipe that you have to touch and disturb. On the five-year storm, you're already touching the yellow and the blue. So it just shows how incrementally you kind of have to expand the web out in order to be able to handle the bigger storms. But the pipe itself is not the driver in the cost. It's those storage tanks, because you see this in all the different areas as you expand this out. You go from 20 million gallons of storage to 43 million gallons of storage from a two-year storm to a 10-year storm. Essentially, I think that is the equivalent of filling up Commonwealth Stadium to the bottom of the upper deck. Fairly significant amount. This table is the one I wanted to go to. I mean, these numbers all change. Pipe sizes get messed around. But you go from 281 to 351 from one storm to the other, it's another 70,000 linear feet. In the big scheme of things, that's not a lot. We've got 1,400 miles of sewer in the system itself. You can double it in concrete and steel and earthwork and all the things building storage tanks. To me, that's the biggest driver difference in the cost between the two-year and the 10-year storm. Does that help? Next up is Councilmember Blues. Thank you, Vice Mayor. You're recommending the two-year design partially based on the fact that, well, I shouldn't say the fact, but the assumption that that's the lowest level that the Environmental Protection Agency will accept under the terms of the consent decree. And one of the things that the council has to factor in, as you know, and you mentioned this a short while ago, is that at whatever level we work at, but particularly if we're talking about the environmental protection agency, if we adopt a two-year, an aggressive private property program needs to be put in place, and of course, as you know, we have a work group that will soon be working on that, headed by Councilmember Farmer. But there are going to be, in addition, I gather, in addition to the costs that have been laid out here, there will be costs to the private property owners and the rate payers for such a program. Do you have a notion of what those costs might be? Let's assume, for example, that we initiated a program by which we, the private property owner would pay, let's say, half, perhaps, and public funds would be used for the other half of whatever remedial measure might be required on that program. On that property. Presumably, I'm thinking that it would involve a public-private partnership. I'm sorry to be so round about this, but I'm just interested in whether we have some kind of projected number on what we're going to be in for as we move forward with that part of the puzzle. The answer to your question is straightforward, and then to kind of wander into some theory. Straightforward is that we spend less than $2,000 per sump pump redirect, on the average. To disconnect a sump pump, we're probably getting, what, between 15 to 25 gallons a minute during a rainstorm off the system. I could go dig up Main Street and repair a small crack in the pipe, and that will cost us $10,000, and we probably got rid of a quarter of the amount of it. My sense of thing is, is that you'll get more gallons per dollar going after the private property than you'll get after the public-private partnership. The, what many of the colleagues in our industry are doing is they're trying to leverage some of that capital dollars that we talked about earlier in going after that private property and getting the water out of the system, because they can get more bang for their buck. Some communities are putting it wholly on the property owner. Some communities are bringing government dollars and investing on it because they know that they're going to spend some percentage of every dollar getting the same amount of water out of it. And so it's going to go back into what the mayor had said, is challenge the numbers. You know, if you challenge the numbers and you don't just assume, is it we'll just spend whatever it takes to make it big enough, as opposed to spending a percentage less to make what you have work better. You know, we'll have missed the point. And so I'm anxious for us to really roll our sleeves up with Councilmember Farmer's work group, because I think there's opportunities to do that. As we go through this, we'll learn more and more about the true costs associated with eye-in-eye removal from the private property. But my sense is, is that it's cheaper incrementally than it is building big storage tanks, big treatment plants. And big pipes that you need once every two years. And this is very important, too, because we know that any private property initiative has to be comprehensive in order for it to be truly measurable and cost effective. I agree. Can I address one other thing that you brought up, is that you had asked about our recommendation for the two-year storm. It's not only that it is what we believe is the lowest cost alternative that EPA would consider for a private property initiative. But our benchmark cities are doing the same thing. And we had this slide in the June 21st meeting. Louisville, Knoxville, Nashville, northern Kentucky, Atlanta, Greenville, North Carolina, wind, you know, it stops there. They all have recommended two-year storms. And so that, we're going at that, is that we feel like that precedent has already been set in these other communities, that that is an intended and intelligent way to be able to approach it. You know, when we looked at some of those larger storms, except the one that Birmingham jumped out at me, based on the information I got, that they had submitted a 10-year storm. And when I read their headlines and I look at their rate increases and stuff, that's very, very troublesome. And then if you build, kind of put in the context of what I just said, if building stuff that you won't use once every two years is an operational challenge, building it to the size that you need, to the size of what I need once every 10 years, just doesn't make sense to me. Is that you're better off spending that money getting the water out of the system. Today, we don't have a capacity problem. We won't have one tomorrow. It's when it rains is when we have a problem. Thank you, Vice Mayor. Mr. Martin, thank you for coming today. That was a big smile. Can we pass legislation that would allow our building inspectors to go into residences and determine if they're illegally attached, you know, sump pumps to our system and have those removed? Because if we were going to try to do that, we wouldn't have to be able to enforce it. I think that's a better question for Commissioner Graham than it is for me. I mean, as far as the what legally or what legal standing we have as far as entering properties, I'll defer to her. It's certainly going to be one of the first questions on the table, I'm sure, when the work group convenes. What our legal authorities are. So you all have not asked yet for an opinion on whether we can pass legislation. Could you go ahead and make a request on that? I think that would be worthwhile to investigate. Because I'm inclined to agree if we could eliminate water going into the system that's illegal, that in turn would reduce the total cost to the rate payers for upgrading the system. So I think that would be a good strategy. The other question I had was if we continue to have sanitary sewers overflows after we put in the two-year 24-hour system, are there continuing penalties for overflows? What's the impact of penalties after we've done the improvements? The consent decree, it ranges between $1,000 to $5,000 per event, depending on the volume of the overflow. And so the cap, though, is $5,000 per. Based on our estimates as far as with the model, that if you design for this two-year storm, during a five-year storm, you'll have 13 overflows at $5,000 apiece once every five years. And that's on the five-year plan or the two-year plan? Build for the two years. That's all we're talking about is building for the two. But if you have a five-year event, the model predicts 13 overflows. If you have a 10-year event, it predicts 53 overflows. If you have a five-year event, you can't plan for Katrina or anything else. But this is talking that five-year situation is that once every five years that you might pay as much as $55,000 for overflows as opposed to hundreds of millions of dollars. Right. One of the things I'm wondering is that our government's planning philosophy is to not really go into the rural area, to keep that more for agribusiness and horse farming, et cetera, and to do more infill and redevelopment within the urban service area. In your calculations, are we assuming that we're going to continue that policy and, for example, the tobacco warehouses on Saturday, South Broadway that were taken out and now there's 600 or 700. apartment units in their place, do we have calculations indicating that we would have this continued type of redevelopment and what impact that would have on SOAR demand? We have set this whole strategy up as far as replacement of pipes based on full development to meet the two-year, 24-hour storm, which would allow capacity for future connections. You know, you can never guess how a property may change its use as far as based on what it is, but I think we've intelligently tried to focus on ones that are obvious, such as tobacco warehouses and others. But it goes back into Councilman Martin's comment, is that what we're asking today is what do we commit to with EPA, which then becomes our commitment. That never precludes us from doing more if we choose to do that. If we want to build for additional capacity in an area that we wish to see it change its character as far as development, that's a local choice to make as opposed to a decision that's made in Atlanta or Washington, D.C. Well, that was one of the questions I had next, and I guess my time is about to run out, so I may go quickly. Would there be a possibility that we could have a two-year plan, a two-year plan modified to maybe have storage for five years or some for three years, some type of a different level of quantity so that we would have redundancy and additional storage in there, eliminate additional overflows? Well, certainly we're going to pursue any place that we can get a cost-effective return on our investment in order to be able to maximize the performance of the system. I mean, I've got 140-some people that are all about that, because every time it rains and we have all these overflows, it's chaos. The linchpin, I think, of that is the plan that you and I agree with is that we can build that additional capacity or that cushion in there by getting water out of the system. Okay. Thank you very much. Next up is Councilmember Ellinger. Thank you, Vice Mayor, and thank you, Charlie and Ryan, for the hard work that you put in this, because I know it's taken a lot to compile all this information for us. In looking at the two-year design in year 2025, it will be $71, 138% increase for the rate payers. After that occurs, will there be some kind of decrease then to the cost then associated to the rate payers, because a lot of the capital projects will be completed? Will this be sunsetted? I would not envision that being the case, because you'd still, after that period of time, you would have still some or more inflationary pressures, ideally, and the debt service is 20-year obligations. So we've essentially ramped up, generated revenue to service the debt, and that debt would continue on essentially for 20 years. So even though we'll have most, I know there will be other maintenance issues and there will be some capital increases for growth, but you don't see this as eventually the cost coming down? No, I do not, because as we layer in this debt, each one of these blocks are essentially debt service that we layer in. You issue bonds 20 years, repayment cycle, similar to your mortgage. Once you put your mortgage in place, you essentially pay for it for a period of time. So again, the driver here is capital. We're going to fund the capital through debt, and the debt essentially is an obligation for 20 years. So debt in 2015 will essentially come off in 2035, but essentially from that point forward, you know, those obligations are going to continue on at that level. There is some play in the cash funded piece, but again, these are not all our capital needs in perpetuity. Even after that period of time, you know, there will be some additional R&R needs and some additional capital replacement we need to do. We can certainly, you know, do a higher amount of cash funded and then have that sunset, but the rates are going to have to ramp up quicker to do that. And also I guess there are going to be private businesses are also going to be putting costs associated in their properties and stuff. Does that come into play in this at all? Vice Mayor, you might help me out on this one. I think he's talking about the private property issues. That's correct. If the private property issues are fixed in a greater amount than expected, does that impact? That's correct. The private property issue is a hole in a pipe that we put a pump on and we're pumping water through that hole. So from there, I'll turn it over to the expert. Let's go to this slide. Where are we as we go through this entire process? Would I like to see this curve flatten out a whole lot more? You bet I would. Will our long-term costs be really what we're reflecting today? That's my job, is to make sure that we do this as cost effective as possible. The mayor, you heard what he's told me. And so it's crystal clear to me is his expectation is if we set this benchmark, is that we do everything that we can to get that down below where we're talking about today. I said this and you weren't in the committee. I have a vested interest myself in making sure that this is done as cost effectively as possible. As a career government employee and stuff, I'm going to be here hopefully until the end, and this is my legacy project. And I want to get to that point there is that our team delivered the goods and we did it responsibly and effectively. That's really the only thing that we can share with rate payers right now, because it goes back into that other slide. Every other community that is in the consent decree, been invited to the consent decree party, is facing this same issue. The Louisville Courier Journal has, I've read articles where MSD has said that they are going to do 6% rate increases for the foreseeable future annually. So they've even gone out and said there's not an end in sight. I think taking this and challenging things on a regulatory standpoint as far as how much is the cost of regulation and how much can the rate payers burden is a legitimate question. Thank you, Charlie. Council members, if we could go back, I noticed Mr. Gardner came in. I think he's still back there. He said there's a need to allow inspectors to go into homes and look at illegal sump pump connections. Can you give us an off-the-cuff answer to that before we go on? I don't think I can give you a full answer today, but I do know that there's been some research, or my recollection is there was some research done sort of along that line a few years ago when there were issues about housing at UK and maybe the use inside not being consistent with what people were telling us they were using housing for. I did not do that research, but my recollection is there are some substantial constitutional issues that you get into when you're talking about getting into somebody's house, as opposed, you know, you probably have to go to, even if you pass legislation, you may have to go to a judge to get an order to allow you to get inside somebody's house. I'm not certain that that's the bottom line, and I don't want you to take that to the bank. But there are some issues that are raised when you're getting into somebody's house, as opposed to things that are outside and obvious in plain view. I think based on Mr. Lane's comments, can you find that out? Yes. Well, I made a note, in fact, I already made a call upstairs to see what, you know, we're not reinventing the wheel, I don't think, in researching it, but I just don't know what the bottom lines are right now. Okay. Thank you very much. Next up is Councilmember Kaye. Thank you, Vice Mayor. I've got a financial question for Ryan and then a few questions for Charlie. I wanted to follow up on Councilmember Ellinger's questions. If we were to take this line out, I guess it would have to go almost 40 years. Is it fair to say that that line would finally come down to zero, just the debt service on this capital investment? I don't think we could achieve zero, because there is going to be normal replacement. Pipes have a long life, 50 years on average. So there would be, even though we put all this infrastructure, there would be other things that we would need to replace. What's your normal capital spend currently? $12 million a year. We're currently spending $12 million a year and we haven't addressed the long-term remedial measures, so there's a baseline of capital for which you would need to fund, even in those out years. I guess I'm still confused. If I'm just talking, I understand that there's ongoing, there's inflationary pressures, there's ongoing issues of replacement and so on. If we're just looking at the cost of the debt service, of those bonds that start in 2012 and go through 2025, if you projected that, now we're talking about 40 years. But would not that, the debt service itself come down? Yes. These bonds that we lay around in 2014, 20 years they would roll off and 20 years later they would roll off. So they would start, 20 years out they would start declining 5% a year and eventually the debt service only would get to zero. That's the one issue that I do have. I would agree that it would be a normal bell curve. We have a backlog right now and the bell curve, we would ramp up debt service payments and it would come way back down. Now, I'm making the assumption that we would not cash fund that. I would say there is going to be capital needs in 40 years from now. So if we debt finance it, we would have some smaller level, it would probably come back down to where you see on the front end. It would ramp up, we would fix our problems, our backlog and then it would lower, but there would be some normal routine replacement that we would need to fund in the sewer. Okay. Thank you. Charlie, a couple of questions for you. On the 2-year, 5-year and 10-year rain event, what's the basis for defining those? How do we figure out what's likely to happen within 2 years, 5 years and 10 years at the present moment? It's all statistical. And it does somewhat change. I think that's what you're honing in on is that it changes. That's why I tried to, in one of these slides here, that I'm not going to go into too much detail. But I tried to bring it into how much rain are you talking about in a 24-hour period? That doesn't change. And so what we're talking about building this for is for 3.2 inches of rain over a 24-hour period. You know, today that's a 2-year storm. As changing weather patterns 10 years from now, we may walk in here and some engineer type like myself is going to call it a different type of storm. Really what we need to focus on is that the amount, the depth of rainfall measured in a specific area over a particular time frame. Okay. But is it fair to say that what is now defined as a 10-year event, when you get that much rainfall in a 24-hour period, is likely to become more frequent than a 10-year event? I don't know. I mean, if I were a climatologist, I could probably tell you that. It does seem like that what we have is more intense storms followed by more intensive long periods of drought-like conditions. It does seem like it's a lot different than it was when we were kids, but maybe I wasn't paying attention as much. I will tell you this, too, is that the amount of rainfall in a 24-hour period doesn't always necessarily drive things. We can have an inch and a half of rain when it hasn't rained for several weeks, and it's not even a blip on the radar screen for sanitary sewers because it all runs off. But when that ground is highly saturated and we have three-quarters of an inch of rain in a given day, we can have lots of problems. The degree of saturation probably has more to do with it than the depth of rainfall. Okay. One additional question. I may come back. But the question of how the individual property owners, how abatement of some of those problems might impact the projections, is it fair to say that those are not now included in the projections that you have for cost for needed work? They are not explicitly projected in these projections. What I would say is that other communities, they've used those dollars to go attack the private property, because then they found that the amount of capacity they gained was incrementally larger getting rid of the water. So it was all the same pot of money, but they got further down the road with the same investment. Thank you. Thank you, separately, for again doing a presentation and working through this. I guess my question would be, and I had raised this question before about the cost of overflows, and you said 13. You could have most likely a possibility of 13 overflows in a five-year? That's what the model tells us, and a model is a mathematical representation of a complex system, but that's what the model says. So what is it for two years? Well, the whole idea is that we have no overflows on a two-year storm. That's why we're designing for the two-year storm is no overflows and sufficient capacity for future connections on a two-year storm. There are overflows, which most likely there will be. It's pretty much unavoidable under the most extreme circumstances. That's why I think that EPA uses the language in the consent decrees that says best engineering judgment. They can't draw the law says you shall not have overflows. In reality, I mean, trying to legislate zero overflows under all circumstances, that's like trying to say you're not going to have traffic accidents. Right. Exactly. But there is a cost involved with overflows. Yes, there is. There is a sewer overflow response plan in place. I think there's some legislation you guys would be considering as part of a regular work session is for a SORP trailer where we are equipped with the signs and all the things that we need to do this with. And so we have to mitigate then, so that will be an operational cost, one of those reflected in Ryan's model. But the idea is to reduce the number of those so you don't have to mobilize people and equipment and do news notifications and all the other things that go along with it. So there's a cost at any time to overflow. Okay. And is that something you considered when you decided to go with the two-year plan? Yes. Okay. I think tackling, reducing the storm water from getting into the sanitary sewer I think is an excellent choice, because I think that's probably a big part of our problem from what I understand. I've heard in past presentations, but I was just curious if all the areas in Lexington are equivalent. So if we say we're going to go with a two-year storm, would that be something we would want to do across the board? So say if one area has a more serious issue than another area. Well, if we're designing for a two-year storm in all areas, then all areas should have the same degree of severity when we have that five-year storm, because that's what it's built for. I think that so it should be a level playing field regardless of what it is, and the degree of severity is going to be whether or not the rain is more concentrated in one neighborhood than it is the other. I think that sometimes the degree of severity is misunderstood by a lot of different folks. I don't know if you saw the employee extra this week, but it was a nice little article about flooding on Main Street in 1928, and that people in Ashland Park had a lot of flooded basements. And this has been going on for nearly 100 years, and that was long before we had a lot of the sewer system we have now. And so water in people's basements, I mean, that's a whole different issue. Sometimes I think that people attribute it to sewage when it is more sinister groundwater issues. But like I said, if we build the sewer system to handle that two-year storm, everybody should have the same level of service. It goes into what Councilmember Lane had asked about, though, is that if we elect on our own as a community that we want to do X in the distillery district and provide additional capacity for something, we have elected to do that locally on our own dime and on our own decision as opposed to decisions being made locally. We have elected to do that locally on our own dime and on our own decision as opposed to decisions being made outside of Fayette County. Thank you. Councilmember Beard. Thank you, Vice Mayor. I know of several neighborhoods, and this is not anybody's fault. This is the way these houses were built. But there's areas over in the Harrodsburg Road area that they have outside stairwell drains of outside entrances into their subfloor that all of those area drains are connected to the sanitary sewer system. That's the way they were built. There's an area in the Harrodsburg Road area where they have a driveway that goes down and their garage is under their house. There's an apron drain at the bottom of that driveway that's connected to the sanitary sewer system. The house was built that way because there's nothing else to drain that to. If they didn't have a drain, it would fill up their garage. I'm just wondering if you could comment on subtle ways in which water gets into the system than the obvious ones, such as roof down spouts and sump pumps. The roof down spout thing was popular in Ashland Park in that area. I know being raised there. What about grease? Grease is, that program is handled under that CMOM program I touched on before, the management thing. We have actually ramped up our staff now to where we have, we're doing regular inspections of institutional food preparation places. Our go live with our information management system now allows us to track where we have grease operational problems and be able to target our inspections in those areas to be able to get things taken care of. It's a capacity issue, but only along the lines, I think, more of operations. If we keep the grease out of the system and the residential grease that gets in there that we clean the system regularly, it really doesn't have a play in this $540 million question we're talking about today. It's included in Ryan's model as far as having that ongoing operation of making sure that institutional food preparation facilities are doing their responsibility at their cost. Our part of it is just inspection and some level of training. Restaurants, when I say institutional food preparation, that's kind of a fancy way of saying restaurants, but it includes school cafeterias, U.K.'s cafeterias, anybody that prepares a fairly large amount of food. Some Kroger's, you know, they have their rotisserie thing and all that and they'll generate some of that grease traps as well. Meyers, a lot of places. She had terrible backup in a fourplex that she owns. And it's in the Camelot area. I'm familiar with it. Good, because Willie has called, I'm sure, everybody several times. I'm not going to go into the details of that. I'm just going to say, you know, that line that we saw yesterday, that did not seem to be downstream from food preparation, because I don't think that line extends all the way over to Nicholsville Road, but we're looking into that. We want to try to find the culprit. Now, you know, residentially, I mean, you're going to get grease contributions from residential customers. But in this financial model, we're recommending in excess of a million dollars a year to clean the system. The goal is going to be to clean the entire system on a 13-year basis. And you're going to hit other places more frequently because it may be of cultural habits to where maybe you generate a little bit more grease than you do in other areas. But have an intelligent way to go about and prevent overflows that are preventable. We can't control rain. Finding restaurants that don't do the right thing as far as grease is concerned. I know we had a problem out on Nicholsville Road some time ago near that marathon station. In east Everton. I signed an enforcement referral form for an unnamed restaurant yesterday morning. We do that. We will go after them. And we have a division of environmental policy for enforcement action, which would include civil penalties. Council Member Beard. You're about done. You could get on for a second. I'm just wondering how much of the grease happened to happen. And it's so complex. It's not just an easy fix in the public maybe thinks so, but it sounds very, very complex. And to be able to communicate that, is there going to have to be paying? Thank you, Vice Mayor. Thank you, Vice Mayor. Charlie, thank you for your group and your work on this. This is an important day. This is an important decision and we need to make it and kind of get on with it. I just have a couple of background questions. Right now at the planning level we're trying to do that strategically to where it minimizes neighborhoods as much as possible. Obviously the sewer is going to be where it's at. And so like on one of the maps in Wolf Run we're looking at someplace close to New Circle and it's an urban county government property we already own that was bought as part of flooding projects years ago. So it's available vacant land, tucked against New Circle. I have a magazine that I got as part of water and wastewater type of stuff. On the cover it had a storage tank that had essentially a forest scene painted into it. And it blended in very nicely. It minimizes the amount of storage as much as possible because we realize that that won't necessarily be well received in certain areas. So it made the cover of Consent Degree magazine? No, it's Water and Wastewater Digest, which is equally gripping. It's a real page turner. Thank you. All right. You talked about the fact that our sanitary system does have enough capacity. Does our storm water system have enough capacity? No, I don't think so. We're working on that part of it, though, right now. That is what GRW Engineers has been hired to help us do, develop this master plan that we need for sanitary, I mean for storm water. I've been here for 12 years and I came here right after the 201 plan was approved the last time. We've always had a pretty good handle on planning documents for sanitary sewers. Sometimes the costs were scary like they are today and that sometimes caused us to pause. One of the things I haven't seen, especially when I was handed the storm water program, is we don't have a master plan for storm water. When I took over the storm water program in 07, essentially we were using maps that were developed in 1982, the infamous Kanoi maps. We have invested a tremendous amount of time mapping the system. With the exception of West Hickman right now, the whole system has been mapped, so we know at least where it's at now. But we're going to spend a few years getting to where we are right now with the sanitary program. But the way we assess this system, the sanitary system, we're applying those same principles in developing a storm water master plan to where you all can make some intelligent decisions about what direction to head in dealing with that. I agree the importance of having good maps. I remember when we started in Lansdowne Merrick a long time ago with some of the first remapping of all that. I'm completely in agreement there. In looking at this, and this is a separate question talking about storm water, if we have a master plan there, what effect will that have on that storm water fee that started almost two years ago coming up in February? I think that remains to be seen. I couldn't even speculate since I started this conversation off about getting in trouble with my speculating how much the sanitary fix was going to be. I'm going to try to avoid that at all costs because I have no idea. The effect of the work on inflow and infiltration, it's going to change the amount of water that people don't discharge in one capacity. But in another way, there's going to be a lot more water in yards and on streets that, in my opinion, we're going to have a problem with. One of the things that I had hoped when we were having the storm water discussion is that we were going to be able to finally have a revenue source to where we could leverage with private folks as they were developing properties. Instead of them just putting on there what they needed for their areas, that they would actually put in storm water infrastructure that we need as a system. Because now what we've got is it's every man for themselves, and as long as I dump it off my property, everything's good. I mean, it's generally the mentality that's been there over the last couple of years, is that if a system, and I'm Mr. Stinnon, and I know there's no one I'll be talking about, somebody built a basin and now we're expanding that basin because for regional purposes it needed to be bigger in the first place. If we would have been in a position at that time to say, here's our share of the money, make it big enough in the first place, we would all have saved a lot of money and time and grief. Well, I just, I may have some more questions, but I'm anxious for us to make this decision, but I want to make it in concert with the other half, which is storm water, and we have to think about that. And we all have those problems in our districts from both kinds, but we need to get this decision done first. Thank you. Thank you. Councilmembers, I wonder if you would allow that we hear the one citizen who is here for public comment, and then we'll go to the councilmembers who want to speak a second time. Does anyone object to that? We have one council, excuse me, one member of the public, Mr. Edward Cushy, and if you'll come forward to the podium, and you'll have three minutes. And if you'll give us your name and address, please. Good afternoon. My name is Edward Cushy, and my address is 2089 Bursells Road. Thank you very much for, and I appreciate this opportunity to voice my opinions. I am proud to be from Lexington, Kentucky. What is the most important invention of all time in the world? I lost my place. The answer is sewers. Very important subject, and why we are here today. Our small business is all for clean water and sewers and good repair. We agree with the principles put forth by livegreenlexington.com. We try to run our business, and I try to run my life accordingly. I have met some very friendly, helpful, and professional people in the Department of Environmental Quality, in the Department of Public Safety, and throughout the LFUCG, but that is not why I am here. Sanitary sewers, storm sewers, environmental quality, public safety, government, and citizens are all connected. You, the Council, are now considering the very important remedial measures plan, which will inevitably include inventing another new tax and or fee for citizens and businesses to pay. We are willing to pay our fair share of taxes, but we feel that we pay enough already. We are very afraid that the remedial measures plan will be another unfair huge tax slash fee, like the very unfair water quality management fee, which is killing our small company with an astronomical $3,000 per year extra, on top of the already grand fortune in a multitude of taxes and fees we pay to the LFUCG, which are continually raised and new ones invented. This morning's newspaper reports on another tax increase thanks to the local government. The emphasis of the mission of the water quality management fee is to minimize the discharge of pollutants into stormwater and to protect streams and lakes and have clean water. The unfair water quality management fee is supposed to be based on ERUs only, yet unfairly gives exemptions and discounts to some of the bigger companies. Our company is very small and our profits are meager to none. We are suffering from the large number and astronomical amounts of taxes and fees we pay to the LFUCG. We resent paying these huge fees when others, especially big polluters with many ERUs, are totally exempted and are given huge discounts for no good reason. We comply properly without refusal to request by the LFUCG. However, we resent abiding by ordinances when the LFUCG is self-exempted and does not have to do as tax-slash-fee-paying citizens and businesses must do. I, a mere taxpaying ordinance-abiding citizen, had to fix a tiny crack in a sidewalk in a tiny hole in a plastic sewer clean-out drain cap within 90 days of notification, plus face, even when complying properly. Threats, false accusations and unhelpfulness from the LFUCG. Meanwhile. Mr. Cushee, your three minutes is up. I do appreciate that. May I finish? Counsel, do you want to give some more time? I move that he have a couple more minutes to finish up. All right. Two more minutes. Thank you very much. Thank you. I'll get to the point. Meanwhile, for years I've been reporting in every proper way to the LFUCG a huge, gaping, dangerous-to-public-safety hole in the storm drain area in the sidewalk by our front entrance. We pay $3,000 a year to the water quality management fee extra for these types of storm sewer repairs, but the LFUCG is self-exempt and seemingly not interested. Even refusing to make those repairs. As a citizen would have 90 days to do from notification or face the wrath from the LFUCG. Where is the accountability of the Department of Environmental Quality and the Department of Public Safety and sewer repairs? The water quality management fee needs to be adjusted and revisited before the remedial measures plan is instituted. Then you will perhaps have more revenue for your remedial measures plan. When considering funding for remedial measures plans, perhaps you can find revenues by cutting the inefficiencies of the LFUCG and the Department of Environmental Quality and the Department of Public Safety division code enforcement sidewalks. The LFUCG does not have the capacity to do that. The LFUCG does not have the capacity to do that. The LFUCG does not have the capacity to do that. The LFUCG does not have the capacity to do that. Or make the exempted railroads pay when devising your new sewer taxes and fees. They are unfairly totally exempted from paying the unfair water quality management fee while their whole operations are nearly all ERUs. They have plenty of money. They get millions of dollars in grants from the government and are encouraged to build by the LFUCG more unfairly exempted ERUs right next to town branch. Make the farms pay. They are perhaps the biggest contributors to stream and water pollution, yet they pay virtually nothing. $4.32 a month. Make homeowners pay and leave small businesses alone. Homeowners are half the problem with both the storm sewer and the sanitary sewer problems. And they receive a big discount from the water quality management fee. I will concede, let the senior citizens continue to receive their discount. We are afraid that the LFUCG is going to ruin our small business by continually raising and concocting new unfair fees and taxes to overburden us while others receive unfair taxes. We are afraid that the LFUCG is going to ruin our small business by continually raising and concocting new unfair fees and taxes to overburden us while others receive unfair taxes. We are afraid that the LFUCG is going to ruin our small business by continually raising and concocting new unfair fees and taxes to overburden us while others receive unfair exemptions for no good reason. We are afraid, based on the pattern of the unfair water quality management fee, that the remedial measures plan will be just as huge and unfair and perhaps the demise of our small company from overtaxation while no one at LFUCG cares. We beg you, please. Thank you, Mr. Coushy, very much. We really appreciate your input. I hope that you will consider some of these opinions when making your decisions about the remedial measures plan. Thank you very much for your time. Thank you. You're welcome. Thank you. Thank you, Vice Mayor. I would add one clarification to Mr. Coushy's comments. And that is that there are no exemptions to the water quality management fee. The urban county government pays the fee. The churches pay the fee, the hospitals, the University of Kentucky. That's the difference between a fee and a tax. So that no entity is exempted from it. There are other points I might make here, but I think that does need to be understood, that when considering the fee, everybody pays. Vice Mayor, we've discussed this issue over weeks and months, and to perhaps move the discussion toward a more conclusion and to respond to the Director of Water Quality's request, I'd like to make the following motion, which is to place on the docket for the August 25th council meeting a resolution approving the Division of Water Quality's recommendation to select a two-year storm event as the basis for the sanitary sewer remedial measures plan. So moved. And Council Member Blues has moved, and Council Member Farmer has seconded to support the recommendation. The Department of Environmental Quality for a two-year design storm, and this to be placed on the docket for August 25th. This would be recommended to the full council. Is there discussion? Mr. Lane, would you like to? Yes, ma'am, I have another question, but I do have a comment on this. It would be helpful if we could also have, when we vote on this, an estimate of the five-year plan. Because some of the operating expenses that would be related to the operating of the system are going to be pretty much the same. The main difference would be the capital and the different capital costs. Just so we would have something to be comparable data to look at. But as I said, I'm leaning towards the two-year plan myself. But I think it would be nice to have two numbers to look at so we could just get a comparison. Okay. Discussion of the motion, Mr. Kaye, would you want to have a comment on the motion or to wait for more questions? I have a comment. I'll just make a comment. My comment is I think it's important to put this question into the larger context. There's a tendency, I think, to view this as something that is simply a mandate from the federal government, EPA, as if the concern were not for the health and welfare of our own community. The Environmental Protection Agency has written these rules and they have been approved at the national level. We're subject to them because if we don't do these things, we degrade our own environment, we degrade our own quality of life. So I think the question is how do we remediate the problem that we have that's been impacting our citizens for 100 years or longer? We know about the flooding. We know about all of the problems that are caused. I think we also know that these are questions that have been before this council, before I was on it, for quite a while. And that the council has never chosen to implement a plan that would remediate the problems until forced by the EPA. So we have a choice before us. As far as I'm concerned, we ought to make a decision that reflects the need to protect the environment and the citizens who live in it, that's us, for the long term. So I do have, I've heard the discussion. I understand the recommendation. I have one further question for Charlie that would help me make my decision about whether to support this or not. And that is, as he's walking forward, as I understand it from the graphics that you've put up, we could make a decision today to implement your recommendation for a two-year storm event. And without losing the investment that we've made in that plan, we could add capacity. That is, we're not talking about right now a decision between a two-inch pipe and a five-inch pipe in the work that we do. We're talking about extending the system to cover a two-year event. If we decided later to go back, we could add capacity without losing that investment. The same thing with detention. We could build detention for a two-year event. In most cases, yes, but not entirely. If you've sized a downstream pipe for a two-year storm and then you decide upstream from there that you want to do a five, then you're going to have to adjust in some way. Now, you wouldn't necessarily have to take all that pipe out of there. You might have to put more storage in someplace else that you would not have wanted to otherwise. The investment that you make is not completely lost, but if you want to make your best investment, it's trying to figure out where you want to land at to start with. I'll couch that in that I sound like a broken record when I talk about that private property issue. If we design this for a two-year storm that's based on zero removal of I&I and we cut the public and the private in half, you've got a lot more than a two-year storm. There's that extra capacity using the same investment you had to start with. So that was a long answer, but for the most part in treatment plants, if you expand capacity, you've always got that investment available to you. Once you put a pipe in the ground, it's like building a three-lane road to Kentucky Speedway. Once you've made that investment, you're kind of stuck with it until you come back in and do something else. Thank you. I think I understand the answer. The answer is mostly we get our investment, but in some instances we would not. Having said that and with the caveat that I think this is an issue that we need to be paying close attention to, as we go forward I'll be inclined to support the motion. Thank you. We'll stay on for another question, I believe. Council Member Martin, to speak to the motion. You know, I grew up in Gardenside and so I grew up playing in Wolf Run Creek at the base of James Lane Allen. And I think that this speaks to me because when I hear that we're dumping raw sewage into our creeks and streams, that disturbs me. It disturbs all our citizens. I mean, we have kids who get out and they play in our creeks and to think that they're out there, you know, playing in sewage in a modern America is something that I find disturbing. And in one of my neighborhoods, when we had these big rain events, raw sewage sort of plumes out of the manhole covers when all this rain pops it out. And, you know, in the Derby storms last year, the kids were out there playing in it. They didn't know it was sewage. They thought it was rain water. And so I think this is a safety and health issue for our citizens. Beyond that, from what I understand from Charlie's comments, that we have to do something. That would sort of overtake us. And then we'd still have to do it. And so they're going to continue to up our penalties until it's so painful that we have to go ahead and do it anyway. So I do have a question, Charlie, for you again. And I'm sorry to pin you down, but we went through this at the last environmental quality meeting. But I'm going to ask almost the same question to you again. How much of the two-year system can we keep if we upgrade it to a five-year? Because I came away from that meeting thinking that this was largely incremental. You just made a statement that it wouldn't be entirely lost, which is sort of different than incremental. Ask your question again so I can make sure. And then we later decided to upgrade it to a five-year system. How much of the two-year system can we keep? Because that affects our decision. Because if we have to go back and dig it all up again, you know, as we add density in our city, which is what we're doing as a policy, if we have to go back again and dig it up to add capacity later, that may not be the smartest thing to do. And from our discussions, I was thrilled that I thought that this was an incremental system, that the yellow that's on this Wes Hickman chart showed additional capacity and that the blue we'd be able to keep when we do the five-year system. But from what I'm understanding now, a lot of the blue would have to be upsized. Is that correct? To some degree. This flows from top of the hill to the bottom of the hill. This is the two-year pipe sizing. And so that would show that all of those things that are in blue would have to be disturbed. You've got a particular pipe size down here at the bottom of the hill that's based on that two-year storm. What this next one shows you is that new pipe in yellow has to be touched. But if you do a five-year storm, you may have to make this pipe slightly, maybe one pipe diameter bigger than what you needed on the two-year storm. But not the whole system. But not the whole system. Up at the top of the hill, you've probably got a whole lot more forgiveness. But at the bottom of the hill, you're making pipe size decisions. And as you incrementally increase the size of it, it impacts the downstreet pipe sizes, Would we be able to add a second storage facility? Yes, that is an option. Assuming that we had the land to do it on. The options, if you wanted to do something different and you decided you wanted to go further, you could maybe parallel that sewer with a second sewer that is a certain pipe diameter that goes to a different storage tank. There's a lot of different ways you can do it. But on a two-year storm, the pipe size is a certain size. But at the bottom of the hill, if you start increasing, you start putting pressure points on it, that size is not going to be enough anymore and you're going to have to make decisions. At the top of the hill, you probably won't have that. So is it accurate to say it's largely incremental? Largely. That will keep most of the two-year infrastructure except for maybe the very trunk of it? Largely, yes. Yes, that would be true. To me, it comes back to this, and I hate to say this because it sounds really bad, but it's, you know, what we have committed to under the consent agreement. It goes into Councilperson Kaye's comments. I mean, you're dead on is that the reason why we're doing this is not because we're made to do it, it's because it's the right thing to do. But we're going to look at opportunities as far as if we can over-deliver on what we promised to accomplish what you're suggesting. I think that's a good thing for this community, but we want to be able to make that decision ourselves. And what we as a council don't want to do is to come back in ten years and have to redo this. Because I think that it is really important that this is going to fix it and that this is the appropriate size and that we're not going to have to dig up half this system in another ten years and start over again. I would agree with that. I wouldn't want to be around for that. I probably won't be at the podium for that. Me neither. But that's the decision we have to make is how big and what's the best use of our money and what's the... And if I may, Vice Mayor, is recognizing is that we're making a decision and we're saying this is as big as we're going to make it. It gets into that how big do you make it, how big a storm do you want to do, and you get to a point where it's diminishing returns. Okay. We have five minutes. We have a motion on the floor. And we have a couple more speakers. Does anyone else wish to speak to the motion or have a question related to the motion? Mr. Farmer or Mr. Lane? You're both on the list. Mr. Martin, we make this decision today. We put it in our packet for October and we deliver it to the EPA. How soon will they say yes or no? It's hard to say. I would expect that we probably won't hear anything until after the first of the year if we're delivering it shortly before holiday seasons kick in. It's going to be an extensive evaluation on their part, probably 2012, sometimes spring. But that wouldn't directly affect any of the deliverables in terms of the difference between a two-year and a five-year, which is kind of the mini discussion we're having right now. I'm sorry. I can still do more. Well, I guess my thing is if the EPA says no to two, my assumption is they would say yes to five is where I am. And those are the questions you're getting right now is the difference between two and five up here. Yeah, I don't know if they said no to two that they would say yes to five. I think that what we would have to have is some really serious discussions and run that financial model for them and try to have that discussion with them, is it a cost-effective solution or not. In the past, the EPA and other cities have used the gross medium income, if I'm using the term correctly, 2% household median income as kind of an affordability type of thing. We're pretty close to that. I'm encouraged. That's the encouragement I wanted right there. And I would just say, you know, right now we have two wastewater treatment plants in town. But every time it rains really hard, we add about 100 to that because it overflows everywhere. And that's the problem we're trying to fix here. And in relation to the business commentary, I don't mind to go back and look at some of the decisions and assumptions we have made in who pays what for this particular fee, but we all got to pay it and we all got to get the job done. Thank you, Vice Mayor. Thank you. Mr. Lane, was yours to the motion? Okay. Okay, very good. Is there any other comment to the motion? Okay. The motion on the floor by Mr. Blues is to forward to the council to place on the August 25th docket a resolution supporting the two-year design storm for the sanitary sewer consent decree remedial measures capital improvement plan. I think that's what you said. All those in favor, please say aye. And you can log in electronically. I'm not sure why Mr. Stennett says aye. Can you remove that? He's not here. He's not in the room. Okay. Has everyone voted? Okay. That motion passes 10-0. Thank you very much. And Mr. Farmer, are you still on to speak? Or Mr. Martin, are you still on to speak? Did you still want to be on the list? Mr. Lane is next and then if you want to be on the list. We have a 1 o'clock meeting on the fifth floor. So we'll use two minutes, one for Mr. Lane and one for Mr. Martin. Okay. I just had a thought that this system that we're going to build is going to be in Lexington for decades, and I think that we need to make sure that we make the right investment and it's the appropriate size for the system that we need, because as Council Member Martin said, I'd hate to have to come back and redevelop it. The other thought that I have is that we're going to be spending a half a billion dollars, and I feel that we need to have extra control over the design and the construction work and to make sure that the quality that we're getting is what we're expecting. The other area I think that's important, that if we can save 1%, we're talking about $5.4 million. If we save 2%, we're talking about $10.8 million. So having really good controls over our costs and construction is really critical for our rate payers. We need to be on top of our game. Thank you. Thank you. Mr. Martin. Thank you, Vice Mayor. I just want to make sort of one last comment that I think I'd like to understand whether this is the end of the fees for the sewer system, whether there's any more projected fees. And you don't have to answer, because we have to leave. But if you could maybe provide us information at the next committee meeting or to the council in the future. But I think that we want to know what's coming up in the next five or ten years, because if we come back in five years and say, oh, well, that was just piece A, here's piece B. I just wanted to respond to that. No, there are no more fees unless future regulations change. That's always the caveat. And I guess as we go forward with this, I think I hope that the department will consider maybe installing those five-year storm trunk lines and looking at what are cost-effective ways to upsize small pieces of this so that we don't have to go back and do it later that might be cost-effective now rather than later, putting a 36-inch pipe rather than a 24-inch pipe. Thank you, Vice Mayor. Thank you very much. I want to thank Charlie Martin and Brian Barrow and all the support team that's here. And we appreciate your hard work on this. Mr. Ellinger has an announcement, I believe, about the 1 o'clock meeting. Thank you, Vice Mayor. Due to the time now, I want to give council members an opportunity to grab some lunch and maybe make a bathroom break. We will convene that meeting at 115 up on the fifth floor. So 115 on the fifth floor. Thank you. Do I hear a motion to adjourn? Move. Do I hear a second? Second. All those in favor say aye. Aye. Okay. We are adjourned. Thank you very much to all. »»