* This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting. UM, [00:00:01] IN OUR, OUR, [Budget and Fiscal Affairs on September 29, 2026.] TO THE SEPTEMBER 29TH BFA MEETING. I'M SALLY ALCORN, CHAIR OF THIS COMMITTEE. I CALL THIS COMMITTEE TO ORDER AND WOULD LIKE TO WELCOME ALL COUNCIL MEMBERS IN ATTENDANCE. MY VICE CHAIR COUNCIL MEMBER MARIO CASTILLO, COUNCIL MEMBER VICE MAYOR, PRO TEM AMY PECK, COUNCIL MEMBER FRED FLICKINGER, COUNCIL MEMBER JULIAN RAMIREZ. AND STAFF FROM COUNCIL MEMBER JOE PANZA. AND COUNCIL MEMBER SALINAS, COUNCIL MEMBER CARTER. AND I THINK THAT'S IT. SO WE WILL GET STARTED. NOT TOO BUSY OF AN AGENDA THIS TIME. WE WILL START WITH THE MONTHLY FINANCIAL REPORT. SO I WELCOME FINANCE DIRECTOR MELISSA DEBOWSKI AND DEPUTY CONTROLLER WILL JONES CLOSE THE DOOR ALSO. WELCOME COUNCIL MEMBER JOAQUIN MARTINEZ. BLESS YOU. ALL RIGHT. OKAY. I'LL START. OKAY, GOOD MORNING. UH, MADAM CHAIR, MEMBERS OF COUNCIL AND STAFF. I AM PLEASED TO PRESENT THE MONTHLY FINANCIAL REPORT FOR THE PERIOD ENDING AUGUST 31ST, 2026. AND THE GENERAL FUND, THE CONTROLLER'S OFFICE IS PROJECTING AN ENDING FUND BALANCE OF 294 MILLION OR 11.2% OF EXPENDITURES, LESS DEBT SERVICE AND PAY AS YOU GO FOR FY 2027. THIS IS 45.5 MILLION LOWER THAN THE PROJECTION OF THE FINANCE DEPARTMENT DUE TO A LOWER REVENUE PROJECTION. BASED ON OUR CURRENT PROJECTIONS, THE FUND BALANCE WILL BE APPROXIMATELY 97.5 MILLION ABOVE THE CITY'S TARGET OF HOLDING 7.5% OF TOTAL EXPENDITURES, EXCLUDING DEBT SERVICE AND PAY AS YOU GO. THE FY 27 BEGINNING FUND BALANCE IS 47.4 MILLION HIGHER THAN THE FY 26 ENDING FUND BALANCE REPORTED IN THE JUNE 30TH, 2026 MONTHLY FINANCIAL REPORT. THIS INCREASES DUE TO YEAREND ADJUSTMENTS TO REVENUES AND EXPENDITURES THAT WILL NOT BE FINAL UNTIL FY 26 ANNUAL COMPREHENSIVE FINANCIAL REPORT IS PUBLISHED. THE FY 27 GENERAL FUND PROJECTIONS ASSUMES APPROXIMATELY 104 MILLION IN REVENUE ASSOCIATED WITH THE PROPOSED RIGHT OF WAY FEE. BECAUSE OF IMPLEMENTATION OF THE FEE REMAINS UNCERTAIN, THIS REVENUE REPRESENTS A SIGNIFICANT RISK TO THE PROJECTED ENDING FUND BALANCE. IF THE RIGHT OF WAY FEE IS NOT IMPLEMENTED OR THE ANTICIPATED REVENUE IS NOT REALIZED, THE PROJECTED END IN FUND BALANCE WOULD BE REDUCED TO APPROXIMATELY 190 MILLION OR 7.3% OF EXPENDITURES, LESS DEBT SERVICE AND PAY AS YOU GO. THIS WOULD PLACE THE GENERAL FUND BELOW THE CITY'S 7.5% RESERVE TARGET. OUR REVENUE AND EXPENDITURE PROJECTIONS REMAINS UNCHANGED FROM LAST MONTH. ADDITIONALLY, WE'RE PROJECTING NO CHANGES FROM THE ADOPTED BUDGET AMOUNTS IN THE ENTERPRISE FUNDS. AND SO MOVING ON TO COMMERCIAL PAPER AND BONDS, THE CITY'S PRACTICE HAS BEEN TO MAINTAIN NO MORE THAN 20% OF THE TOTAL OUTSTANDING DEBT FOR EACH TYPE OF DEBT IN A VARIABLE RATE STRUCTURE. AS OF AUGUST 31ST, ALL OUTSTANDING DEBT IS WITHIN THAT THRESHOLD. THANK YOU VERY MUCH. AND THAT CONCLUDES MY REPORT. THANK YOU, DIRECTOR. HI, GOOD MORNING. THIS IS THE TWO PLUS 10 FINANCIAL REPORT FOR THE PERIOD ENDING AUGUST 31ST, 2026. FISCAL YEAR 27 PROJECTIONS ARE BASED ON TWO MONTHS OF ACTUAL RESULTS AND 10 MONTHS OF PROJECTIONS FOR THE GENERAL FUND. BOTH OUR REVENUE AND EXPENDITURE PROJECTIONS REMAIN UNCHANGED FROM THE ADOPTED BUDGET AND THE PRIOR MONTH. UM, JUST TOUCHING ON SALES TAX, EVEN THOUGH WE'RE NOT CHANGING ANY PROJECTIONS THIS MONTH, THE SALES TAX RECEIPTS FOR THE MONTH OF JULY WERE 80.5 MILLION, WHICH IS 5.3% HIGHER THAN THE SAME PERIOD LAST YEAR, AND IS 2.3 MILLION HIGHER THAN THE BUDGET. WE'RE CURRENTLY PROJECTING THE ENDING FUND BALANCE TO BE 339.5 MILLION, WHICH IS 66.6 MILLION HIGHER THAN THE ADOPTED BUDGET, AND REPRESENTS 13% OF ESTIMATED EXPENDITURES, NOT INCLUDING DEBT SERVICE AND PAY AS YOU GO. THE FUND BALANCE IS 143 MILLION ABOVE THE TARGET OF HOLDING 7.5% OF EXPENDITURES, EXCLUDING DEBT SERVICE AND PAY AS YOU GO IN THE ENTERPRISE SPECIAL REVENUE AND OTHER FUNDS. UH, WE'RE ONLY PROJECTING CHANGES IN THE ASSET FORFEITURE FUND. UM, THIS IS DUE TO REVENUES, UM, EXCEEDING THE BUDGET. UH, YEAR TO DATE. UM, WE'RE INCREASING THE REVENUE PROJECTION BY 2.8 MILLION, UH, DUE TO HIGHER THAN ANTICIPATED CONFISCATIONS. AND THAT CONCLUDES THE [00:05:01] REPORT FOR THIS MONTH. THANK YOU VERY MUCH. VICE MAYOR PRO TEM PECK. THANK YOU CHAIR. THANK YOU BOTH FOR THE PRESENTATION, UM, REGARDING THE NEW ADMINISTRATIVE, UM, GARBAGE FEE THAT, UM, HAS NOW BEEN IMPLEMENTED. SO I NOTICED THAT THERE IS, UM, A SALES TAX ON THE FEE AND UM, I DO APPRECIATE THAT IT'S NOT $5 PLUS THE SALES TAX, THAT IT'S ALL, THE SALES TAX IS INCLUDED WITHIN THE $5. BUT IN ALL OF THE BRIEFINGS, UM, AND MODELS PRESENTED TO US, I DON'T RECALL US EVER TALKING ABOUT SALES TAX AS BEING PART OF IT. UM, AND 'CAUSE THE MODELS PRESENTED TO US SHOWED $24 MILLION YEARLY GOING TO THE COMBINED UTILITY SYSTEM, BUT IT'S REALLY 22,176,000 TO THE COMBINED UTILITY SYSTEM AND OVER 277,000 GOING TO THE GENERAL FUND BECAUSE OF SALES TAXES. SO THAT'S A DIFFERENCE OF $1.8 MILLION NOW GOING TO COMBINED UTILITY SYSTEM AND OVER $1.5 MILLION NOW, NOT GOING TO THE CITY OF HOUSTON AT ALL BECAUSE OF THE SALES TAX. SO MY QUESTIONS ARE, UM, DO WE KNOW THAT WE WOULD HAVE TO DO A SALES TAX FOR THIS FEE? AND THEN TWO, WHY ARE WE DOING A SALES TAX AT ALL? IT, I'M NOT CONVINCED THAT IT MEETS THE CRITERIA FOR SALES TAX. UM, DO WE GET A COMPTROLLER DETERMINATION ON THIS? I MEAN, IT DOESN'T APPEAR THAT WE PAY SALES TAXES ON OTHER SIMILAR FEES LIKE THE CONTAINER LEASE FEE, THE DRAINAGE FEE, STUFF LIKE THAT. SO CAN YOU JUST EXPLAIN A LITTLE BIT MORE ABOUT THE SALES TAX ON THIS? SURE. SO, UM, WHEN WE WERE LOOKING AT THE, UM, $5 AND WHAT WE HAD COMMUNICATED TO THE PUBLIC, WE FELT THAT, UM, YOU KNOW, TO YOUR POINT, HAVING THE $5 PLUS THE SALES TAX WOULDN'T BE WHAT WAS PUBLICLY DISCUSSED. BUT, UM, WE DID WORK WITH CITY LEGAL TO LOOK AT, UM, WHAT IS TAXABLE, WHICH IS GOVERNED BY STATE LAW. SO, UM, I KNOW WE HAVE A REPRESENTATIVE FROM THE CITY ATTORNEY'S OFFICE HERE, SO I DON'T KNOW, ERIC, IF YOU COULD, UM, HELP WITH THAT. YES, PLEASE, ERIC, GO. WE DID GO AHEAD, DID TALK TO LEGAL. YEAH, SURE. GOOD MORNING. UM, THAT'S CORRECT AS, UM, REQUIRED UNDER STATE LAW, MUNICIPALITIES HAVE TO CHARGE A SALES TAX ON CERTAIN SERVICES THAT IT PROVIDES. AND ONE OF THE CATEGORIES UNDER STATE LAW IS A VERY BROAD CATEGORY CALLED REAL PROPERTY SERVICES. AND THAT IS FURTHER DEFINED TO INCLUDE GARBAGE COLLECTION. AND VERY BROADLY SPEAKING, UM, STATE LAW BASICALLY SAYS THAT IF YOU PROVIDE GARBAGE COLLECTION SERVICES, I AS A MUNICIPALITY, YOU ARE REQUIRED TO IMPOSE SALES TAX AND THEN COLLECT IT, REIT IT TO THE STATE, WHICH THEN, UM, DISTRIBUTES AND REMITS IT TO THE TAX ENTITIES, INCLUDING THE STATE TO THE STATE. IF I MAY FOLLOW UP ON THAT, UM, I DID SEE THAT, BUT I ALSO SAW THAT THE COMPTROLLER'S OFFICE SAID THAT WHEN A GOVERNMENTAL ENTITY PROVIDES GARBAGE COLLECTION AS PART OF SERVICES FUNDED BY A TAX OR SET FEE STRUCTURE, SALES TAXES ARE NOT DUE. SO DID WE GET AN OFFICIAL DETERMINATION FROM THE COMPTROLLER'S OFFICE? WE DID. UM, WE WROTE TO THE COMPTROLLER TO ASK THEM TO ADVISE ABOUT THIS SPECIFIC FACT, UH, ISSUE. UM, WE TOLD THEM THAT, YOU KNOW, WE INTENDED TO CHARGE A SPECIFIC FEE ON THE GARBAGE COLLECTION. IT'S NOT A GENERAL TAX, IT'S A FEE THAT'S, YOU KNOW, JUST FOR GARBAGE COLLECTION. AND THE RESPONSE IS THAT UNDER THE TEXAS ADMINISTRATIVE CODE, WHEN A GOVERNMENTAL ENTITY CHARGES, UM, A SPECIFIC FEE, NOT TAXES, BUT A FEE FOR GARBAGE COLLECTION SALES TAXES APPLIED TO THE RECEIPTS OF THE MONEY FOR THAT ACTIVITY. OKAY. I THOUGHT THAT THIS WAS NOT FOR GARBAGE COLLECTION, THOUGH. THIS WAS AN ADMINISTRATIVE FEE TO RUN THE DEPARTMENT AND NOT FOR GARBAGE COLLECTION. BUT SO UNDER THE SAME THOUGHT, THE CONTAINER LEASE FEE AND THE DRAINAGE FEE DON'T FIT INTO THOSE CATEGORIES THAT WE WOULD NEED TO PAY SALES TAXES ON A DRAINAGE FEE. UH, NO, UM, CONTAINER LEASE FEE. I'LL HAVE TO GET BACK TO YOU ON THAT. OKAY. UM, I THINK WE DID DO SOME LEGAL RESEARCH INTO THAT, BUT I HAVE TO GET BACK TO YOU. WHAT ABOUT OTHER CITIES? DO THEY ALL PAY A, A SALES TAX ON THEIR GARBAGE FEE? THEY DO. UM, WE DID SOME RESEARCH INTO OTHER MUNICIPALITIES THAT CHARGE, UM, A SPECIFIC FEE FOR THEIR GARBAGE COLLECTION, AND WE DID, YOU KNOW, COME UP WITH A LIST OF OTHER CITIES THAT DO CHARGE, UM, A SEPARATE SALES TAX AND THEY, THEY ARE KIND OF EXTENSIVE. WELL, I HOPE IT'S EVERY CITY. I MEAN, IF WE'RE GETTING CHARGED THE SALES TAX, I MEAN, IT, IT SHOULD BE, I DON'T WANT IT TO BE LIKE PICKING AND CHOOSING WHICH CITIES PAY THE, PAY THE SALES TAX ON THIS FEE. AND, AND TO THE VICE MAYOR PRO TEMS, UH, POINT, DID WE KNOW THIS WHEN WE WERE TALKING ABOUT THIS ADMINISTRATIVE FEE ABOUT THAT WE WOULD BE CHARGED A SALES TAX ON IT. IT WAS JUST NEVER COMMUNICATED AND THE MODELS DON'T INCORPORATE. I THINK THAT WE WERE, UM, DOING A LOT OF THIS LEGAL RESEARCH PROBABLY AROUND THE TIME OF THE BUDGET DISCUSSION. I CAN'T REMEMBER EXACTLY WHEN WE FINALIZED OR GOT THE FINAL INFORMATION FROM THE COMPTROLLER'S OFFICE, BUT IT WAS, YOU KNOW, IT WAS SOMETHING THAT WE WERE TALKING ABOUT IN RESEARCHING INTERNALLY. VICE MAYOR , YOU HAVE MORE, UH, I PROBABLY HAVE MORE QUESTIONS FROM THIS, BUT [00:10:01] I'LL, I'LL GET WITH YOU OFFLINE ABOUT IT. OKAY. THANK YOU. THANK YOU. UH, CONTROLLER FROM THE CONTROLLER'S OFFICE. UH, MR. JONES, YOU TALKED ABOUT THE, UH, THE RIGHT OF WAY FEE, NOT, UH, YOU KNOW, NOT BEING INCORPORATED. YOU, YOU GUYS DIDN'T COUNT THAT IN BECAUSE IT'S, YOU KNOW, WAITING ON IMPLEMENTATION. I UNDERSTAND. WE'LL BE TALKING ABOUT THAT, UH, DIRECTOR AND THE UPCOMING FINANCIAL TRANSACTIONS, TALKING ABOUT THE BOND AND THE, AND THE RIGHT OF WAY FEE. UM, BUT, UH, WILL, IF YOU WANNA TALK A LITTLE BIT ABOUT WHAT YOUR CONCERNS ARE, ARE YOU JUST WAITING TILL THAT'S ALL FINALIZED BEFORE YOU GUYS BOOK IT? YEAH, IT, IT IS IN OUR PROJECTION THE SAME WAY IT'S IN THE BUDGET. UM, IT'S JUST MORE SO THAT, I MEAN, THERE'S STILL ACTIONS THAT HAVE TO TAKE PLACE, UH, THAT I'M SURE DIRECTOR GO INTO DETAILS ON, BUT ESSENTIALLY IT'S MORE OF A, YOU KNOW, JUST LETTING YOU KNOW THAT WE'RE STILL MONITORING THIS UNTIL EVERYTHING THAT NEEDS TO HAPPEN IS DONE. AND ONCE THAT HAPPENS, THEN YOU KNOW, WE'RE GOOD, BUT WE, BUT YOUR PROJECTIONS ARE STILL INCORPORATING IT. IT, IT DOESN'T INCORPORATE IT, IT'S JUST THAT, YOU KNOW, ESSENTIALLY WE'VE, YOU KNOW, MOVED INTO THE HOUSE BEFORE THE CLOSING DATE AND SO THE CLOSING DATE'S COMING UP IN DECEMBER. UM, AND SO UNTIL THAT HAPPENS, UH, THE CITY SHOULD JUST STILL BE AWARE THAT THERE ARE SOME RISK. IF SOMETHING DOESN'T GO THE WAY, IF ANTICIPATE IT GOING, THEN THE 104 MILLION COULD BE A RISK. OKAY, GOT IT. AND DIRECTOR ON THE SALES TAX? SO WE'RE UP 5% YEAR OVER YEAR. THAT WAS ABOUT THE SAME LAST MONTH TOO, AS I RECALL. SO DO WE HAVE, I KNOW IT'S IMPOSSIBLE TO FIGURE OUT EXACTLY WHAT WAS FROM FIFA AND WHAT WAS FROM JUST NORMAL. I THINK SALES TAX IS UP KIND OF A LOT OF, YOU KNOW, PLACES WHERE THERE WAS, WASN'T EVEN FIFA, BUT MM-HMM . UM, I KNOW WE'RE ASKING, OR AT LEAST WHAT THE CHRONICLE WAS REPORTED IS THAT WE WERE, WE WERE ASKING FOR 76 MILLION FROM THE EVENT TRUST FUND PROGRAM AT, UH, AT THE STATE. SO WE'RE ASKING FOR SE WE GOT 65 MILLION FROM THE FEDS FOR THE PUBLIC SAFETY. WE'RE GET, WE'RE ASKING FOR 76 MILLION FROM THE STATE TRUST FUND. UM, HOW, HOW ARE WE PROJECTING KIND OF, CAN WE ESTIMATE KIND OF WHAT OUR BUMP WAS? UM, IN SALES TAX HERE BECAUSE OF FIFA? IT'S REALLY HARD TO, AND THIS IS FROM MY PERSPECTIVE, AND, AND, UM, MR. JONES MAY HAVE A, UM, MORE OR A DIFFERENT, UH, PERSPECTIVE, BUT FROM MY PERSPECTIVE, IT'S REALLY DIFFICULT TO TELL HOW MUCH IT'S FROM AND EVENT VERSUS STANDARD GROWTH. WE'RE ALSO SEEING, OBVIOUSLY HIGH INFLATION RIGHT NOW, AND WHEN THINGS COST MORE, RIGHT. MORE SALES TAXES GET APPLIED AND COLLECTED. SO IT'S REALLY HARD TO TELL HOW MUCH OF THAT IS DUE TO GROWTH IN THE ECONOMY, INFLATION, FIFA, IT'S A LOT OF DIFFERENT FACTORS KIND OF HAPPENING AT ONCE. RIGHT. ANYTHING TO ADD WILL YEAH, I TOTALLY AGREE. SO WHAT'S THAT, WHAT'S THE PROCESS FOR THE 76 MILLION? WE, HOW, HOW DOES IT WORK? WE JUST MAKE AN APPLICATION. HOW IS IT, WHAT A LONG TIME PERIOD DO WE, AM I RIGHT ON THE NUMBERS? I MEAN, THAT'S WHAT THE CHRONICLE WAS REPORTING, 76 MILLION THAT WE'RE THE CITY OF HOUSTON'S ASKING FOR IN REIMBURSEMENTS. SO FOR THE, UM, THE 65 MILLION WE'RE GETTING, WHICH IS A FEDERAL GRANT COMING THROUGH THE OFFICE OF THE GOVERNOR, UM, AND THEN THERE'S A SEPARATE GRANT FOR THE, UM, COUNTER DRONE. UM, THAT'S ABOUT 15 MILLION. SO I DON'T KNOW IF THAT MAKES UP CLOSE TO THE NUMBER THAT YOU'RE TALKING ABOUT. UM, WE STILL ARE, UM, WORKING WITH, UM, CHIEF SATTER WHITE'S TEAM, ALLISON BELCHER AND HIS TEAM COMBING THROUGH ALL THE ACTUALS AND WHERE THINGS ENDED UP AS FAR AS OVERTIME WORKED. UM, YOU KNOW, WE CONTRACTED FOR AMBULANCE SERVICES. WE BOUGHT SOME EQUIPMENT LIKE CONCRETE BARRIERS. SO WE'RE COMBING THROUGH ALL THOSE DETAILS AND, UM, WE'RE ACTUALLY MEETING INTERNALLY, UM, LATER THIS WEEK TO TALK ABOUT WHAT THE FINAL NUMBER IS. YEAH. AND I, AND I UNDERSTAND THE PUBLIC SAFETY THING. MM-HMM . I THINK THAT'S SEPARATE FROM WHAT WE ASKED FOR FROM THE STATE. YOU KNOW, HOW THE STATE HAS THAT TRUST FUND THAT THEY, THAT THEY PUT TOGETHER TO LIKE REIMBURSE CITIES THAT THEY'RE USING, YOU KNOW, WHAT WOULD BE EXCESS SALES TAX TO SET UP THIS TRUST FUND? AND THEN WE ASKED FOR REIMBURSEMENT FOR THAT. I WAS THINKING THAT WAS FOR NON-PUBLIC SAFETY KIND OF STUFF. I'M NOT SURE ABOUT THAT. SO MAYBE WE CAN TALK, TALK MORE OFFLINE SO I CAN MAKE SURE I UNDERSTAND. OKAY. YEAH. OKAY. COUNCIL MEMBER RAMIREZ. THANK YOU MADAM CHAIR AND APPRECIATE THE, THE, UH, PRESENTATION. SO MAYBE MY QUESTION IS BETTER DIRECTED TO LEGAL. UM, THIS DISCUSSION ABOUT SALES TAXES ON, UH, THE GARBAGE FEE, UH, MAKES ME WONDER WHEN WE SELL WATER TO ENTITIES OUTSIDE THE CITY, DO WE CHARGE SALES TAX ON THAT? ARE WE ALLOWED TO CHARGE SALES TAX? I'D HAVE TO GET BACK TO YOU ON THAT. I THINK THE QUESTION IS UNDER CONTRACTS WHEN THERE'S A SALE OF WATER, IF THERE'S SALES TAX ON THAT, IS THAT KIND OF THE QUESTION? UH, I WOULD IMAGINE THAT EVEN IF IT'S UNDER CONTRACT, THE STATE WOULD WANT TO, UH, RECOUP ITS PORTION OF SALES TAXES IF IT WERE ABLE TO. SO YEAH, IF YOU COULD REPORT BACK TO US, THAT'D BE GREAT. SURE. THANK YOU. OKAY. SEEING NO OTHER [00:15:01] QUESTIONS ON THE MONTHLY FINANCIAL REPORT. THANK YOU VERY MUCH. AND WE WILL CONTINUE WITH THE NEXT ITEM, WHICH ARE, WHICH IS UPCOMING FINANCIAL TRANSACTIONS DIRECTOR ? YES. OKAY, THANK YOU. UM, SO I'M HERE TODAY THIS MORNING TO PRESENT, UM, THE UPCOMING FINANCIAL TRANSACTIONS ON BEHALF OF THE FINANCE WORKING GROUP. UM, AND JUST AS A REMINDER, UM, TO THIS BODY, THE FINANCE WORKING GROUP IS, UM, A GROUP OF US THAT WE ACTUALLY, WE MEET BIWEEKLY EVERY OTHER MONDAY. UM, IT'S THE FINANCE DEPARTMENT, CONTROLLER'S, OFFICE, CITY LEGAL, UM, AND THEN ALSO THE, UM, ENTERPRISE DEPARTMENTS THAT ISSUE DEBT. SO IN THIS CASE, UM, FOR THE TWO TRANSACTIONS WE'RE TALKING ABOUT TODAY, IT'S THE, UM, HOUSTON PUBLIC WORKS DEPARTMENT AND THE AIRPORT DEPARTMENT. AND THEN WE ALSO WORK CLOSELY WITH HOUSTON FIRST ON OUR CONVENTION ENTERTAINMENT CREDIT. UM, SO AGAIN, WE MEET BIWEEKLY. WE ALSO, UM, UH, MEET WITH OUR FINANCIAL ADVISORS WHO ARE, UM, OUR PARTNERS THAT WE CONTRACT WITH, UM, AS OUR REGISTERED MUNICIPAL ADVISOR TO HELP US WITH ALL THESE TRANSACTIONS AND OUTSIDE BOND COUNSEL AND TAX COUNSEL, UM, DEPENDING ON THE TRANSACTION. UM, SO GOING TO THE AGENDA TODAY, WE'RE GONNA TALK, LIKE I MENTIONED ABOUT, UM, TWO DIFFERENT CREDITS. THE COMBINED UTILITY SYSTEM CREDIT, WHICH IS, UM, PART OF THE HOUSTON PUBLIC WORKS DEPARTMENT, AND THEN THE, UH, HOUSTON AIRPORT SYSTEM, UH, SPECIAL FACILITY REVENUE BONDS FOR UNITED AIRLINES. SO ON THE FIRST ITEM, UM, THE COMBINED UTILITY SYSTEM, UM, SERIES 2026, B, C, AND D. UM, SO THIS IS THE BOND TRANSACTION THAT WE HAVE BEEN TALKING ABOUT SINCE, UM, AROUND THE TIME OF THE BUDGET. UM, THE TEAM HAS BEEN, UH, MEETING, IN ADDITION TO OUR BIWEEKLY MEETINGS, WE'VE BEEN HAVING WEEKLY MEETINGS ON THIS BOND TRANSACTION TO WORK THROUGH ALL THE DETAILS OVER THE LAST PROBABLY FOUR OR FIVE MONTHS. UM, SO WE'VE HAD DONE A LOT OF WORK TO GET TO THIS POINT. I'M GONNA PRESENT WHERE WE ARE WITH THE INFORMATION WE KNOW NOW, UM, AND THEN LAY OUT THE NEXT STEPS FOR THE TRANSACTION. UM, SO RIGHT NOW THE, UM, THE CITY'S COMBINED UTILITY SYSTEM HAS $1.77 BILLION OF FIRST LIEN REVENUE BONDS THAT ARE CURRENTLY CALLABLE. UM, WE WILL DEFINITELY LOOK AT THESE BONDS AND SEE WHICH ONES, UM, UH, MAKE SENSE TO REFUND TO ACHIEVE PRESENT VALUE SAVINGS, UM, AS WELL AS CASHFLOW SAVINGS FOR THE UTILITY. THE LARGEST PART OF THE TRANSACTION AND WHAT'S, UM, DRIVING IT, IN ADDITION TO LOOKING FOR SAVINGS, UM, IS LOOKING TO MODERNIZE AND UPDATE THE MASTER BOND ORDINANCE. UH, SIMILAR TO WHAT WE DID WITH THE CONVENTION ENTERTAINMENT CREDIT, THAT MASTER BOND ORDINANCE HAD NOT BEEN MODERNIZED AND UPDATED FOR, UM, QUITE A LONG TIME. AND THE LAST TIME THAT THE COMBINED UTILITY SYSTEM MASTER BOND ORDINANCE WAS REALLY, UM, THERE HAD BEEN AMENDMENTS SINCE 2004, BUT THE LAST TIME WE'VE REALLY MADE ANY MEANINGFUL CHANGES WAS BACK IN 2004 WHEN THE UTILITY WAS CREATED. UM, SO SOME OF THE THINGS THAT WE'RE SEEKING TO ADD TO THE MASTER BOND ORDINANCE INCLUDE PUTTING SOME OF THE GUARDRAILS IN PLACE, LIKE WE TALKED ABOUT AT THE TIME OF THE BUDGET, RELATED TO THE RIGHT OF WAY TRANSFER, UM, AND ADDING ADDITIONAL BOND HOLDER PROTECTIONS TO THE MASTER BOND ORDINANCE WITH THE CHANGES THAT ARE, THAT, UH, ARE IN PLACE AT THE UTILITY BASED ON THE ADOPTED BUDGET. SO AS A REMINDER, THE FY 27 ADOPTED BUDGET INCLUDED SOME LARGE STRUCTURAL CHANGES FOR THE GENERAL FUND, WHICH INCLUDED MOVING THE SOLID WASTE DEPARTMENT AS PART OF THE COMBINED UTILITY SYSTEM, UH, WHICH IS ALLOWED UNDER STATE LAW, AND, UM, ALSO IMPLEMENTING THE, UH, REVENUE SOURCE TO THE GENERAL FUND IN THE FORM OF THE RIGHT OF WAY FEE. UM, SO JUST KIND OF AS A REMINDER OF THE RIGHT OF WAY FEE AND WHAT'S HAPPENING, UM, THROUGHOUT THE STATE ON THIS TOPIC, UM, AS WE DISCUSSED AT THE TIME OF THE BUDGET, UM, YOU KNOW, THERE ARE RIGHT OF WAY TRANSFER FEES HAPPENING IN SAN ANTONIO, DALLAS, EL PASO, FORT WORTH, AUSTIN BROWNSVILLE, EL PASO, UH, PRETTY MUCH EVERYWHERE EXCEPT FOR THE CITY OF HOUSTON. UM, AND SO, YOU KNOW, THAT IS SOMETHING THAT THOSE, UM, CITIES AND THOSE UTILITIES INCLUDE LANGUAGE IN THEIR MASTER BOND ORDINANCE RELATED TO THIS. AND SO THAT'S SOMETHING THAT WE'RE, UH, GONNA BE ADDING TO OUR MASTER BOND ORDINANCE AS PART OF THIS TRANSACTION. IF I CAN STOP YOU THERE MM-HMM . SO, SO THE, WHAT, WHAT IS THE LANG, WHAT ARE THE GUARDRAILS FOR THE BOND HOLDERS? LIKE, IS IS IT LIMITING? LIKE I KNOW WE TALK, WE'RE DOING 5% OF GROSS RECEIPTS, RIGHT? FOR WATER, FOR WATER SEWER REVENUES. SO IT, DOES IT LIMIT THAT? ARE YOU GETTING TO THAT? AM I JUMPING AHEAD? YEAH, SORRY. ON THE, ON THE NEXT SLIDE, IT, UM, LAYS OUT SOME OF THE DIFFERENT GUARDRAILS. SO TOUCHING ON THE FIRST POINT THAT YOU BROUGHT UP IS, IS THE MIDDLE ONE ON THE PAGE, THE BOND HOLDER PROTECTION, WHICH IS LIMITING THE RIGHT OF WAY TRANSFER FROM THE GENERAL PURPOSE FUND, UM, IN AN AMOUNT THAT CANNOT EXCEED A CERTAIN PERCENT, THAT'S GONNA BE LAID OUT IN THE MASTER BOND ORDINANCE. SO BASED ON THE ADOPTED BUDGET, WE'RE GONNA BE TRANSFERRING 5% OF THEIR GROSS REVENUES. WHEN YOU LOOK AT, AND THIS IS PART OF WHAT THE TEAM'S BEEN WORKING ON, WHEN YOU LOOK AT ALL THE OTHER ISSUERS AND UTILITIES THAT DO THIS, THEY HAVE A MAXIMUM AMOUNT IN [00:20:01] THEIR MASTER BOND ORDINANCE THAT IS HIGHER THAN WHAT THEY'RE ACTUALLY TRANSFERRING, RIGHT? SO YOU WANNA LEAVE SOME, SOME CUSHION IN SOME ROOM. AND SO WHEN WE LOOK AT THE OTHER, UM, THE OTHER UTILITIES THROUGHOUT THE STATE, FOR EXAMPLE, UM, AUSTIN WATER, THEIR CAP IN THEIR ORDINANCE IS 8.2%. THEY TRANSFERRED 7%. UM, UH, EL PASO, THEIR MAXIMUM IN THEIR ORDINANCE IS 10%. THEY TRANSFER 5.29%. UM, I'M JUST GIVING, IT'S IN EVERY CITY, YOU KNOW, UH, AUSTIN, SORRY, SAN ANTONIO CPS 14%. THEY TRANSFER 11% AUSTIN ENERGY, 12%, THEY TRANSFER 7%. SO THE AMOUNT, THE LIMITATION IN THE MASTER BOND ORDINANCE, UM, IT'S, IT'S VERY, UM, IT ACTUALLY WOULD BE ABNORMAL FOR IT TO BE THE EXACT AMOUNT THAT YOU DO IN YOUR BUDGET. UM, BUT IT IS SOMETHING IN PLACE THAT WHEN YOU AMEND THE MASTER BOND ORDINANCE, THIS IS SOMETHING THAT WE'RE GONNA LIVE WITH THIS MASTER BOND ORDINANCE FOR DECADES. THE LAST TIME WE OPENED THE MASTER BOND ORDINANCE, LIKE THIS WAS OVER 20 YEARS AGO. SO IT'S SOMETHING THAT, YOU KNOW, YOU DO WANT TO, OF COURSE HAVE THAT GUARDRAIL IN PLACE FOR THE BOND HOLDERS, BUT YOU KNOW, YOU DON'T WANNA EXACTLY HAVE YOUR MAXIMUM BE EXACTLY WHAT YOU'RE DOING. UM, SO WHAT WE'RE LOOKING AT, INCLUDING IN THE MASTER BOND ORDINANCE, IS SOMEWHERE BETWEEN THE NINE TO 10% RANGE, EVEN THOUGH THE BUDGET AND THE PLAN IS 5% FOR THIS YEAR, SINCE THIS IS SOMETHING THAT NEEDS TO BE VERY, UM, UH, WE'RE GONNA HAVE TO LIVE WITH FOR A VERY LONG TIME, LONG AFTER, YOU KNOW, WE ARE HERE, UM, OUR PRECESS, OUR, OUR, YOU KNOW, OUR, UM, THE PEOPLE THAT COME AFTER US ARE GONNA HAVE TO LIVE WITH IT. UM, SO THAT'S SOMETHING THAT, UM, IS GONNA BE IN THE MASTER BOND ORDINANCE. AND THEN ANOTHER THING THAT IS A CREDIT POSITIVE THAT THE WILL, UH, BE, UM, AN ADVENT ADVANTAGEOUS THING FOR THE BOND HOLDERS IS THAT INSTEAD OF JUST, YOU KNOW, HAVING OUR DEBT SERVICE PAYMENT IN OUR BUDGET AND JUST PAYING IT, YOU KNOW, RIGHT OUT OF THE BUDGET EVERY YEAR, UH, WE'RE GONNA, UM, USE AN INTEREST IN SINKING FUND, UM, UH, PROGRAM WHERE WE BASICALLY TRANSFER A PORTION OF THE DEBT SERVICE PAYMENT ON A MONTHLY BASIS SO THAT IT'S SET ASIDE IN A, A SEPARATE AREA SO THAT THE BOND HOLDERS CAN BE ASSURED THAT THE FUNDING FOR THE DEBT SERVICE PAYMENT IS THERE. UM, AND THEN, UM, THE OTHER THING THAT WE'RE DOING AS PART OF THE PROPOSED ORDINANCE AMENDMENTS IS, UM, TO FEES, SOME OLD BONDS FROM 1998 AND, UM, REFRESHING THAT, THAT PART OF THE LANGUAGE OF THE MASTER BOND ORDINANCE BECAUSE THE COMBINED UTILITY SYSTEM HAS SEVERAL DIFFERENT, UM, BOND LIEN LEVELS. AND SO WE'RE GONNA BE CLEANING, UH, CLEANING THAT UP IN THE ORDINANCE. SO GOING ONTO THE NEXT SLIDE, UM, THIS GIVES A BREAKDOWN OF THE OVERVIEW OF THE ENTIRE TRANSACTION. SO THE, THE LAST MAJOR COMPONENT OF THE TRANSACTION THAT WE HAVEN'T TALKED ABOUT YET IS, UM, THE SWAPS. SO YOU HEAR FROM THE CONTROLLER'S OFFICE ABOUT THE SWAPS, UM, EVERY QUARTER, UM, IN THE QUARTERLY FINANCIAL REPORT THE CONTROLLER PRESENTS ON IT. THE SWAPS ARE A FAIRLY COMPLEX INSTRUMENT WHERE WE HAVE VARIABLE RATE DEBT, UH, OUTSTANDING FOR THE UTILITY, AND WE HAVE, UM, SWAP AGREEMENTS IN PLACE TO MAKE A SYNTHETIC FIXED RATE. AGAIN, IT'S FAIRLY COMPLEX, SO IF YOU HAVE DETAILED QUESTIONS, WE'RE HAPPY TO SIT AND MEET WITH YOU. UM, UH, VERNON, UH, MIDDLETON LEWIS AND THE CONTROLLER'S OFFICE IS REALLY THE EXPERT ON THE SWAPS. UM, BUT IT IS SOMETHING THAT IS OBVIOUSLY FAIRLY COMPLEX. UM, AND SO THE IDEA IS TO REFUND THAT VARIABLE RATE DEBT AND REPLACE IT WITH LONG-TERM FIX RATE DEBT. SO WE NO LONGER HAVE THIS VARIABLE VARIABLE RATE EXPOSURE AND RISK. AND, UM, IT'S, IT'S ALSO PRETTY COMPLICATED FROM AN ADMINISTRATION PERSPECTIVE TO ADMINISTER THE SWAPS. UM, AND SO PART OF THE TRANSACTION IS GONNA BE TO FIX THOSE OUT INTO LONG-TERM FIX RATE DEBT. UM, AND THEN THE OTHER PIECE WE'RE GONNA DO IS REFUND ANY OUTSTANDING COMMERCIAL PAPER. THIS IS VERY STANDARD PART OF OUR PROCESS. YOU, YOU USUALLY HEAR US WHEN WE PRESENT TRANSACTIONS, TALK ABOUT WE'RE GONNA FIX OUT THE COMMERCIAL PAPER, AND WE'RE GONNA LOOK FOR REFUNDING FOR SAVINGS. SO THIS IS ONE OF OUR STANDARD THINGS WE DO. UM, AND THEN THE LAST PIECE WE'RE GOING TO DO IS ANOTHER WAY TO ACHIEVE SAVINGS ON BONDS BY, UH, DOING A, UH, POTENTIALLY DOING A TENDER OF EXISTING BONDS WHERE WE REACH OUT TO BOND HOLDERS THAT HOLD OUR BONDS AND, UM, ASK THEM FOR THEIR PERMISSION TO REFUND THEM, WHICH WE, UM, GENERALLY HAVE PRETTY GOOD PARTICIPATION WITH. IN PAST TRANSACTIONS. WE'VE HAD ABOUT 30% OF, UM, BOND HOLDERS, UM, PARTICIPATE IN THIS TENDER PROCESS, WHICH CAN PRODUCE ADDITIONAL SAVINGS. SO THAT'S ANOTHER AVENUE THAT WE'RE GOING TO PURSUE, AND HOPEFULLY WE CAN GET SOME SAVINGS FROM, UH, FROM THOSE TYPES OF REFUNDINGS. SO ON THE NEXT SLIDE, THE NEXT STEPS, UM, AGAIN, THE TRANSACTION, UH, IN TOTAL ACROSS ALL THE SERIES IS EXPECTED TO BE ABOUT $1.76 BILLION. UM, IT'S GONNA BE BROKEN DOWN TO THREE SEPARATE SERIES. THE 2026 B IS GOING TO BE APPROXIMATELY 785 MILLION. AND THAT'S WHERE WE'LL DO THE REFUNDING, THE TENDER PROCESS, WHICH IS ANOTHER WAY OF REFUNDING BONDS, LIKE I MENTIONED, AND THEN THE COMMERCIAL PAPER TAKEOUT. AND THEN THE, UH, SERIES 2026 C AND D [00:25:01] APPROXIMATELY, UH, 975 MILLION. UM, THE GOAL OF THAT PIECE OF THE TRANSACTION WILL BE TO REFUND THOSE VARIABLE RATE BONDS INTO FIXED RATE BONDS AND TO TERMINATE THE SWAP AGREEMENTS. SO THE RCA IS EXPECTED TO COME TO CITY COUNCIL IN OCTOBER, UM, SO THAT WE CAN CONTINUE MOVING FORWARD WITH THE TRANSACTION. AND ON THE NEXT SLIDE, UH, WE'LL GO OVER THE REST OF THE TIMELINE AND THEN SOME OF THE NUMBERS ASSOCIATED WITH THE TRANSACTION. UM, SOME OF THE DEBT THAT WE'RE REFUNDING, UH, THE ESTIMATED AVERAGE LIFE OF THAT DEBT IS 5.785 YEARS. SO ONE THING THAT WE ALWAYS MONITOR WHEN WE DO A REFUNDING IS WE DON'T WANT TO, UM, BE SORT OF, YOU KNOW, KICKING THE CAN DOWN THE ROAD BY TAKING DEBT THAT'S COMING DUE AND REFUNDING IT FAR OUT. SO THAT'S WHERE YOU SEE THE LINE BELOW THAT, WHERE THE ESTIMATED CHANGE TO THE WEIGHTED AVERAGE LIFE OF THE DEBT BEING REFUNDED IS ACTUALLY WE'RE SHORTENING THE DEBT BY 0.44 YEARS. SO, UM, YOU CAN SEE THAT WE'RE NOT GONNA BE EXTENDING THE AVERAGE LIFE OF THE, THE DEBT THAT'S BEING REFUNDED, WHICH IS ONE OF OUR, UM, UH, YOU KNOW, ONE OF OUR METRICS THAT WE FOLLOW. AND THEN INCLUDING, UM, ALL OF THE, UM, THE FEES WITH THE TRANSACTION, THE COST OF ISSUANCE, UM, AND ALL THE DIFFERENT, UH, COMPONENTS OF THE TRANSACTION. WE'RE STILL, UM, ESTIMATING THAT WE'RE GONNA SAVE AROUND $4 MILLION ASSOCIATED WITH THIS TRANSACTION. UM, WHICH REPRESENTS ABOUT, UM, A 0.25% SAVINGS ALL TOTAL. UM, AND THEN THE ESTIMATED TRUE INTEREST COST OF THE, UH, INTEREST RATE THAT WE THINK WE'RE GOING TO BE ABLE TO ACHIEVE WITH THE TRANSACTION IS ABOUT 4.25%. AND THIS DOES INCLUDE, UH, YOU KNOW, THE FED JUST RECENTLY RAISED THE, UM, BENCHMARK INTEREST RATE. SO THIS DOES FACTOR THAT IN AS PART OF THE FORECAST. UM, AND OUR PLANNED AS FAR AS THE TIMELINE, LIKE I MENTIONED, IS TO BRING THE RCAS TO CITY COUNCIL IN OCTOBER, UM, AND THEN PRICE THE BONDS IN NOVEMBER AND CLOSE THE TRANSACTION IN DECEMBER. UM, AND THEN THE OTHER PIECE THAT I DIDN'T, UH, REALLY MENTION AS PART OF THE TALKING POINTS, UH, YET ON THIS TRANSACTION IS THE, THE BOND HOLDER CONSENT. SO THE REASON THAT THIS TRANSACTION IS SO LARGE, THE 1.76 BILLION, UM, IS BECAUSE AT THE TIME OF THE BUDGET, WHEN WE WERE TALKING ABOUT DO BOND HOLDERS HAVE TO CONSENT TO THIS RIGHT OF WAY, UM, AFTER WORKING WITH CITY LEGAL, WE FEEL THAT IT'S NOT, UM, LEGALLY NECESSARY FOR THE BOND HOLDERS TO CONSENT, BUT THAT THIS IS MORE OF A BELT AND SUSPENDERS APPROACH TO, AND IT'S MORE CLARITY AND TRANSPARENCY FOR THE BOND HOLDERS TO SEE THESE CHANGES IN THE MASTER BOND ORDINANCE. AND SO THAT'S WHY THE TRANSACTION SIZE IS SO LARGE IS TO GET TO THAT, YOU KNOW, 50% PLUS 1% OF THE BOND HOLDERS TO BEING, YOU KNOW, CONSENTING TO THESE AMENDMENTS IN THE, UM, OR CHANGES IN THE MASTER BOND ORDINANCE. SO THAT WILL BE A, UM, YOU KNOW, A MAJOR PIECE OF THIS TRANSACTION THAT WILL BE, UM, A DRIVER FOR THE TRANSACTION AND THE SIZING. OKAY. SO MOVING ON TO THE NEXT TRANSACTION. THIS IS FOR THE AIRPORT SYSTEM. THIS IS THE UNITED AIRLINES SPECIAL, UH, FACILITY REVENUE BONDS, UM, RELATED TO TERMINAL B. SO YOU MAY REMEMBER, UM, EVEN AS FAR BACK AS THREE YEARS AGO, A LOT OF CONVERSATION ABOUT UNITED AND TERMINAL B BONDS. UM, IT WAS DEFINITELY IN THE, IN THE MEDIA. THERE WAS A LOT OF LIVELY DEBATE, UM, EVEN UNDER THE PREVIOUS ADMINISTRATION AND CONTINUED ONTO THIS ADMINISTRATION AS WELL. UM, BUT WE DID, UH, WE WERE ABLE TO, UM, FINALIZE THAT, UM, MEMORANDUM OF UNDER, UH, MEMORANDUM OF AGREEMENT BETWEEN THE CITY AND UNITED AIRLINES THAT CITY COUNCIL APPROVED. UM, AND WE DID ISSUE THE FIRST, UM, TRANCHE OF THE BONDS. UM, THE $2 MILLION, UH, $2 BILLION IS THE MAXIMUM AMOUNT IN THAT MOA, AND WE DID ISSUE THE FIRST TRANCHE OF THEM, UM, BACK IN 2024, ABOUT $1.1 BILLION WAS ISSUED. UM, AND SO THIS PIECE THAT WE'RE MOVING FORWARD WITH IS THE REMAINING AMOUNT, $850 MILLION REPRESENTING THE LAST PIECE OF THE BORROWING UNDER THIS MOA WITH UNITED. AS A REMINDER, UM, THESE SPECIAL FACILITY REVENUE BONDS ARE NOT SUPPORTED BY THE GENERAL FUND. THEY'RE NOT SUPPORTED BY GENERAL AIRPORT REVENUES OR ANY OTHER FUNDS OF THE CITY. THE PLEDGE FOR THE BONDS AND THE REPAYMENT OF THEM COMES FROM THE, UM, UNITED SPECIAL FACILITIES LEASE PAYMENTS THAT WE GET FROM UNITED. UM, AND SO THAT'S JUST ONE THING I WANTED TO POINT OUT SINCE I KNOW WE, WE DID TALK QUITE A BIT ABOUT THAT A COUPLE YEARS AGO. SO JUST TO, TO REMIND EVERYONE, UM, NEXT STEPS ON SLIDE NINE, UH, WE ANTICIPATE TO ISSUE THE BONDS IN, UM, NOVEMBER OF 2026. UM, AND THAT ISSUANCE, UH, WILL REQUIRE ONE OR MORE COUNCIL ACTIONS. SO WE'RE STILL WORKING THROUGH ALL THE DETAILS OF EXACTLY HOW MANY ITEMS WILL COME TO CITY COUNCIL, BUT DEFINITELY WE'LL NEED, UM, CITY COUNCIL APPROVAL, UM, TO, UH, UH, CLEAR UP SOME THINGS IN THE LEASE AND THE FINANCING AGREEMENT TO CONTEMPLATE FOR THESE BONDS. UM, AND THAT'S EXPECTED TO COME IN OCTOBER. AND THEN CITY COUNCIL, UH, APPROVAL OF THE TERM, INCLUDING THE PRINCIPAL AMOUNT AND SOME OF THE, UH, AMORTIZATION PROVISIONS ON THE SALE OF THE BONDS, UM, IS EXPECTED TO BE BROUGHT TO COUNCIL IN, UH, [00:30:01] NOVEMBER. SO ON THE NEXT SLIDE, SLIDE 10, UM, THIS GIVES THE STANDARD FORMAT, UM, LIKE I MENTIONED, $850 MILLION IS THE NOT TO EXCEED AMOUNT, AND THAT WILL BRING THE TOTAL TO THE $2 BILLION THAT'S CONTEMPLATED IN THE MOA. THE ANTICIPATED TRUE INTEREST COST IS BETWEEN 5.8 TO SIX, UH, 6.2%. UM, YOU SEE THIS RATE IS OBVIOUSLY A LITTLE BIT HIGHER THAN THE COMBINED UTILITY SYSTEM CAN ACHIEVE. IT IS, UM, PRICED OFF OF UNITED'S CREDIT RATING, BUT USING THE CITY'S TAX EXEMPT STATUS. SO IT IS LOWER THAN IT OTHERWISE WOULD BE, HAD IT, WOULD IT NOT BE A SPECIAL FACILITIES TRANSACTION. UM, AND SO, UM, AGAIN, THE, THE ANTICIPATED COUNCIL DATES ARE IN OCTOBER AND NOVEMBER, UH, WITH PRICING IN NOVEMBER AND CLOSING IN NOVEMBER AS WELL. AND THAT CONCLUDES MY PRESENTATION. THANK YOU VERY MUCH. COUNCIL MEMBER RAMIREZ. THANK YOU, MADAM CHAIR. THANK YOU. DIRECTOR, I WANT TO ASK YOU ABOUT THE, UH, RIGHT OF WAY FEE GUARDRAILS. UM, WE APPROVED A 5% FEE IS TO START OFF, IS THAT CORRECT? YES. AND, UM, THE ADMINISTRATION IS PROPOSING TO LIMIT THE FEE, UH, YEAR AFTER YEAR, UH, TO, TO WHAT, DO YOU KNOW WHAT, WHAT YOU'RE GONNA BE PROPOSING HERE? WELL, WE'RE STILL IN CONVERSATIONS IS SOMEWHERE IN THE NINE AND A HALF TO 10% RANGE, JUST LOOKING AT OTHER, UM, UTILITY ISSUERS AROUND THE STATE WHERE THERE, UM, TOTAL LIMITATION IS IN THEIR MASTER BOND ORDINANCE COMPARED TO WHAT THEY DO IN THEIR BUDGETS. AGAIN, IT'S SOMETHING THAT THIS IS GOING TO HAVE TO LIVE IN OUR MASTER BOND ORDINANCE FOR DECADES, PROBABLY AT LEAST 20 YEARS. SO WHEN WE CHARGE AT AND T FOR THE USE OF THE SPACE MM-HMM . DO, DO, UH, ARE THERE, ARE THERE GUARDRAILS, SO TO SPEAK, THERE, IS THERE A RANGE THAT WE CAN CHARGE 'EM OR IS IT A FLAT PERCENTAGE? EACH OF THE FRANCHISE, UM, EACH OF THE ENTITIES THAT WE CHARGE CHARGE FRANCHISE FEES TO ARE GOVERNED BY DIFFERENT, UM, DIFFERENT THINGS. SOME ARE GOVERNED BY STATE LAW, SOME ARE GOVERNED BY CONTRACTS AND AGREEMENTS THAT WE HAVE WITH THOSE FRANCHISEES. UM, A RA, UM, HAS A REALLY NICE SUMMARY THAT THEY'VE PUT TOGETHER THAT I CAN SHARE WITH YOU THAT WILL LAY OUT, YOU KNOW, THE, WHAT WE CHARGE TO THOSE ENTITIES. SOME ARE, UM, PERCENT OF GROSS REVENUE, SOME ARE A DOLLAR AMOUNT THAT WAS SET IN THE NINETIES AND ESCALATES EVERY YEAR. SO IT'S VARIABLE. OKAY, I UNDERSTAND. BUT LET'S SAY I'M JUST PICKING AT T AS AN EXAMPLE, DOES AT T'S RIGHT OF WAY FEE VARY FROM YEAR TO YEAR? I DON'T KNOW OFF OFF THE TOP OF MY HEAD EXACTLY HOW AT AND T'S IS. SO I, I'LL HAVE TO GET BACK TO YOU ON AT T SPECIFICALLY. SO, OKAY. SO THE RIGHT OF WAY FEE THAT THE ADMINISTRATION PROPOSES TO CHARGE THE CUS YEAR TO YEAR IS GONNA FLUCTUATE BASED ON, ON WHAT IT'S GONNA FLUCTUATE, BASED ON WHAT'S PROPOSED IN THE BUDGET AND ADOPTED AT THE TIME OF THE BUDGET BY CITY COUNCIL EVERY YEAR. SO, SO BASICALLY HOW MUCH WE NEED TO PLUG A BUDGET GAP, UH, WILL DETERMINE HOW MUCH THE CUS PAYS AS A RIGHT OF WAY FEE. NO, I MEAN, IT DEPENDS ON THE YEAR. AND I MEAN, THE OTHER THING THAT WE'VE BEEN DOING IS, UM, WORKING WITH PUBLIC WORKS AND OUR FINANCIAL ADVISORS TO MODEL OUT, UM, HOW THE, NOT JUST THE RIGHT OF WAY, BUT THE EXPENSES OF THE UTILITY. SO THEY HAVE OTHER EXPENSES, OBVIOUSLY, RIGHT? THEY HAVE THE, THE WATER AND WASTEWATER PLANTS, THE SANITARY SEWER OVERFLOWS, THE THINGS UNDER THE CONSENT DECREE THAT THEY HAVE TO GET DONE, THEIR CIP PROJECTS THAT THEY'RE IMPLEMENTING, WHICH TRANSLATES INTO A DEBT SERVICE PAYMENT AND MODELING ALL OF THAT OUT PART OF IT. UM, AND I, WE DIDN'T TALK ABOUT IT IN HERE, BUT PART OF IT, AND ALL THE CONVERSATIONS THAT WE'RE HAVING INTERNALLY AND WE'LL BE HAVING WITH THE RATING AGENCIES ALSO LOOKS AT THE PROJECTED DEBT SERVICE COVERAGE RATIO FOR THE UTILITY, THE DAYS CASH ON HAND FOR THE UTILITY. UM, ALL THOSE THINGS ARE IMPORTANT AND, AND WE'VE PROVIDED SOME OF THAT INFORMATION AT THE TIME OF THE BUDGET. I KNOW COUNCIL MEMBER ALCORN WAS, UM, UH, KEEN ON RECEIVING THAT INFORMATION. SO, UM, IT'S NOT JUST WHAT THE GENERAL FUND NEEDS TO PLUG THE GAP, IT'S ALSO TAKING INTO CONSIDERATION MAKING SURE THE CREDIT WORTHINESS OF THE UTILITY AND THAT THEY'RE STILL ABLE TO MEET THEIR METRICS ON DEBT SERVICE COVERAGE RATIOS AND DAYS, CASH ON HAND TO, TO MAINTAIN THEIR CREDIT RATING. OKAY. THANK YOU. MM-HMM . COUNCIL MEMBER MARTINEZ. THANK YOU, CHAIR. UM, AND I WANNA SPEAK A LITTLE BIT ALONG THOSE LINES AS WELL. SO THE GUARDRAILS WILL BE ANYWHERE BETWEEN NINE AND 10%, UNDERSTANDING THAT, YOU KNOW, WE WON'T BE ABLE TO CHANGE THIS MAYBE IN TWO, THREE DECADES, POSSIBLY. MM-HMM . UM, BUT MORE INTO THE CONVERSATION WITH COUNCIL, HER RAMIREZ IS SPEAKING TO THAT PROCESS OF THIS YEAR IS 5%, I DON'T KNOW WHEN, MAYBE TWO, THREE YEARS FROM NOW, WE MIGHT GO UP TO 6%. CAN YOU SHARE JUST HIGH LEVEL WHAT THAT WOULD LOOK LIKE COMING TO BFA? WE TALK ABOUT IT HERE. UM, HOW, HOW IS THE COMMUNITY BEING INFORMED? FOR EXAMPLE, WHENEVER WE START TALKING ABOUT THE TRASH FEE, UH, AS A, THAT COMES MORE INTO FRUITION. [00:35:01] WE'VE, WE'VE TOLD FOLKS $5 FOR THE FIRST, UH, TWO YEARS, TWO YEARS, AND THEN, UH, MOVING FORWARD, UH, WE'LL, WE'LL HAVE, YOU KNOW, CONVERSATIONS ABOUT WHAT THAT WOULD LOOK LIKE, YOU KNOW, YEAR THREE MM-HMM . IT COULD BE TOTAL OF $6 OR $7, WHATEVER IT MIGHT BE. BUT FOR THIS PARTI SPECIFIC RIGHT OF WAY, UH, FEE, UM, WHAT DOES THAT PROCESS, WHAT DOES IT LOOK LIKE MM-HMM . SO IT WOULD BE DEFINITELY PART OF THE BUDGET DISCUSSIONS AND BUDGET PROCESS. BUT EVEN LEADING UP TO THAT, I, I DON'T REMEMBER IF IT WAS COUNCIL MEMBER ALCOR OR, OR PECK, I'M SORRY, THERE WAS A BUDGET AMENDMENT TO BRING THE, UM, STATUS OF THE HEALTH OF THE COMBINED UTILITY SYSTEM TO THIS, UH, COMMITTEE EVERY QUARTER ALONG, UH, THIS FISCAL YEAR. SO WE CAN KIND OF SEE, YOU KNOW, HOW IS THE UTILITY DOING, UM, IS SOMETHING THAT WE'RE BREAKING OUT SOME MORE DETAILS IN THE PRINTED REPORTING ABOUT HOW MUCH IS WATER WASTEWATER VERSUS SOLID WASTE. SO REALLY, YOU KNOW, ALL ALONG THROUGHOUT THE FISCAL YEAR, UM, HAVING THOSE CONVERSATIONS ABOUT THE FINANCIAL HEALTH OF THE UTILITY, UM, WHERE WE SEE THEIR FUND BALANCE AT, YOU KNOW, UM, LIKE I SAID, MONITORING THE DAYS, CASH ON HAND, THE DEBT SERVICE COVERAGE RATIOS. SO ALL THAT WILL BE, YOU KNOW, BROUGHT TO THIS COMMITTEE THROUGHOUT THE FISCAL YEAR. AND THEN AS PART OF THE BUDGET PROPOSAL PROCESS, WHEN WE'RE TALKING ABOUT, YOU KNOW, WHAT THAT PERCENTAGE OF RIGHT OF WAY WILL BE. AND I'M TALKING GENERALLY, YEAH. I'M NOT NECESSARILY TALKING ABOUT NEXT YEAR. IT COULD BE, YOU KNOW, EVERY YEAR FOR THE NEXT 20 YEARS OR 30 YEARS HOW WE, UM, PROPOSE THE BUDGET AND HOW THE BUDGET IS ULTIMATELY ADOPTED. YEAH. I JUST WANNA MAKE SURE THAT, UM, IF FOR WHATEVER REASON, LET'S SAY THAT WE INCREASE THE WATER, THE RIGHT OF AWAY FEE, UM, WILL FOLKS, UH, ATTACH THAT TO NEW, THE, THE WATER RATE STUDY THAT WE'RE ABOUT TO HAVE, THE FEE STUDY WE'RE ABOUT TO HAVE, AND WE INCREASE FEES SO THEN WE CAN INCREASE, YOU KNOW, THE, THE RIGHT OF WAY FEE, JUST WANNA MAKE SURE THAT WE CAN ALWAYS DISTINGUISH WHY WE'RE DOING WHAT WE'RE DOING WITH THIS RIGHT OF WAY FEE. MM-HMM . SO THAT'S, THAT WAS MY QUESTION. AND ALONG THE LINES WITH COUNCILOR RAMIREZ, JUST MAKING SURE THAT WE'RE BEING VERY TRANSPARENT ABOUT ANY INCREASES AND WHAT DOES THAT LOOK LIKE MM-HMM . UNDERSTOOD. YEAH. I DO HOPE THAT IN THE QUARTERLY DISCUSSIONS OF THE CU S YOU KNOW, WE'LL BE TALKING ABOUT THAT. IT WON'T JUST, IT, IT, I DEFINITELY SHOULDN'T JUST BE TO PLUG A, PLUG A PLUG A BUDGET GAP. RIGHT. UM, WELL, AND I, I THINK TO THAT POINT, YOU KNOW, WHEN WE'RE LOOKING AT, UM, UM, YOU KNOW, ALL OF OUR DIFFERENT AREAS AND REVENUE SOURCES FOR THE GENERAL FUND, UM, YOU KNOW, THERE ARE THINGS THAT WE, UM, ARE NOT NECESSARILY COLLECTING THAT WE COULD LEGALLY COLLECT UNDER LAW. I MEAN, OUR LOCAL PROP ONE CAP IS AN EXAMPLE OF THAT, RIGHT? LIKE, WE KNOW WE'VE BEEN COLLECTING UNDER THE PROP ONE CAP, EVEN THOUGH THIS IS OUR MAXIMUM, WE'RE NOT GOING ALL THE WAY UP TO THAT. SO JUST BECAUSE IT'S A MAXIMUM AMOUNT AS PART OF THE ORDINANCE DOES NOT NECESSARILY MEAN THAT WE'RE GONNA GO ALL THE WAY UP TO THAT. BUT IT GIVES, YOU KNOW, THIS BODY AND FUTURE, UH, ADMINISTRATIONS AND FUTURE CITY COUNCIL BODIES, MORE FLEXIBILITY, MORE TOOLS IN THEIR TOOLBOX. OH, I GET THAT. ARE ARE YOU, I FINISHED? YEAH, I'M DONE. ON THE, IS THERE, I REMEMBER THERE WAS TALK IN THE LEGISLATURE ABOUT, UM, MAYBE PUTTING A CAP ON THE, ON THE AMOUNT PEOPLE COULD USE FOR RIGHT OF WAY. SOME CITIES WERE FELT TO HAVE GONE TOO HIGH ON THAT. DID ANYTHING HAPPEN WITH THAT OR NOTHING PASSED IN THE LAST LEGISLATIVE SESSION? UM, IT, I'M SURE IS GONNA BE A RECURRING TOPIC. I JUST TO KIND OF, UM, UH, RECAP WHERE WE ARE COMPARED TO OUR PEERS. YOU KNOW, WE'RE AT THE 5% IN OUR BUDGET. UM, THE CITY OF SAN ANTONIO, FOR EXAMPLE, THEIR TRANSFER FROM THEIR WATER AND THEIR ELECTRICITY UTILITY, THEY BRING IN AS MUCH MONEY FROM THEIR UTILITIES TO THE GENERAL FUND AS THEY RECEIVE IN PROPERTY TAXES. WOW. SO THAT WOULD BE LIKE THE EQUIVALENT OF US BRINGING $1.5 BILLION OF UTILITY TRANSFER INTO OUR GENERAL FUND. RIGHT. SO WE ARE REALLY TAKING A VERY MEASURED APPROACH RIGHT. COMPARED TO WHAT SOME OF OUR PEERS AROUND THE STATE ARE DOING. OKAY. UM, ON THE UNITED, UH, I, I DO REMEMBER ALL OF THAT ABOUT THE SPECIAL REVENUE BONDS IS, IS IT ALL PLAYING OUT KIND OF HOW WE EXPECTED OR HOW WE PROJECTED AND SO HAS THERE BEEN ANY SURPRISES IN ANY OF THAT? UM, I THINK THE ONLY THING, UM, THIS SLIDE MENTIONS 600, WHICH I DIDN'T REALLY FOCUS ON IT, THE 624 MILLION IN GENERAL AIRPORT REVENUE BONDS THAT, UM, WAS PART OF THE MOA FOR WHAT WE CALL ENABLING PROJECTS. UM, SOME OF THOSE COST ESTIMATES, WHICH WE DON'T, WE DON'T HEAR THIS OFTEN. SOME OF THOSE COST ESTIMATES ACTUALLY CAME IN UNDER THOSE PROJECTIONS. SO I DON'T THINK WE'RE GONNA QUITE ISSUE UP TO THE 624 MILLION ON OUR SIDE ON ENABLING PROJECTS THAT'S, UM, PAYABLE THROUGH GENERAL AIRPORT REVENUES. UM, BUT OTHER THAN THAT, I THINK EVERYTHING HAS BEEN GOING, YOU KNOW, ACCORDING TO PLAN. I THINK THERE ARE DEFINITELY, UM, SOME EXCITING, UM, UH, OPENINGS THAT ARE GONNA BE HAPPENING WITH THE TERMINAL BEE COMING UP VERY SOON IN THE NEXT COUPLE MONTHS. SO REALLY LOOKING FORWARD TO, TO SEEING THAT PROJECT COME TO COME TO LIFE. GREAT. WELL THANK YOU VERY MUCH. I DON'T SEE ANY OTHER COUNCIL MEMBER QUESTIONS, SO THANK YOU VERY MUCH, DIRECTOR AND THANK YOU CONTROLLER'S OFFICE FOR YOUR PARTICIPATION TODAY. DO WE HAVE ANY PUBLIC SPEAKERS? I KNOW WE HAD [00:40:01] DOMINIC MAZO SIGN UP, BUT I DON'T THINK I SEE HIM IN HERE, BUT ANYBODY ELSE IS WELCOME TO COME, COME SPEAK WITH US UP HERE. OKAY. SEEING NONE, THIS MEETING IS ADJOURNED. WE'LL SEE YOU ON NOVEMBER 2ND AT 10:00 AM OPEN SPACE. * This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting.